REG - Investment Co PLC - Final Results
19/09/2024 07:00
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RNS Number : 7004E Investment Company PLC 19 September 2024
THE INVESTMENT COMPANY PLC
Annual Results Announcement for the year ended 30 June 2024
LEI: 2138004PBWN5WM2XST62
SUMMARY OF RESULTS
At 30 June 2024 At 30 June 2023 Change %
Equity Shareholders' funds (£) 7,376,741 16,270,804 (54.66)
Number of ordinary shares in issue 1,837,205 4,772,049 (61.50)
Net asset value ("NAV") per ordinary share 401.52p 340.96p 17.76
Ordinary share price (mid) 353.00p 340.00p 3.82
Discount to NAV 12.08% 0.28% (11.80)
At 30 June 2024 At 30 June 2023
Total return per ordinary share* 49.50p 15.49p
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
Shareholders will be aware that at the beginning of this financial period, on
26 July 2023, Chelverton Asset Management were appointed as the Company's
Investment Manager to oversee all aspects of the management of the Company's
assets and were able to immediately introduce a new investment policy.
The results of their endeavours are set in their comprehensive Investment
Manager's Report below. Your Board is delighted with their progress.
Performance for the 11 months ending 30 June 2024 is that the net asset value
"NAV" has increased by 18.6% to 401.52p and the share price by 3.8% to 353.0p.
The Company's performance over the year is in the Summary of Results table
above.
Board
As I reported last year, Michael Weeks resigned following the restructure of
the Company in July 2023 and David Horner joined the Board as part of this
re-organisation.
Outlook
Despite the many headwinds experienced in the UK domestic funds sector
Chelverton's management of the assets has laid down a very credible track
record from which to grow the size of the Company.
As market conditions ease the Board and the Investment Manager look forward to
taking advantage of these opportunities in the not too distant future. We take
this opportunity to thank all Shareholders for their support and loyalty to
the Company.
I. R. Dighé
Chairman
18 September 2024
INVESTMENT MANAGER'S REPORT
As Manager, we are now 11 months into running the Company's investment
portfolio since the change of mandate and our appointment by the Board. By the
end of the Company's interim period to 31 December 2023, we had exited all
possible legacy holdings and invested just under three quarters of the
proceeds in 57 small and mid-sized UK listed equities, in line with the new
mandate. By the Company's year-end, the portfolio was 96% invested across 85
companies that met the new investment criteria.
It has been an extraordinary period from both a macro economic and political
newsflow perspective. Initially, UK inflation proved much stickier than had
been expected, putting a dampener on the market, especially at the small and
mid-cap end, where the Company now invests. The conflict in the Middle East
prompted another sell-off in small and mid-caps, as investors fought shy of
what is perceived to be a riskier asset class. The latter part of calendar
2023 and the first half of 2024 saw a rapid decline in UK inflation, which was
helpful for the UK equity market. Finally, the election of a Labour Government
with a commanding majority in Parliament, post the Company's year-end, has
barely caused the domestic equity market to blink.
From a performance perspective, having got off to a difficult start with small
and mid-cap equities remaining out of favour, the portfolio then enjoyed a
10.9% NAV appreciation in the last two months of the first half to end
December 2023, from its nadir in October, as inflation started to fall
rapidly. This recovery carried on into the second half of the Company's
financial year, until June 2024 when the portfolio gave up some of its gains
after a strong run, as the market rebound paused for breath. Notwithstanding
this modest setback, by the end of the period, the Company's NAV had risen
23.6% from its low point at the end of October 2023.
As we pointed out in the Interim Report, whilst the evidence points to small
cap equity outperformance over the long-term, this trend is punctuated by
periods of often quite severe underperformance and de-rating during periods of
economic stress, whether caused by inflation, conflicts or, as in 2007/8, a
financial crisis. We have just come through one such period, driven by the
first instance of high inflation seen this century, initially arising out of
supply chain disruption caused by the pandemic, then exacerbated by the
invasion of Ukraine, which led to a loss of consumer and business confidence.
The Board's decision to change the Company's investment strategy to capital
growth by investing in UK listed small and mid-cap equities presciently
coincided with the turn in fortune for this oversold segment of the UK market.
