TIDMATS
ARTEMIS ALPHA TRUST PLC (the "Company")
LEI: 549300MQXY2QXEIL3756
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Half-Yearly Financial Report for the six months ended 31October 2023
This announcement contains regulated information
Chairman's Statement
Performance
In the six months to 31 October 2023 your Company's net asset value per share
and share price (on a total return basis) fell by 9.6% and 16.2% respectively,
ending the period at 327.14p (NAV per share) and 263.50p (share price). The FTSE
All-Share Index fell by 5.9% over the same period. The FTSE 250, a UK domestic
index of smaller companies which more closely resembles our portfolio, declined
by 10.5%.
Market conditions have continued to be challenging during the period, with the
conflicts in Ukraine and Gaza as well as uncertainty over interest rates and
inflation contributing to volatility.
During the half-year, we suffered from our overweight exposure (comprising about
half the portfolio) to UK domestic equities where weak sentiment still
prevails. However, the Manager remains confident that these conditions offer
the prospect of attractive future returns from the portfolio. These returns are
still likely to be influenced by the relatively high concentration within the
portfolio and the fact that it does not resemble the broader stock market or our
benchmark index.
Performance since the 31 October has been particularly strong with the latest
NAV per share up by about 16.4% at 380.79p, compared to an advance of 6.1% by
the FTSE All-Share Index.
More detailed information on the portfolio is set out in the Investment
Manager's Review which follows.
Revenue earnings and dividends
Revenue earnings per share for the half-year were 2.84p, a decrease of 19% on
the comparable period last year, reflecting the uncertain outlook. Investment
income from our portfolio was 9.0% lower. This reflects the timing of dividend
payments and carries no implication for the magnitude of the final dividend.
The Board has today declared a first interim dividend of 2.54p per ordinary
share (2022: 2.33p) which will be paid on 31 January 2024 to shareholders on the
register as at 5 January 2024. This increase of 8.7% over the equivalent interim
dividend paid in January 2023 is consistent with our policy of growing dividends
in line with, or at a rate greater than, the UK CPI inflation rate of the
preceding financial year (8.7% as at 30 April 2023).
Share buybacks / discount
We have continued our pragmatic approach to buying back our shares, aiming to do
so when we believe this is in the best interests of our shareholders. In the
period, adverse market conditions and sentiment have resulted in wider discounts
amongst our peer group and in the investment trust sector generally. Despite a
widening in the Company's discount, from 12.8% to 19.5%, particularly at the end
of the period, buyback activity was limited. Our judgement was that the risk of
impacting the liquidity in our shares was likely to outweigh the scope to create
material accretion in net asset value per share. The Company bought back 21,756
shares at a total cost of £69,000 and an average discount of 13.0%.
At the date of this report, the share price stood at 336p, representing a
discount of 11.8%.
Gearing
During the half year, the Company marginally increased its gearing, which stood
at 14.1% of NAV at the period end (13.9% 30 April 2023). This gearing is
achieved by "contracts for difference" which continue to offer a more cost
-efficient alternative to a conventional bank loan as well as providing a
revenue stream over the half-year amounting to 16.8% of investment income (9% in
the six months to 31 October 2022).
Outlook
There are, perhaps, the first signs of an improvement in economic and market
conditions, with the prospect of a reduction in interest rates and inflation.
Our policy remains essentially one of picking individual stocks in pursuit of
increasingly attractive long-term returns.
Contact
As always, we welcome contact with our shareholders. I can be contacted by email
on alpha.chairman@artemisfunds.com.
Detailed information on the Company can be found on our website,
artemisalphatrust.co.uk, including a monthly factsheet and quarterly updates
from the Manager.
Duncan Budge
Chairman
20 December 2023
Investment Manager's Review
In the 6-month period, the Company's NAV declined by 9.6% compared to 5.9% fall
in the FTSE All-Share.
The key factor impacting equities over the period was a rise in long-term
interest rates with 10-year UK bond yields rising to 4.5%. This reflects
continued uncertainty over the path of inflation and monetary policy, which has
damaged confidence, compounded more recently by the outbreak of conflict in the
Middle East.
