Schroder Br.Opps.Tst - Half-year Report
04/12/2023 07:00
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RNS Number : 4844V Schroder British Opportunities Tst. 04 December 2023
Half Year Report
Schroder British Opportunities Trust plc hereby submits its Half Year Report
for the six months ended 30 September 2023 as required by the Financial
Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.
The Half Year Report is also available to download from the Company's webpage.
Please click on the following link to view the document:
(http://www.schroders.com/inov)
http://www.rns-pdf.londonstockexchange.com/rns/4844V_1-2023-12-3.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/4844V_1-2023-12-3.pdf)
The Company has submitted a copy of its Half Year Report to the National
Storage Mechanism and it will shortly be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
Enquiries:
Schroder Investment Management Limited
Augustine Chipungu (Press) 020 7658 6000
John Spedding 0207 658
3206
Highlights for the year ended 30 September 2023
Financial Highlights
· Over the six months to 30 September 2023, the net asset value
("NAV") per share decreased by 2.5% from 107.32 pence per share to 104.66
pence per share, with weakness in UK equity markets impacting the public
allocation of the portfolio, while the private allocation continues to show
robust growth in aggregate.
· The share price increased 6.9% over the period (30 September
2023: 73.25p vs. 31 March 2023: 68.50p). The Board believes the current share
price still undervalues the Company and does not reflect the strong underlying
fundamentals of the portfolio.
Portfolio Highlights
· At period end, the portfolio consisted of 9 private companies
(65% of NAV) and 23 public companies (27% of NAV).
· The public equity portfolio detracted from NAV performance over
the period. These investments focus on small and medium-sized UK businesses,
with a high weighting towards the consumer discretionary sector - both areas
of the market that have struggled as rising interest rates have encouraged
investors to seek safer havens, such as cash, bonds, and more defensive
sectors.
· The private segment of the portfolio has continued to perform
well in aggregate, having increased in value every quarter since the Company's
inception. The focus on 'growth capital' and 'buyout' areas continues to
deliver.
· Main contributors to performance over the six months included
EasyPark (private), Pirum (private) and Bytes Technology (public):
o EasyPark's recent announcement of its intention to acquire Flowbird Group
has led to a positive re-rating of the Company's holding, adding c.£1.8
million to the NAV.
o Pirum's strong sales and EBITDA growth has triggered a c.£1.1 million
increase to its valuation.
o Shares in Bytes Technology increased following strong financial results.
· Main detractors to performance over the six months included
Watches of Switzerland (public), Rapyd (private) and Learning Technologies
(public):
o Watches of Switzerland's ("WoS") shares unexpectedly fell over the
market's concerns that Rolex's acquisition of luxury watch retailer Bucherer
would hurt WoS' growth.
o While Rapyd continues to grow, the investment landscape in the payments
sector remains challenging, leading to a reduction in valuation over the
period.
o Learning Technologies announced an earnings downgrade, citing tough
markets primarily in its contracts business.
Schroder British Opportunities Trust plc
Half Year Report and Accounts for the six months ended 30 September 2023
Chairman's Statement
Introduction
This report covers your Company's progress in the six months to 30 September
2023 and its financial position at that date.
Investment Strategy
Your Company invests in a diversified mix of public and private companies,
either UK based or generating a significant proportion of their revenues from
the UK. The investment team look for companies with the potential for high
growth along with strong ESG credentials, a combination that we believe will
create shareholder value over time. Our objective is to provide long term,
sustainable capital growth.
Performance
During the six-month period to 30 September 2023, the net asset value ("NAV")
per share decreased by 2.5% from 107.32 pence per share to 104.66 pence per
share. This reflects markedly different performance from the public and
private investments.
Net asset value attribution(1)
6 months to 1 year to Since IPO to
30.09.23 30.09.23 30.09.23
Public -4.9% -2.0% -17.7%
Private 2.9% 6.8% 27.2%
Other -0.5% -1.2% -4.4%
Total -2.5% 3.6% 5.2%
The public segment of the portfolio has suffered from lower sales and profit
multiples as UK equity market sentiment, particularly toward the mid and small
cap stocks, continues to be weak. Capital outflows from equities have
increasingly been allocated to safe haven investments such as cash, gilts and
gold. During the period, the Bank of England raised interest rates from 4% to
5.25% which had further negative impacts on the valuation of UK growth shares.
The public investments' valuation reduction is frustrating, but the Portfolio
Manager's investment thesis is based on the potential for growth and value
accretion over the medium to long term. They believe that their strategy
remains valid despite current market negatives.
