REG - Investment Co PLC - Half-year Report
28/02/2024 07:00
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RNS Number : 6944E Investment Company PLC 28 February 2024
The Investment Company plc
Half Year Report for the six months ended 31 December 2023
The Investment Company plc (the "Company") is pleased to announce its
unaudited results for the six months ended 31 December 2023
Summary of Results
At 31 December 2023 At 30 June
(unaudited) 2023
(audited) Change %
Equity Shareholders' funds (£) 6,613,860 16,270,804 (59.35)
Number of ordinary shares in issue * 1,837,205 4,772,049 (61.50)
Net asset value ("NAV") per ordinary share 360.00p 340.96p 5.58
Ordinary share price (mid) 315.00p 340.00p (7.35)
Discount to NAV 12.50% 0.28% (12.22)
6 months to 6 months to
31 December 2023 31 December 2022
(unaudited) (unaudited)
Total return per ordinary share ** 11.09p 18.53p
Dividends paid per ordinary share nil nil
* Excluding 3,747,673 shares held in Treasury.
** The total return per ordinary share is based on total income after taxation
as detailed in the Condensed consolidated income statement and in note 4.
Introduction
On 26 July 2023, the Company adopted a new investment objective and policy
following the completion of a tender offer and fund raising. Alongside the
change of investment objective and policy, Chelverton Asset Management Limited
were appointed as the Company's Investment Manager.
Investment Objective
The Company's investment objective is to maximise capital growth for
Shareholders over the long-term by investing in high-quality, quoted, UK small
and midcap companies.
Investment Policy
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.
Chairman's Statement
Dear fellow Shareholders,
The six-months ending 31 December 2023 was one of considerable change for the
Company. Having been conscious of the illiquid nature of the Company's
shares and the resulting challenges our Shareholders faced, proposals were put
to Shareholders on 30 March 2023. These encompassed a proposed change of
Investment Manager to Chelverton Asset Management Limited ("Chelverton"), and
importantly an opportunity for Shareholders to either retain some or all of
their shareholding in the Company with Chelverton offering a new investment
strategy or, alternatively, to realise their investment in cash (at the
prevailing net asset value per ordinary share, adjusted for transaction
costs).
These proposals were approved by Shareholders just before the start of the
period on 26 June 2023 and completed on 26 July 2023. Through the process we
said goodbye to a number of long-standing Shareholders with different
investment objectives and welcomed new Shareholders, including Chelverton
itself and a number of its management and employees.
Alongside the appointment of Chelverton, we also welcomed David Horner, the
Investment Trust Director and founder of Chelverton, to the Board. David has
already provided a valuable contribution to the Company and the Board values
his wise counsel.
With the changes to the Company completed, Michael Weeks stepped down from the
Board. I would like to thank Michael for his significant contribution to the
Company over his three years as a Director and to wish him well for the
future.
Auditors
The Board and the Audit Committee have approved an extension to the engagement
term of the Senior Statutory Auditor responsible for the audit opinion in
relation to The Investment Company plc. The term was extended for a further
year and was made to safeguard the quality of the audit. The Audit Committee
is satisfied that this extension does not in any way prejudice the objectivity
and independence of the audit.
Outlook
Our objective is now clearly to maximise capital growth over the long term by
investing in high quality small and mid-cap companies. Smaller companies in
the long-term have outperformed the London Main Market on a total return
basis. When this out-performance is compounded, the investment case becomes
even more compelling. We now have a very experienced team managing the
Company's assets and an investment approach which I believe allows
under-priced assets to be identified and advantage to be taken of favourable
market dynamics. The UK equities market continues to trade at a significant
discount to broader global equities and we believe it offers many attractive
investment opportunities that will provide long-term capital appreciation for
the Company's Shareholders.
Whilst we start the Company's next chapter 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 its investors,
whilst increasing investment funds' size.
