REG - Schroder UK Mid - Half-year Report
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RNS Number : 8354O Schroder UK Mid Cap Fund PLC 30 June 2025
Schroder UK Mid Cap Fund plc
Half year report
For the six months ended 31 March 2025
Schroder UK Mid Cap Fund plc (the "Company") hereby submits its half year
report for the six months ended 31 March 2025 as required by the Financial
Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.
Harry Morley, Chair of the Company, commented:
"In the search for value outside the US, UK mid-caps are attracting renewed
interest and represent an excellent investment opportunity."
Key highlights
· As previously announced on 26 March 2025, the Board set out a series
of strategic initiatives designed to further strengthen the investment
proposition of the Company, for the benefit of current and prospective
shareholders. This comprised of a reduction in management fees to 0.60% of
market capitalisation, the introduction of a three-yearly continuation vote,
and a commitment to a more active buy-back policy.
· During the six-month period to 31 March 2025 the portfolio NAV saw a
negative return of 9.3%, underperforming the Benchmark return of -7.9%.
However, from the start of the second half of the financial year to the date
of this report, the Company NAV has outperformed the Benchmark by 2.1
percentage points, delivering a total return of 14.6%.
· UK mid-cap companies are attracting renewed interest, supported by
attractive valuations, strong financials, and a wave of M&A activity.
Emerging signs of an end to the era of the dominance of US technology stocks
in global market returns may herald a return of equity investors to help to
correct the valuation dislocation which has developed among UK mid-caps.
· In recognition of our commitment to delivering shareholder value and
reflecting the ongoing recovery in portfolio income stemming from our
underlying company holdings, the Board is pleased to announce an interim
dividend of 6.3 pence per share for the financial year ending 30 September
2025, an increase of 5%.
The Company's half year report is being published in hard copy format and an
electronic copy of that document will shortly be available to download from
the Company's web pages www.schroders.com/ukmidcap
(http://www.schroders.com/ukmidcap)
The Company's half year report will shortly be uploaded to the Financial
Conduct Authority's National Storage Mechanism and will be available for
inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
Enquiries:
Schroder Investment Management Limited
Kirsty Preston / Charlotte Banks (Press) 020 7658 6000
Phoebe Merrell / Katherine Fyfe (Company 020 7658 6000
Secretary)
CHAIR'S STATEMENT
I am delighted to share my first interim report as Chair of the Company. I
succeeded Robert Talbut as Chair following the Company's AGM on 24 February
2025. On behalf of the Board, I would like to take the opportunity to thank
Robert for his valuable contribution during his nine-year tenure. I would also
like to welcome Richard Curling, who joined the Board as an independent
non-executive Director immediately following the AGM.
On 26 March 2025, the Board announced a series of strategic initiatives
designed to further strengthen the investment proposition of the Company, for
the benefit of current and prospective shareholders. This comprised of a
reduction in management fees to 0.60% of market capitalisation, the
introduction of a three-yearly continuation vote, and a commitment to a more
active buy-back policy.
INVESTMENT AND SHARE PRICE PERFORMANCE
During the six-month period to 31 March 2025, the Company's net asset value
("NAV") declined by 9.3%, versus the 7.9% fall in the Company's Benchmark
(FTSE 250 ex Investment Trusts Index). The share price declined by 6.8% over
the same period. More detailed commentary on the performance of your Company
can be found in the Investment Manager's Review. I am pleased to report that
from the start of the second half of the financial year to the date of this
report, the Company NAV increased by 14.6%, outperforming the Benchmark by 2.1
percentage points.
DIVIDEND
In recognition of our commitment to delivering shareholder value and
reflecting the ongoing recovery in portfolio income stemming from our
underlying company holdings, the Board is pleased to announce an interim
dividend of 6.3 pence per share for the financial year ending 30 September
2025, an increase of 5%. This dividend will be payable on 8 August 2025 to
shareholders recorded on the register at the close of business on 11 July
2025. The increase in dividend reflects our confidence in the sustainability
of income generation from our portfolio companies.
DISCOUNT MANAGEMENT
The discount of the Company's share price to NAV had narrowed to 7.9% as of 31
March 2025, a level around which it has remained since. We believe this is
partially due to the strategic initiatives announced in March, aimed at
enhancing shareholder value and improving market perception. The Board remains
vigilant in monitoring the discount and will utilise the share buy-back to
inhibit a wide discount to NAV from developing. No share buy-backs were
undertaken during the six-month period ending 31 March 2025. Since the period
end, the Company has acquired a small quantity of stock and anticipates
continuing this practice when it aligns with the interests of all our
shareholders.
GEARING
As at 31 March 2025, the Company's net gearing ratio was 9.5%. This level of
gearing underlines our confidence in leveraging opportunities within the
market to enhance potential returns and we anticipate that the Investment
Manager will continue to utilise gearing strategically. The use of gearing is
a feature of the investment trust structure which can enhance returns relative
to open-ended funds.