By contrast, the private segment of the portfolio has seen a valuation
increase as the companies we have invested in have generally shown robust
revenue growth and continue to increase market share. The net increase in the
value of the private equity portfolio in the most recent quarter represents
the 11th consecutive quarter of increases since the Company's IPO. This
increase is despite public market comparators negatively impacting our private
company valuations. The attribution table above explains how the two segments
of the portfolio have developed in the period and since IPO. Shareholders
approved the removal of the 60% limit of NAV held in private companies (at the
AGM in September 2022) as the Portfolio Manager believed that this would offer
the best opportunities over the past year. The results we are now reporting
validate this view.
Importantly, the underlying operational and financial performance of the vast
majority of our portfolio companies has been strong. Our private equity
portfolio companies continue to show resilience in challenging times. By way
of example, six of the nine private equity companies were EBITDA(2) positive,
and their weighted average EBITDA margin was 44%. Over the period, the key
drivers of performance from the portfolio were EasyPark and Pirum both of
which are progressing ahead of their original investment cases.
Notwithstanding the fall in net asset value per share, the Company's share
price increased by 6.9% to 73.25 at the period end. The improvement in share
price was driven by a reduction in the discount to NAV to 30.0% at 30
September 2023. This was against a backdrop of widening discounts across the
whole investment trust sector, and private equity trusts remaining on material
discounts relative to the wider investment trust space.
At period end, our portfolio consisted of nine private companies (65% of NAV),
23 public companies (27% of NAV), and cash and cash equivalents of £8.2m (10%
of NAV). Our Top 10 holdings represented 73% of total investments.
The Portfolio Manager's report, beginning on page 7, includes a detailed
review of the portfolio, individual company performance, and investment
transactions in the period.
(1 ) "Total" represents the percentage change in NAV over a given
period. The percentages shown for public, private and other represent the
contribution to the total change in NAV over a given period. For public and
private, this is based on fair value gains and losses.
(2 ) EBITDA = Earnings Before Interest, Tax, Depreciation, and
Amortisation. EBITDA is a measure of core corporate profitability. EBITDA is a
valuation metric used to compare relative value of different businesses.
EBITDA margin is a profitability ratio that compares the EBITDA of a company
to its net revenue.
Valuations
As I have reported previously, public investments are obviously valued at the
listed share price and the private portfolio has valuations developed by a
specialist valuations team within Schroders. This team is independent from the
Portfolio Manager. In general, we use public market comparable companies to
avoid insulating the private valuations from the broader market. Valuations
are calculated using established methodologies and public market comparators
in accordance with International Private Equity and Venture Capital
guidelines. The output from the Schroders independent specialist valuations
team is reviewed by the Valuations Committee, the Board and, in respect of the
annual results, by the Company's external auditors. Shareholders can be
assured that your Board is cognisant of scepticism toward private equity
valuations due to a reduced level of transparency and leads a discursive and
challenging process.
Discount Control
The Company's shares continued to trade at a discount to NAV during the period
under review and up to the date of this report. There continue to be many
examples of a disconnect between an investment company's share price and the
value of its portfolio holdings. We believe this to be the case with your
Company. We suffer from two forms of discount. First, the unwarranted discount
of the UK market relative to peers and second, the discount applied to your
Company, which we believe to be a result of exogenous factors. It does not
reflect the aggregate operational performance of the Company's unquoted
holdings since inception.
Buybacks are one of several mechanisms your Board actively considers to reduce
this discount. The use of our cash reserves is a matter of regular review. We
aim to balance the benefits of highly accretive buybacks when discounts are
high against ensuring that we hold appropriate reserves to fund potential
follow-on investments in the private portfolio and capture the best of the new
investment opportunities that we continue to see. Given the current pipeline,
particularly from companies that want to stay private for longer, and taking
into consideration the current size of the trust, we have chosen not to buy
back in the period.
Board
In September, we created a separate Valuations Committee to be chaired by
Professor Tim Jenkinson, a leading authority on private equity and the
mechanisms of valuation. This decision recognises the importance of the
Board's oversight role on valuations and the need for shareholders to have
confidence in the outcomes.
Diana Dyer Bartlett was appointed as Senior Independent Director in September
2023, in addition to her role as chair of the Audit & Risk Committee.
The Board intends to recruit a new non-executive director in the new year in
order to bring the Board strength back to four. We aim to improve Board
diversity when doing so.
Dividend
No dividend has been declared or recommended for the year. Your Company is
focused on providing capital growth and has a policy to only pay dividends to
the extent that it is necessary to maintain the Company's investment trust
status.
Outlook
The world is an uncertain place as I write, and equity markets may well remain
out of favour for the next few months. High interest rates and uncertainty
over future rates have continued to be a major negative factor affecting
investment companies that focus on growth. The assumption is that these
companies will need cash to fund that growth and that will be expensive and/or
difficult to get. Unfortunately, the market is not differentiating between
those companies with genuine issues in this regard and those that have no such
needs, as is the case with the vast bulk of our investments.