I look forward to continuing to work 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
27 February 2024
Investment Managers Report
The history of UK small cap investing over the last 50 years has been one of
long-term capital appreciation and wider equity market outperformance
punctuated by periods of severe underperformance and sell-downs during periods
of economic stress. Examples include the 1975 oil price shock, the 1987
inflation bubble and the 2008 credit crisis, with investors shunning seemingly
riskier asset classes. For the last two years we have been experiencing one of
those periods of small cap underperformance, particularly the more highly
rated growth segment, as a result of meaningful inflation for the first time
this century, started by the supply chain disruption during pandemic
lockdowns, only to be exacerbated by the invasion of Ukraine. This sustained
inflation dented consumer and business confidence, with the attendant
increases in interest rates making cash deposit accounts and government bonds
an attractive home for investors' savings for the first time in many years,
further undermining the appetite for equities. With inflation now starting to
fall back, the Directors and Manager are of the view that the recent sell-off
and de-rating of UK small cap shares presents one of those opportunities that
one will see only a few times in the course of an investment career, to get
exposure to a highly attractive asset class, with long-term outperformance
characteristics, at a compellingly attractive valuation to drive long-term
capital growth.
Since the Board changed the Company's mandate in July 2023 to one of
maximising capital growth by investing in high quality, quoted, UK small and
mid-caps, the Company's remaining legacy holdings have been liquidated. The
Manager has invested just under three-quarters of the funds available in 57
new holdings by the period end, in line with its Investment Strategy of buying
businesses that can grow faster than the market through the economic cycle,
funding organic growth through their own cash generation thanks to a
combination of high margins and low capital intensity. Another characteristic
the Manager is looking for is high levels of revenue visibility, which may
come from either recurring subscription revenue streams, as enjoyed by many of
its software, media and financial services holdings, or design acceptance of
'must have' components by its industrial stocks. Many of the Company's new
holdings enjoy market leading positions in their respective sectors, giving
them a degree of pricing power. All these characteristics lend themselves to
the Company owning, in the Manager's view, a "sleep well at night" portfolio,
whilst also providing the prospect of excellent capital growth.
By way of example, the top six holdings at the period end manifest many of
these characteristics:
Pendragon, until recently one of the UK's leading motor retail groups, which
would not have normally lent itself to the Manager's process, is selling its
car retail and leasing businesses to focus on its technologically leading SAAS
dealer management software business, which will have the opportunity to grow
sales by engaging with previously competing UK motor dealership groups, as
well as expanding into the US market by way of a joint venture with the motor
group which is acquiring its UK retail assets.
JTC is a leading international provider of administration services to
alternative fund managers, private trusts and high net worth wealth offices,
with high margin recurring revenues. The business is enjoying strong revenue
growth, particularly in the USA, from both the growth of alternative funds'
assets under management and a growing trend to outsource their administration.
Ascential owns a number of market leading media assets and is in the process
of realising shareholder value by selling two of its three divisions, leaving
it with an events business with two leading platforms for the global marketing
and fintech industries.
Auction Technology is a leading provider of online bidding software and
services for auctioneers in the USA and UK, specialising in the industrial and
commercial goods and arts and antiques auction markets. It enjoys very high
margins and is therefore prodigiously cash generative, whilst benefitting from
the long-term trend for more bidding to be conducted online, as well as
offering new ancillary services, like payments, to its auctioneers.
Restore is the UK's second largest document storage and ancillary services
business. The records management business provides an inflation linked
annuity-like revenue stream, servicing government departments, the NHS and
lawyers and other professional service providers, which have a requirement to
retain and digitise their records.
Finally, dotDigital provides a digital marketing platform that enables its
clients to communicate effectively across multiple online channels with their
customer base. It enjoys high levels of recurring revenues, strong margins and
negative working capital and is growing successfully from its UK base into
international markets.
The Company's portfolio is currently weighted towards what the Manager sees as
oversold growth sectors with technology (21%), media (15%) and financials
(14%), where the emphasis is very much on asset light financial service
providers, namely JTC (see earlier), Fintel (mortgage market services),
Mattioli Woods (wealth manager), AJ Bell (investment platform), and Man Group
(asset manager) rather than asset intensive banks and insurance companies.
However, with falling inflation bringing on the prospect of rate cuts later
this year, and a return to economic growth on the horizon, the Manager has
tentatively started to invest in some of its preferred quality cyclical names,
with 11% of the invested capital held in construction stocks, 8% in
industrials and 6% in consumer cyclicals (excluding Pendragon, which is
currently categorised as a consumer stock but on de-merger will move to
technology).