Against this backdrop, weak sentiment towards UK domestic equities deteriorated
further causing underperformance against the broader market, with the FTSE 250
declining by 10.5%. The Company's NAV suffered from its overweight exposure to
this segment of the market, with banks (Lloyds/Natwest) and airlines
(Easyjet/Ryanair), offsetting positive contributions from overseas allocations
(Alphabet/Universal Music Group) and energy (BP/Shell).
We retain high confidence that the recent confluence of events, which has led to
broad weakness in UK equity prices, has created the conditions for high, future
portfolio returns. There are three important and inter-linked concepts that form
the basis of our view:
1.) Human psychology explains the tendency to weigh losses more heavily than
gains. In investing this creates adverse behaviour;
2.) Equities can be owned forever, and earnings tend to grow in inflation
-adjusted terms. Real earnings growth, reinvestment risk and duration are
important concepts when making comparisons between asset classes;
3.) Equity risk premium is the compensation you receive for the volatility
and uncertainty for investing in equities. In the UK, equity risk premium is
high in absolute terms and relative to bonds.
These factors are paramount to our current optimistic outlook and so we explain
each in turn.
UK investors are driving in the rain
Daniel Kahneman established the concept of "loss aversion", which is a cognitive
bias impacting decision-making under uncertainty. The simple notion is that
basic survival instincts impact human nature meaning that the pain of loss is
felt more highly than the pleasure of an equivalent gain.
Kahneman's demonstrated loss aversion with New York taxi drivers in the rain. A
taxi driver earns more per hour when it is raining than when it is sunny and
there is less demand. The price of a driver's leisure is therefore lower when it
is sunny. Counterintuitively, Kahneman found that taxi drivers work harder when
it is sunny and less when it is rainy. This is because low income on a sunny day
feels like lost income.
The same concept explains why golfers statistically make fewer successful putts
for birdie than for par. A bogey feels like a loss, whereas a par does not.
The concept of loss aversion is widely applicable to financial markets where
volatility in prices creates loss aversion. Customers in a supermarket will buy
more goods when they are on sale, but investors in a stock market do the
opposite. Investment trusts discounts widen after markets fall and fund outflows
are highest after markets decline, not before.
Our view is that loss aversion is impacting behaviour in UK equity markets
following poor and weak absolute and relative performance. One clear indicator
is the fact that there have been over £76bn in outflows from UK funds since
2016. Another is the near halt in the market for initial public offerings after
a boom in 2021.
Our approach to investing is aimed at helping to combat these natural instincts
and take advantage of the opportunity it creates. In forecasting the prospective
returns of a stock by estimating earnings and exit multiples, we are forced to
see that, all else being equal, prospective returns rise when prices fall.
This approach can be seen in the current positioning in several respects. First,
we have held on to poorly performing holdings where we retain conviction in
future returns. Secondly, we have utilised gearing to increase our net exposure.
Thirdly, we have made switches into holdings where we perceive risk-adjusted
returns to be higher. This approach created significant value between March
-September 2020 when prices were depressed, and sector dispersion was high.
The third point explains the majority of the activity undertaken in the period.
Overseas holdings in Prosus, Meta, and EssilorLuxottica were sold. We added to
existing holdings in Natwest, Hargreaves Lansdown, Delivery Hero, and
Springfield Properties following share price declines.
Our Company's share price discount to its net asset value has widened recently.
Repurchasing shares is an option we have that would also take advantage of the
value opportunity. However, our current judgement is that the impact this would
have on vehicle liquidity likely outweighs the scope to create material
accretion in net asset value per share. As can be seen from disclosures, the
managers have continued to purchase shares in the Company.
Misperceptions over nominal yields and duration
The UK's National Savings and Investment (NS&I) scheme raised over £10bn between
April and September with one product offering a 1-year interest rate of 6.2%. UK
investment platforms have seen weak flows as a result. There is a widespread
view that equities are no longer attractive because of the yield now available
on cash.
There are multiple issues with this comparison.
Firstly, company earnings and dividends tend to grow with economic and corporate
prosperity. This means that mathematically, a business earning high returns on
capital (e.g. 20%) that grows earnings by 3% per annum, will return more than 6%
per annum even if it is purchased on a PE ratio of 25x. Both the earnings yield
and dividend yield of this stock would be materially lower than 6%, but
theoretically the return should be in excess of 6% owing to the growth
generated.
