REG - Investment Co PLC - Final Results
04/10/2023 15:30
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RNS Number : 7181O Investment Company PLC 04 October 2023
THE INVESTMENT COMPANY PLC
Annual Results Announcement for the year ended 30 June 2023
LEI: 2138004PBWN5WM2XST62
SUMMARY OF RESULTS
At 30 June 2023 At 30 June 2022 Change %
Equity Shareholders' funds (£) 16,270,804 16,048,191 1.39
Number of ordinary shares in issue 4,772,049 4,772,049 -
Net asset value ("NAV") per ordinary share 340.96p 336.30p 1.39
Ordinary share price (mid) 340.00p 294.00p 15.65
Discount to NAV 0.28% 12.58% 12.30
At 30 June 2023 At 30 June 2022
Total return per ordinary share* 15.49p (5.21)p
Dividends paid per ordinary share - -
* The total return per ordinary share is based on total income after taxation
as detailed in the Consolidated Income Statement and in note 6.
CHAIRMAN'S STATEMENT
For the year ended 30 June 2023 the Company was self-managed and the trust's
objective until July 2023 was primarily to protect the purchasing power of
capital. The details of that historic investment policy are set out below for
reference purposes. Over its history, the Company has undergone a number of
changes of investment policy and operational structure to most appropriately
reflect the interests of its Shareholders, with the most recent change in
November 2020.
Whilst the Board was satisfied with the Company's performance since 2020, it
has been mindful for some time of the size of the Company, together with the
illiquid nature of the ordinary shares, and the impact of these factors on the
discount to NAV at which the ordinary shares trade. This discount persisted
despite the strong NAV performance. Accordingly, the Board announced in
February 2023 that it was actively considering credible opportunities to grow
the size and increase the liquidity of the Company, while also providing an
immediate complete liquidity option for all Shareholders who wished to realise
their shareholding.
This process culminated in a number of proposals being put to Shareholders and
these were approved at a General Meeting held on 26 June 2023, with over
99.99% of votes cast in favour of the proposals. In July 2023 a tender offer
was carried out to allow those Shareholders who wished to realise their
shareholding to exit and Chelverton Asset Management ("Chelverton") were
appointed as the Company's Investment Manager to oversee all aspects of the
management of the Company's assets, with a new investment policy.
The Company's new investment objective is to maximise capital growth for
Shareholders over the long term by investing in high quality quoted UK small
and mid-cap companies. Details of this objective and the consequent investment
policies are elaborated in detail elsewhere in the Report and Accounts.
Following the change of investment policy, it is expected the majority, if not
all, of the Company's return will be derived from capital appreciation and any
dividend will be modest in the context of total long-term returns. The Board
is not proposing a dividend is paid for the year ended 30 June 2023 given the
opportunity provided to Shareholders, for those who wished to, to realise
their holding in the Company post the year end.
Performance in the year to 30 June 2023
During the twelve months the net asset value ("NAV") increased by 1.39% to
340.96p and the share price increased by 15.65% to 340.00p. At the year-end
the Company was in transition following the general meeting held on 26 June
2023 and 36.7% of net assets were invested in 11 different businesses, a
further 15.9% invested in gold bullion held through two ETFs, and 47.4% was in
cash net of other liabilities, together with a small number of other legacy
assets. The holdings as at 30 June 2023 are set out below. As part of the
process of changing to an investment manager the portfolio was substantially
converted into cash in July 2023 and has subsequently been invested in a
number of small and mid-cap companies in line with the new investment policy.
Income and expenses
Total expenses, including those that fell to be accounted for directly through
reserves, included considerable one-off costs in relation to the proposals put
to Shareholders at the General Meeting on 26 June 2023. The proposals were
structured in a manner which apportioned these costs fairly across both new
incoming Shareholders and those who redeemed their shares pursuant to those
proposals.
Board
As mentioned in my statement last year, Tom Cleverly stood down as a Director
at the Company's Annual General Meeting in October 2022. Subsequent to the
reorganisation of the shares and the appointment of Chelverton Asset
Management as Investment Manager to the Company on 26 July 2023, Michael Weeks
stood down from the Board. The Board wishes to record their deep appreciation
of both Tom and Michael's significant contribution to the Company since their
appointment
in November 2020 and wishes them both well in their future endeavours.
On 26 July 2023, we were delighted to welcome David Horner to the Board. His
deep knowledge and experience will be highly accretive as we serve to increase
the value of the Company.
Outlook
Whilst we start the Company's next chapter still as a modest sized investment
trust, the Company's assets are now being managed by an award-winning asset
manager in Chelverton, with a strong track record of creating value for
investors, whilst increasing the Company's' size. I look forward to working
with the Chelverton team as we look to maximise capital growth over the long
term by investing in high quality small and mid-cap companies.
I. R. Dighé
Chairman
4 October 2023
Investment Manager's Report
With the new Manager in place, the Company's new investment strategy is to
generate long-term capital growth for its Shareholders by investing in a
portfolio of small and mid-cap UK listed growth stocks, capturing the
well-publicised small cap outperformance effect. The characteristics the new
Manager looks for in their investments are companies that can grow faster than
the market through the economic cycle, that self-fund their organic growth
because they are cash generative and have high levels of revenue visibility.
The Manager has a 3-stage investment process. Firstly, deploying a
quantitative screen to identify growing companies which generate cash, have
low working capital intensity and have a sensible balance sheet. Secondly,
reviewing screened companies to better understand the business model,
predictability of sales, quality of management and sustainability of margins.
Finally, once an investment universe is formed from stages 1 and 2, the
Managers review a company's valuation (against their growth rate, margin and
sales visibility) to decide whether to include it in the portfolio.
The basic premise of the investment strategy is that if a company can grow
faster than the rest of the market and fund its own growth through its own
cashflow, then over time it should outperform the wider market. Chelverton has
successfully deployed this approach in its open-ended Growth fund since it
launched in 2014.
With small and mid-caps underperforming their large cap peers in the last
12-18 months, and UK equities trading at historic lows vs their global peers,
the Manager believes this is an excellent time, as we near the point of
maximum pain at the top of the interest rate cycle, to be deploying your
capital in a portfolio of attractive small and mid-cap growth stocks on
relatively low valuations to generate long-term capital growth for our
Shareholders.
With the legacy portfolio largely realised, the Manager has started to invest
in some of its favourite mid and small cap shares, which manifest the
characteristics referred to above. The initial focus has been on the more
liquid mid cap names, which the Manager feels are currently under-rated, with
the intention being to build up the smaller cap weighting over time as
opportunities present themselves at the right valuation.
Examples of new mid cap investments by the Company include:
1. Auction Technology Group ("ATG") - a leading provider of online
bidding services to auctioneers in the Art and Antiques and Industrial and
Commercial products segments in the USA and UK. An exceptionally high margin
business, ATG is benefitting from the trend of more bidding at auctions moving
online, with auctioneers benefitting from much wider audiences that can be
brought to them by accessing ATG's customer list. This growth is being
supplemented by a move into adjacent services for auctioneers and their
customers such as payments and delivery, significantly increasing the value
ATG can drive from its customer base of nearly 4,000 auctioneers.
2. Ascential - a media group, which owns an attractive group of high
margin assets with excellent revenue visibility including: (i) two major trade
shows, Cannes Lion, the leading global event for the marketing and advertising
industry, and Money2020, a leading FinTech show held annually in the USA and
Europe, (ii) WGSN, the leading subscription data provider for the fashion and
beauty industry, and finally (iii) a collection of digital commerce
businesses, which advise brands on how to position themselves on online retail
platforms. Management have initiated a de-merger process, which the Manager
feels should realise meaningful upside above its current undemanding
valuation.
3. Globaldata - another media business, which provides what it regards
as "gold standard" online data and analytics across a wide range of industry
sectors from a single platform. An annual subscription business with high
renewal rates gives Globaldata excellent cashflow and revenue visibility
characteristics. Already a high margin business, Globaldata is highly
operationally leveraged off a relatively fixed cost based and should continue
to see margins expand as it adds more customers to its 5,000 subscriber base.
At the smaller cap end of the market, the Manager has, amongst others, added
the following names:
1. Aquis Exchange - provides an equity trading exchange across most
European equity markets in competition with the national exchanges and
competitors like Turquoise. It has a disruptive "all you can eat" subscription
pricing model, which makes its offering very competitive relative to its
competition. It also sells its exchange software technology to non-competing
exchanges in other geographies and across other asset classes. It has also
acquired its own stock exchange - The Aquis Stock Exchange - for growth
companies. In the Manager's view Aquis has multiple opportunities for growth
across its trading platform, proprietary data and technology base.