OUTLOOK
UK mid-cap companies are attracting renewed interest, supported by attractive
valuations, strong financials, and a wave of M&A activity. Emerging signs
of an end to the era of the dominance of US technology stocks in global market
returns may herald a return of equity investors to help to correct the
valuation dislocation which has developed among UK mid-caps. As highlighted in
the Investment Manager's Review on pages 5 to 9, valuations are currently
attractive, and corporate balance sheets and other financial indicators are
strong. Furthermore, the UK economy's emphasis on the service sector may allow
it to avoid the worst effects of the Tariffs imposed by the US.
In Jean Roche and Andy Brough, we have two highly experienced portfolio
managers in our sector of the market, which reinforces the Board's positive
outlook for the prospects of the Company going forward.
HARRY MORLEY
Chair
27 June 2025
INVESTMENT MANAGER'S REVIEW
MARKET BACKGROUND
UK equities rose over the period, despite increased geopolitical and trade
tensions. However, this masked underperformance of UK mid-caps relative to
large-caps: the FTSE 100 index produced a total return of 5.1%, whilst your
Company's Benchmark index, the FTSE 250 ex Investment Trusts, saw a negative
total return of 7.9%, as fund outflows persisted in this area of the market.
A number of domestically focused sectors detracted amid a rise in long-term
bond yields. While long-term bond yields rose in line with global trends as
inflation expectations were revised upwards, their rise in the UK was
exacerbated by concerns around the new UK government's fiscal policies
unveiled in its Autumn Budget. These were seen to be negative for the
macro-economic outlook and add to company cost pressures.
News that the country had narrowly avoided a technical recession at the end of
2024 provided little respite to the negative sentiment. Meanwhile, spending
cuts unveiled in the Spring Statement didn't stop questions around the
country's fiscal outlook, with risks from higher defence spending and a
disruption of global trading patterns related to US tariffs raising fears of
another round of tax hikes in the autumn. As we will discuss later, we see
reasons why UK households could hold up better than expected.
PORTFOLIO PERFORMANCE
The portfolio NAV saw a negative return of 9.3%, underperforming the Benchmark
return of -7.9%. However, the share price total return of -4.4% meant that the
discount to NAV narrowed, from 12.3% at the beginning of the period to 7.9% at
the end. Gearing detracted from performance, but, over the longer term, has
contributed positively.
An underweight to financials, in particular a lack of exposure to Georgian
banks - and stock selection in technology were the main reason for the
Company's underperformance. However this was partially offset by positive
stock selection in industrials, and in particular the defence sub-sector.
During the review period, long-standing holding 4imprint, the direct marketing
and promotional product company - one of your Company's 'multi-baggers', with
compound annual growth in excess of 15% in the 21 years since our launch - was
the biggest detractor from performance. Uncertainty surrounding US
macroeconomic conditions, slowing orders and more muted top-line growth all
weighed on the direct marketing specialist, whose revenues are overwhelmingly
(>98%) sourced from the US. However, we would flag the company's very
strong balance sheet, which should position it well to ride out any short-term
headwinds, and we also note news of a special dividend payment following the
full-year results in March.
Online review platform, Trustpilot, a new holding for the portfolio during the
review period, performed weakly, which we put down to some profit taking after
a very strong 2024 and its tendency to reflect sentiment towards the US tech
sector, which weakened during the latter half of the period. However, we
believe that the underlying business is performing well with strong customer
retention, together with EBITDA (earnings before interest, taxes,
depreciation, and amortisation) margin expansion. The shares which are
supported by an ongoing share buy-back programme and the company has net cash
on the balance sheet. Additionally, we see potential in management's idea,
TrustLayer™, which is being developed. It would aim to make money from the
200,000 new reviews written daily using an Application Programming Interface,
similar to how the London Stock Exchange uses its data.
Flexible office space provider Workspace detracted amid negative sentiment
following the Autumn Budget, as hopes for interest rate cuts were scaled back,
while inflation expectations were revised up. With a proforma loan to value of
34%, and a new and very well-regarded CEO, we think that Workspace is in a
strong position to benefit from new demand for office space from (small and
medium-sized enterprises), its core customer.
The Budget also had a negative impact on shares in private hospitals group
Spire Healthcare. While its full-year results met expectations, the group
warned on future profitability due to a rise in the UK minimum wage and
employer National Insurance contributions. We would, however, note that supply
and demand dynamics for the private healthcare sector remain favourable.
Finally, technology products and services provider Computacenter detracted, as
its enterprise customer base pulled back from IT spending amid a more
uncertain economic backdrop. Although this has been a standout performer for
your Company in the past, and remains a highly cash generative business model,
we have taken a cautious view, following the departure of a fairly new finance
director, and have now exited this position.
On the positive side, companies in the defence supply chain performed
particularly well amid rising geopolitical tensions and a growing consensus
among European nations to increase defence spending in order to reduce
reliance on the US. This drove outperformance for defence contractors Babcock
International - the top contributor to performance during the period - and
Chemring.
Strategy board game and crafting business Games Workshop performed well on the
back of yet another positive trading update, and news of a further dividend
payment in line with the policy to distribute "truly surplus" cash. Games
Workshop was promoted to the FTSE 100 in the December 2024 index rebalancing,
an event that would normally trigger your Investment Manager to exit the
position fairly swiftly. However, it is our view that as a truly globally
unique business that is arguably only at the start of its journey into new
markets outside the UK - including a deal with Amazon to adapt the Warhammer
40,000 universe into films and television series - it would be unwise to sell
out in short order from a holding that has driven significant performance for
the Company over multiple years. We have therefore trimmed the position to
less than half of its pre-promotion size while continuing to take account of
valuation fundamentals.