Secondly, the duration of equities must be considered. Equities offer a
perpetual claim on the earnings of a business. They are among the most long-term
of all financial instruments. You should not be in equities if you do not have a
long-term horizon.
A short-duration instrument, such as a 1-year savings product carries
reinvestment risk, which is the risk that you cannot reinvest cash flow in the
future at the current rate on offer. If your objective is to maximise your
wealth over 5 or 10 years and you invest in a 1-year product, your long-term
returns will be less certain.
The other important consideration with duration is that the longer the duration,
the more sensitive the security's value will be to changes in interest rates.
This explains why investors in long-dated bonds have suffered significant losses
in 2021 and 2022 as interest rates rose. Equities are long- duration
instruments, but their values offered more resilience than bonds as their
earnings grew with the inflation that prompted the interest rate increases.
Interest rates are likely above neutral and inflationary pressures appear to be
abating. Equity values will be geared to a decline in interest rates as
illustrated by the following quotation from Warren Buffett, writing in 2000:
"The best time to buy stocks. has been when interest rates were sky high, and it
looked like a very safe thing to do to put your money into Treasury Bills. As
attractive as that appeared, it was exactly the wrong thing to be doing. It was
better to be buying equities at that time, because when interest rates changed,
their values changed even much more."
In a scenario where interest rates fall, a short-dated instrument will see
reinvestment risk realised and will not capture the upside in values from
gearing to duration.
UK equity risk premium is elevated
Equities carry a variety of risks which may mean that the earnings for any one
security do not grow by inflation and GDP. Failure to adapt to change is the
greatest risk for most businesses and this is often difficult to assess at the
time. In addition, equity prices can be highly volatile in the short-term.
Equity investors require compensation for this risk and uncertainty over
investing in a risk-free and inflation-linked bond. This is defined as equity
risk premium and can be quantified by comparing the earnings yield (the inverse
of its price-to-earnings ratio) of an index.
To note, dividend yields are an incomplete measure of value. Companies can
effectively use earnings for distribution through share buybacks or be retained
for reinvestment: Berkshire Hathaway has never paid a dividend and its returns
are now considered legendary.
The graph below shows the FTSE All-Share's earnings yield is 10.4% and 10-year
inflation linked bonds yield 0.6%, implying thereby that the equity risk premium
today is 9.8%.
[image]
This chart suggests that, so long as you believe earnings for the stock market
as a whole will rise with inflation, the excess return from equities over bonds
should be close to 10%. In absolute terms, equity returns should be 10% plus
inflation and real corporate profit growth, which historically would add c.4%.
It is important to note from the chart above when bond yields were materially
higher in the 1990s, equity risk premium was materially lower than it is today,
with the average being 5%.
The aspect of this logic that could most likely be questioned is the assumption
around inflation linking. The UK market has sectors such as financials and
commodities, which are cyclical, meaning that there have been multi-year periods
where earnings do not grow in excess of inflation.
This is a valid reservation and risk, but we would note that cyclical sectors,
to which the Company has significant exposure, offer earnings yields far in
excess of the index. For example, our bank stocks have earnings yields of 18%
-20%. Our airline holdings offer earnings yields of 12%-14%.
Reasons to be optimistic about portfolio returns
We have explained why we believe the current state of the UK equity market ought
to deliver compelling returns. Negative sentiment and loss aversion is
manifesting itself in high equity risk premium. High short-term cash rates are
creating an illusion of attractiveness.
By asserting that the future is bright, we are not setting out a near-term
prediction. Equity returns are inherently "lumpy" and particularly for a
portfolio that is concentrated and does not resemble the broader stock market.
There have been two months since 2019 where our portfolio's absolute returns
have been 10% points in excess of the market (August 2020 and January 2023).
Some encouragement can be found in recent developments that have been supportive
for a reduction in UK risk premium.