2. Severfield - the UK's leading structural steel manufacturer (used in
commercial buildings, infrastructure projects and leisure facilities like
stadia) has an impeccable track record under its current management team. In
the Manager's view it is very lowly rated especially given the growth
potential offered by its joint venture with a local steel producer in the
large Indian construction market, which is just starting to shift from
concrete frames to steel structures.
3. Ebiquity - audits the effectiveness of advertisers' campaigns for
many of the leading global brands. New management have been productising and
automating many of the company's data driven solutions to improve both its own
operational and customers' marketing efficiency. In the Manager's view the low
rating currently accorded to this business does not give credit to its market
position with many of the world's leading global brands nor to its
profitability and growth prospects.
4. Restore - the second largest records storage business in the UK,
enjoying high levels of recurring revenues, has recently seen its share price
slump on the back of profit warnings relating to some of its ancillary
revenues, namely shredding, on the back of weaker paper recycling prices, and
IT asset destruction, as companies are holding on to their IT hardware assets
for longer as the economy slows. The subsequent de-rating in the Manager's
view materially undervalues the strength of the underlying records management
business.
Whilst the list above is not exhaustive, the examples given are designed to
give Shareholders an idea of the type of businesses the Manager is investing
in. Many of the companies are market leaders in their own space and are
generally high margin, have low capital intensity and above average prospects.
Due to the current economic backdrop and interest rate environment, they are
trading on depressed valuations, the like of which the Manager has not seen
for several years, so representing in the Manager's view an excellent time to
build a portfolio to generate long-term capital growth for Shareholders.
Chelverton Asset Management
4 October 2023
Portfolio and Assets
At 30 June 2023
Fair
value % of total net assets
Security Country Holding £
Hal Trust Netherlands 13,024 1,309,776 8.0
Imperial Oil Canada 20,000 805,803 5.0
Lucas Bols Netherlands 65,000 582,847 3.6
Emmi Switzerland 700 531,123 3.3
Agnico Eagle Mines Canada 13,000 511,043 3.1
Barrick Gold Canada 35,000 466,060 2.9
Cembre Italy 16,000 420,112 2.6
Bucher Industries Switzerland 1,200 416,740 2.6
Tonnellerie François Frères Group France 10,003 351,916 2.1
Nedap Netherlands 6,904 344,786 2.1
Bakkafrost Faroe Islands 5,000 235,701 1.4
Total equity participations 5,975,907 36.7
Invesco Physical Gold ETC UK 10,000 1,455,953 8.9
WisdomTree Physical Gold ETC UK 8,000 1,132,610 7.0
Total gold 2,588,563 15.9
Cash 8,282,426 50.9
Other liabilities net of other assets (576,092) (3.5)
Total cash less other net current liabilities 7,706,334 47.4
Total net assets 16,270,804 100.0
CORPORATE SUMMARY
The Company's purpose, values, strategy and culture
The Investment Company plc (the Company) is an investment trust company that
has a premium listing on the London Stock Exchange, its principal activity is
portfolio investment. The Company's wholly owned subsidiaries are Abport
Limited, an investment dealing company and New Centurion Trust Limited, an
inactive investment company (together the "Group").
The Company consists of the Board and its Shareholders and has no employees or
customers in the traditional sense. The culture of the Company is embodied in
the Board of Directors whose values are trust and fairness.
Investment Objective
At the Annual General Meeting on 4 November 2020, Shareholders voted to amend
the Company's Investment Objective and Policy to that shown below.
The Company's investment objective during the year was to protect the
purchasing power of its capital in real terms, and to participate in enduring
economic activities which lend themselves to genuine capital accumulation and
wealth creation.
At a General Meeting held on 26 June 2023, the members voted to amend the
Investment Objective to: maximise capital growth for Shareholders over the
long-term by investing in high-quality, quoted, UK small and mid-cap
companies.
Investment Policy
The Company's investment policy to 26 June 2023 was that the Company would
seek to acquire and hold, with no predetermined investment time horizon, a
collection of assets which, in the Directors' judgement, are well-suited to
the avoidance of a permanent loss of capital. These assets will be comprised
of minority participations in the equity, debt or convertible securities of
quoted businesses which the Directors believe are led by responsible and
like-minded managers and suitable for the long-term compounding of earnings.
In addition, to protect its capital as well as to maintain liquidity for
future investments, the Company will keep reserves in (a) liquid debt
instruments such as cash in banks or securities issued by governments and/or
(b) liquid, non-debt, tangible assets such as gold bullion, whether held
indirectly or in physical form.
The Company has no predetermined maximum or minimum levels of exposure to
asset classes, currencies or geographies, and has the ability to invest
globally. These exposures will be monitored by the Board in order to ensure an
adequate spreading of risks. No holding in an individual company or debt
instrument will represent more than 15% by value of the Company's total assets
at the time of acquisition (such restriction does not, however, apply to gold
bullion or cash balances). The Company's holdings of gold bullion may be as
high as 35% of total assets at the time of investment.
Given the Company's investment objective, asset mix and time horizon, the
portfolio will not seek to track any benchmark or index. The Company will not
invest more than 10% of its total assets in other listed closed-ended
investment funds. The Company will not use derivative instruments for
speculative purposes, nor will it use currency hedges to manage returns in any
currency.
The Company's gearing will not exceed 20% of net assets at the time of
drawdown.
With effect from 26 June 2023, the Company's investment policy will be as
follows: The Company intends to fulfil its investment objective through
investing in cash-generative quoted UK small and mid-cap companies that are
expected to grow faster than the UK stock market as a whole over the long term
and which can finance their own organic growth. The Company will primarily
invest in equity securities of companies with shares admitted to listing on
the Main Market, the AQSE or to trading on AIM with a market capitalisation of
less than £250 million at the time of investment. The Company may also invest
in companies with shares admitted to listing on the Main Market, the AQSE or
to trading on AIM with a market capitalisation of £250 million or more at the
time of investment for liquidity purposes. The Company will identify
prospective companies through a formal quantitative and qualitative screening
process which focuses on criteria such as the ability to convert a high
proportion of profit into cash, sustainable margins, limited working capital
intensity and a strong management team. Companies that successfully pass the
screening process will form part of the Company's 'investable universe' of
prospective companies.
The Company has not set any limits on sector weightings within the portfolio
but its exposures to sectors and stocks will be reported to, and monitored by,
the Board in order to ensure that adequate diversification is achieved. The
Company will maintain a diversified portfolio of a minimum of 60 holdings in
UK small and mid-cap companies.
The Company may also invest in cash, cash equivalents, near cash instruments
and money market instruments.
The Company will apply the following restrictions on its investments:
• not more than 10% of the Company's Gross Assets at the time of investment
will be invested in the securities of a single issuer;
• no investment will be made in companies that are not listed or traded on
the Main Market, the AQSE or AIM at the time of investment, nor in any
companies which have not applied for their shares to be admitted to listing or
trading on these markets;
• no investment will be made in other listed or unlisted closed-ended
investment funds or in any open-ended investment funds; and
• the Company will not invest directly in FTSE 100 companies (preference
shares, loan stocks or notes, convertible securities or fixed interest
securities or any similar securities convertible into shares), nor will it
invest in the securities of other investment trusts or in unquoted companies.
The Company may, on some occasions, hold such investments as a result of
corporate actions by investee companies. If the Company holds shares in a
company which enters the FTSE 100, it may not immediately divest of those
shares but will do so when it considers appropriate, subject to market
conditions.
The Company may hold assets acquired by the Company prior to the adoption of
its investment policy for which there is no market and whose value the Company
has written down to zero. The Company shall dispose of such assets as soon as
is reasonably practicable.
No material change will be made to the investment policy without the approval
of Shareholders by ordinary resolution.
Principal Risks and Uncertainties
The management of the business and the execution of the Company's strategy are
subject to a number of risks. A robust assessment of the principal risks to
the Group and Company has been carried out, including those that would
threaten its business model, future performance, solvency and liquidity.
The current economic environment including the level of inflation, rising
interest rates and the conflict in Ukraine continue to have an effect on both
global and domestic economies. These events are all being closely monitored by
the Board as is the potential impact on the Company.
The Group's principal risks are set out below. An explanation of how these
have been mitigated or managed is also provided, where appropriate.
The key business risks affecting the Group are:
Risk Mitigation
Business risk The profitability, market positioning and outlook for companies in which the The Company looks to invest in businesses that can demonstrate resilient
Company is invested may decline or fail to make expected progress. This may be characteristics and a shared philosophy around long term creation of value.
because of internal factors at the investee company or external factors such
as competitive pressures, economic downturns or political events.
Concentration risk The Company has too much exposure to one stock of sector. Under the new investment policy, from 26 July 2023 investments in any one
company shall not exceed 10% of the Company's gross assets at the time of
acquisition.