The portfolio as it is now constructed very much represents the Manager's
investment objective of generating long-term capital growth by investing in
cash generative UK listed businesses, that can grow faster than the rest of
the market through the business cycle and are able to fund their organic
growth from their own cash generation, either because they are high margin or
asset light and preferably a combination of both. This strategy has proved to
be highly effective for the open-ended Chelverton UK Equity Growth Fund, which
the Investment Team also manages. On top of these financial characteristics of
self-funded growth, the Manager also looks for companies with good revenue
visibility, characterised by subscription revenues for software or data
provision, repeating revenues for essential goods and services or in the case
of industrials, design wins for essential components into their end customer
products, which are unlikely to be replaced. Finally, the Manager looks for
companies with sustainable margins and sensible management teams. Whilst the
funds were being invested, a substantial part of the Company's cash was
invested in UK Treasury stock, to optimise allowable income rather than income
arising from holding cash on deposit.
At the sector level, the investment strategy not surprisingly leads us to
invest in Technology stocks (22.2% weighting in the portfolio at the
year-end), given their often above average growth, high margins and recurring
subscription revenues. The Company's largest software stocks include Gamma
Communications, which provides software and systems for managing businesses
communications networks on a subscription basis; dotDigital , an omnichannel
marketing software platform business; Celebrus Technologies, software for real
time data aggregation from multiple sources and subsequent analysis for
marketing communications and fraud detection; Auction Technologies, the
provision of online bidding services for auctioneers; and Accesso Technology,
a leading global online ticketing software provider.
Another sector of note is Financials (11.6% of the portfolio). Here, as
Managers, we prefer high margin, asset light financial service providers with
sticky client relationships manifested in low customer churn such as JTC, the
fund administration and back-office service provider for alternative funds and
high net worth investors, and Brooks MacDonald and Mattioli Woods, the wealth
managers. Other significant holdings include Alpha Group International, a fast
growing tech-enabled provider of FX management to mid sized business customers
and alternative banking services to Alternative Investment funds, both markets
poorly served by the mainstream banks.
Media (11.5% weighting) comprises business subscription data providers like
Global Data and Pulsar, an online consumer content provider, LBG Media, and
marketing services companies like Next Fifteen, YouGov and System1 Group.
More recently with the prospect of an economic recovery, the Manager has been
building up the Company's exposure to quality cyclicals. Here the Manager has
built up the Company's Construction exposure (11.9% weighting), focusing on
building materials companies with good margins and strong market positions,
rather than the more asset intensive builders or low margin contractors.
Holdings include SigmaRoc, a leading European aggregates business; Eurocell, a
manufacturer and distributor in the UK of window and roofing components;
Volution, a leading supplier of ventilation products in Europe and
Australasia; and Severfield, the UK market leader in structural steel with a
joint venture with an indigenous steel producer in the fast-growing Indian
market.
In Consumer (11.7% of the portfolio) the Manager has invested in a mix of
non-cyclical consumer staples like Premier Foods, owner of heritage brands
like Mr Kipling, Ambrosia, Oxo, Batchelors and Angel Delight, and Tate and
Lyle, the international food ingredients business. Warpaint, the cosmetics
company, is an out and out growth stock. More recently, the Manager has built
up the Company's exposure to more cyclical stocks, like DFS, Britain's largest
furniture retailer; Victorian Plumbing, the online bathroom products business,
which is rapidly growing market share, and finally On the Beach, the online
tour operator, ahead of a potential pick-up in consumer spending arising from
a return to real wage growth and a pick-up in housing transactions from
depressed levels.
Finally, whilst less exposed to the domestic economy, after a low initial
weighting the Manager has more recently built up the portfolio's Industrials
exposure (11.3% weighting at the year-end) as overstocking caused by earlier
post pandemic supply chain disruption, which has impacted industrial companies
recent trading, starts to normalise. The Manager has recently added Morgan
Advanced Materials, insulation materials and industrial consumables; Spectris,
a leading global industrial and life science precision measuring and testing
business and TT Electronics, electronic components and subassemblies, to its
earlier holdings of Vesuvius, steel and foundry consumables, and Bodycote,
industrial heat treatment.
As Manager, we believe we have been able to assemble a portfolio of UK small
and mid-cap equities, that meet our investment criteria, at attractive
valuations at a time when these companies have been out of favour with the
market. Consequently, we feel the portfolio is well placed to generate
long-term capital growth as the economy and investor sentiment improve. Our
confidence in the valuations we have paid is borne out by the number of bids
for UK listed companies we have seen from Private Equity and overseas trade
buyers with three companies in the portfolio - Mattioli Woods, Alpha Financial
Markets Consulting and Tyman - succumbing to agreed offers. Another holding,
Ascential, has successfully de-merged and sold off two of its divisions
generating significant shareholder returns, with the remaining business
subject to an agreed bid from Informa post period end, whilst Global Data sold
a minority interest in one of its divisions at a substantial premium to the
underlying valuation for the whole group, coupled with the high number of
share buy-backs being conducted by management teams, who feel their share
prices are too low.