First, several factors that led to high inflation were global, exogenous, and
temporary in their nature such as supply chain interruptions and energy
disruption. It is clear that many of these factors have abated. As an example,
container rates have fallen 80% from their peak and are forecast to fall a
further 30% in 2024. Central Banks were not wrong to talk about "transitory"
factors impacting inflation.
Secondly, UK-specific endogenous factors (monetary supply and tight labour
markets) that contributed to inflation are also normalising. Interest rates have
risen markedly, and money supply is declining in nominal terms. Input costs are
a leading indicator and point to deflation. UK labour market participation
continues to increase towards pre-pandemic levels, migration has reached a
record high, and unemployment has risen to 4%.
All these factors point to an improvement in real wage growth and recovery in
consumer and business confidence. We also see more reasons to be constructive
about the future path of interest rates and inflation than the market is
currently pricing in.
Our judgement is that the return potential in the UK domestically exposed
segment of the portfolio (c.50% of NAV) is particularly exciting.
Our bank holdings (Lloyds/Natwest) trade on earnings yields of close to 20% and
are using capital generated to repurchase shares. The sector's performance has
been impeded by a rise in deposit costs. We are confident this is a timing issue
and that the tailwinds from a repricing of interest rate hedges will lead to
higher earnings.
We have 5 holdings across UK housebuilders, which is the sector likely to be
most geared to a stabilisation or fall in interest rates. The current depressed
market is only compounding the undersupply of housing in the UK which underpins
the long-term demand for the industry.
Frasers Group has successfully led consolidation in segments of the retail
industry, underpinned by its high cash generation. Its strategy to focus on
brands is yielding strong results in terms of improved product availability and
gross margins. The company continues to invest in operational efficiency, such
as warehouse automation, which increases the scale economies advantage of the
business.
The airline sector (Ryanair/easyJet) has seen a strong earnings recovery this
year, although performance has been muted owing to concerns over demand. We feel
that the more important factor is the industry's capacity constraints. Key UK
airports are operating at capacity and new airplanes ordered today would not be
delivered until after 2030. In a commoditised industry, we think supply dynamics
are more important than demand.
Plus500 continues to execute well and make progress on growing its business
outside of Europe. In the period, the company bought back 8% of its share
capital in one transaction, which demonstrates its shrewd approach to capital
allocation and confidence in the business. Hargreaves Lansdown is well placed to
benefit from a return in investor confidence and from the growth potential of
direct-to-consumer investing.
Our ownership in Dignity was transferred to Castlenau following its takeover. As
we have articulated historically, this holding has the potential significantly
to drive overall portfolio returns owing to our judgement of perceived value and
favourable characteristics of the end-of-life industry (predictability and lack
of cyclicality).
Our positions in long-duration, compounding franchises continue to offer
exciting prospects.
Nintendo is pursuing a strategy to extend the reach of its intellectual property
outside of its core video gaming market. In the period, the company released its
first Mario movie, which grossed over $1.3bn, to become the second-highest
grossing animation of all-time. Alphabet is well-placed to create new growth
opportunities from integrating artificial intelligence into its broad product
suite. A new holding was started in Universal Music Group in May following
concerns over generative AI as we felt that risks to the franchise were being
overestimated.
Haleon and GSK continue to trade on material discounts to peers yet are
delivering earnings growth that does not justify their discounts. Vinci's
contracting business is enjoying record levels of demand as the energy
transition necessitates significant new infrastructure investment.
Our conviction has been retained in food delivery companies (Delivery Hero/Just
Eat). Higher interest rates have led to capacity rationalisation. Sector revenue
and volumes have troughed and should improve further if cyclical headwinds
abate. Profitability has markedly improved as efficiencies have been sought and
scale advantages exploited.
Overall, we feel optimistic about the portfolio's return potential.
UK value stocks resemble coiled springs where even a modest reappraisal of the
path forward could result in a marked reaction. Long duration franchises are
delivering robust earnings and remain attractively priced, in absolute terms and
relative to bonds. Lastly, we have idiosyncratic exposures where upside
potential has the potential to make a substantial difference to fund returns.