Monetary risk The widespread implications of quantitative easing and other monetary The Company looks to own a portfolio of assets that possess an enduring real
policies, which include mounting inflationary pressure, pose a risk to the value whether from the value of the underlying assets in an investment, or in
real value of the Company's assets. the investee's ability to create an enduring profit stream.
Operational risk The Company is reliant on service providers including, ISCA Administration The Board formally reviews the Company's service providers on an annual basis.
Services Limited as Administrator and Company Secretary, and Fiske plc as
Custodian. Failure of the internal control systems of these parties could
result in losses to the Company.
There are other risks that are becoming more prominent but are not yet
considered key risks.
Global conflict
The continuing war between Russia and Ukraine has had a significant impact,
inter alia, on inflation and, in conjunction with affairs in China, an impact
on supply chains and globalisation. Investee companies will vary as to the
impact on them and their ability to adapt.
Inflationary pressure
Inflation has escalated sharply in the last 12 months and the Bank of England
has raised interest rates on several occasions in an attempt to reduce the
level of inflation. Not all investee companies are well-placed to pass on cost
pressures to their customers. In addition, for the Company, it is expected
that operating costs will rise more than dividend income.
In addition, there are other risks that may materially impact the Company;
however the likelihood thereof is considered small.
Foreign currency risk
Under the investment policy in operation during the year the Company was
invested in stocks in overseas markets dominated in foreign currencies thus
increasing the foreign currency risk. However, as discussed under Post Balance
Sheet Events in Note 19, the policy approved at the General Meeting on 26 June
2023 means that, going forward, the Company will only invest in UK stocks.
Regulatory risk
The Company operates in an evolving regulatory environment and faces a number
of regulatory risks. A breach of sections 1158/1159 of the Corporation Tax Act
2010 would result in the Company being subject to capital gains tax on
portfolio investments. Breaches of other regulations, including the Companies
Act 2006, the United Kingdom Listing Authority ("UKLA") Listing Rules, the
UKLA Disclosure Guidance and Transparency Rules, or the Alternative Investment
Fund Managers' Directive, could lead to a detrimental outcome. Breaches of
controls by service providers to the Company could also lead to reputational
damage or loss. The Board monitors compliance with regulations, with reports
from the Administrator.
Discount volatility
The Company's shares may trade at a price which represents a discount to its
underlying NAV.
Market price risk
The Board monitors the prices of financial instruments held by the Company on
a regular basis. In addition, it is the Board's policy to hold an appropriate
spread of investments in the portfolio in order to reduce risks arising from
investment decisions and investment valuations. The Board actively monitors
market prices throughout the year and meets regularly in order to review
investment strategy. Most of the equity investments held by the Company are
listed on a recognised Stock Exchange.
Liquidity risk
The Company's assets mainly comprise readily realisable quoted securities that
can be sold to meet funding commitments if necessary.
Credit risk
The failure of a counterparty to a transaction to discharge its obligations
under that transaction that could result in the Company suffering a loss.
Normal delivery versus payment practice and review of counterparties and
custodians by the Board mean that this is not a significant risk.
Interest rate risk
Given the changes in the portfolio in November 2020 this is not considered a
significant risk other than through its effect on investee companies.
Performance
Details of the Company's performance during the financial year are provided in
the Chairman's Statement and in the financial statements below
.
Key Performance Indicators ("KPIs")
The Board reviews performance by reference to a number of KPIs and considers
that the most relevant KPIs are those that communicate the financial
performance and strength of the Group as a whole. The Board and Investment
Manager monitor the following KPIs:
- NAV performance
The NAV per ordinary share at 30 June 2023 was 340.96p per share (2022:
336.30p). The total return of the NAV was 1.39% (2022: -1.43)%.
- Discount of share price in relation to NAV
Over the year to 30 June 2023, the Company's share price moved from trading at
a discount of 12.58% to a discount of 0.28%.
- Ongoing Charges Ratio
The Ongoing Charges Ratio for the year to 30 June 2023 amounted to 2.39%
(2022: 2.17%).
Going Concern
In accordance with the Financial Reporting Council's guidance on going
concern, the Directors have undertaken a review of the Company's ability to
continue as a going concern.
The Directors believe that the Company is well placed to manage its business
risks and that the assets of the Company consist mainly of securities which
are readily realisable. The Directors are of the opinion that the Group has
adequate resources to continue in operational existence for the foreseeable
future and that it is therefore appropriate to adopt the going concern basis
in preparing the financial statements. In arriving at this conclusion, the
Directors have considered the liquidity of the portfolio and reviewed cash
flow forecasts showing the ability of the Company to meet obligations as they
fall due for a period of at least 12 months from the date that these financial
statements were approved.
In addition, the Directors have regard to ongoing investor interest in the
sustainability of the Company's business model and in the continuation of the
Company, specifically being interested in feedback from meetings and
conversations with Shareholders.
In addition to considering the principal risks shown above and the financial
position of the Company as described above, the Board has also considered the
following further factors:
• the Board continues to adopt a long-term view when making investments;
• regulation will not increase to a level that makes the running of the
Company uneconomical; and
• the performance of the Company will be satisfactory and should performance
be less than the Board deem acceptable it has the powers to take appropriate
action.
Viability Statement
Over the Company's life it has experienced a number of significant social and
economic events impacting world history. The level of inflation, rising
interest rates and the conflict in Ukraine are the latest events impacting not
just this Company but all commercial entities. The change in Investment Policy
and the decision as supported by Shareholders during the year demonstrates the
viability of the Company as a vehicle for delivering investment performance to
Shareholders. The Board's analysis is based on the performance and progress of
the Company and its investment portfolio, an assessment of current and future
risks, the appropriateness of the investment strategy and review of the
financial position of the Company, and operating expenses over the next two
years. In addition, consultation with key Shareholders as to their
perspectives is a key consideration.
The Directors also consider viability in the context of the Company being a
going concern and it being appropriate that the accounts are prepared on such
a basis. This is elaborated in Note 1 to the financial statements.
Future Prospects
The future of the Company is dependent upon the success of the investment
strategy. The outlook for the Company is discussed in the Chairman's Statement
above.
Board Diversity
When recruiting a new Director, the Board's policy is to appoint individuals
on merit matched against the skill requirements identified by the Board. The
changes to the Board during the reporting period were driven from the
re-structuring undertaken and voted on by Shareholders including David Horner
joining the Board as a representative of the newly appointed Investment
Manager.
The Board believes diversity is important in bringing an appropriate range of
skills, knowledge and experience to the Board and gives this consideration
when recruiting new Directors and has also noted the requirements of Listing
Rule 9.8.6R (9) following the Parker Report on increasing the diversity on the
boards of public companies. As at 30 June 2023, there were four male Directors
on the Board. All Directors identified themselves as Caucasian by ethnic
background. As disclosed in Note 19, Michael Weeks stepped down as a Director
on 26 July 2023 with David Horner appointed as a Director on the same day.
When making appointments in the future the Board will continue to operate an
open-minded approach to recruitment without restrictions against any perceived
group or individual. The Board will take into consideration the diversity
targets set by Listing Rule 9.8.6R (9) when making future appointments,
however due to the size of the Board, meeting a target of 40% of Directors
being women, with one in a senior Board position, and one individual being
from a minority ethnic background may not be reached in the immediate future.
The Company does not have any employees other than Directors and, as a result,
the Board does not consider it necessary to establish means for employee
engagement with the Board as required by the latest version of the UK
Corporate Governance Code
Section 172(i) Statement
Section 172(i) of the Companies Act 2006, requires Directors to take into
consideration the interests of stakeholders in their decision making. The
Directors continue to have regard to the interests of, and the impact of the
firm's activities on, the various stakeholders in the firm and to consider
what is most likely to promote the success of the Company for its members in
the long term.
Whilst the importance of giving due consideration to our stakeholders is not
new, S172 requires that the Board elaborates how it discharges its duties in
this respect. We have categorised our key stakeholders into two groups. Where
appropriate, each group is considered to include both current and potential
stakeholders:
· Shareholders
· Administrator and other service providers
Shareholders
Our Shareholders are of course the owners of the Company and we need to act
fairly as between members of the Company.
During the year the Board considered the size of the Company and after
consultation with Shareholders made the following proposals to Shareholders:
1. To offer existing Shareholders an exit from the Company via a Tender Offer.
2. To announce an Offer for Subscription to enable new Shareholders to
subscribe for new shares in the Company.
3. To change the Investment Objective and Policy.
4. To appoint Chelverton Asset Management as Investment Manager.
5. To cancel the share premium account and capital redemption reserve.
The proposals were approved by Shareholders at a General Meeting on 26 June
2023. Further details are given in Note 19.
We have a regular dialogue with our key Shareholders - but all are welcome to
be in communication. All Shareholders are encouraged to attend our Annual
General Meeting.
