TIDMSBO
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.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
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.GBP1.8 million to the NAV.
o Pirum's strong sales and EBITDA growth has triggered a
c.GBP1.1 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 1 year Since IPO
to to 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 GBP8.2m (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 (GBPm) 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 GBP77.3 million, a decrease
of 2.5% compared with the NAV (GBP79.3 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.GBP1.8 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.GBP1.1 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 T otal Fair value T otal
as of as of
Quoted/ 31 March i nvestments 30 September i nvestments
2023 2023
Top 10 holdings unquoted (GBP'000) % (GBP'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 Total
where Fair value Investments
Holding Quoted/unquoted applicable) Industry Sector GBP'000 %
----------------------- ------------------ ----------------- ----------------- ----------- --------------
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 Health Care
à r l Unquoted United Kingdom 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
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Diversified
Culligan(1) Consumer
(formerly Waterlogic) Unquoted United Kingdom Services 4,909 6.9
----------------------- ------------------ ----------------- ----------------- ----------- --------------
CFC Underwriting(1) Unquoted United Kingdom Insurance 4,416 6.2
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Diversified
Consumer
Learning Curve(1) Unquoted United Kingdom Services 1,918 2.7
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Semiconductors
Graphcore Unquoted United Kingdom & Equipment 1,801 2.5
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Building
Volution Quoted United Kingdom products 1,691 2.3
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Hotels,
Restaurants
City Pub Quoted United Kingdom & Leisure 1,650 2.3
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Hotels,
Restaurants
Trainline Quoted United Kingdom & Leisure 1,580 2.2
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Hotels,
Restaurants
Dalata Hotel Quoted Ireland & 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
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Hotels,
Restaurants
SSP Quoted United Kingdom & Leisure 1,334 1.9
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Bytes Technology Quoted United Kingdom Software 1,067 1.5
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Electrical
Discoverie Quoted United Kingdom Equipment 1,059 1.5
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Textiles,
Apparel
Sosandar Quoted United Kingdom & Luxury Goods 1,046 1.5
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Financial
OSB Quoted United Kingdom Services 1,036 1.5
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Interactive
Media &
Trustpilot Quoted United Kingdom Services 962 1.3
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Judges Scientific Quoted United Kingdom Machinery 861 1.2
----------------------- ------------------ ----------------- ----------------- ----------- --------------
GB Quoted United Kingdom Software 837 1.2
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Ground
Mobico Quoted United Kingdom Transportation 658 0.9
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Life Sciences
Tools &
MaxCyte Quoted United Kingdom Services 597 0.8
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Hotels,
Restaurants
On the Beach Quoted United Kingdom & Leisure 589 0.8
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Learning Technologies Quoted United Kingdom Software 493 0.7
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Electrical
Luceco Quoted United Kingdom Equipment 429 0.6
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Victorian Plumbing Quoted United Kingdom Specialty Retail 403 0.6
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Invinity Energy Electrical
Systems Quoted Jersey Equipment 274 0.4
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Financial
Lendinvest Quoted United Kingdom Services 199 0.3
----------------------- ------------------ ----------------- ----------------- ----------- --------------
Energy Equipment
Velocys Quoted United Kingdom & 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: GBP'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 ended 30 September 31 March 2023
2023 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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 GBP2,288,000. The balance has been restated
to GBP673,000 because performance fees of GBP1,615,000 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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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
(GBP'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 Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Investments in equities - quoted - - 21,049
- unquoted - - 50,357 50,357
----------------------------------------------- -------- -------- -------- --------
Total 21,049 - 50,357 71,406
----------------------------------------------- -------- -------- -------- --------
30 September 2022 (unaudited)
Level 1 Level Level Total
2 3
GBP'000 GBP'000 GBP'000 GBP'000
Investments in equities - quoted 26,297 - - 26,297
- unquoted - - 45,535 45,535
----------------------------------------------- -------- -------- -------- --------
Total 26,297 - 45,535 71,832
----------------------------------------------- -------- -------- -------- --------
31 March 2023 (audited)
Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Investments in equities - quoted 26,166 - - 26,166
- unquoted - - 47,962 47,962
----------------------------------------------- -------- -------- -------- --------
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 GBP5,171,000 (30 September 2022:
GBP7,652,000; 31 March 2023: GBP5,476,000) 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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