John Dodd, Kartik Kumar
Fund Managers
Artemis Fund Managers Limited
20 December 2023
Current positioning
October
2023 -
Key
Sector
Exposures
Weighting Sector Companies
16.2% General Retail Frasers, Currys
13.6% Housebuilding Redrow, Bellway, Berkeley, Barratt, Springfield
11.2% Airlines easyJet, Ryanair
8.3% Banking Lloyds, Natwest
7.7% Video Games & Nintendo, Hornby
Hobbies
7.5% Financial Hargreaves Lansdown, Singers
Services
7.3% Funerals Castelnau
6.5% Energy BP, Shell
6.0% Defence Reaction Engines
5.6% Food Delivery Delivery Hero, JustEat Takeaway
3.9% Trading Plus500
Platform
4.4% Technology Alphabet
4.3% Pharmaceuticals GSK
4.2% Infrastructure Aena, Vinci
3.2% Consumer Haleon
staples
2.0% Media Universal Music Group
1.5% Basic Materials Anglo American
PORTFOLIO OF INVESTMENTS
Investment Business Country of Global % of Market
activity incorporation exposure* NAV value
£'000 £'000
Consumer
Discretionary
Barratt UK UK 2,690 2.5 2,690
Developments housebuilder
Bellway (long UK UK 3,755 3.5 29
CFD)1 housebuilder
Berkeley Group UK UK 2,085 1.9 19
Holdings (long housebuilder
CFD)1
Currys European UK 1,667 1.6 1,667
electricals
retailer
Delivery Hero Online food Germany 3,967 3.7 3,967
delivery
company
easyJet European low UK 5,856 5.5 5,856
-cost
airline
Frasers Group Sports and UK 15,257 14.3 15,257
general
apparel
retailer
Hardlyever2 Apparel e UK 569 0.5 569
-commerce
platform
Hornby3 Hobby and toy UK 2,260 2.1 2,260
products
Nintendo, ADR Video games Japan 5,953 5.6 5,953
Redrow UK UK 4,739 4.4 4,739
housebuilder
Rok Global mobile USA - - -
Entertainment entertainment
Group4
ROK Global4 Global mobile UK - - -
entertainment
Ryanair European low Ireland 6,050 5.7 6,050
Holdings -cost
airline
Springfield UK UK 1,573 1.5 1,573
Properties3 housebuilder
Universal Music Movies & Netherlands 2,113 2.0 2,113
Group Entertainment
Total Consumer 58,534 54.8 52,742
Discretionary
Financials
Castelnau Group Closed-ended Guernsey 7,680 7.2 7,680
Limited investment
company
Hargreaves Investment UK 4,240 4.0 4,240
Lansdown services
Lloyds Banking UK retail bank UK 4,712 4.4 4,712
Group
NatWest Group UK retail bank UK 4,187 3.9 4,187
Plus500 Global online Israel 4,935 4.6 4,935
financial
trading
platform
Singer Capital UK investment UK 3,804 3.6 3,804
Markets2 bank
Total 29,558 27.7 29,558
Financials
Industrials
Aena Transportation Spain 2,144 2.0 2,144
Infrastructure
MBA Polymers2 Plastics USA - - -
recycling
Rated People2 UK home UK 589 0.6 589
maintenance
services
platform
Reaction Rocket UK 6,433 6.0 6,433
Engines2 propulsion
systems
Vinci (long French France 2,375 2.2 29
CFD)1 concessions
and
construction
company
Total 11,541 10.8 9,195
Industrials
Health Care
GlaxoSmithKline Global UK 4,664 4.4 4,664
healthcare
company
Haleon Multinational UK 3,460 3.2 3,460
consumer
healthcare
company
Total Health 8,124 7.6 8,124
Care
Energy
BP (long CFD)1 Global UK 3,517 3.3 (170)
integrated oil
&
gas company
Energy Equity African oil UK - - -
Resources and gas
(Norway)4 exploration
Leed Resources4 Oil and gas UK - - -
exploration
and production
company
PetroHunter Oil and gas USA - - -
Energy4 exploration
and
production
company
Shell (long Global UK 3,308 3.1 (51)
CFD)1 integrated oil
and gas
company
Total Energy 6,825 6.4 (221)
Technology
Alphabet Inc Multinational USA 4,129 3.9 (16)
(long CFD)1 technology
conglomerate
Just Eat Online food Netherlands 2,176 2.0 2,176
Takeaway.com delivery
company
Total 6,305 5.9 2,160
Technology
Basic Materials
Anglo American Basic UK 1,572 1.5 1,572
materials
Total Basic 1,572 1.5 1,572
Materials
Total 103,290 96.8 103,290
investments
(excluding
CFDs)1
Total CFDs1 19,169 17.9 (160)
Total 122,459 114.7 103,130
investments
(including
CFDs)1
Forward
Currency
Contracts
Buy GBP (218)
4,725,848
Sell USD
6,000,000
16/11/2023
Buy GBP (34)
6,066,352
Sell EUR
7,000,000
16/11/2023
Total Forward (252)
Currency
Contracts
Portfolio fair 102,878
value
Net other 4,140
assets
Net assets 107,018
1 CFDs are disclosed in Derivative assets/liabilities at market value in the
Statement of Financial Position.