Investment Manager
As part of the changes as stated above and in Note 19, Chelverton Asset
Management were appointed as Investment Manager on 26 July 2023. Details of
the Investment Management Agreement are given in Note 3.
Administrator and other service providers
The Board seeks to maintain constructive liaison with its service providers so
as to optimise the way in which the Company's needs are met. ISCA
Administration Services acted as Company Secretary and Administrator during
the year and worked with the Directors to ensure the Company continued to
operate efficiently.
Environmental, Human Rights, Employee, Social and Community Issues
The Board consists entirely of Non-Executive Directors and during the year the
Company had no employees. The Company has no direct impact on the community or
the environment, and as such has no environmental, human rights, social or
community policies. In carrying out its investment activities and in
relationships with suppliers, the Company aims to conduct itself responsibly,
ethically and fairly.
Environmental, Social and Governance factors are considered as part of
commercial evaluation of investee companies.
The Strategic Report has been approved by the Board of Directors.
On behalf of the Board
I. R. Dighé
Chairman
4 October 2023
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
· the Group and Company financial statements, which have been
prepared in accordance with UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006 and, for the Group,
UK adopted international accounting standards give a true and fair view of the
assets, liabilities, financial position and profit of the Group and Company;
· the Annual Report includes a fair review of the development and
performance of the business and the position of the Group and Company together
with a description of the principal risks and uncertainties faced by the Group
and Company; and
· the Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
Shareholders to assess the position and performance, business model and
strategy of the Group and Company.
On behalf of the Board
I. R. Dighé
Chairman
4 October 2023
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2023
Year ended 30 June 2023 Year ended 30 June 2022
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Gains/ (losses) on investments at fair value through profit or loss 8 - 876,505 876,505 - (227,992) (227,992)
Exchange gains on capital items - 798 798 - 2,583 2,583
Investment income 2 303,475 - 303,475 371,956 - 371,956
Investment management fee 3 - - - - - -
Other expenses 4 (396,562) - (396,562) (355,618) - (355,618)
(Loss)/return before taxation (93,087) 877,303 784,216 16.338 (225,409) (209,071)
Taxation 5 (45,020) - (45,020) (39,554) - (39,554)
Total (loss)/income after taxation (138,107) 877,303 739,196 (23,216) (225,409) (248,625)
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
(Loss)/return on total income after taxation per 50p ordinary share - basic 6 (2.89) 18.38 15.49 (0.49) (4.72) (5.21)
& diluted
The total column of this statement is the Income Statement of the Group
prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006. The supplementary revenue and
capital columns are prepared in accordance with the Statement of Recommended
Practice ("AIC SORP") issued in July 2022 by the Association of Investment
Companies.
The Group did not have any income or expense that was not included in total
income for the year. Accordingly, total income is also total comprehensive
income for the year, as defined by IAS 1 (revised) and no separate Statement
of Comprehensive Income has been presented.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year.
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2023
Ordinary share Share Capital redemption reserve Capital Revenue Total
capital premium £ reserve reserve £
£ £ £ £
Balance at 1 July 2022 2,386,025 4,453,903 2,408,820 8,185,191 (1,385,748) 16,048,191
Total comprehensive income
Net return/(loss) for the year - - - 877,303 (138,107) 739,196
Transactions with Shareholders recorded directly to equity
Tender Offer costs (Note 19) * - - - (516,583) - (516,583)
Balance at 30 June 2023 2,386,025 4,453,903 2,408,820 8,545,911 (1,523,855) 16,270,804
Balance at 1 July 2021 2,386,025 4,453,903 2,408,820 8,410,600 (1,377,544) 16,281,804
Total comprehensive income
Net loss for the year - - - (225,409) (23,216) (248,625)
Transactions with Shareholders recorded directly to equity
Ordinary dividends (note 7) - - - - 15,012 15,012
Balance at 30 June 2022 2,386,025 4,453,903 2,408,820 8,185,191 (1,385,748) 16,048,191
* These costs relate to the Tender Offer as discussed in Note 19. As
Shareholders approved the proposals in a General Meeting on 26 June 2023, the
Directors feel it appropriate to accrue for the costs considered unavoidable
in the year. As the share premium account was in the process of being
cancelled at the year end, the costs have been charged against the capital
reserve.
The notes below form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2023
Ordinary share Preference share Share Capital redemption reserve Capital Revenue Total
capital capital premium £ reserve reserve £
£ £ £ £ £
Balance at 1 July 2022 2,386,025 858,783 4,453,903 2,408,820 5,626,497 1,128,452 16,862,480
Total comprehensive income
Net return/(loss) for the year - - - - 340,885 (124,976) 215,909
Transactions with Shareholders recorded directly to equity
Tender Offer costs 9 (Note 19) * - - - - (516,583) - (516,583)
Preference share dividends paid - - - - - (172) (172)
Balance at 30 June 2023 2,386,025 858,783 4,453,903 2,408,820 5,450,799 1,003,304 16,561,634
Balance at 1 July 2021 2,386,025 858,783 4,453,903 2,408,820 5,852,000 1,122,327 17,081,858
Total comprehensive income
Net loss for the year - - - - (225,503) (8,715) (234,218)
Transactions with Shareholders recorded directly to equity
Ordinary dividends (note 7) - - - - - 15,012 15,012
Preference share dividends paid - - - - - (172) (172)
Balance at 30 June 2022 2,386,025 858,783 4,453,903 2,408,820 5,626,497 1,128,452 16,862,480
The notes below form part of these financial statements.
CONSOLIDATED BALANCE SHEET
As at 30 June 2023
30 June 30 June
2023 2022
Notes £ £
Non-current assets
Investments held at fair value through profit or loss 8 8,564,470 15,445,243
Current assets
Trade and other receivables 11 25,068 30,358
Cash and cash equivalents 8,282,426 678,592
8,307,494 708,950
Current liabilities
Trade and other payables 12 (601,160) (106,002)
(601,160) (106,002)
Net current assets 7,706,334 602,948
Net assets 16,270,804 16,048,191
Capital and reserves
Ordinary share capital 13 2,386,025 2,386,025
Share premium 4,453,903 4,453,903
Capital redemption reserve 2,408,820 2,408,820
Capital reserve 8,545,911 8,185,191
Revenue reserve (1,523,855) (1,385,748)
Shareholders' funds 16,270,804 16,048,191
NAV per 50p ordinary share 15 340.96p 336.30p
These financial statements were approved by the Board on 4 October 2023 and
were signed on its behalf by:
I. R. Dighé
Chairman
Company Number: 0004205
The notes below form part of these financial statements.
COMPANY BALANCE SHEET
As at 30 June 2023
30 June 30 June
2023 2022
Notes £ £
Non-current assets
Investments held at fair value through profit or loss 8 8,564,470 15,444,619
Investment in subsidiaries 9 326,277 862,656
8,890,747 16,307,275
Current assets
Trade and other receivables 11 80,759 89,097
Cash and cash equivalents 8,281,759 663,863
8,362,518 752,960
Current liabilities
Trade and other payables 12 (691,631) (197,755)
(691,631) (197,755)
Net current assets 7,670,887 555,205
Net assets 16,561,634 16,862,480
Capital and reserves
Ordinary share capital 13 2,386,025 2,386,025
Preference share capital 14 858,783 858,783
Share premium 4,453,903 4,453,903
Capital redemption reserve 2,408,820 2,408,820
Capital reserve 5,450,799 5,626,497
Revenue reserve 1,003,304 1,128,452
Shareholders' funds 16,561,634 16,862,480
As permitted by section 408 of the Companies Act 2006, the Company has not
presented its own Income Statement. The amount of the Company's return for the
financial year dealt with in the financial statements of the Group is a gain
after tax of £215,909 (2022: loss of £234,218).