Financials was the best-performing sector in the Benchmark during the period.
Insurer Just Group saw strong share price performance as the company continued
to beat market expectations, and specialist lender OSB Group also
outperformed. When we initiated the position in OSB Group in November 2024,
the share price was close to a 12-month low, with matching expectations, but
it has since rebounded well given the better than expected outlook for the
buy-to-let mortgage market, an active share buy-back policy and a
significantly increased dividend.
STOCKS HELD - SIGNIFICANT POSITIVE AND NEGATIVE CONTRIBUTIONS VERSUS THE
BENCHMARK
POSITIVE CONTRIBUTORS
Portfolio Weight Relative Impact(3) (
weight(1) (
relative to
performance(2) ( ) (%)
) (%)
index ) (%)
(%)(1)
Babcock International 3.11 1.87 53.65 0.99
Games Workshop 3.25 2.39 34.54 0.95
Just Group 3.65 2.91 5.61 0.41
Chemring 2.59 2.13 1.39 0.37
OSB Group 1.17 0.43 19.42 0.20
========= ========= ========= =========
NEGATIVE CONTRIBUTORS
Portfolio Weight Relative Impact(3) (
weight(1) (
relative to
performance(2) ( ) (%)
) (%)
index ) (%)
(%)(1)
4imprint 2.71 2.04 -25.70 -0.37
Trustpilot 0.59 0.10 -28.60 -0.36
Workspace 1.23 0.90 -34.82 -0.29
Spire Healthcare 1.71 1.41 -24.76 -0.28
Computacenter 1.92 1.20 -11.16 -0.27
========= ========= ========= =========
Source: Schroders, FactSet, close 30 September 2024 to close 31 March 2025.
1 Weights are averages.
2 Performance of the stock in the index relative to the FTSE 250 (ex.
ITs) Index return.
3 Impact is the contribution to performance relative to the FTSE 250
(ex. ITs) Index. Any reference to regions/countries/sectors/ stocks/
securities is for illustrative purposes only and not a recommendation to buy
or sell any financial instruments or adopt a specific investment strategy.
Turning to stocks not held, the two UK-listed but Georgia-based banks, TBC
Bank and Bank of Georgia, detracted from returns during the period after they
published good results despite geopolitical concerns. Among other financials
not held, Direct Line was acquired by fellow insurer Aviva at a 73% premium to
its pre-bid share price, and wealth manager St James's Place saw a recovery
from earlier share price weakness after it revamped its oft-criticised
charging structures to meet the Financial Conduct Authority's new Consumer
Duty requirements. Your Investment Manager prefers Rathbones (discussed in the
Portfolio Activity section) in the wealth management space, where cost savings
could be very significant as the Investec Wealth merger beds in.
Not owning shares in luxury company Burberry detracted from returns. The
appointment of a new CEO and announcement of a turnaround plan were well
received by the market, but we have adopted a wait and see approach.
Stocks we were right not to own from a performance perspective included
high-street names Greggs and B&M, both of which reported slowing top-line
growth due to pressures facing some pockets of the UK consumer population.
Others were industrial distributor RS Group (formerly Electrocomponents),
builders' merchant Travis Perkins and oil services company John Wood Group,
all of which saw profit warnings during the period.
STOCKS NOT HELD - SIGNIFICANT POSITIVE AND NEGATIVE CONTRIBUTIONS VERSUS THE
BENCHMARK
POSITIVE CONTRIBUTORS
Portfolio Weight Relative Impact(3) (
weight(1) (
relative to
performance(2) ( ) (%)
) (%)
index ) (%)
(%)(1)
Greggs - -1.19 -44.37 0.54
RS Group - -1.53 -29.84 0.38
B&M - -0.77 -24.70 0.30
Travis Perkins - -0.74 -40.24 0.29
John Wood Group - -0.22 -69.69 0.25
========= ========= ========= =========
NEGATIVE CONTRIBUTORS
Portfolio Weight Relative Impact(3) (
weight(1) (
relative to
performance(2) ( ) (%)
) (%)
index ) (%)
(%)(1)
Direct Line - -1.45 50.13 -0.66
St James's Place - -0.96 17.57 -0.36
TBC Bank Group - -0.71 60.24 -0.35
Bank of Georgia - -0.80 48.57 -0.34
Burberry - -1.59 10.10 -0.20
========= ========= ========= =========
Source: Schroders, FactSet, close 30 September 2023 to close 31 March 2024.
1 Weights are averages.
2 Performance of the stock in the index relative to the FTSE 250 (ex.
ITs) Index return.
3 Impact is the contribution to performance relative to the FTSE 250
(ex. ITs) Index. Any reference to regions/countries/ sectors/ stocks/
securities is for illustrative purposes only and not a recommendation to buy
or sell any financial instruments or adopt a specific investment strategy.