2 Unquoted investment.
3 AIM quoted investment.
4 Delisted, suspended or investments in administration or liquidation.
* Global exposure has been calculated in line with the guidelines issued by the
European Securities and Markets Authority (`ESMA') and represents the market
value of an equivalent position in the underlying investment of each derivative
contract. For all other asset types the percentage of net assets has been
calculated based on the valuation of each holding.
Interim Management Report and Responsibility Statement
Principal Risks and Uncertainties
Pursuant to DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, the
principal risks and uncertainties faced by the Company include strategic risk,
investment risk, legal and regulatory risk, operational, cybercrime and climate
change risks. External factors such as UK political and geopolitical events also
bring risk and uncertainty to the Company.
The Directors have assessed these risks and are of the opinion the nature of the
risks and the way in which they are managed has not materially changed as
described in the previous Annual Financial Report. These risks remain applicable
to the six months under review and the remaining six months in the financial
year. Details of the risks and their management is described in more detail in
the Annual Financial Report 30 April 2023 which is available at
artemisalphatrust.co.uk.
Related Party Transactions
During the six months ending 31 October 2023, no transactions with related
parties have taken place which have materially impacted the Company.
Going Concern
The Directors have considered the Company's principal risks and uncertainties
together with its current financial position, assets and liabilities, projected
revenue and expenses and the Company's dividend policy. The Directors also
considered the impact on the Company of recent market volatility due to
geopolitical events and the inflationary pressures currently being felt. It is
the Directors' opinion that the Company has adequate resources to continue in
operational existence for the foreseeable future; a period of at least 12 months
from the approval of this Half-Yearly Report. For this reason, the going concern
basis of accounting continues to be used in the preparation of this financial
statement.
Responsibility Statement of the Directors in respect of the Half-Yearly
Financial Report
The Directors confirm that to the best of their knowledge, in respect of the
Half-Yearly Financial Report for the six months ended 31 October 2023:
? the condensed set of financial statements has been prepared in accordance
with IAS 34 `Interim Financial Reporting' issued by the International Accounting
Standards Board as adopted by the EU;
? the Interim Management Report, together with the Chairman's Statement and
the Investment Manager's Report, include a fair review of the information
required by:
(a) Disclosure Guidance and Transparency Rule 4.2.7R (indication of important
events during the first six months; and a description of the principal risks and
uncertainties for the remaining six months of the year); and
(b) Disclosure Guidance and Transparency Rule 4.2.8R (related party
transactions).