One result of this is that the price at which our shares are trading continues
to significantly undervalue the Company as it does not reflect the strong
fundamentals of our portfolio.
History suggests that within listed UK equities, small and medium sized growth
companies are often the first to suffer in a bear market but also first to
rerate on signs of recovery and a change in market sentiment. A reduction in
interest rates may well be the trigger for this. UK inflation appears to have
peaked, and some commentators are predicting a base rate reduction as early as
Q2 2024. At the time of writing, we are experiencing some improvement in the
share prices of our public investments. This has generated a post period end
NAV increase of 4.7%.
Your Board expects that the patient shareholder will benefit when market
sentiment changes and the value and quality of the underlying portfolio
becomes appreciated.
Neil England
Chairman
1 December 2023
Portfolio Manager's Review
Introduction
Summary
Market
Over the six-month period to 30 September 2023, UK small and mid-cap stocks
(SMIDs) underperformed against a backdrop of spiked interest rate expectations
in early summer. Markets got ahead of themselves when they briefly anticipated
that base rates would head north of 6% on the back of stronger-than-expected
jobs, wage growth and core inflation data. This was reflected in higher
long-term UK government bond yields. However, towards the end of the period,
market interest rate expectations stabilised and the sell-off in long-term UK
government bonds moderated. The expectation now is that near-term inflation
will fall, and UK base interest rates may have peaked.
In private equity markets, global deal activity has fallen back to the normal
pre-pandemic levels in terms of deal value and volume, following the
exuberance of 2021. Exit activity remains muted compared to 2021. This lower
level of deal activity, paired with relatively reduced fundraising levels, has
kept valuations lower, with bigger valuation corrections noticed in
small/mid-sized deals (<$1 billion enterprise value). Buyout performance
has remained robust, despite the macroeconomic backdrop, with lower entry
valuation and healthy EBITDA growth possibly explaining relatively strong
performance despite cost pressures. While these observations come from global
trend analysis, we believe these dynamics are also being reflected in the UK
private equity market. Furthermore, we have observed the bid-ask spread
between buyers and sellers closing during the second half of 2023, which
should start to deliver a pipeline of attractive UK growth and buyout
opportunities.
Portfolio Performance
Since the Company's IPO in December 2020, the net asset value has proved
resilient despite a volatile market. However, the Company's NAV has fallen
over the six-month period under review, predominantly due to weakness in
listed UK equity markets. The private portfolio has continued to show positive
momentum and strong underlying operational performance in aggregate.
Attribution analysis (£m) for six months to 30 September 2023
Quoted Unquoted Net cash Other NAV
Value as at 31 March 2023 26.2 47.9 7.8 (2.6) 79.3
+ Investments 0.6 0.2 (0.8) - -
- Realisations at value (1.9) - 1.9 - -
+/- Fair value gains/(losses) (3.9) 2.3 - - (1.6)
+/- Costs and other movements - - (0.8) 0.4 (0.4)
Value as at 30 September 2023 21.0 50.4 8.1 (2.2) 77.3
Component rows have been rounded
Main positive and negative performers over the six months to 30 September
2023
Top 5 contributors Contribution %
EasyPark 2.2
Pirum 1.4
Cera 0.4
Bytes 0.4
Mintec 0.3
Bottom 5 contributors Contribution %
Watches of Switzerland -0.9
Rapyd -0.9
Learning Technologies -0.7
Learning Curve -0.7
OSB -0.6
The NAV as of 30 September 2023 was £77.3 million, a decrease of 2.5%
compared with the NAV (£79.3 million) as of 31 March 2023. The 2.5% decrease
in the net asset value was comprised of:
• Quoted holdings: -4.9%
• Unquoted holdings: 2.9%
• Costs and other movements: -0.5%
The public equity portfolio detracted from NAV performance over the period.
These investments focus on small and medium-sized UK businesses, with a high
weighting towards the consumer discretionary sector - both areas of the market
that have struggled as rising interest rates have encouraged investors to seek
safer havens, such as cash, bonds, and more defensive sectors.
Watches of Switzerland's ("WoS") shares unexpectedly fell over the market's
concerns that Rolex's acquisition of luxury watch retailer Bucherer would hurt
WoS' growth. However, we remain a shareholder given our view that the share
price reaction was excessive, whilst we are optimistic of the equity story
from the subsequent release of the new Long Range Plan. Elsewhere, workplace
digital learning and talent management company, Learning Technologies, was a
negative contributor, as the company announced an earnings downgrade citing
tough markets primarily in its contracts business. Meanwhile, our position in
specialist mortgage lender OSB Group also held performance back, after warning
that its profits would be hampered by mortgage customers rushing to mitigate
against rising interest rates. On the positive side, shares of software
reseller Bytes Technology and premium British pub operator City Pub Group did
well, following strong financial results. Performance was also helped by
Dalata Hotel Group, which continued to grow its revenue per available room
ahead of the industry.