We enter the second half of calendar 2024 with a new government with a
substantial majority, which should provide some much-needed political
stability, after the recent merry-go-round of Chancellors and Prime Ministers.
This political back-drop, coupled with the prospect of lower interest rates
before too long, will help provide a more supportive back-drop for domestic
equity investors. A manifesto commitment to increase UK pension fund
investment in UK markets would be a welcome change from the steady
disinvestment we've seen for many years, providing a real liquidity boost for
the Company's small and mid-cap end of the market.
Chelverton Asset Management
18 September 2024
PORTFOLIO AND ASSETS
At 30 June 2024
Fair
value % of total net assets
Security Holding £
Restore 65,000 171,600 2.3
Clarkson 4,000 165,600 2.3
JTC 16,250 156,000 2.1
Alpha Group International 6,666 149,986 2.0
Sigmaroc 225,000 149,400 2.0
Global Data 67,750 147,017 2.0
Premier Foods 92,500 146,705 2.0
Gamma Communications 10,000 141,000 1.9
Bodycote 20,000 136,200 1.9
AJ Bell 35,000 132,650 1.8
Eurocell 100,000 129,000 1.8
dotdigital 137,500 127,188 1.7
Learning Technologies Group 150,000 126,751 1.7
Oxford Metrics 125,000 123,750 1.7
Tate & Lyle 20,000 119,600 1.6
Celebrus Technologies 51,333 119,093 1.6
Ebiquity 300,000 117,000 1.6
Volution Group 25,000 112,750 1.5
Auction Technology Group 22,500 112,726 1.5
Inchcape 15,000 111,600 1.5
Warpaint London 17,940 109,434 1.5
Accesso Technology Group 15,000 108,900 1.5
Advanced Medical Solutions Group 50,675 108,445 1.5
Severfield 140,000 106,120 1.4
Spectris 3,750 104,175 1.4
Vesuvius 22,500 103,838 1.4
LBG Media 95,000 100,700 1.4
Pulsar 111,378 99,126 1.3
Duke Capital Limited 325,000 99,125 1.3
Alpha Financial Markets 18,750 93,000 1.3
FDM Group (Holdings) 22,500 92,364 1.3
Balfour Beatty 25,000 91,250 1.2
Tyman 25,000 90,625 1.2
EnSilica 175,000 87,500 1.2
Eckoh 212,500 87,125 1.2
Epwin Group 100,000 86,000 1.2
On the Beach Group 62,500 85,750 1.2
TT Electronics 57,500 83,950 1.1
1Spatial 125,000 82,500 1.1
YouGov 20,000 81,200 1.1
Hostelworld 50,000 80,000 1.1
Trufin 100,000 80,000 1.1
Spectra Systems 36,250 79,750 1.1
Next 15 Group 10,000 79,700 1.1
Coats Group 100,000 79,100 1.1
Man Group 32,500 78,650 1.1
System1 Group 15,300 78,030 1.1
Morgan Advanced 25,000 77,250 1.1
Big Technologies 50,000 77,000 1.0
Aptitude Software Group 20,000 74,000 1.0
Adriatic Metals 35,000 70,875 1.0
Victorian Plumbing 75,000 69,600 0.9
XP Power Limited 4,694 69,283 0.9
Alfa Financial Software Holdings 36,000 66,816 0.9
Mattioli Woods 8,500 66,810 0.9
Zoo Digital 100,000 64,000 0.9
Wickes 47,500 63,175 0.9
Inspired 85,000 62,050 0.8
RWS Holdings 32,500 61,035 0.8
Macfarlane Group 50,000 59,250 0.8
Water Intelligence 14,500 58,725 0.8
Somero Enterprise Inc. 17,500 58,275 0.8
Aquis Exchange 12,500 58,250 0.8
Merit Group 70,000 58,100 0.8
Kooth 20,000 58,000 0.8
The Pebble Group 100,000 57,000 0.8
DFS Furniture 50,000 55,000 0.7
DP Poland 500,000 52,500 0.7
SDI Group 75,000 48,000 0.7
Microlise Group 35,000 47,250 0.6
PCI-PAL 75,893 46,295 0.6
Acuity RM 1,142,857 40,000 0.5
Brooks Macdonald 2,000 39,000 0.5
Alliance Pharma 100,000 38,900 0.5
Breedon Group 10,000 38,650 0.5
Getbusy 50,000 34,500 0.5
Seeing Machines 760,000 34,200 0.5
Dianomi 75,000 33,750 0.5
Gooch & Housego 7,000 33,040 0.4
Ascential 9,393 32,078 0.4
Diaceutics 25,000 30,750 0.4
Arecor Therapeutics 25,000 28,750 0.4
Concurrent Technology 25,000 25,500 0.3
Luceco 10,000 16,560 0.2
Invinity Energy Systems 71,739 13,630 0.2
PJSC Lukoil ADR (Rep 1 Ord RUB0.025) 9,500 - 0.0
Total equity investments 7,069,820 95.8
Cash 252,293 3.4
Other assets net of other liabilities 54,628 0.8
Total cash and other net current assets 306,921 4.2
Total net assets 7,376,741 100.0
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
("NCT"), which was placed into members' voluntary liquidation on 29 May 2024
(the "Subsidiaries"). The Company and its wholly owned Subsidiaries together
comprise a group (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 a General Meeting held on 26 June 2023, the members voted to amend the
investment objective which is 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 Investment Company plc ("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 and the Middle East 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. 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 monetary policies, which include inflationary The Company looks to own a portfolio of assets that possess an enduring real