The Half-Yearly Financial Report for the six months ended 31 October 2023 was
approved by the Board and the above responsibility statement was signed on its
behalf by:
Duncan Budge
Chairman
20 December 2023
Condensed Income Statement
Six months Six months
Year
ended 31 ended 31
ended 30
October October
April
2023 2022
2023
(unaudited) (unaudited)
(audited)
Revenue Capital Total Revenue Capital Total
Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
£'000 £'000 £'000
Investment income 1,440 - 1,440 1,582 - 1,582
3,052 - 3,052
Total revenue 1,440 - 1,440 1,582 - 1,582
3,052 - 3,052
Net losses on - (12,121) (12,121) - (15,588) (15,588) -
(4,609) (4,609)
investments
Net - 585 585 - (1,846) (1,846) -
4,134 4,134
gains/(losses) on
derivatives
Currency - (57) (57) - 22 22 -
140 140
(losses)/gains
Total 1,440 (11,593) (10,153) 1,582 (17,412) (15,830)
3,052 (335) 2,717
income/(loss)
Expenses
Investment (74) (295) (369) (76) (301) (377)
(154) (615) (769)
management fee
Other expenses (251) (9) (260) (257) (1) (258)
(456) (8) (464)
Profit/(loss) 1,115 (11,897) (10,782) 1,249 (17,714) (16,465)
2,442 (958) 1,484
before finance
costs and tax
Finance costs (124) (495) (619) (22) (91) (113)
(115) (461) (576)
Profit/(loss) 991 (12,392) (11,401) 1,227 (17,805) (16,578)
2,327 (1,419) 908
before tax
Tax (62) - (62) (60) - (60)
(101) - (101)
Profit/(loss) and 929 (12,392) (11,463) 1,167 (17,805) (16,638)
2,226 (1,419) 807
total
comprehensive
income/ (expense)
for
the period
Earnings/(loss) 2.84p (37.88)p (35.04)p 3.51p (53.61)p (50.10)p
6.74p (4.30)p 2.44p
per ordinary
share
The total column of this statement represents the Statement of Comprehensive
Income of the Company, prepared in accordance with International Financial
Reporting Standards. The supplementary revenue and capital columns are both
prepared under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.
All income is attributable to the equity shareholders of Artemis Alpha Trust
plc. There are no minority interests.
Condensed statement of financial position
31 October 31 October 30 April
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-current assets
Investments 103,290 102,086 109,979
Investments in subsidiary undertaking 4,360 4,083 4,264
107,650 106,169 114,243
Current assets
Derivative assets 77 277 2,187
Other receivables 580 1,688 2,208
Collateral held 1,110 - -
Cash and cash equivalents 3,020 978 7,653
4,787 2,943 12,048
Total assets 112,437 109,112 126,291
Current liabilities
Derivative liabilities (489) (66) (106)
Collateral pledged - (160) (1,930)
Other payables (4,930) (5,219) (4,438)
Total liabilities (5,419) (5,445) (6,474)
Net assets 107,018 103,667 119,817
Equity attributable to equity holders
Share capital 373 373 373
Share premium 676 676 676
Special reserve 18,709 19,308 18,779
Capital redemption reserve 217 217 217
Retained earnings - revenue 3,100 3,144 3,437
Retained earnings - capital 83,943 79,949 96,335
Total equity 107,018 103,667 119,817
Net asset value per ordinary share 327.14p 315.08p 366.02p
Condensed statement of changes in equity
Sixmonthsended31October202
3(unaudited)
Share capital Share
premium Special reserve Capital redemption reserve Retainedearnings
£'000
£'000 £'000
£'000
Revenue
Capital Total
£'000
£'000 £'000
At 1 May 2023 373 676
18,779 217 3,437 96,335 119,817
Total comprehensive income:
Profit/(loss) for the period - -
- - 929 (12,392) (11,463)
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury - -
(70) - - - (70)
Dividends paid - -
- - (1,266) - (1,266)
At 31 October 2023 373 676
18,709 217 3,100 83,943 107,018
Sixmonthsended31October202
2(unaudited)
Share capital Share
premium Special reserve Capital redemption reserve Retainedearnings
£'000
£'000 £'000
£'000
Revenue
Capital Total
£'000
£'000 £'000
At 1 May 2022 373 676
21,964 217 3,117 97,754 124,101
Total comprehensive income:
Profit/(loss) for the period - -
- - 1,167 (17,805) (16,638)
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury - -
(2,656) - - - (2,656)
Dividends paid - -
- - (1,140) - (1,140)