4 Source: Dividends/Close Brothers Group.
LARGEST OVERWEIGHT POSITIONS
Sector Portfolio Benchmark Difference
weight
weight
%
%
%
Cranswick Consumer staples 4.45 1.26 3.18
Telecom Plus Utilities 3.71 0.59 3.11
Just Group Financials 3.65 0.75 2.91
Dunelm Consumer discretionary 3.38 0.66 2.72
QinetiQ Industrials 3.70 1.01 2.69
Paragon Group Financials 3.30 0.74 2.56
Games Workshop Consumer discretionary 3.25 0.86 2.39
Inchcape Consumer discretionary 3.65 1.28 2.37
Man Group Financials 3.45 1.16 2.29
ME Group Consumer discretionary 2.42 0.25 2.18
========= ========= =========
Source: Schroders, as at 31 March 2025, for Schroder UK Mid Cap Fund
investment portfolio. Benchmark refers to FTSE 250 ex Investment Companies.
PORTFOLIO ACTIVITY
New purchases The opportunity
Future Product replacement cycle in consumer electronics should drive readership of
Future's titles in technology, gaming and entertainment; new CEO
Ibstock Brick maker that should benefit from an anticipated revival in UK
housebuilding
Kier Group Building contractor well placed to capitalise on a ̒golden age' of growth in
the UK construction market
OSB Group Specialist business-to-business mortgage lender. Attractively priced under
pinned by share buyback programme
Playtech Pureplay business to business online gaming company. Improving balance sheet
and high potential in JV with Mexican online gaming company Caliplay
Pollen Street Group Alternative assets fund manager with exposure to the fast-growing fintech
sector, trading at an attractive valuation
Rathbones Beneficiary of continued consolidation in the wealth management market,
increasing synergies of the Investec wealth and investment acquisition, with
cost saving in mind
Trustpilot Unique company operating an online review platform, with growing operations in
the US and Europe
Complete sales Rationale
Britvic Bid approach
Computacenter Management change
Energean Valuation
Johnson Matthey Increased execution risk
Oxford Instruments Management change
Tyman Bid approach
Zegona Communications Valuation
Source: Schroders, 30 September 2024 to 31 March 2025.
For illustrative purposes only and not a recommendation to buy or sell shares.
Three of the holdings added during the period could be seen as a play on the
government's efforts to get Britain building. Building contractor Kier Group
is well placed to capitalise on what could be a "golden age" for those in the
sector with strong balance sheets, given an acute shortage of capacity on the
supply side in combination with strong pent-up demand. Brick maker Ibstock
supplies both the private and public sectors, so should benefit from increased
development activity in social housing as well as the construction of
properties for sale or private rental. We also reinitiated a holding in
specialist mortgage lender OSB Group, which trades on a significant discount
to peer Paragon. We continue to hold a larger position in OSB's peer Paragon,
which was a top ten holding at the period end: we are positive on the sub
sector as we see continued demand for buy-to-let mortgages and little appetite
from the bulge bracket banks to get involved from scratch.
Like OSB Group, the publishing company Future was added back to the portfolio
during the period, having been sold in H124. Future has a strong stable of
titles (both in print and online) covering areas from electronics, computing
and gaming to music, current affairs and interior design, as well as owning
price comparison services including Go Compare. The company trades on a low
earnings multiple relative to its growth prospects, and we believe it is in a
good position to benefit from the IT product replacement cycle that informed
our purchase of electrical retailer Curry's in the last financial year, as
consumers seek to inform themselves on the best products to buy. The same is
true of online reviews business Trustpilot, a unique company to which many
consumers turn when seeking the reassurance they need to make significant
purchases. A good Trustpilot rating is particularly important for that crucial
first purchase. The investment case has been explored earlier in this report.
We initiated a position in Playtech during the period. After selling its
Italian business Snaitech to Flutter Entertainment, Playtech is now almost a
pure-play business-to-business presence in the gaming technology space, with
opportunities to create material value through reinvesting the proceeds of the
sale or to de-gear by paying down debt. The gambling sector is seen as quite
defensive - that is, it is largely insulated from economic cycles - and as
such the holding sits well alongside some of the more cyclical exposures in
the portfolio.
Two investment management companies were added to the portfolio during the
review period: Rathbones and Pollen Street Group. Rathbones is the UK's
largest discretionary wealth management business and also has an investment
management arm. With UK household savings rates remaining well above long-term
averages as consumer confidence continues to be muted, there is a larger
amount of money potentially in need of professional management. Rathbones
acquired its peer Investec Wealth & Investment in 2023 and continues to
see good and increasing synergies from this. Pollen Street is a more
specialised asset management business focusing on private equity and credit.
We particularly like its exposure to the fast-growing fintech sector.
As noted in last year's annual report, 2024 was a bumper year for merger and
acquisition (M&A) activity in the Mid 250 index, as trade and private
equity buyers sought to capitalise on the low valuation of the UK market. Two
holdings - building products supplier Tyman and soft drinks business Britvic -
were taken over during the period, exiting the portfolio as a result. Both
were acquired by international trade buyers: Tyman by the US-based Quanex
Building Products and Britvic by Danish brewing company Carlsberg. There has
been no further bid activity in the portfolio during the review period, which
likely relates to uncertainty caused by changes to trade and geopolitical
ructions more generally.