The portfolio's private equity holdings have continued to perform well in
aggregate, having increased in value every quarter since the Company's
inception. The Company's focus on the 'growth capital' and 'buyout' areas of
the private equity landscape, in contrast to venture capital and pre-IPO areas
(which have been negatively impacted by rising inflation and interest rates)
has been successful. Eight out of the nine companies in the Company's private
equity portfolio are either profitable or, in our assessment, have cash
runways to fund them through to profitability. The increase in the aggregate
valuation of these holdings has been driven by transactional activity and
trading gains, offset somewhat by valuation multiple compression, as
illustrated below. Additionally, the private equity portfolio companies have
continued to demonstrate robust organic and inorganic growth in aggregate,
also illustrated on the next page.
Focusing on the EBITDA-positive companies in the private equity portfolio, the
profitability of these companies significantly exceeds those of selected and
relevant public market comparables. This strong positive differential against
listed comparators is also prevalent when assessing the combination of sales
growth and profitability (referred to as the "rule of 40" and typically used
in the software space). This rule acts as a proxy to help assess how
effectively a company is utilising capital to achieve a balance between growth
and profitability. Our applicable portfolio companies display metrics almost
1.8x higher than listed comparators on average. Despite these favourable
metrics, these companies are being valued more prudently on aggregate than
public comparators, as illustrated below.
EasyPark and Pirum were the key positives in the period. EasyPark Group, one
of the global leaders in mobile paid parking, recently announced its intention
to acquire Flowbird Group. While the deal is subject to customary approvals by
relevant authorities and the parties have agreed not to disclose the terms
agreed, this has led to a positive re-rating of the Company's holding, adding
c.£1.8 million to the NAV. This deal will be highly complementary to
EasyPark's existing business and extend their global reach. Pirum, a leading
provider of post-trade automation and collateral management technology for the
global securities industry, has displayed strong sales and EBITDA growth,
which has been reflected in a c.£1.1 million increase to its valuation in the
period.
On the more challenging side, the valuations for both holdings in Rapyd and
Learning Curve have come down over the past six months. Rapyd continues to
grow, principally fuelled by its small and medium-sized customers. In August,
the company announced the $610 million acquisition of a substantial part of
PayU Global Payment Organisation, a leading provider of best-in-class payment
solutions to emerging markets, operating in over 30 countries worldwide. This
deal, which is subject to regulatory approval, will continue Rapyd's global
expansion across Central and Eastern Europe and Latin America. Rapyd would
then be present in over 100 countries, including 41 that are licensed or
regulated, servicing 250,000+ customers. While the company continues to
perform, the investment landscape in the payments sector remains challenging,
with comparable businesses amending their long-term growth outlooks. As a
result, the valuation multiple applied has been reduced, offsetting the
company's positive financial performance, leading to a reduction in valuation
over the period. The valuation for leading private UK training and education
specialist, Learning Curve Group, has also been reduced due to some short-term
demand weakness. We believe the longer-term outlook remains positive.
Portfolio Diversification
While having notable exposure to software, the portfolio is well-diversified
across a number of growing industry sectors.
Portfolio breakdown by industry as % of total investments (30 September 2023)
Portfolio Changes
Early in the reporting period, we exited our holding in video games outsourcer
Keywords Studios, as we believed the potential downside risk on parts of its
business from artificial intelligence was not fully priced into its shares.
Finally, we modestly trimmed our position in City Pub Group following a period
of robust share price performance, however we retained our holding given the
significant discount to net asset value that the shares were trading at. The
firm was subsequently bid for by competitor Young & Co's Brewery Plc on 16
November 2023 (after the period under review), at a price that was a 46%
premium to the prior day's closing share price, thus making it the sixth
company that has been bid for since the Company's inception. We have since
exited our position at a profit.
Outlook
The public equity portion of the portfolio is weighted towards the consumer
discretionary sector, which is sensitive to consumer confidence and interest
rate sentiment. When clearer signs of a sustained economic recovery
materialise and market sentiment substantially improves, we believe that both
small and mid-caps and the consumer sector should be the first to re-rate. Our
analysis shows that such market underperformance in the past by UK small and
mid-caps has usually been followed by outperformance over three- to five-year
periods relative to large cap companies in the FTSE 100. Aside from the
relative valuation opportunity with UK equities remaining unloved relative to
world markets in an historical context, in aggregate, they are also attractive
as a result of their strong balance sheets. The valuation opportunity can also
be looked at through the lens of free cash flow yields, with the UK having a
higher yield than many other developed markets, making investing in the UK a
compelling opportunity in our view.