The nadir for small cap growth stocks was reached in October 2023, with robust
US employment data suggesting rates would need to stay higher for longer and
conflict in the Middle East leading to a further bout of risk aversion. Since
then, sharp falls in inflation prompted a year-end rally in small and mid-cap
growth stocks, witnessed by the Company's 10.9% NAV appreciation in the last
two months of the year. Hopefully this provides an indication of what calendar
2024 might hold in store as we go through the year, with the prospect of
ongoing declines in inflation providing the opportunity for rate cuts and a
further recovery in small and mid-cap equity performance.
Chelverton Asset Management
27 February 2024
Enquiries
The Investment Company plc +44 (0) 20 3934 6630
Ian Dighé, Chairman info@theinvestmentcompanyplc.co.uk (mailto:info@theinvestmentcompanyplc.co.uk)
Chelverton Asset Management Limited - Investment Manager
David Horner +44(0)1225 483030
dah@chelvertonam.com (mailto:dah@chelvertonam.com)
Singer Capital Markets - Corporate Broker +44 (0)20 7496 3000
James Moat / Alex Emslie
ISCA Administration Services Limited +44 (0) 1392 487056
Company Secretary
Portfolio and Assets
At 31 December 2023
Fair Value % of net assets
Security Holding £
Pendragon 750,000 242,250 3.7
JTC 20,000 162,000 2.4
Ascential 54,407 159,413 2.4
Auction Technology Group 27,500 143,550 2.2
Restore 65,000 141,700 2.1
dotdigital 137,500 135,988 2.1
Premier Foods 100,000 135,600 2.1
Sigmaroc 250,000 133,500 2.0
Oxford Metrics 125,000 132,500 2.0
Clarkson 4,000 126,400 1.9
Learning Technologies Group 150,000 121,500 1.8
Bodycote 20,000 118,902 1.8
Gamma Communications 10,000 112,400 1.7
Alpha Group International 6,577 111,809 1.7
Somero Enterprise Inc. 30,000 111,000 1.7
AJ Bell 35,000 109,550 1.7
Volution Group 25,000 108,400 1.6
YouGov 9,211 107,769 1.6
Inchcape 15,000 107,327 1.6
Global Data 50,000 97,500 1.5
Ebiquity 300,000 96,000 1.5
Man Group 40,000 93,000 1.4
Severfield 140,000 89,040 1.3
Alpha Financial Markets 22,143 86,358 1.3
Celebrus Technologies 40,000 86,000 1.3
Aptitude Software Group 30,000 84,000 1.3
Advanced Medical Solutions Group 40,000 83,001 1.3
Accesso Technology Group 15,000 82,501 1.2
Next 15 Group 10,000 82,500 1.2
Macfarlane Group 70,000 81,900 1.2
Mattioli Woods 12,500 76,250 1.2
Adriatic Metals 35,000 73,500 1.1
FDM Group (Holdings) 15,000 68,776 1.0
Alliance Pharma 175,000 66,500 1.0
Zoo Digital 100,000 65,000 1.0
MPAC 25,000 63,750 1.0
XP Power Limited 4,694 63,651 1.0
Eckoh 164,062 62,344 0.9
Inspired 85,000 61,200 0.9
On the Beach Group 35,000 61,180 0.9
DFS Furniture 50,000 60,900 0.9
LBG Media 75,000 60,300 0.9
The Pebble Group 100,000 59,000 0.9
Water Intelligence 14,500 58,000 0.9
Eurocell 40,000 50,400 0.8
Keystone Law Group 10,000 50,000 0.8
Fintel 20,000 49,000 0.7
Hostelworld 35,000 47,600 0.7
Aquis Exchange 12,500 45,000 0.7
Arecor Therapeutics 25,000 45,000 0.7
Gooch & Housego 7,000 41,300 0.6
Seeing Machines 750,000 40,350 0.6
Luceco 30,000 37,140 0.6
Getbusy 50,000 32,500 0.5
CAB Payments Holdings 35,000 28,910 0.4
Diaceutics 25,000 21,500 0.3
Argentex Group 20,000 17,200 0.3
Legacy holdings - -
Total equity 4,889,609 73.9
UK Treasury Bill 4.125% 29/01/27 1,300,000 1,320,124 20.0
Total investments 6,209,733 93.9
Cash 368,049 5.6
Other assets net of other liabilities 36,078 0.5
Total net assets 6,613,860 100.0
Interim management report and Directors' responsibility statement
Interim management report
The important events that have occurred during the period under review and
their impact on the financial statements are set out in the Chairman's
Statement and Investment Manager's Report above.