pressures, pose a risk to the real value of the Company's assets. value whether from the value of the underlying assets in an investment, or in
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 conflicts in Ukraine and the Middle East have 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 reduced in the last 12 months and the Bank of England has
recently reduced interest rates.
In addition, there are other risks that may materially impact the Company,
however, the likelihood thereof is considered small.
Foreign currency risk
Under the previous investment policy in operation at the beginning of the year
the Company was invested in stocks in overseas markets dominated in foreign
currencies thus increasing the foreign currency risk. However, with the change
in investment policy described above, as the portfolio moved to UK stocks this
risk was removed.
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. All 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
This is not considered to be a direct risk to the Company 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 2024 was 401.52p per share (2023:
340.96p). The total return of the NAV was 17.76% (2023: 1.39%).
- Discount of share price in relation to NAV
Over the year to 30 June 2024, the Company's share price moved from trading at
a discount of 0.28% to a discount of 12.08%.
- Ongoing Charges Ratio
The Ongoing Charges Ratio for the year to 30 June 2024 amounted to 2.00%
(2023: 2.39%).
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 Company 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 Investment Manager 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, interest
rates and the conflicts in Ukraine and the Middle East are the latest events
impacting not just this Company but all commercial entities. The change in
investment objective and policy and the decision as supported by Shareholders
during the previous 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. The Board is required to disclose their
compliance in relation to the targets on board diversity set out under
paragraph 9.8.6R (9) of the Listing Rules which are as follows:
1. at least 40% of the individuals on the Board of Directors are
women;
2. at least one of the senior positions on the Board of Directors is
held by a woman; and
3. at least one individual on the Board of Directors is from a
minority ethnic background.
The table below sets out the composition of the Board at the year-end based on
the prescribed criteria.
Gender Identity Number of Board members Percentage of the Board Number of senior positions on the Board
Men 4 100% 2
Women - 0% -
Ethnic Background Number of Board members Percentage of the Board Number of senior positions on the Board
White British 4 100% 2
or other White
(including minority
-white groups)
Mixed/Multiple - 0% -
Ethnic Groups
Asian/Asian - 0% -
British
Black/African - 0% -
Other ethnic group - 0% -
including Arab
Not specified/ - 0% -
prefer not to say
The Board notes that it does not currently meet the targets for women or
ethnic diversity in the Board's current composition. 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 being 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.
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 ("ESG") factors are considered as part of
the commercial evaluation of investee companies.
The Investment Manager's ESG process is shown on page 16 of the Annual Report.
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.
The Board considers the following:
• the likely consequences of any decisions in the long term;
• the need to foster the Company's business relationships with service
suppliers;
• the impact of the Company's operations on the community and environment;
• the desirability of the Company maintaining a reputation for high
standards of business conduct; and
• the need to act fairly as between Shareholders of the Company.
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
· Investment Manager, 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 previous 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 and enacted during the year.
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, 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.
The Strategic Report has been approved by the Board of Directors.