Spain-focused telecoms company Zegona Communications - which we bought in the
first half of the last financial year - was fully exited in December having
seen its share price rise by more than 125% during the calendar year. We also
sold our holding in gas explorer and producer Energean following a small
rally.
During the review period, we sold out of three stocks where corporate
developments had called our original investment thesis into question:
Computacenter, as previously discussed, Oxford Instruments, preferring instead
to focus on peer Spectris, and Johnson Matthey, where we see increased
execution risk.
OUTLOOK
Whenever a set of portfolio company results lands, the first place your
Investment Manager turns is the outlook commentary - it's the "what's next",
the best window into how management sees the equity story unfolding. With that
perspective, let us share a few insights of our own.
The best predictor of returns is the price paid and, with this in mind, and
prices as they are in the UK mid-cap market, we can be cautiously optimistic
about the chances of a positive return from here:
· Valuations, in aggregate are attractive (<12.0x price to
earnings ratio, >4% dividend yield and >8% cash flow yield).
· Balance sheets, both corporate and household, are,
collectively, strong.
· Shares are being bought back in significant quantities (20%
of your Company's holdings have active share buy-back programmes).
· Sterling strength is, broadly speaking, helpful for UK
domestic mid-caps.
· Management teams remain highly motivated; and
· It looks as though the UK may be able to tread that delicate
diplomatic and trade path between the US and Europe. It is helpful that the UK
economy is primarily a service economy and therefore looks likely to escape
the heaviest US tariffs.
Turning to the UK economy itself, we have positioned ourselves in niches of
the economy which we think can grow for idiosyncratic reasons, from specialist
retail (Dunelm, Games Workshop and Curry's, for example) to defence (Babcock,
Chemring and Qinetiq). We also see less obvious opportunities outside the
direct defence subsector, for example in Sirius Real Estate, which is likely
to benefit from increased demand for industrial property in Germany from
suppliers to the defence sector.
Although PMI ("Purchasing Managers' Index") data has been weak, the UK
consumer's real household disposable income growth and strong balance sheets
have been able to support some good growth in certain pockets of the economy
and the resilience of the housing market has helped to offset some unease in
the labour market as a result of unexpected changes to the National Insurance
regime.
Companies are facing extreme pressures on profit margins, in part related to
higher taxes and other costs of doing business, but also due to weak consumer
confidence given the uncertainty hanging over the UK jobs market and
disruption to established trading patterns, as the US seeks to reshape global
supply chains. In this environment, investors need to focus on businesses with
strong market positions, or those able to take market share, perhaps as a
result of a disruptive technology. In addition, strong balance sheets, as
mentioned above, are a key tenet of your Company's investment process, with
three-quarters of our holdings being either net cash or less than 1.5 times
geared*.
*Net debt/EBITDA
55% of the Benchmark index revenue is generated outside the UK, but we have
tilted ourselves in favour of UK revenues. This is because we see more
opportunity in some UK focused company investment cases, as opposed to more
internationally exposed ones. Events since the period end would seem to have
vindicated this approach, with the FTSE 250 being among the first indices
globally to recapture the ground lost in the widespread sell-off sparked by US
president Donald Trump's 'Liberation Day' tariff announcement.
However, we are prepared to be nimble when the situation changes.
The UK stock market in general and mid-cap companies in particular have been
overwhelmingly out of favour in the nine years since 2016, but outflows from
the market are showing some signs of abating - albeit in fits and starts. A
wave of M&A activity - 10% of the Mid 250 by value was acquired in 2024,
for example - underscores not just the low valuation of many UK companies, but
the attraction of their business models to potential acquirers.
The Investment Manager would therefore like to remind readers that the UK is
still punching above its weight in terms of multi-baggers relative to the US.
Indeed, we have had the great pleasure, over the last two years, of
interviewing for our UK Mid 250 multi-bagger podcast a number of mid-cap CEOs:
· >200 "bagger"* Cranswick CEO, Adam Couch;
· CEO of the UK's number one homewares company Dunelm, Nick
Wilkinson;
· Lyssa McGowan, CEO of the UK's number one Petcare provider, Pets
at Home;
· Leo Quinn, CEO of Balfour Beatty; and
· Nick Jefferies, CEO of Discoverie plc.
* A "bagger" is a term used to describe a stock that has increased in
value by a multiple of its original price
The link to these can be found below, or on major podcast platforms such as
Spotify, under Schroders Investor Download:
https://www.schroders.com/en-gb/uk/individual/ insights/?topic=mid+250+podcast
(https://www.schroders.com/en-gb/uk/individual/%20insights/?topic=mid+250+podcast)
.
Capital allocators such as these are why the Benchmark has beaten the S&P
500 return over the 25 years to 28 February 2025, when measured in local
currency. In US dollar terms, it has very nearly matched the popular US index.