While our public equity allocation suffered over the reporting period of six
months to end September 2023, we have been encouraged with returns since,
helped by positive sentiment around interest rate expectations, the announced
bid for our largest holding City Pub Group, the first steps towards a realised
break up of Ascential, and a buoyant move in MaxCyte's shares.
In private equity markets, with financial engineering unlikely to propel
returns in the near term due to increased interest rates, inflation and
macroeconomic uncertainty, we continue to believe that strategies focused on
identifying companies that exhibit strong underlying financial performance are
poised to do well. This may be achieved by the expansion of product lines,
geographic footprint, and professionalising companies to improve profit
margins, for example. This is all easier to do in small and medium-sized
companies, and typically harder to achieve at larger companies, which have
often been through several rounds of private equity or institutional
ownership. Furthermore, despite the economic backdrop, we are seeing
significant deal flow across a breadth of opportunities. We have established a
formidable network in the UK (as well as globally) with hard-to-access
investment partners, and strongly believe we are well positioned to seek out
the best opportunities for the Company going forward.
The Company's differentiated public-private equity strategy enables us to
continue to invest without boundaries, providing access to a broader
investable universe which differentiates us from other investment trusts.
Schroder Investment Management Limited
1 December 2023
The Company's top ten holdings as of 30 September 2023 are set out below.
Fair value as of Total Fair value as of Total
Quoted/ 31 March 2023 investments 30 September 2023 investments
Top 10 holdings unquoted (£'000) % (£'000) %
Mintec(1) Unquoted 8,614 11.6 8,865 12.4
Rapyd Financial Network(1) Unquoted 8,399 11.3 7,721 10.8
Cera EHP S à r l Unquoted 6,986 9.5 7,316 10.2
Pirum Systems(1) Unquoted 6,087 8.2 7,166 10.0
EasyPark(1) Unquoted 4,492 6.1 6,245 8.7
Culligan(1) (formerly Waterlogic) Unquoted 5,053 6.9 4,909 6.9
CFC Underwriting(1) Unquoted 4,098 5.5 4,416 6.2
Learning Curve(1) Unquoted 2,455 3.3 1,918 2.7
Graphcore Unquoted 1,778 2.4 1,801 2.5
Volution Quoted 2,012 2.7 1,691 2.3
(1) The fair value disclosed for the following investments represents
the Company's investment in an intermediary vehicle:
- Mintec (held via Synova Merlin LP)
- Rapyd Financial Network (held via Target Global Fund)
- Pirum Systems (held via Bowmark Investment Partnership LP)
- Culligan (formerly Waterlogic) (held via Epic-1b Fund)
- EasyPark (held via Purple Garden Invest (D) AB)
- CFC Underwriting (held via Vitruvian Investment Partnership
LLP)
- Learning Curve (held via Agilitas Boyd 2020 Co-invest Fund)
Investment Portfolio
As at 30 September 2023
Country of incorporation
(of underlying holding
where applicable)
Fair value
£'000
Holding Quoted/unquoted Industry Sector Total Investments %
Mintec(1) Unquoted United Kingdom Software 8,865 12.4
Rapyd Financial Network(1) Unquoted United Kingdom IT Services 7,721 10.8
Cera EHP S à r l Unquoted United Kingdom Health Care Technology 7,316 10.2
Pirum Systems(1) Unquoted United Kingdom Software 7,166 10.0
EasyPark(1) Unquoted Sweden Software 6,245 8.7
Culligan(1) (formerly Waterlogic) Unquoted United Kingdom Diversified Consumer Services 4,909 6.9
CFC Underwriting(1) Unquoted United Kingdom Insurance 4,416 6.2
Learning Curve(1) Unquoted United Kingdom Diversified Consumer Services 1,918 2.7
Graphcore Unquoted United Kingdom Semiconductors & Equipment 1,801 2.5
Volution Quoted United Kingdom Building products 1,691 2.3
City Pub Quoted United Kingdom Hotels, Restaurants & Leisure 1,650 2.3
Trainline Quoted United Kingdom Hotels, Restaurants & Leisure 1,580 2.2
Dalata Hotel Quoted Ireland Hotels, Restaurants & Leisure 1,502 2.1
Watches of Switzerland Quoted United Kingdom Specialty Retail 1,400 2.0
Ascential Quoted United Kingdom Media 1,340 1.9
SSP Quoted United Kingdom Hotels, Restaurants & Leisure 1,334 1.9
Bytes Technology Quoted United Kingdom Software 1,067 1.5
Discoverie Quoted United Kingdom Electrical Equipment 1,059 1.5