On behalf of the Board
I. R. Dighé
Chairman
18 September 2024
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
18 September 2024
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2024
Year ended 30 June 2024 Year ended 30 June 2023
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Gains on investments at fair value through profit or loss 8 - 886,415 886,415 - 876,505 876,505
Exchange (losses)/gains on capital items - (10,484) (10,484) - 798 798
Investment income 2 210,040 118,536 328,576 303,475 - 303,475
Investment management fee 3 - - - - - -
Other expenses 4 (188,232) - (188,232) (396,562) - (396,562)
Return/(loss) before taxation 21,808 994,467 1,016,275 (93,087) 877,303 784,216
Taxation 5 (3,629) - (3,629) (45,020) - (45,020)
Total income/ (loss) after taxation 18,179 994,467 1,012,646 (138,107) 877,303 739,196
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Return/(loss) on total income after taxation per 50p ordinary share - basic 6 0.89 48.61 49.50 (2.89) 18.38 15.49
& 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 2024
Ordinary share Share Capital Revenue Total
capital premium Capital redemption reserve
reserve reserve £
Special reserve
£ £ £
£ £
£
Balance at 1 July 2023 2,386,025 4,453,903 2,408,820 - 8,545,911 (1,523,855) 16,270,804
Total comprehensive income
Net return for the year - - - - 994,467 18,179 1,012,646
Transactions with Shareholders recorded directly to equity
Cancellation of share - (4,453,903) (2,408,820) 6,862,723 - - -
premium account and
capital redemption
reserve
Share issue 406,414 2,425,325 - - - - 2,831,739
Cost of shares purchased under Tender Offer and held in Treasury - - - (6,862,723) (5,795,417) - (12,658,140)
Ordinary dividends - - - - - 1,927 1,927
Tender Offer costs - - - - (82,235) - (82,235)
Balance at 30 June 2024 2,792,439 2,425,325 - - 3,662,726 (1,503,749) 7,376,741
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 - - - - (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
The notes below form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2024
Ordinary share Preference share Share Capital redemption reserve Special reserve Capital Revenue Total
capital capital premium £ £ reserve reserve £
£ £ £ £ £
Balance at 1 July 2023 2,386,025 858,783 4,453,903 2,408,820 - 5,450,799 1,003,304 16,561,634
Total comprehensive income
Net return for the year - - - - - 1,562,294 27,453 1,589,747
Transactions with Shareholders recorded directly to equity
Cancellation of share - - (4,453,903) (2,408,820) 6,862,723 - - -
premium account and
capital redemption
reserve
Share issue 406,414 - 2,425,325 - - - - 2,831,739
Cost of shares purchased under Tender Offer and held in Treasury - - - - (6,862,723) (5,795,417) - (12,658,140)
Tender Offer costs - - - - - (82,235) - (82,235)
Ordinary dividends - - - - - - 1,927 1,927
Preference share dividends paid - - - - - - (172) (172)
Balance at 30 June 2024 2,792,439 858,783 2,425,325 - - 1,135,441 1,032,512 8,244,500
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 - - - - - (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
The notes below form part of these financial statements.
CONSOLIDATED BALANCE SHEET
As at 30 June 2024
30 June 30 June
2024 2023
Notes £ £
Non-current assets
Investments held at fair value through profit or loss 8 7,069,820 8,564,470
Current assets
Trade and other receivables 11 264,926 25,068
Cash and cash equivalents 252,293 8,282,426
517,219 8,307,494
Current liabilities
Trade and other payables 12 (210,298) (601,160)
(210,298) (601,160)
Net current assets 306,921 7,706,334
Net assets 7,376,741 16,270,804
Capital and reserves
Ordinary share capital 13 2,792,439 2,386,025
Share premium 2,425,325 4,453,903
Capital redemption reserve - 2,408,820
Special reserve - -
Capital reserve 3,662,726 8,545,911
Revenue reserve (1,503,749) (1,523,855)
Shareholders' funds 7,376,741 16,270,804
NAV per 50p ordinary share 15 401.52p 340.96p
These financial statements were approved by the Board on 18 September 2024 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 2024
30 June 30 June
2024 2023
Notes £ £
Non-current assets
Investments held at fair value through profit or loss 8 7,069,820 8,564,470
Investment in subsidiaries 9 807,946 326,277
7,877,316 8,890,747
Current assets
Trade and other receivables 11 318,775 80,759
Cash and cash equivalents 251,625 8,281,759
570,400 8,362,518
Current liabilities
Trade and other payables 12 (203,216) (691,631)
(203,216) (691,631)
Net current assets 367,184 7,670,887
Net assets 8,244,500 16,561,634
Capital and reserves
Ordinary share capital 13 2,792,439 2,386,025
Preference share capital 14 858,783 858,783
Share premium 2,425,325 4,453,903
Capital redemption reserve - 2,408,820
Special reserve - -
Capital reserve 1,135,441 5,450,799
Revenue reserve 1,032,512 1,003,304
Shareholders' funds 8,244,500 16,561,634
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 £1,589,747 (2023: gain of £215,909).