In the view of the Board, the principal risks facing the Group are
substantially unchanged since the date of the Report and Accounts for the year
ended 30 June 2023 and continue to be as set out in that report. Risks faced
by the Group include, but are not limited to, market risk (which comprises
market price risk, interest rate risk and liquidity risk). Details of the
Group's management of these risks and exposure to them is set out in the
Group's Report and Accounts for the year ended 30 June 2023.
Other than as disclosed in note 9, there have been no significant changes in
the related party disclosures set out in the Annual Report.
The Board has undertaken a review of the Company's subsidiaries and has
concluded that it is in the best interests of the Group to commence the
wind-up of New Centurion Trust Limited which became a subsidiary of the
Company in 2005. It is a dormant company whose only asset is the preference
shares in the Company which are eliminated on consolidation. Therefore, the
wind up will have no impact on the Group's financial statements.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with International Accounting Standard 34, Interim Financial
Reporting, and gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group; and
· this Half-Yearly Financial Report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the Group during that period; and any changes in
the related party transactions that could do so.
This Half-Yearly Financial Report was approved by the Board of Directors on 27
February 2024 and the above responsibility statement was signed on its behalf
by I. R. Dighé, Chairman.
Condensed consolidated income statement
For the six months ended 31 December 2023 (unaudited)
6 months to 31 December 2023 6 months to 31 December 2022 Year ended 30 June 2023
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £ £ £ £
Gains on investments at fair value through profit or loss - 258,021 258,021 - 971,706 971,706 - 876,505 876,505
Exchange (loss)/gain on capital items - (10,475) (10,475) - 22,642 22,642 - 798 798
Investment income 2 84,002 - 84,002 104,010 - 104,010 303,475 - 303,475
Investment Management fee 3 - - - - - - - - -
Expenses (80,660) - (80,660) (201,786) - (201,786) (396,562) - (396,562)
Return/(loss) before taxation 3,342 247,546 250,888 (97,776) 994,348 896,572 (93,087) 877,303 784,216
Taxation (1,123) - (1,123) (12,185) - (12,185) (45,020) - (45,020)
Total income/ (loss)/ after taxation 2,219 247,546 249,765 (109,961) 994,348 884,387 (138,107) 877,303 739,196
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Pence pence Pence Pence pence Pence pence pence pence
Return on total income after taxation per 50p ordinary share - basic & 4 0.10 10.99 11.09 (2.30) 20.83 18.53 (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 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 period. Accordingly, total income is also total comprehensive
income for the period, 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 period.
The notes form part of these condensed financial statements.
Condensed consolidated statement of changes in equity
For the six months ended 31 December 2023 (unaudited)
Ordinary Share Capital redemption reserve * Capital Revenue Total
share premium * £ Special reserve reserve £
capital £ 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 period - - - - 247,546 2,219 249,765
Transactions with Shareholders recorded directly to equity
Cancellation of share premium account and capital redemption reserve - (4,453,903) (2,408,820) - - -
6,862,723
Share issue 406,414 2,425,325 - - - - 2,831,739
Costs of shares purchased under Tender Offer and held in Treasury - - - (12,658,140) - (12,658,140)
-
Tender offer and share issue costs - - - - (82,235) - (82,235)
Ordinary dividends - (note 5) - - - - - 1,927 1,927
Balance at 31 December 2023 2,792,439 2,425,325 - 6,862,723 (3,946,918) (1,519,709) 6,613,860
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 period - - - - 994,348 (109,961) 884,387
Balance at 31 December 2022 2,386,025 4,453,903 2,408,820 - 9,179,539 (1,495,709) 16,932,578
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 and share issue 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
* Following approval by Shareholders at the General Meeting on 26 June 2023
the special reserve was created by order of the Court on 18 July 2023 by the
cancellation of the share premium account and capital redemption reserve.
The notes form part of these condensed financial statements.