It is our firm belief that the UK mid-cap space contains many more of these
unique and attractive companies, with strong growth prospects, generating cash
and delivering attractive returns on capital. Emerging signs of an end to the
era of the dominance of US technology stocks in global market returns may
herald a return of equity investors to help to correct the valuation
dislocation which has developed among UK mid-caps. Although the global
economic backdrop is skittish, as stock pickers, we are confident that the
collective strength of our holdings' balance sheets will continue to provide
resilience in all manner of economic and geopolitical environments.
SCHRODER INVESTMENT MANAGEMENT LIMITED
27 June 2025
Past performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up
and investors may not get back the amount originally invested. Any references
to securities, sectors, regions and/ or countries are for illustrative
purposes only. The Company invests in a smaller number of stocks carrying more
risk than funds spread across a larger number of companies. The Company will
invest solely in the companies of one country or region. This can carry more
risk than investments spread over a number of countries or regions. The
Company may borrow money to invest in further investments, this is known as
gearing. Gearing will increase returns if the value of the investments
purchased increase in value by more than the cost of reduced returns if they
fail to do so. As a result of the fees and finance costs being charged
partially to capital, the distributable income of the Company may be higher,
but the capital value of the trust may be eroded.
INVESTMENT PORTFOLIO AS AT 31 MARCH 2025
Companies in bold represent the 20 largest investments, which by value account
for 58.6% (31 March 2024: 59.0% and 30 September 2024: 58.3%) of total
investments. All investments are equities, listed on a recognised stock
exchange.
£'000 %
Industrials
QinetiQ 7,720 3.3
Chemring 7,585 3.2
Spectris 7,464 3.2
Babcock 6,516 2.8
Grafton 6,443 2.7
Bodycote International 5,004 2.1
Mitie 4,362 1.9
Clarkson 3,978 1.7
Kier Group 3,875 1.6
Renishaw 3,560 1.5
Keller 3,302 1.4
Zigup 2,587 1.1
Paypoint 2,254 1.0
Ibstock 2,128 0.9
--------------- ---------------
Total Industrials 66,778 28.4
========= =========
Financials
Man Group 7,900 3.4
Just Group 7,718 3.3
Paragon 7,360 3.1
IG Group 6,661 2.8
Savills 5,157 2.2
Sirius 4,436 1.9
OSB Group 4,292 1.8
Lancashire 3,757 1.6
Rathbones 2,797 1.2
Safestore 2,763 1.2
Workspace 2,490 1.1
Ashmore 1,640 0.6
--------------- ---------------
Total Financials 56,971 24.2
========= =========
Consumer Services
Inchcape 7,839 3.3
Dunelm 7,167 3.0
Mony Group 6,118 2.6
4Imprint 4,662 2.0
Currys 3,322 1.4
Future 3,125 1.3
WH Smith 3,039 1.3
Watches of Switzerland 2,426 1.0
Pollen Street Group 1,986 0.8
Pets At Home 1,297 0.6
--------------- ---------------
Total Consumer Services 40,981 17.3
========= =========
Consumer Goods
Cranswick 10,055 4.3
Photo-Me 5,184 2.2
SSP Group 5,097 2.2
Games Workshop 4,197 1.8
Crest Nicholson 1,743 0.7
--------------- ---------------
Total Consumer Goods 26,276 11.2
========= =========
Healthcare
Genus 5,586 2.4
Spire Healthcare 3,530 1.5
Indivior 2,394 1.0
Puretech Health 1,651 0.7
--------------- ---------------
Total Healthcare 13,161 5.6
========= =========
Technology
Playtech 6,134 2.6
IP Group 2,868 1.2
Trustpilot 2,690 1.1
--------------- ---------------
Total Technology 11,692 4.9
========= =========
Telecommunications
Telecom Plus 9,135 3.9
--------------- ---------------
Total Telecommunications 9,135 3.9
========= =========
Basic Materials
Victrex 3,620 1.5
Elementis 2,029 0.9
Ecora resources 1,101 0.5
--------------- ---------------
Total Basic Materials 6,750 2.9
========= =========
Oil & Gas
Harbour Energy 3,677 1.6
--------------- ---------------
Total Oil & Gas 3,677 1.6
========= =========
Total investments 235,421 100.0
========= =========
INTERIM MANAGEMENT STATEMENT
PRINCIPAL RISKS AND UNCERTAINTIES
The Directors consider that the principal risks and uncertainties faced by the
Company for the remaining six months of the financial year, which could have a
material impact on performance, remain consistent with those on pages 22 to 24
in the Annual Report and Financial Statements for the year ended 30 September
2024.
The Company's principal risks and uncertainties have not materially changed
during the six months ended 31 March 2025.
GOING CONCERN
Having assessed the principal risks and uncertainties, and the other matters
discussed in connection with the viability statement as set out on page 25 of
the published Annual Report and Financial Statements for the year ended 30
September 2024, the Directors consider it appropriate to adopt the going
concern basis in preparing the financial statements.
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 31 March 2025.
DIRECTORS' RESPONSIBILITY STATEMENT
In respect of the half year report for the six months ended 31 March 2025, the
Directors confirm that, to the best of their knowledge:
· the condensed set of Financial Statements contained within have
been prepared in accordance with IAS 34 Interim Financial Reporting and give a
true and fair view of the assets, liabilities, financial position and profit
and loss of the Company as at 31 March 2024, as required by the Disclosure
Guidance and Transparency Rule 4.2.4R; and
· the half year report includes a fair review of the information as
required by the Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R.