These financial statements were approved by the Board on 18 September 2024 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 2024
Group Company
30 June 30 June 30 June 30 June
2024 2023 2024 2023
Notes £ £ £ £
Cash flows used in operating activities
Income received from investments 269,318 303,114 269,318 303,114
Interest received 50,708 6,451 50,706 6,451
Overseas taxation paid (4,475) (46,539) (4,475) (46,539)
Investment management fees paid - - - -
Other cash payments (352,286) (382,266) (339,205) (370,586)
Net cash used in operating activities (36,735) (119,240) (23,656) (107,560)
Cash flows used in financing activities
Proceeds from Share Issue 3,618,690 - 3,618,690 -
Funding of Tender Offer (13,445,091) - (13,445,091) -
Tender offer expenses paid (539,075) (35,000) (539,075) (35,000)
Net cash used in financing activities (10,365,476) (35,000) (10,365,476) (35,000)
Cash flows generated from investing activities
Purchase of investments 8 (9,459,505) (3,412,011) (9,459,505) (3,412,011)
Sale of investments 8 11,831,583 11,174,206 11,831,583 11,173,539
Loans to subsidiaries - - (13,080) 3,049
Net cash generated from investing activities 2,372,078 7,762,195 2,358,998 7,764,577
Net (decrease)/increase in cash and cash equivalents (8,030,133) 7,607,955 (8,030,134) 7,622,017
Reconciliation of net cash flow to movement in net cash
(Decrease)/increase in cash (8,030,133) 7,607,955 (8,030,134) 7,622,017
Exchange rate movements - (4,121) - (4,121)
(Decrease)/increase in net cash (8,030,133) 7,603,834 (8,030,134) 7,617,896
Net cash at start of period 8,282,426 678,592 8,281,759 663,863
Net cash at end of period 252,293 8,282,426 251,625 8,281,759
Analysis of net cash
Cash and cash equivalents 252,293 8,282,426 251,625 8,281,759
252,293 8,282,426 251,625 8,281,759
The notes below form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2024
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 The Office Suite, Den House,
Den Promenade, Teignmouth, Devon, TQ14 8SY.
The Group's consolidated financial statements for the year ended 30 June 2024,
which comprise the audited results of the Company and its wholly owned
subsidiaries, Abport Limited and New Centurion Trust Limited (until the date
of liquidation) (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 a review of 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, the
continued eligibility to be approved as an investment trust company, the
impact of the current economic environment and the conflicts in Ukraine and
the Middle East. 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.
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 regarding 1 January 2024
classification of
liabilities as Current or Non-current
IAS 1 (Amendments) classification of liabilities as
Current or Non-current - 1 January 2024
Deferral of
effective date
IAS 7 (Amendments) Statement of Cash Flows
1 January 2024
IFRS 7 (Amendments) Financial Instruments:
Disclosures: Supplier Finance 1 January 2024
Arrangements
IAS 21 (Amendments) Lack of
Exchangeability
1 January 2025
*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 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.
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 any
provision for impairment 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 or capital
depending on the nature of the dividend, on an ex-dividend basis. Special
dividends are considered individually to ascertain the reason behind the
payment and determine whether they are treated as revenue or capital.
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;
· dividends receivable 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.
Realised gains on investments less expenses, provisions and unrealised gains
may be considered by the Board for distribution. The unrealised gains are 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.
Special Reserve
The special reserve was created by a Court Order on 18 July 2023. The cost of
share buybacks and any dividend distributions can be made from this reserve.
2. Income
Year ended Year ended
30 June 2024 30 June 2023
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Income from investments:
UK dividends 122,596 118,536 241,132 52,082 - 52,082
Unfranked dividend income (including scrip dividends): 13,548 - 13,548 244,942 - 244,942
UK fixed interest 23,188 - 23,188 - - -
159,332 118,536 277,868 297,024 297,024
Other income
Bank deposit and other interest 50,708 - 50,708 6,451 - 6,451
Total income 210,040 118,536 328,576 303,475 - 303,475
3. Investment management fee
Year ended Year ended
30 June 2024 30 June 2023
£ £
Investment management fee - -
Following completion of the Tender Offer, on 26 July 2023 Chelverton Asset
Management was appointed as Investment Manager.
The Investment Manager is 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%. An
amount of £189,476 is available for offset against future investment
management fees.