These financial statements were approved by the Board on 4 October 2023 and
were signed on its behalf by:
I. R. Dighé
Chairman
Company Number: 0004205
The notes below form part of these financial statements.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
For the year ended 30 June 2023
Group Company
30 June 30 June 30 June 30 June
2023 2022 2023 2022
Notes £ £ £ £
Cash flows used in operating activities
Income received from investments 303,114 342,923 303,114 342,923
Interest received 6,451 38 6,451 38
Overseas taxation paid (46,539) (29,350) (46,539) (29,350)
Investment management fees paid - (1,678) - (1,678)
Other cash payments (382,266) (347,995) (370,586) (335,407)
Net cash used in operating activities (119,240) (36,062) (107,560) (23,474)
Cash flows used in financing activities
Tender offer expenses paid 19 (35,000) - (35,000) -
Net cash used in financing activities (35,000) - (35,000) -
Cash flows generated from investing activities
Purchase of investments 8 (3,412,011) (3,580,745) (3,412,011) (3,580,745)
Sale of investments 8 11,174,206 3,748,933 11,173,539 3,748,933
Loans to subsidiaries - - 3,049 (12,588)
Net cash generated from investing activities 7,762,195 168,188 7,764,577 155,600
Net increase in cash and cash equivalents 7,607,955 132,126 7,622,017 132,126
Reconciliation of net cash flow to movement in net cash
Increase in cash 7,607,955 132,126 7,622,017 132,126
Exchange rate movements (4,121) 5,666 (4,121) 5,666
Increase in net cash 7,603,834 137,792 7,617,896 137,792
Net cash at start of period 678,592 540,800 663,863 526,071
Net cash at end of period 8,282,426 678,592 8,281,759 663,863
Analysis of net cash
Cash and cash equivalents 8,282,426 678,592 8,281,759 663,863
8,282,426 678,592 8,281,759 663,863
The notes below form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2023
1. Accounting policies
Basis of Preparation
The Company is a public limited company limited by shares and incorporated and
registered in England and Wales. The Company has been approved as an
investment trust within the meaning of sections 1158/1159 of the Corporation
Tax Act 2010. The Company's registered office is Suite 8, Bridge House,
Courtenay Street, Newton Abbot, Devon TQ12 2QS.
The Group's consolidated financial statements for the year ended 30 June 2023,
which comprise the audited results of the Company and its wholly owned
subsidiaries, Abport Limited and New Centurion Trust Limited (together
referred to as the "Group"), have been prepared in accordance with UK adopted
international accounting standards and in accordance with the requirements of
the Companies Act 2006. The annual financial statements have also been
prepared in accordance with the AIC Statement of Recommended Practice issued
in July 2022 ("AIC SORP"), except to any extent where it is not consistent
with the requirements of UK IFRS.
In order to better reflect the activities of an investment trust company and
in accordance with guidance issued by the AIC, supplementary information which
analyses the Income Statement between items of a revenue and capital nature
have been prepared alongside the Income Statement.
The financial statements are presented in Pounds Sterling, which is the
Group's functional currency as the UK is the primary environment in which it
operates.
Going Concern
The Directors have made an assessment of the Group's ability to continue as a
going concern. This has included consideration of the reconstruction in July
2023 as discussed in the Post Balance Sheet events note 19, portfolio
liquidity, the Group's financial position in respect of its cash flows and
investment commitments (of which there are none of significance), the working
arrangements of key service providers, continued eligibility to be approved as
an investment trust company and the impact of the current economic environment
and the conflict in Ukraine. In addition, the Directors are not aware of any
material uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern.
The Directors are satisfied that the Group has the resources to continue in
business for the foreseeable future being a period of at least 12 months from
the date that these financial statements were approved. Therefore, the
financial statements have been prepared on the going concern basis.
Basis of Consolidation
IFRS10 stipulates that subsidiaries of Investment Entities are not
consolidated. The Investment Company meets all three characteristics of
Investment Entity as described, however, it is envisaged that one of the
subsidiaries will be a dealing subsidiary and, therefore consolidated
financial statements are presented for the Group. The financial statements of
the subsidiaries are prepared for the same reporting year as the parent
Company, using consistent accounting policies. All inter-company balances and
transactions, including unrealised profits arising from them are eliminated.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being investment business. During the year the Group primarily
invested in companies listed in the UK, Continental Europe and North America.
As part of the change of investment policy, adopted on 26 June 2023, going
forward the Group will primarily invest in the UK.
Accounting Developments
The following relevant accounting standards and their amendments were in issue
at the year end but will not be in effect until after this financial year.
International Accounting
Standards
Effective date*
IAS 1 (Amendments) Presentation of Financial
Statements 1 January 2023
regarding
classification of liabilities
IAS 1 (Amendments) Presentation of Financial
Statements 1 January 2023
regarding the
amendments of disclosure of accounting policies
IAS 8 (Amendments) Accounting Policies, Changes in
Accounting
Estimates and Error to
distinguish between accounting policies
and accounting
estimates
1 January 2023
*Years beginning on or after
The Directors do not expect that the adoption of the standards listed above
will have a material impact on the financial statements of the Group or
Company in future periods.
Critical Accounting Judgments and Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and the reported amounts in the Balance Sheet, the
Consolidated Income Statement and the disclosure of contingent assets and
liabilities at the date of the financial statements. The estimates and
associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making judgements about carrying values of
assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are based on historical experience
and other factors that are considered to be relevant. These are reviewed on an
ongoing basis. Actual results may differ from these estimates. Revisions to
accounting estimates are recognised in the period in which the estimate is
revised if the revision affects only that period or in the period of the
revision and future period if the revision affects both current and future
periods.
The major part of the investment portfolio is valued by reference to quoted
prices. However, the Board assesses the portfolio for any investments which it
considers the value has fallen permanently below cost. Any such loss is
treated as a permanent impairment and as a realised loss, even though the
investment is still held.
In addition, the portfolio comprises some legacy holdings of fixed interest
stocks which are thinly traded; such stocks are primarily valued by reference
to current market price lists provided by an independent broker, itself a
recognised leader in such preference share and similar fixed interest stocks.
The Directors may overlay such prices with situation specific adjustments
including (a) taking a second independent opinion on a specific stock, or (b)
reducing the value to a net present value, to reflect the likely time to be
taken to realise a stock which the Group is actively looking to sell. At 30
June 2023 these were valued at nil. The outturn is reflected in the valuations
set out in Note 8 to the financial statements.
There were no other significant accounting estimates or significant judgements
in the current or previous year.
Investments
As the Group's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth,
Investments are classified at fair value through profit or loss on initial
recognition in accordance with IFRS 9. The portfolio of financial assets is
managed and its performance evaluated on a fair value basis, in accordance
with a documented investment strategy, and information about the portfolio is
provided internally on that basis to the Group's Board of Directors.
Investments are measured initially, and at subsequent reporting dates, at fair
value, and derecognised at trade date where a purchase or sale is under a
contract whose terms require delivery within the time-frame of the relevant
market. For quoted investments this is deemed to be bid market prices or
closing prices.
Changes in fair value of investments and realised gains and losses on disposal
are recognised in the Consolidated Income Statement as capital items. The
holdings of the investment in subsidiaries are stated at cost less diminution
in value. All investments for which fair value is measured or disclosed in the
financial statements are categorised within the fair value hierarchy in Note
8.
Foreign Currency
Transactions denominated in foreign currencies are converted to Pounds
Sterling at the actual exchange rate as at the date of the transaction. Items
that are denominated in foreign currencies at the year end are reported at the
rate of exchange at the Balance Sheet date. Any gain or loss arising from a
change in exchange rate subsequent to the date of the transaction is included
as an exchange gain or loss in the capital reserve or the revenue account
depending on whether the gain or loss is of a capital or revenue nature.
Cash and Cash Equivalents
Cash comprises cash at bank and demand deposits. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to insignificant risk of changes in
value.
For the purpose of the Cash Flow Statement, cash and cash equivalents consist
of cash and cash equivalents as defined above.
Current Assets
Current assets are initially recognised at cost and subsequently measured at
amortised cost and balances revalued for exchange rate movement. Current
assets comprise debtors, prepayments and cash and are subject to review for
impairment at least at each reporting date.
Current Liabilities
Current liabilities are initially recognised at cost and subsequently measured
at amortised cost and balances revalued for exchange rate movement. Current
liabilities comprise accruals and other creditors and are subject to review
for impairment at least at each reporting date.
Income
Dividends receivable on quoted equity shares are taken to revenue on an
ex-dividend basis. Dividends receivable on equity shares where no ex-dividend
date is quoted are brought into account when the Company's right to receive
payment is established. Fixed returns on non-equity shares are recognised on a
time-apportioned basis.
Dividends from overseas companies are shown gross of any non-recoverable
withholding taxes which are disclosed separately in the Consolidated Income
Statement.
Dividend income will only be recognised when there is reasonable certainty
that the issuer has the ability to make the return.
Expenses and Finance Costs
All expenses and finance costs are accounted for on an accruals basis.
Taxation
The tax expense represents the sum of the tax currently payable. The tax
payable is based on the taxable profit for the year. Taxable profit differs
from net profit as reported in the Consolidated Income Statement because it
excludes items that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates applicable at the Balance Sheet
date.
No taxation liability arises on gains from sales of fixed asset investments by
the Group by virtue of its investment trust status. However, the net revenue
(excluding UK dividend income) accruing to the Group is liable to corporation
tax at the prevailing rates.
Dividends Payable to Shareholders
Dividends to Shareholders are recognised as a liability in the period in which
they are paid or approved in general meetings and are taken to the Statement
of Changes in Equity. Dividends declared and approved by the Company after the
Balance Sheet date have not been recognised as a liability of the Company at
the Balance Sheet date.