Condensed consolidated balance sheet
At 31 December 2023 (unaudited)
31 December 2023 31 December 2022 30 June
£ £ 2023
Notes £
Non-current assets
Investments held at fair value through profit or loss 8 6,209,733 15,528,839 8,564,470
Current assets
Trade and other receivables 140,531 93,101 25,068
Cash and cash equivalents 368,049 1,393,505 8,282,426
508,580 1,486,606 8,307,494
Current liabilities
Trade and other payables (104,453) (82,867) (601,160)
(104,453) (82,867) (601,160)
Net current assets 404,127 1,403,739 7,706,334
Net assets 6,613,860 16,932,578 16,270,804
Capital and reserves
Ordinary share capital 6 2,792,439 2,386,025 2,386,025
Share premium 2,425,325 4,453,903 4,453,903
Capital redemption reserve - 2,408,820 2,408,820
Special reserve 6,862,723 - -
Capital reserve (3,946,918) 9,179,539 8,545,911
Revenue reserve (1,519,709) (1,495,709) (1,523,855)
Shareholders' funds 6,613,860 16,932,578 16,270,804
NAV per ordinary share of 50p 7 360.00p 354.83p 340.96p
The notes form part of these condensed financial statements.
Condensed consolidated cash flow statement
For the six months ended 31 December 2023 (unaudited)
31 December 2023 31 December 2022 30 June
£ £ 2023
£
Cash flows used in operating activities
Income received from investments 14,451 105,195 303,114
Interest received 48,236 - 6,451
Overseas taxation paid (2,609) (13,843) (46,539)
Investment management fees paid - - -
Other cash payments (211,259) (229,231) (382,266)
Net cash used in operating activities (151,181) (137,879) (119,240)
Cash flows generated from/(used in) financing activities
Proceeds from Share Issue 3,618,690 - -
Funding of Tender Offer (13,445,091) - -
Share Issue and Tender Offer expenses paid (539,075) - (35,000)
Net cash used in financing activities (10,365,476) - (35,000)
Cash flows (used in)/generated from investing activities
Purchase of investments (5,956,391) (921,273) (3,412,011)
Sale of investments 8,558,662 1,752,246 11,174,206
Net cash generated from investing activities 2,602,271 830,973 7,762,195
Net (decrease)/increase in cash and cash equivalents (7,914,386) 693,094 7,607,955
Reconciliation of net cash flow to movement in net cash
(Decrease)/increase in cash (7,914,386) 693,094 7,607,955
Exchange rate movements 9 21,819 (4,121)
(Decrease)/increase in net cash (7,914,377) 714,913 7,603,834
Net cash at start of period 8,282,426 678,592 678,592
Net cash at end of period 368,049 1,393,505 8,282,426
Analysis of net cash
Cash and cash equivalents 368,049 1,393,505 8,282,426
368,049 1,393,505 8,282,426
The notes form part of these condensed financial statements.
Condensed notes to the consolidated financial statements
For the six months ended 31 December 2023 (unaudited)
1. Significant accounting policies
Basis of Preparation
The condensed consolidated financial statements, which comprise the unaudited
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 United Kingdom adopted International Accounting
Standards and in accordance with the requirements of the Companies Act 2006.
The financial statements have been prepared in accordance with the AIC SORP,
except to any extent where it is not consistent with the requirements of
International Accounting Standards. The accounting policies are as set out in
the Report and Accounts for the year ended 30 June 2023.
The half-year financial statements have been prepared in accordance with IAS
34 "Interim Financial Reporting".
The financial information contained in this half year financial report does
not constitute statutory accounts as defined by the Companies Act 2006. The
financial information for the periods ended 31 December 2023 and 31 December
2022 have not been audited or reviewed by the Company's Auditor. The figures
and financial information for the year ended 30 June 2023 are an extract from
the latest published audited statements, and do not constitute the statutory
accounts for that year. Those accounts have been delivered to the Registrar of
Companies and include a report of the Auditor, which was unqualified and did
not contain a statement under either Section 498(2) or 498(3) of the Companies
Act 2006.
Going Concern
The Directors have made an assessment of the Group's ability to continue as a
going concern. This has included consideration of 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 the key service providers, the continued eligibility to be
approved as an investment trust company, the impact of the conflicts in
Ukraine and the Middle East, and the current economic environment. 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.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being investment business.