Sosandar Quoted United Kingdom Textiles, Apparel & Luxury Goods 1,046 1.5
OSB Quoted United Kingdom Financial Services 1,036 1.5
Trustpilot Quoted United Kingdom Interactive Media & Services 962 1.3
Judges Scientific Quoted United Kingdom Machinery 861 1.2
GB Quoted United Kingdom Software 837 1.2
Mobico Quoted United Kingdom Ground Transportation 658 0.9
MaxCyte Quoted United Kingdom Life Sciences Tools & Services 597 0.8
On the Beach Quoted United Kingdom Hotels, Restaurants & Leisure 589 0.8
Learning Technologies Quoted United Kingdom Software 493 0.7
Luceco Quoted United Kingdom Electrical Equipment 429 0.6
Victorian Plumbing Quoted United Kingdom Specialty Retail 403 0.6
Invinity Energy Systems Quoted Jersey Electrical Equipment 274 0.4
Lendinvest Quoted United Kingdom Financial Services 199 0.3
Velocys Quoted United Kingdom Energy Equipment & Services 42 0.1
Total investments(2) 71,406 100.0
(1 ) The fair value disclosed for the following investments represents the
Company's investment in an intermediary vehicle:
Mintec (held via Synova Merlin LP)
Rapyd Financial Network (held via Target Global Fund)
Pirum Systems (held via Bowmark Investment Partnership LP)
Culligan (held via Epic-1b Fund)
EasyPark (held via Purple Garden Invest (D) AB)
CFC Underwriting (held via Vitruvian Investment Partnership LLP)
Learning Curve (held via Agilitas Boyd 2020 Co-invest Fund)
Total investments comprise: £'000 %
Unquoted 50,357 70.4
Quoted on FTSE 250 11,068 15.5
Quoted on AIM 6,402 9.1
Quoted on FTSE Allshare 2,077 2.9
Listed on a recognised stock exchange overseas 1,502 2.1
Total 71,406 100.0
Interim Management Statement
Principal risks and uncertainties
The Board has determined that the principal risks and uncertainties for the
Company fall into the following categories: strategic risks, market risks and
operational risks. These risks are set out on pages 34 to 36 of the Annual
Report and Accounts for the period ended 31 March 2023. The Company's
principal risks and uncertainties, and their mitigation, have not materially
changed during the six months ended 30 September 2023 or since the Annual
Report was published on 6 July 2023.
Going concern
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence until 31 December 2024, which
is more than 12 months from the date when these financial statements were
signed and the Directors have accordingly adopted the going concern basis in
preparing the financial statements.
The Board has considered the Company's principal risks and uncertainties
including whether there are any emerging risks. They have additionally
considered the liquidity of the Company's portfolio of listed investments, the
Company's cash balances and the forecast income and expenditure flows as well
as commitments to provide further funding to the Company's private equity
investee companies; the Company currently has no borrowings. A substantial
proportion of the Company's expenditure varies with the value of the
investment portfolio. In the event that there is insufficient cash to meet the
Company's liabilities, the listed investments in the portfolio may be realised
and the Directors have reviewed the average days to liquidate the listed
investments. On this basis, the Board considers it appropriate to adopt the
going concern basis of accounting in preparing the Company's accounts.
Related party transactions
There have been no transactions with related parties that have materially
affected the financial position or the performance of the Company during the
six months ended 30 September 2023.
Directors' responsibility statement
The Directors confirm that, to the best of their knowledge, this set of
condensed financial statements has been prepared in accordance with United
Kingdom Generally Accepted Accounting Practice, in particular with Financial
Reporting Standard 104 "Interim Financial Reporting" and with the Statement of
Recommended Practice, "Financial Statements of Investment Companies and
Venture Capital Trusts" issued in July 2022 and that this Interim Management
Statement includes a fair review of the information required by 4.2.7R and
4.2.8R of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules.
The half-yearly financial report has not been audited or reviewed by the
Company's auditor.
Signed on behalf of the Board of Directors.