4. Other expenses
Year ended Year ended
30 June 2024 30 June 2023
£ £
Administration and secretarial services 85,000 85,000
Auditors' remuneration for:
- audit of the Group's financial statements 50,000 46,300
Directors' remuneration (see note 18) 61,667 86,667
Investment Manager's contribution to expenses (see Note 3) (189,476) -
Other expenses 181,041 178,595
Total expenses 188,232 396,562
The audit of the Group's financial statements includes the cost of the audit
of Abport Limited of £4,180 (2023: £3,800) and New Centurion Trust Limited
£nil (2023: £3,800), 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 2024 Year ended 30 June 2023
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Current Taxation - - - - - -
Overseas taxation suffered 3,629 - 3,629 45,020 - 45,020
3,629 - 3,629 45,020 - 45,020
The current tax charge for the year differs from the standard rate of
corporation tax in the UK of 25.0%. The differences are explained below:
Year ended 30 June 2024 Year ended 30 June 2023
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Return on ordinary activities 21,808 994,467 1,016,275 (93,087) 877,303 784,216
Tax at UK Corporation tax rate of 25.0% (2023:20.5%) 5,452 248,617 254,069 (19,083) 179,847 160,764
Effects of:
UK dividends that are not taxable (30,649) (29,634) (60,283) (10,677) - (10,677)
Overseas dividends that are not taxable - - - (11,172) - (11,172)
Non-taxable investment gains - (218,983) (218,983) - (179,847) (179,847)
Overseas taxation suffered 3,629 - 3,629 45,020 - 45,020
Unrelieved expenses 25,197 - 25,197 40,932 - 40,932
Actual current tax charged to the revenue account 3,629 - 3,629 45,020 - 45,020
Factors that may affect future tax charges
The Company has excess management expenses of £2,623,987 (2023 £2,523,199).
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.
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 2024 Year ended 30 June 2023
Revenue Capital Total Revenue Capital Total
Return/(loss) after taxation attributable to ordinary Shareholders (£) 18,179 994,467 1,012,646 (138,107) 877,303 739,196
Weighted average number of ordinary shares in issue (excluding 2,045,691 4,772,049
shares held in Treasury)
Return/(loss) per ordinary share 0.89 48.61 49.50 (2.89) 18.38 15.49
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
2024 2023
£ £
Unclaimed dividends in respect of prior periods clawed back after 12 years 1,927 -
Total 1,927 -
No dividend will be declared in respect of the year under review.
8. Investments
Group Company
2024 2023 2024 2023
£ £ £ £
Opening book cost 8,123,670 15,087,359 8,177,670 15,107,651
Opening net investment holding gains 440,800 357,884 386,800 336,968
Opening valuation 8,564,470 15,445,243 8,564,470 15,444,619
Movements in the year:
Purchases at cost 9,504,441 3,439,089 9,504,441 3,439,089
Sales proceeds (11,885,506) (11,196,367) (11,885,503) (11,195,700)
Realised gains on sales 544,141 793,589 490,138 826,631
Unrealised gains in the year 342,274 82,916 396,274 49,831
Closing valuation 7,069,820 8,564,470 7,069,820 8,564,470
Being:
Book cost 6,286,746 8,123,670 6,286,746 8,177,670
Net investment holding gains 783,074 440,800 783,074 386,800
7,069,820 8,564,470 7,069,820 8,564,470
Group Company
Summary of capital gains 2024 2023 2024 2023
£ £ £ £
Realised gains on sales 544,141 793,589 490,138 826,631
Unrealised gains in the year 342,274 82,916 396,274 49,831
886,415 876,505 886,412 876,462
Transaction costs
Group Company
2024 2023 2024 2023
£ £ £ £
Costs on purchases 32,920 5,734 32,920 5,734
Costs on sales 39,595 21,680 39,595 21,592
72,515 27,414 72,515 27,326
Reconciliation of cash movements in investment transactions
The difference between the purchases in note 8 of £9,504,441 and that shown
in the Cash Flow Statement above is £44,936 which is represented by
outstanding trades of £44,936.
The difference between the sales proceeds in note 8 of £11,885,506 and that
shown in the Cash Flow Statement above is £53,923 which is represented by an
exchange loss of £10,484 and outstanding trades of £43,439.
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 for the asset or liability.
The table below sets out fair value measurement of financial instruments as at
30 June 2024, 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 2024 £ £ £ £
Financial assets at fair value through profit or loss:
Equities 7,069,820 - - 7,069,820
7,069,820 - - 7,069,820
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
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.