Share Capital
Issued share capital consists of ordinary shares with voting rights and issued
preference shares which are non-voting. The issued preference shares, owned in
their entirety by New Centurion Trust Limited, a wholly-owned subsidiary of
the Company, are entitled to receive a cumulative dividend of 0.01p per share
per annum, and are entitled to receive their nominal value, 50p, on a
distribution of assets or a winding up.
Share Premium
The share premium account represents the accumulated premium paid for shares
issued in previous periods above their normal value less issue expenses. This
is a reserve forming part of non-distributable reserves. The following items
are taken to this reserve:
· costs associated with the issue of equity; and
· premium on the issue of shares.
Capital Redemption Reserve
The reserve represents the nominal value of the shares bought back and
cancelled. This reserve is not distributable.
Capital Reserve
Capital expenses, gains or losses on realisation of investments held at fair
value through profit or loss and changes in fair value of investments are
transferred to the capital reserve.
The following are taken to this reserve:
· gains and losses on the disposal of investments;
· net movement arising from changes in the fair value of investments held and
subsidiaries and classified as at "fair value through profit or loss";
· exchange differences of a capital nature;
· expenses together with the related taxation effect, allocated to this
reserve in accordance with the above policies; and
· the cost of the Tender Offer as discussed in Note 19.
Realised gains on investments less expenses, provisions and unrealised gains
may be considered by the Board for distribution. This reserve is not
distributable.
Revenue Reserves
The net revenue for the year is transferred to the revenue reserve and
dividends paid are deducted from the revenue reserve.
The revenue reserve represents the surplus accumulated profits and is
distributable.
2. Income
Year ended Year ended
30 June 2023 30 June 2022
£ £
Income from investments:
UK dividends 52,082 122,508
Unfranked dividend income (including scrip dividends): 244,942 258,224
UK fixed interest - (8,814)
297,024 371,918
Other income
Bank deposit and other interest 6,451 38
Total income 303,475 371,956
3. Investment management fee
Year ended Year ended
30 June 2023 30 June 2022
£ £
Investment management fee - -
The Company has been self-managed since 4 November 2020.
Following completion of the Tender Offer, on 26 July 2023 Chelverton Asset
Management was appointed as Investment Manager.
The Investment Manager will be entitled to an annual fee of 0.75% of the Net
Asset Value. To the extent that the ongoing charges ratio exceeds 2% the
Investment Manager has waived the management fee and shall instead make a
contribution to the Company to ensure that the ongoing charges ratio does not
exceed 2%.
4. Other expenses
Year ended Year ended
30 June 2023 30 June 2022
£ £
Administration and secretarial services 85,000 85,000
Auditors' remuneration for:
- Audit of the Group's financial statements 46,300 38,900
Directors' remuneration (see note 18) 86,667 100,000
Other expenses 178,595 131,718
Total expenses 396,562 355,618
The audit of the Group's financial statements includes the cost of the audit
of Abport Limited of £3,800 (2022: £3,300) and New Centurion Trust Limited
£3,800 (2022: £3,300), which are charged to the subsidiaries.
The Directors were the Group and Company's only employees in the current and
comparative period.
5. Taxation
Year ended 30 June 2023 Year ended 30 June 2022
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Current Taxation - - - - - -
Overseas taxation suffered 45,020 - 45,020 39,554 - 39,554
45,020 - 45,020 39,554 - 39,554
The current tax charge for the year is higher than (2022: higher than) the
standard rate of corporation tax in the UK of 20.5%. The differences are
explained below:
Year ended 30 June 2023 Year ended 30 June 2022
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Return on ordinary activities (93,087) 877,303 784,216 16,338 (225,409) (209,071)
Tax at UK Corporation tax rate of 20.5% (2022:19%) (19,083) 179,847 160,764 3,104 (42,828) (39,724)
Effects of:
UK dividends that are not taxable (10,677) - (10,677) (23,277) - (23,277)
Overseas dividends that are not taxable (11,172) - (11,172) (11,537) - (11,537)
Non-taxable investment (gains)/ losses - (179,847) (179,847) - 42,828 42,828
Overseas taxation suffered 45,020 - 45,020 39,554 - 39,554
Unrelieved expenses 40,932 - 40,932 31,710 - 31,710
Actual current tax charged to the revenue account 45,020 - 45,020 39,554 - 39,554
Factors that may affect future tax charges
The Company has excess management expenses of £2,523,199 (2022: £2,323,531).
It is unlikely that the Company will generate sufficient taxable income in the
future to use these expenses to reduce future tax charges and therefore no
deferred tax asset has been recognised.
Deferred tax is not provided on capital gains and losses arising on the
revaluation or disposal of investments because the Company meets (and intends
to continue for the foreseeable future to meet) the conditions for approval as
an investment trust company under HMRC rules.
On 3 March 2021, the UK government announced that it intended to increase the
main rate of corporation tax to 25% for the financial years beginning 1 April
2023. This new rate was substantively enacted by Finance Act 2021 on 10 June
2021.
6. Return per Ordinary Share
Returns per share are based on the weighted average number of shares in issue
during the year. Normal and diluted returns per share are the same as there
are no dilutive elements on share capital.
Year ended 30 June 2023 Year ended 30 June 2022
Revenue Capital Total Revenue Capital Total
(Loss) /return after taxation attributable to ordinary Shareholders (£) (138,107) 877,303 739,196 (23,216) (225,409) (248,625)
Weighted average number of ordinary shares in issue (excluding 4,772,049 4,772,049
shares held in Treasury)
(Loss)/return per ordinary share (2.89) 18.38 15.49 (0.49) (4.72) (5.21)
basic and diluted (pence)
7. Dividends per Ordinary Share
Amounts recognised as distributions to equity holders in the year.
Year ended 30 June Year ended 30 June
2023 2022
£ £
Unclaimed dividends in respect of prior periods clawed back after 12 years - (15,012)
Total - (15,012)
No dividend will be declared in respect of the year under review.
8. Investments
Group Company
2023 2022 2023 2022
£ £ £ £
Opening book cost 15,087,359 15,354,823 15,107,651 15,375,115
Opening net investment holding gains 357,884 264,041 336,968 243,219
Opening valuation 15,445,243 15,618,864 15,444,619 15,618,334
Movements in the year:
Purchases at cost 3,439,089 3,443,998 3,439,089 3,443,998
Sales proceeds (11,196,367) (3,389,627) (11,195,700) (3,389,627)
Realised gains on sales 793,589 219,171 826,631 219,171
Permanent diminution * - (541,006) - (541,006)
Unrealised gains in the year 82,916 93,843 49,831 93,749
Closing valuation 8,564,470 15,445,243 8,564,470 15,444,619
Being:
Book cost 8,123,670 15,087,359 8,177,670 15,107,651
Net investment holding gains 440,800 357,884 386,800 336,968
8,564,470 15,445,243 8,564,470 15,444,619
* The Company provided for a permanent diminution in the value of its holding
in Lukoil GDR.in year ended 30 June 2022
Group Company
Summary of capital gains/(losses) 2023 2022 2023 2022
£ £ £ £
Realised gains on sales 793,589 219,171 826,631 219,171
Permanent diminution - (541,006) - (541,006)
Unrealised gains in the year 82,916 93,843 49,831 93,749
876,505 (227,992) 876,462 (228,086)
Transaction costs
Group Company
2023 2022 2023 2022
£ £ £ £
Costs on purchases 5,734 7,339 5,734 7,339
Costs on sales 21,680 5,405 21,592 5,405
27,414 12,744 27,326 12,744
Reconciliation of cash movements in investment transactions
The difference between the purchases in note 8 of £3,439,089 and that shown
in the Cash Flow Statement above is £27,078 which is represented by the scrip
dividend in Hal Trust of £27,249 and an exchange loss of £171.
The difference between the sales proceeds in note 8 of £11,169,367 and that
shown in the Cash Flow Statement above is £4,839 which is represented by an
exchange loss of £4,839.
Fair Value Hierarchy
Fair value is the amount at which an asset could be sold in an ordinary
transaction between market participants at the measurement date, other than a
forced or liquidation sale. The Group measures fair values using the following
hierarchy that reflects the significance of the inputs used in making the
measurements.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset as follows:
Level 1 - valued using quoted prices, unadjusted in active markets for
identical assets and liabilities.
Level 2 - valued by reference to valuation techniques using observable inputs
for the asset or liability other than quoted prices included in Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data or the asset or liability.
The table below sets out fair value measurement of financial instruments as at
30 June 2023, by the level in the fair value hierarchy into which the fair
value measurement is categorised.