Neil England
Chairman
1 December 2023
Income Statement
for the six months ended 30 September 2023 (unaudited)
(Unaudited) (Unaudited) (Audited)
For the six months For the six months For the year ended
ended 30 September 2023 ended 30 September 2022 31 March 2023
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments held at
fair value through profit or loss
- (1,735) (1,735) - (2,018) (2,018) - 3,198 3,198
(Losses)/gains on foreign exchange - - - - (1) (1) - 16 16
Income from investments 202 - 202 227 - 227 392 - 392
Other interest receivable and similar income 115 - 115 - - - 77 - 77
Gross (loss)/return 317 (1,735) (1,418) 227 (2,019) (1,792) 469 3,214 3,683
Investment management fee (232) - (232) (226) - (226) (458) - (458)
Performance fee - - - - (500) (500) - (555) (555)
Administrative expenses (314) - (314) (324) - (324) (650) - (650)
Transaction costs - - - - - - - (4) (4)
Net (loss)/return before finance costs
and taxation
(229) (1,735) (1,964) (323) (2,519) (2,842) (639) 2,655 2,016
Finance costs - - - - - - - - -
Net (loss)/return before taxation (229) (1,735) (1,964) (323) (2,519) (2,842) (639) 2,655 2,016
Taxation (note 3) - - - - - - - - -
Net (loss)/return after taxation (229) (1,735) (1,964) (323) (2,519) (2,842) (639) 2,655 2,016
(Loss)/return per share
(note 4) (0.31)p (2.35)p (2.66)p (0.43)p (3.37)p (3.80)p (0.86)p 3.57p 2.71p
The "Total" column of this statement is the profit and loss account of the
Company. The "Revenue" and "Capital" columns represent supplementary
information prepared under guidance issued by The Association of Investment
Companies. The Company has no other items of other comprehensive income, and
therefore the net return after taxation is also the total comprehensive income
for the period.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
Statement of Changes in Equity
for the six months ended 30 September 2023 (unaudited)
For the six months ended 30 September 2023 (unaudited)
Called-up Share Special Capital Revenue
share capital premium reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 March 2023 750 - 71,957 8,253 (1,649) 79,311
Net loss after taxation - - - (1,735) (229) (1,964)
At 30 September 2023 750 - 71,957 6,518 (1,878) 77,347
For the six months ended 30 September 2022 (unaudited)
Called-up Share Special Capital Revenue
share capital premium reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 March 2022 750 - 72,765 5,598 (1,010) 78,103
Repurchase of ordinary shares into treasury - - (617) - - (617)
Net loss after taxation - - - (2,519) (323) (2,842)
At 30 September 2022 750 - 72,148 3,079 (1,333) 74,644
For the year ended 31 March 2023 (audited)
Called-up Share Special Capital Revenue
share capital premium reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 March 2022 750 - 72,765 5,598 (1,010) 78,103
Repurchase of ordinary shares into treasury - - (808) - - (808)
Net return/(loss) after taxation - - - 2,655 (639) 2,016
At 31 March 2023 750 - 71,957 8,253 (1,649) 79,311
Statement of Financial Position
at 30 September 2023
(Unaudited) (Unaudited)(1) (Audited)
30 September 30 September 31 March
2023 2022 2023
£'000 £'000 £'000
Fixed asset
Investments at fair value 71,406 71,832 74,128
Current assets
Debtors 75 14 151
Cash and cash equivalents 8,160 5,086 7,759
8,235 5,100 7,910
Current liabilities
Creditors: amounts falling due within one year (624) (673) (1,543)
(624) (673) (1,543)
Net current assets 7,611 4,427 6,367
Total assets less current liabilities 79,017 76,259 80,495
Creditors: amounts falling due after more than one year
Performance fee (1,670) (1,615) (1,184)
Net assets 77,347 74,644 79,311
Capital and reserves
Called-up share capital (note 5) 750 750 750
Capital reserve 78,475 75,227 80,210
Revenue reserve (1,878) (1,333) (1,649)
Total equity shareholders' funds 77,347 74,644 79,311
Net asset value per share (note 6) 104.66p 100.62p 107.32p
(1) Other creditors and accruals at 30 September 2022 were previously reported
as £2,288,000. The balance has been restated to £673,000 because performance
fees of £1,615,000 could not have fallen due within one year under any
circumstances. Therefore, they have been reclassified as creditors: amounts
falling due after more than one year.
Registered in England and Wales as a public company limited by shares
Company registration number: 12892325
Cash Flow Statement
for the six months ended 30 September 2023
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
30 September 30 September 31 March
2023 2022 2023
£'000 £'000 £'000
Operating activities
Total (loss)/return before taxation (1,964) (2,842) 2,016
Less capital (return)/loss before taxation 1,735 2,519 (2,655)
Decrease/(increase) in prepayments and accrued income 93 80 (45)
(Increase)/decrease in other debtors (17) 21 9
(Decrease)/increase in creditors and performance fee payable (433) 125 572
Performance fee and transaction costs allocated to capital - (500) (559)
Net cash outflow from operating activities (586) (597) (662)
Investing activities
Purchases of investments (872) (16,281) (19,840)
Sales of investments 1,859 7,121 13,601
Net cash inflow/(outflow) from investing activities 987 (9,160) (6,239)
Net cash inflow/(outflow) before financing 401 (9,757) (6,901)
Financing activities
Repurchase of ordinary shares into treasury - (609) (808)
Net cash outflow from financing activities - (609) (808)
Net cash inflow/(outflow) in the period 401 (10,366) (7,709)
Cash and cash equivalents at the beginning of the period 7,759 15,452 15,452
Net cash inflow/(outflow) in the period 401 (10,366) (7,709)
Exchange movements - - 16
Cash and cash equivalents at the end of the period 8,160 5,086 7,759
Notes to the Financial Statements
1. Financial statements
The information contained within the accounts in this half year report has not
been audited or reviewed by the Company's independent auditor.