9. Investment in Subsidiaries
Company Company
30 June 2024 30 June 2023
£ £
At cost 5,410,552 5,410,552
Provision for diminution in value (4,603,056) (5,084,275)
Net value 807,496 326,277
At 30 June 2024, 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
(in liquidation)
The registered office of the subsidiaries is the same as that of the Company.
On 29 May 2024, New Centurion Trust Limited was placed into members' voluntary
liquidation. This subsidiary is a dormant legacy holding which the Directors
have determined to have no further useful purpose.
10. Substantial Share Interests
The Company has no notified interests in 3% or more of the voting rights of
any companies at 30 June 2024 (30 June 2023: nil).
11. Trade and Other Receivables
Group Company
2024 2023 2024 2023
£ £ £ £
Amounts due from subsidiaries - - 53,849 55,690
Dividends receivable 14,495 5,944 14,495 5,944
Taxation recoverable - 639 - 639
Trade receivables 43,439 - 43,439 -
Other receivables 206,992 18,485 206,992 18,486
264,926 25,068 318,775 80,759
The carrying amount of such receivables approximates their fair value. Trade
and other receivables are not past due at 30 June 2024.
12. Trade and Other Payables
Group Company
2024 2023 2024 2023
£ £ £ £
Preference dividends payable to the Company's wholly owned subsidiary - - - 1,721
Amounts due to subsidiaries - - - 101,533
Trade payables 44,936 - 44,936 -
Other accruals 165,362 601,160 158,280 588,377
210,298 601,160 203,216 691,631
13. Ordinary Share Capital
Group and Company Group and Company
2024 2023
Issued allotted and fully paid: Number £ Number £
Ordinary shares of 50p each 5,584,878 2,792,439 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.
Tender Offer costs totalling £598,818 were incurred as part of this offer. An
amount of £516,583 was incurred at 30 June 2023 and a further £82,235
incurred during the year.
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 holds
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 is 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 held 3,747,673 ordinary shares in Treasury (2023:
None).
14. Issued Preference Share Capital
Group Company
2024 2023 2024 2023
£ £ £ £
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. New Centurion Trust was placed into members'
voluntary liquidation on 29 May 2024.
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:
2024 2023
£ £
Net Assets 7,376,741 16,270,804
Ordinary shares in issue (excluding Treasury shares) 1,837,205 4,772,049
NAV per ordinary share 401.52p 340.96p
The underlying investments of the wholly owned subsidiary New Centurion Trust
Limited comprise issued preference share capital in the Company as discussed
in Note 14, 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
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 13 and 14 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 monitors these risks on the whole of the investment portfolio on
an ongoing basis.
Currency risk
In the early part of 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 invests 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 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,
3.4% 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
2024 2023 2024 2023
£ £ £ £
Trade and other receivables 264,926 25,068 318,775 80,759
Cash and cash equivalents 252,293 8,282,426 251,625 8,281,759
517,219 8,307,494 570,400 8,362,518
Sensitivity Analysis
At the year end, the Board believes that the Group's assets are mainly exposed
to market price risk. A fall of 20% in the value of the equity shares would
reduce the assets of the Company by 1,413,964 or 77.0 pence per share. An
increase in the value of the equity shares would increase assets by an equal
amount.
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 2024 or 30 June 2023.
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 £6,449 (2023: £7,248) was paid to Fiske
plc pursuant to the custody agreement and, as at the year end, £nil (2023:
£1,228) 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 Horner, who is Managing Director of Chelverton
Asset Management, the Company's Investment Manager, are considered to be
independent by the Board. Mr Dighé holds a directorship within Edelweiss
Holdings plc ("Edelweiss"), who were significant Shareholders in the Company
in the previous year. For the year ended 30 June 2024, the Directors,
including the Chairman but excluding David Horner, received an annual fee of
£20,000. Further information can be found within the Directors' Remuneration
Report on page 33 of the Annual Report.
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 Investment Manager. Mr Horner has waived his right to receive fees.
Further information regarding waived investment management fees can be found
in Note 3 above.
The Directors did not receive any other form of remuneration and at the year
end, there were no outstanding fees payable to Directors (2023: £nil)
.
There were no other related party transactions during the current or previous
year.
19. Post Balance Sheet Events
The preference shares of the Parent Company will be repaid to NCT via a Scheme
of Arrangement at a date still to be finalised.
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 Thursday 31 October
2024 at 10.00am at the offices of Chelverton Asset Management Limited, Ground
Floor Office, Basildon House, 7 Moorgate, London 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
18 September 2024
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