Group Level 1 Level 2 Level 3 Total
At 30 June 2023 £ £ £ £
Financial assets at fair value through profit or loss:
Equities 5,975,907 - - 5,975,907
Exchange traded commodities 2,588,563 - - 2,588,563
8,564,470 - - 8,564,470
Group Level 1 Level 2 Level 3 Total
At 30 June 2022 £ £ £ £
Financial assets at fair value through profit or loss:
Equities 10,814,305 - 61,152 10,875,457
Exchange traded commodities 4,569,786 - - 4,569,786
15,384,091 - 61,152 15,445,243
There were no transfers between levels during the current or prior year.
The valuation techniques used by the Group are set out in the Accounting
Policies in Note 1.
Valuation process for Level 2 investments
Investments classified within level 2 are valued by reference to quoted prices
but not being actively traded have been treated as level 2.
Valuation process for Level 3 investments
Investments classified within Level 3 comprise those valued by reference to an
indicative price list of an independent third-party broker, but the said price
list is not sufficiently definitive or observable/publicly available, so as to
meet the criteria for a level 2 categorisation.
If the value of the level 3 investments were to increase or decrease by 10%,
while all the other variables remained constant, the net assets and net profit
available to Shareholders would have increased/decreased by nil (2022:
£6,115).
Reconciliation of Level 3 investments
The following table summarises Level 3 investments that were accounted for at
fair value for the year ending 30 June 2023.
Financial assets at fair value through profit or loss
Group and Company £
Opening fair value 61,152
Total (losses) included in gain/(losses) on investments in the Consolidated
Income Statement
- on assets sold -
- on assets held at the year end (61,152)
Closing balance -
9. Investment in Subsidiaries
Company Company
30 June 2023 30 June 2022
£ £
At cost 5,410,552 5,410,552
Provision for diminution in value (5,084,275) (4,547,896)
Net value 326,277 862,656
At 30 June 2023, the Company held interests in the following subsidiary
companies:
Country of Incorporation % share of capital held % share of voting rights Nature of business
Abport Limited England 100% 100% Investment dealing company
New Centurion Trust Limited England 100% 100% Investment dealing company
The registered office of the subsidiaries is the same as that of the Company.
10. Substantial Share Interests
The Company has no notified interests in 3% or more of the voting rights of
any companies at 30 June 2023 (30 June 2022: nil).
11. Trade and Other Receivables
Group Company
2023 2022 2023 2022
£ £ £ £
Amounts due from subsidiaries - - 55,690 58,739
Dividends receivable 5,944 12,035 5,944 12,035
Taxation recoverable 639 641 639 641
Other receivables 18,485 17,682 18,486 17,682
25,068 30,358 80,759 89,097
The carrying amount of such receivables approximates to their fair value.
Trade and other receivables are not past due at 30 June 2023.
12. Trade and Other Payables
Group Company
2023 2022 2023 2022
£ £ £ £
Preference dividends payable to the Company's wholly owned subsidiary - - 1,721 1,549
Amounts due to subsidiaries - - 101,533 101,533
Trade payables and accruals 601,160 106,002 588,377 94,673
601,160 106,002 691,631 197,755
As the Shareholders voted in favour of the new proposals at a General Meeting
on 26 June 2023, the Directors feel it appropriate to accrue for the costs
relating to the proposals which are now considered unavoidable.
13. Ordinary Share Capital
Group and Company Group and Company
2023 2022
Issued allotted and fully paid: Number £ Number £
Ordinary shares of 50p each 4,772,049 2,386,025 4,772,049 2,386,025
As announced on 18 July 2023, 3,980,664 ordinary shares were validly tendered
pursuant to the Tender Offer, constituting 83.4% of the existing issued share
capital. All validly tendered ordinary shares were accepted in full, with
3,747,673 ordinary shares repurchased by the Company and 232,991 ordinary
shares sold to Incoming Shareholders pursuant to the Matched Bargain Facility
In addition, on 26 July 2023 the Company issued 812,829 new ordinary shares in
connection with the Offer for Subscription and Intermediaries Offer.
Following Admission, and completion of the Tender Offer, the Company's total
issued share capital comprises of 5,584,878 ordinary shares. The Company will
hold all 3,747,673 ordinary shares that were repurchased pursuant to the
Tender Offer in Treasury. Therefore, the total number of shares with voting
rights in the Company will be 1,837,205.
The above figure of 1,837,205 may be used by Shareholders as the denominator
for the calculations by which they will determine if they are required to
notify their interest, or a change to their interest in, the Company under the
FCA's Disclosure Guidance and Transparency Rules.
The ordinary shares entitle the holders to receive all ordinary dividends and
all remaining assets on a winding up, after the fixed rate preference shares
have been satisfied in full.
At the year end, the Company did not hold any ordinary shares in Treasury
(2022: None).
14. Issued Preference Share Capital
Group Company
2023 2022 2023 2022
£ £ £ £
Issued preference share of 50p each - - 858,783 858,783
The 1,717,565 fixed rate preference shares are non-voting, entitled to receive
a cumulative dividend of 0.01p per share per annum, and are entitled to
receive their nominal value of 50p, on a distribution of assets or a winding
up. The whole of the issue is held by New Centurion Trust Limited, a wholly
owned subsidiary of the Company.
The Directors do not consider the fair values of the issued preference share
capital to be significantly different from the carrying values.
15. Net Asset Value per Ordinary Share
The NAV per ordinary share is calculated as follows:
2023 2022
£ £
Net Assets 16,270,804 16,048,191
Ordinary shares in issue 4,772,049 4,772,049
NAV per ordinary share 340.96p 336.30p
The underlying investments of the wholly owned subsidiary New Centurion Trust
Limited comprise issued preference share capital, as discussed in Note 14, in
the Company and, being effectively eliminated on consolidation, the valuation
thereof does not impact the NAV attributable to ordinary Shareholders.
16. Financial Instruments and Associated Risks
Investment Objective and Policy
The Company's investment objective during the year was to protect the
purchasing power of its capital in real terms, and to participate in enduring
economic activities which lend themselves to genuine capital accumulation and
wealth creation.
At a General Meeting held on 26 June 2023, the members voted to amend the
Investment Objective to: maximise capital growth for Shareholders over the
long-term by investing in high-quality, quoted, UK small and mid-cap
companies.
Risks
The Group's financial risk management can be found in the Strategic Report on
pages 11 and 12 of the Annual Report.
The Group's financial instruments comprise securities, cash balances,
receivables and payables. They are classified in the following categories:
• those to be measured subsequently at fair value through
profit or loss; and
• those to be measured at amortised cost.
The financial assets held at amortised cost include trade and other
receivables, cash and cash equivalents.
The main risks identified arising from the Group's financial instruments are:
a) market price risk, including currency risk, interest rate risk
and other price risk;
b) liquidity risk; and
c) credit risk.
The Board reviews and agrees policies for managing each of these risks, which
are summarised below.
Market price risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments used in the Group's business. It represents the
potential loss the Group might suffer through holding market positions by way
of price movements, interest rate movements and exchange rate movements. The
Board assesses the exposure to market price risk when making each investment
decision and monitor these risks on the whole of the investment portfolio on
an ongoing basis.
Currency risk
During the year, the Group's total return and net assets were affected by
currency translation movements as a significant proportion of the Company's
assets were denominated in currencies other than Sterling, which is the
Group's functional currency. It was not the Group's policy to hedge this
currency risk. Under the new investment policy, voted for on 26 June 2023, the
Company will invest in UK companies only, hence this risk will have little
direct impact going forward.
Interest rate risk
The Group's financial assets and liabilities, include cash, equity shares,
preference shares and fixed interest stocks. As the majority of the Group's
financial assets and liabilities are non-interest bearing the direct exposure
to interest rates is not material.
The impact of movements would not significantly affect the net assets
attributable to ordinary Shareholders or the total profit.
Other price risk
Other price risk arises from changes in market prices other than those arising
from currency risk or interest rate risk.
The Board manages the risks inherent in the investment portfolio by
maintaining a spread of investments across different sectors and monitoring
market prices throughout the year. The Board meets regularly in order to
review investment performance and its investment strategy.
Liquidity risk
This is the risk that that the Group will encounter difficulty in meeting its
obligations associated with financial liabilities. All liabilities are due
within one year.
The Group invests in a spread of investments which are traded on recognised
stock markets and which can be readily realised for cash. At the year end,
50.9% of the portfolio was held in cash.
Credit risk
The Group does not have any significant exposure to credit risk arising from
one individual party. Credit risk is spread across a number of counterparties,
each having an immaterial effect on the Group's cash flows should a default
happen. The Group assesses its debtors from time to time to ensure they are
neither past due nor impaired.
The maximum exposure of financial assets to credit risk at the Balance Sheet
date was as follows:
Financial assets neither past due or impaired Group Company
2023 2022 2023 2022
£ £ £ £
Accrued income and other debtors 25,068 30,358 80,759 89,097
Cash and cash equivalents 8,282,426 678,592 8,281,759 663,863
8,307,494 708,950 8,362,518 752,960
Sensitivity Analysis
At the year end, the Board believes that the Group's assets are mainly exposed
to market price risk.