The half year report has not been reviewed or audited by the Company's
auditors.
The half year report for the six months ended 31 March 2025 was approved by
the Board and the above Responsibilities Statement has been signed on its
behalf.
HARRY MORLEY
Chair
FOR AND ON BEHALF OF THE BOARD
27 June 2025
FINANCIAL
FINANCIAL
Statement of Comprehensive Income 14
Statement of Changes in Equity 15
Statement of Financial Position 16
Notes to the Financial Statements 17
STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MARCH 2025
(UNAUDITED)
(Unaudited) (Unaudited) (Audited)
For the six months
For the six months
For the year
ended 31 March 2025
ended 31 March 2024
ended 30 September 2024
Notes 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 - (24,100) (24,100) - 18,365 18,365 - 31,395 31,395
Income from investments 3,877 - 3,877 3,158 - 3,158 8,614 - 8,614
Other interest receivable and similar income 67 - 67 - - - 123 - 123
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Gross return/(loss) 3,944 (24,100) (20,156) 3,158 18,365 21,523 8,737 31,395 40,132
========= ========= ========= ========= ========= ========= ========= ========= =========
Investment management fee (243) (567) (810) (239) (557) (796) (495) (1,155) (1,650)
Administrative expenses (489) - (489) (425) - (425) (738) - (738)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net return before finance costs and taxation 3,212 (24,667) (21,455) 2,494 17,808 20,302 7,504 30,240 37,744
Finance costs (218) (510) (728) (179) (417) (596) (402) (937) (1,339)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net return/(loss) before taxation 2,994 (25,177) (22,183) 2,315 17,391 19,706 7,102 29,303 36,405
Taxation 3 - - - - - - - - -
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net return/(loss) after taxation 2,994 (25,177) (22,183) 2,315 17,391 19,706 7,102 29,303 36,405
========= ========= ========= ========= ========= ========= ========= ========= =========
Return/(loss) per share (pence) 4 8.66 (72.81) (64.15) 6.69 50.29 56.98 20.54 84.74 105.28
========= ========= ========= ========= ========= ========= ========= ========= =========
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 31 MARCH 2025 (UNAUDITED)
Notes Called-up Share Capital Merger Share Capital Revenue Total
share
premium
redemption
Reserve
purchase
reserve
reserve
£'000
capital
£'000
reserve
£'000
reserve
£'000
£'000
£'000
£'000
£'000
At 30 September 2024 9,036 13,971 220 2,184 7,233 200,263 10,059 242,966
Net (loss)/return after taxation - - - - - (25,177) 2,994 (22,183)
Dividend paid in the period 5 - - - - - - (5,360) (5,360)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 2025 9,036 13,971 220 2,184 7,233 175,086 7,693 215,423
========= ========= ========= ========= ========= ========= ========= =========
FOR THE SIX MONTHS ENDED 31 MARCH 2024 (UNAUDITED)
Notes Called-up Share Capital Merger Share Capital Revenue Total
share
premium
redemption
Reserve
purchase
reserve
reserve
£'000
capital
£'000
reserve
£'000
reserve
£'000
£'000
£'000
£'000
£'000
At 30 September 2023 9,036 13,971 220 2,184 7,233 170,960 10,219 213,823
Net return after taxation - - - - - 17,391 2,315 19,706
Dividend paid in the period 5 - - - - - - (5,187) (5,187)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 31 March 2024 9,036 13,971 220 2,184 7,233 188,351 7,347 228,342
========= ========= ========= ========= ========= ========= ========= =========
FOR THE YEAR ENDED 30 SEPTEMBER 2024 (AUDITED)
Notes Called-up Share Capital Merger Share Capital Revenue Total
share
premium
redemption
Reserve
purchase
reserve
reserve
£'000
capital
£'000
reserve
£'000
reserve
£'000
£'000
£'000
£'000
£'000
At 30 September 2023 9,036 13,971 220 2,184 7,233 170,960 10,219 213,823
Net return after taxation - - - - - 29,303 7,102 36,405
Dividends paid in the year 5 - - - - - - (7,262) (7,262)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
At 30 September 2024 9,036 13,971 220 2,184 7,233 200,263 10,059 242,966
========= ========= ========= ========= ========= ========= ========= =========
STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2025 (UNAUDITED)
Notes (Unaudited) (Unaudited) (Audited)
At 31 March
At 31 March
At 30 September
2025
2024
2024
£'000
£'000
£'000
Fixed assets
Investments held at fair value through profit or loss 235,421 248,750 261,421
Current assets
Debtors 2,202 893 7,469
Current asset investments 4,263 - 116
Cash at bank and in hand 1,217 1,384 1,845
--------------- --------------- ---------------
7,682 2,277 9,430
========= ========= =========
Current liabilities
Creditors: amounts falling due within one year 6 (27,680) (22,685) (27,885)
--------------- --------------- ---------------
Net current liabilities (19,998) (20,408) (18,455)
--------------- --------------- ---------------
Total assets less current liabilities 215,423 228,342 242,966
========= ========= =========
Net assets 215,423 228,342 242,966
========= ========= =========
Capital and reserves
Called-up share capital 7 9,036 9,036 9,036
Share premium 13,971 13,971 13,971
Capital redemption reserve 220 220 220
Merger reserve 2,184 2,184 2,184
Share purchase reserve 7,233 7,233 7,233
Capital reserves 175,086 188,351 200,263
Revenue reserve 7,693 7,347 10,059
--------------- --------------- ---------------
Total equity shareholders' funds 215,423 228,342 242,966
========= ========= =========
Net asset value per share (pence) 8 622.95 660.31 702.60
========= ========= =========
Registered in Scotland as a public company limited by shares
Company registration number: SC082551
NOTES TO THE FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The information contained within the financial statements 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 30 September 2024 are
extracted from the latest published financial statements of the Company and do
not constitute statutory financial statements for that year. Those financial
statements 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 financial statements 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 financial statements are consistent
with those applied in the financial statements for the year ended 30 September
2024.