2. Income
6 months to 6 months to Year ended
31 December 2023 31 December 2022 30 June
£ £ 2023
£
Income from investments:
UK dividends 22,061 37,048 52,082
Unfranked dividend income (including scrip dividends) 5,115 66,962 244,942
UK fixed interest 7,723 - -
34,899 104,010 297,024
Other income
Bank deposit and other interest 49,103 - 6,451
Total income 84,002 104,010 303,475
3. Investment Management Fee
6 months to 6 months to Year ended
31 December 2023 31 December 2022 30 June
£ £ 2023
£
Investment management fee - - -
The Company was self-managed until 26 July 2023 when Chelverton Asset
Management were appointed as Investment Manager following completion of the
Tender Offer.
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%,of Net Asset
Value, the Investment Manager has waived the management fee and shall instead
make a contribution to the Group to ensure that the ongoing charges ratio does
not exceed 2% of Net Asset Value. The Investment Manager's contribution due to
the Group at the period end was £94,736 and this figure has been deducted
from the expenses in the Income Statement.
4. Return per Ordinary Share
Returns per share are based on the weighted average number of shares in issue
during the period. Normal and diluted returns per share are the same as there
are no dilutive elements on share capital.
6 months to 6 months to Year ended
31 December 2023 31 December 2022 30 June 2023
Net return Pence per share Net return Pence per share Net return Pence per share
£ £ £
Return after taxation attributable to ordinary Shareholders
Revenue 2,219 0.10 (109,961) (2.30) (138,107) (2.89)
Capital 247,546 10.99 994,348 20.83 877,303 18.38
Total comprehensive income 249,765 11.09 884,387 18.53 739,196 15.49
Weighted average number of ordinary shares 2,251,911 4,772,049 4,772,049
5. Dividends per Ordinary Share
Amounts recognised as distributions to equity holders in the period.
6 months to 31 December 2023 6 months to 31 December 2022 Year ended
£ £ 30 June
2023
£
Ordinary shares
Unclaimed dividends in respect of prior periods clawed back after 12 years (1,927) - -
Total (1,927) - -
6. Ordinary Share Capital
31 December 2023 31 December 2022 30 June 2023
Number £ Number £ Number £
Ordinary shares of 50p each 5,584,878 2,792,439 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 of the Company at that date. 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. Of the shares in
issue, 3,747,673 ordinary shares are held 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 31 December 2023, the Company holds 3,747,673 ordinary shares in Treasury
(31 December 2022: Nil, 30 June 2023: Nil).
7. Net Asset Value per Ordinary Share
The NAV per ordinary share is calculated as follows:
31 December 2023 31 December 2022 30 June 2023
£ £ £
Net assets 6,613,860 16,932,578 16,270,804
Ordinary shares in issue (excluding shares held in Treasury) 1,837,205 4,772,049 4,772,049
NAV per ordinary share 360.00p 354.83p 340.96p
8. Fair Value Hierarchy
The 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
31 December 2023, by the level in the fair value hierarchy into which the fair
value measurement is categorised.
Level 1 Level 2 Level 3 Total
£ £ £ £
At 31 December 2023
Investments held at fair value through profit or loss 6,209,733 - - 6,209,733
At 31 December 2022
Investments held at fair value through profit or loss 15,472,364 - 56,475 15,528,839
At 30 June 2023
Investments held at fair value through profit or loss 8,564,470 - - 8,564,470
Reconciliation of Level 3 investments
The following table summarises Level 3 investments that were accounted for at
fair value.
31 December 2023 31 December 2022 30 June
£ £ 2023
£
Opening balance - 61,152 61,152
Sales proceeds* - - -
Losses on investments - (4,677) (61,152)
Closing balance - 56,475 -
* No Level 3 investments were sold in the period.
9. Related party transactions
Fiske plc, a company in which Mr Perrin is a non-executive
director, is the Company's custodian. An amount of £3,088 (2022: £4,069) was
paid to Fiske plc pursuant to the custody agreement and, as at the period end,
£1,553 (2022: £2,209) was payable to Fiske plc.
David Horner was appointed as a non-executive Director on 26 July 2023. Mr
Horner is the Investment Trust Director of the Investment Manager. The
transactions with the Investment Manager are described in note 3. At 31
December 2023, there was an amount of £94,736 due from the Investment Manager
to the Group as a contribution towards the running costs of the Group.
During the first six months of the financial year, no other transactions with
related parties have taken place which have materially affected the financial
position or performance of the Group.
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of this announcement.
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