As part of the Tender Offer and Issue of Shares as discussed in Note 19, the
majority of the portfolio was converted into cash. As a result, the Directors
feel it is not helpful to provide sensitivity analysis at the year end. At the
Tender Offer calculation date of 18 July 2023, the Net Asset Value was
348.38p, excluding accrued transaction costs.
17. Capital Management Policies
Capital is managed so as to maximise the return to Shareholders while
maintaining a capital base to allow the Group to operate effectively. Capital
is managed on a consolidated basis and to ensure that the Group will be able
to continue as a going concern.
In order to maintain or adjust the capital structure, the Group may pay
dividends to Shareholders, return capital to Shareholders, issue new shares or
sell securities to reduce debt.
The Group had no debt during the years to 30 June 2023 or 30 June 2022.
18. Related Party Transactions
Fiske plc, a company in which Mr Perrin is a non- executive director, is the
Company's custodian. An amount of £7,248 (2022: £8,247) was paid to Fiske
plc pursuant to the custody agreement and, as at the year end, £1,228 (2022:
£2,005) was payable to Fiske plc.
Key Management Personnel
At the year end, the Board consisted of four non-executive Directors all of
whom, with the exception of Mr Perrin, who is a non-executive director of
Fiske plc, the Company's custodian and until 4 November 2020 the investment
manager, are considered to be independent by the Board. Messrs Dighé and
Weeks hold directorships or positions of senior management within Edelweiss
Holdings plc ("Edelweiss"), who were significant Shareholders in the Company
during the year. For the year ended 30 June 2023, all Directors, including the
Chairman, received an annual fee of £20,000. Further information can be found
within the Directors' Remuneration Report on page 31 of the Annual Report.
As described in Note 19, as part of the Post Balance Sheet Events, Michael
Weeks resigned from the Board on 26 July 2023 and David Horner was appointed
as a non-executive Director. Mr Horner is the Managing Director of the new
Investment Manager.
The Directors did not receive any other form of remuneration and at the year
end, there were no outstanding fees payable to Directors (2022: £nil)
.
There were no other related party transactions during the current or previous
year.
19. Post Balance Sheet Events
On 9 June 2023 the Company published a circular setting out details outlining
the following proposals:
• the appointment of Chelverton Asset Management Limited as the Company's
Investment Manager;
• the appointment of David Horner, the founder and managing director of the
Proposed Manager, as a Proposed Director;
• an amendment to the Company's investment objective and policy;
• a Tender Offer to all Shareholders to realise some or all of their
investment in the Company;
• the cancellation of the amounts standing to the credit of the Company's
share premium account and capital redemption reserve in order to increase the
Company's distributable reserves to fund the Tender Offer;
• an Issue of up to 6 million ordinary shares on a non-pre-emptive basis for
new and existing investors;
• an amendment to the Company's Articles of Association to change the timing
of the Company's next continuation vote; and
• following completion of the Issue and the Tender Offer, a sub-division of
the Company's ordinary shares.
These proposals were approved by Shareholders in a General Meeting on 26 June
2023.
On 18 July 2023, the Board announced that 3,980,664 ordinary shares had been
validly tendered pursuant to the Tender Offer, constituting 83.4% of the
existing issued share capital of the Company. In addition, the Company had
received total commitments of approximately £3.6 million pursuant to the
Placing, Offer for Subscription and Intermediaries Offer.
On 19 July 2023, the Company announced:
1. That the Net Asset Value ("NAV") per ordinary share (including unaudited
revenue but excluding any accrued Transaction Costs) at the Calculation Date,
being 6.00 p.m. on 18 July 2023, was 348.38 pence per ordinary share.
Accordingly, the Tender Price and Issue Price, which had been calculated using
the methodology set out in Part 6 of the Prospectus published by the Company
on 9 June 2023, was as follows:
TENDER PRICE 337.76 PENCE
ISSUE PRICE 348.38 PENCE
The Tender Price represented a 3.0% discount to the Company's NAV per ordinary
share at close of business on 18 July 2023, reflecting the proportion of the
Transaction Costs to be borne by Existing Shareholders, and is equal to the
estimated Post-Transaction NAV per ordinary share.
The Issue Price represented a 3.1% premium to the Tender Price and the
estimated Post-Transaction NAV per ordinary share reflecting the proportion of
the estimated Transaction Costs borne by Incoming Shareholders.
2. That the following Directors, and the Proposed Director, subscribed for new
ordinary shares pursuant to the Issue (the "Directors' Participation") as
outlined below:
Number of new ordinary shares subscribed for pursuant to the Issue Resulting number of ordinary shares held Percentage of issued share capital held on Admission
Existing
number of ordinary shares held
Ian Dighe 30,820 7,176 37,996 2.07%
Martin Perrin * 21,695 10,046 31,741 1.73%
David Horner - 28,704 28,704 1.57%
* Together with his persons closely associated.
3. That by virtue of Ian Dighé and Martin Perrin's positions as current
directors of the Company, the Directors Participation was considered to be a
related party transaction for the purposes of the Listing Rules. In addition,
David Horner was considered to be an associate of the Proposed Manager as a
result of his holding of over 30% of the shares in the Proposed Manager. The
Transaction constituted a smaller related party transaction and the Company
had received written confirmation from the Sponsor that the terms of the
Transaction were fair and reasonable as far as Shareholders of the Company
were concerned.
4. That with effect from, Completion of the Tender Offer, on 26 July
2023, Michael Weeks would resign from the Board and David Horner would be
appointed as a non-independent non-executive Director of the Company.
5. That the Court had confirmed the cancellation of the Company's share
premium account and capital redemption reserve on 18 July 2023 creating
further distributable reserves to fund the Tender Offer.
6. That 3,980,664 ordinary shares were validly tendered pursuant to the Tender
Offer, constituting 83.4% of the existing issued share capital. All validly
tendered ordinary shares would be accepted in full with 3,747,673 ordinary
shares repurchased by the Company and 232,991 ordinary shares sold to Incoming
Shareholders pursuant to the Matched Bargain Facility.
7. That the Company would issue 812,829 new ordinary shares in connection with
the Offer for Subscription and Intermediaries Offer. Applications had been
made for the new ordinary shares to be admitted to the premium listing segment
of the Official List and to trading on the London Stock Exchange's main market
for listed securities ("Admission") and that Admission would become effective
and that dealings will commence on 26 July 2023.
On 26 July 2023 the Company announced:
that following Admission, and completion of the Tender Offer, the Company's
total issued share capital will comprise of 5,584,878 ordinary shares. The
Company will hold all 3,747,673 ordinary shares that were repurchased pursuant
to the Tender Offer in treasury. Therefore, the total number of shares with
voting right in the Company will be 1,837,205.
That the above figure of 1,837,205 may be used by Shareholders as the
denominator for the calculations by which they will determine if they are
required to notify their interest, or a change to their interest in, the
Company under the FCA's Disclosure Guidance and Transparency Rules.
That as part of the Tender Offer and Issue of Share the following transactions
with Directors had occurred:
Bought
Ian Dighé 7,176 shares
Martin Perrin* 10,046 shares
David Horner 28,704 shares
Sold
Michael Weeks 32,000 shares
* Together with his persons closely associated
20. Ultimate controlling party
The Directors consider that there is no overall controlling party.
SHAREHOLDER INFORMATION
Fraud warning
Fraudsters use persuasive and high-pressure tactics to lure investors into
scams and we are aware of entities from time to time purporting to be The
Investment Company plc. They may offer to sell shares that turn out to be
worthless or non-existent, or to buy shares at an inflated price in return for
an upfront payment. While high profits are promised, if you buy or sell shares
in this way you will probably lose your money. Detailed advice on how to avoid
and report potential investment scams is available on the FCA website:
www.fca.org.uk/scamsmart.
The Company has also been made aware of attempts to issue documentation in the
Company's name which is not legitimate. Anyone wishing to verify the
authenticity of any documentation should contact the Company Secretary on
01392 487056 or tic@iscaadmin.co.uk.
The Company has also been made aware of a website purporting to be the
Company's website which is not legitimate. Anyone wishing to verify the
authenticity of the website should contact the Company Secretary on 01392
487056 or tic@iscaadmin.co.uk.
FURTHER INFORMATION
The Annual General Meeting of the Company will be held on 7 November 2023 at
11.00am at the offices of Chelverton Asset Management Limited , Ground Floor
Office, Basildon House, 7 Moorgate, London Club EC2R 6AF.
A copy of the Annual Report will be submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . This document will
also be available on the Company's website at
https://theinvestmentcompanyplc.co.uk/
(https://theinvestmentcompanyplc.co.uk/) .
ISCA Administration Services Limited
4 October 2023
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