3. TAXATION
The Company's effective corporation tax rate is nil, as deductible expenses
exceed taxable income.
4. (LOSS)/RETURN PER SHARE
(Unaudited) (Unaudited) (Audited)
For the six
For the six
Year ended
months ended
months ended
30 September
31 March
31 March
2024
2025
2024
£'000
£'000
£'000
Revenue return 2,994 2,315 7,102
Capital (loss)/return (25,177) 17,391 29,303
--------------- --------------- ---------------
Total (loss)/return (22,183) 19,706 36,405
========= ========= =========
Weighted average number of shares in issue during the period 34,581,190 34,581,190 34,581,190
Revenue return per share (pence) 8.66 6.69 20.54
Capital (loss)/return per share (pence) (72.81) 50.29 84.74
--------------- --------------- ---------------
Total (loss)/return per share (pence) (64.15) 56.98 105.28
========= ========= =========
5. DIVIDENDS
(Unaudited) (Unaudited) (Audited)
Six months
Six months
Year ended
ended
ended
30 September
31 March
31 March
2024
2025
2024
£'000
£'000
£'000
2024 final dividend paid of 15.5p (2023: 15.0p) 5,360 5,187 5,360
Interim dividend of 6.0p - - 2,075
--------------- --------------- ---------------
5,360 5,187 7,435
========= ========= =========
An interim dividend of 6.3p (2024: 6.0p) per share, amounting to £2,179,000
(2024: £2,075,000), has been declared payable in respect of the six months
ended 31 March 2025.
6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
(Unaudited) (Unaudited) (Audited)
31 March
31 March
30 September
2025
2024
2024
£'000
£'000
£'000
Bank loan 26,000 20,000 25,000
Securities purchased awaiting settlement 1,020 2,150 1,815
Other creditors and accruals 660 535 1,070
--------------- --------------- ---------------
27,680 22,685 27,885
========= ========= =========
The bank loan comprises a £30 million revolving credit facility agreement
with Bank of Nova Scotia, London Branch expiring on 26 February 2026, of which
£26 million has been drawn down.
7. CALLED-UP SHARE CAPITAL
Changes in called-up share capital during the period were as follows:
(Unaudited) (Unaudited) (Audited)
Six months
Six months
Year ended
ended
ended
30 September
31 March
31 March
2024
2025
2024
£'000
£'000
£'000
Opening balance of ordinary shares of 25p each, excluding shares held in 8,645 8,645 8,645
treasury
Repurchase of shares into treasury - - -
Subtotal of ordinary shares of 25p each, excluding shares held in treasury 8,645 8,645 8,645
Shares held in treasury 391 391 391
--------------- --------------- ---------------
Closing balance of ordinary shares of 25p each, including shares held in 9,036 9,036 9,036
treasury
========= ========= =========
Changes in the number of shares in issue during the period were as follows:
(Unaudited) (Unaudited)
Six months
Six months
(Audited)
ended
ended
Year ended
31 March
31 March
30 September
2025
2024
2024
£'000
£'000
£'000
Ordinary shares of 25p each, allotted, called-up and fully paid
Opening balance of shares in issue, excluding shares held in treasury 34,581,190 34,581,190 34,581,190
Repurchase of shares into treasury - - -
Closing balance of shares in issue, excluding shares held in treasury 34,581,190 34,581,190 34,581,190
Closing balance of shares held in treasury 1,562,500 1,562,500 1,562,500
--------------- --------------- ---------------
Closing balance of shares in issue, including shares held in treasury 36,143,690 36,143,690 36,143,690
========= ========= =========
8. NET ASSET VALUE PER SHARE
Net asset value per share is calculated by dividing shareholders' funds by the
34,581,190 (31 March 2024: 34,581,190 and 30 September 2024: 34,581,190)
shares in issue, excluding shares held in treasury.
9. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The Company's financial instruments that are held at fair value comprise its
investment portfolio. At 31 March 2025, all investments in the Company's
portfolio were categorised as Level 1 in accordance with the criteria set out
in paragraph 34.22 (amended) of FRS 102. That is, they are all valued using
unadjusted quoted prices in active markets for identical assets (31 March 2024
and 30 September 2024: same).
10. 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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