The figures and financial information for the year ended 31 March 2023 are
extracted from the latest published accounts of the Company and do not
constitute statutory accounts for that year. Those accounts have been
delivered to the Registrar of Companies and included the 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.
2. Accounting policies
Basis of accounting
The accounts have been prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, in particular with Financial Reporting Standard
104 "Interim Financial Reporting" and with the Statement of Recommended
Practice "Financial Statements of Investment Trust Companies and Venture
Capital Trusts" issued by the Association of Investment Companies in July
2022.
All of the Company's operations are of a continuing nature.
The accounting policies applied to these accounts are consistent with those
applied in the accounts for the year ended 31 March 2023.
3. Taxation
The Company's effective corporation tax rate is nil, as deductible expenses
exceed taxable income. The Company intends to continue meeting the conditions
required to maintain its status as an Investment Trust Company, and therefore
no provision has been made for deferred tax on any capital gains or losses
arising on the revaluation or disposal of investments.
4. (Loss)/return per share
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
30 September 30 September 31 March
2023 2022 2023
£'000 £'000 £'000
Revenue loss (229) (323) (639)
Capital (loss)/return (1,735) (2,519) 2,655
Total (loss)/return (1,964) (2,842) 2,016
Weighted average number of shares in issue during the period 73,900,000 74,823,042 74,376,633
Revenue loss per share (0.31)p (0.43)p (0.86)p
Capital (loss)/return per share (2.35)p (3.37)p 3.57p
Total (loss)/return per share (2.66)p (3.80)p 2.71p
5. Called-up share capital
Changes in called-up share capital during the period were as follows:
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
30 September 30 September 31 March
2023 2022 2023
£'000 £'000 £'000
Opening balance of ordinary shares of 1p each 739 750 750
Repurchase of shares into treasury - (8) (11)
Subtotal, ordinary shares of 1p each, excluding shares held in treasury 739 742 739
Shares held in treasury 11 8 11
Closing balance, ordinary shares of 1p each, including shares held in treasury 750 750 750
Changes in the number of shares in issue during the period were as follows:
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
30 September 30 September 31 March
2023 2022 2023
£'000 £'000 £'000
Opening balance of shares in issue 73,900,000 75,000,000 75,000,000
Repurchase of shares into treasury - (818,365) (1,100,000)
Closing balance of shares in issue, excluding shares
held in treasury 73,900,000 74,181,635 73,900,000
Closing balance of shares held in treasury 1,100,000 818,365 1,100,000
Closing balance of shares in issue, including shares held in treasury 75,000,000 75,000,000 75,000,000
6. Net asset value per share
(Unaudited) (Unaudited) (Audited)
30 September 30 September 31 March
2023 2022 2023
Total equity shareholders' funds (£'000) 77,347 74,644 79,311
Shares in issue at the period end, excluding shares held in treasury 73,900,000 74,181,635 73,900,000
Net asset value per share 104.66p 100.62p 107.32p
7. Financial instruments measured at fair value
The Company's financial instruments within the scope of FRS 102 that are held
at fair value comprise its investment portfolio and any derivative financial
instruments.
FRS 102 requires that financial instruments held at fair value are categorised
into a hierarchy consisting of the three levels below. A fair value
measurement is categorised in its entirety on the basis of the lowest level
input that is significant to the fair value measurement.
Level 1 - valued using unadjusted quoted prices in active markets for
identical assets.
Level 2 - valued using observable inputs other than quoted prices included
within Level 1.
Level 3 - valued using inputs that are unobservable.
The following tables set out the fair value measurements using the above
hierarchy:
30 September 2023 (unaudited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities - quoted - - 21,049
- - - 50,357 50,357
unquoted
Total 21,049 - 50,357 71,406
30 September 2022 (unaudited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities - quoted 26,297 - - 26,297
- - - 45,535 45,535
unquoted
Total 26,297 - 45,535 71,832
31 March 2023 (audited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities - quoted 26,166 - - 26,166
- - - 47,962 47,962
unquoted
Total 26,166 - 47,962 74,128
There have been no transfers between Levels 1, 2 or 3 during the period (six
months ended 30 September 2022 and year end 31 March 2023: nil).
8. Uncalled capital commitments
At 30 September 2023, the Company had uncalled capital commitments amounting
to £5,171,000 (30 September 2022: £7,652,000; 31 March 2023: £5,476,000) in
respect of follow-on investments, which may be called at any time by investee
companies, subject to their achievement of certain milestones and objectives.
9. Events after the interim period that have not been reflected in
the financial statements for the interim period
The Directors have evaluated the period since the interim date and have not
noted any events which have not been reflected in the financial statements.
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