At 31 October 2022 373 676
19,308 217 3,144 79,949 103,667
Year Ended 30 April 2023
(audited)
Share capital Share
premium Special reserve Capital redemption reserve Retainedearnings
£'000
£'000 £'000
£'000
Revenue
Capital Total
£'000
£'000 £'000
At 1 May 2022 373 676
21,964 217 3,117 97,754 124,101
Total comprehensive income:
Profit/(loss) for the year - -
- - 2,226 (1,419) 807
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury - -
(3,185) - - - (3,185)
Dividends paid - -
- - (1,906) - (1,906)
As at 30 April 2023 373 676
18,779 217 3,437 96,335 119,817
Condensed Statement of Cashflows
Six months Six months Year
ended 31 ended 31 ended
October October
2023 2022 30 April
(unaudited) (unaudited) 2023
£'000 £'000
(audited)
£'000
Operating activities
(Loss)/profit before tax (11,401) (16,578) 908
Interest payable 619 113 576
Net losses on investments 12,121 15,588 4,609
Net (gains)/losses on (585) 1,846 (4,134)
derivatives
Currency losses/(gains) 57 (22) (140)
Decrease/(increase) in other 94 35 (6)
receivables
Decrease in accrued expenses (45) (219) (12)
Net cash inflow from operating 860 763 1,801
activities before interest and
tax
Interest paid (619) (113) (576)
Irrecoverable overseas tax (62) (60) (101)
suffered
Net cash inflow from operating 179 590 1,124
activities
Investing activities
Purchase of investments (16,180) (13,322) (24,601)
Sale of investments 11,762 15,437 28,584
Sale/(purchase) of derivatives 3,858 (3,257) 583
Collateral (held)/pledged (3,040) 2,130 3,900
Net cash (outflow)/inflow from (3,600) 988 8,466
investing activities
Financing activities
Repurchase of ordinary shares (70) (2,722) (3,251)
into treasury
Dividends paid (1,266) (1,140) (1,906)
Increase in intercompany loan 181 851 691
Net cash outflow from financing (1,155) (3,011) (4,466)
activities
Net (increase)/decrease in net (4,576) (1,433) 5,124
debt
Net funds at the start of the 7,653 2,389 2,389
period
Effect of foreign exchange rate (57) 22 140
changes
Net funds at the end of the 3,020 978 7,653
period
Cash and cash equivalents 3,020 978 7,653
NOTES TO THE HALF-YEARLY FINANCIAL REPORT
1. Accounting policies
The Half Yearly Financial Report has been prepared in accordance with
International Accounting Standard 34, `Interim Financial Reporting', the
provisions of the Companies Act 2006 and with the guidance set out in the
Statement of Recommended Practice for Investment Trust Companies and Venture
Capital Trusts ("SORP") issued by the Association of Investment Companies in
July 2022.
All other accounting policies remain the same as disclosed in the Annual Report
for the year ended 30 April 2023.
2. (Loss)/earnings per ordinary share
Six months Six months Year ended
ended 31 ended 31 30 April
October October 2023
2023 2022
(Loss)/earnings per ordinary share
is based on:
Revenue earnings (£'000) 929 1,167 2,226
Capital loss (£'000) (12,392) (17,805) (1,419)
Total (loss)/earnings (£'000) (11,463) (16,638) 807
(Loss)/earnings per ordinary share (35.04)p (50.10)p 2.44p
Weighted average number of 32,713,531 33,209,552 33,033,940
ordinary shares in issue during
the period
3. Net asset value per ordinary share
As at 31 October As at 31 October As at 30 April
2023 2022 2023
Net asset value per
ordinary share is based
on:
Net assets (£'000) 107,018 103,667 119,817
Net asset value per 327.14p 315.08p 366.02p
ordinary share
Number of shares in issue 32,713,152 32,902,188 32,734,908
at the end of the period
During the period, the Company repurchased 21,756 shares into treasury (six
months ended 31 October 2022: repurchased 852,486 shares into treasury; 30 April
2023: repurchased 1,019,766 shares into treasury).
4. Dividends
Six Six Year ended 30 April
months months 2023
ended 31 ended 31 £'000
October October
2023 2022
£'000 £'000
Final dividend for the year ended 1,266 1,140 1,140
30 April 2023 - 3.87p (2022:
3.46p)
First interim dividend for the - - 766
year ended 30 April 2023 - 2.33p
1,266 1,140 1,906
A first interim dividend for the year ending 30 April 2024 of 2.54p per ordinary
share has been declared. This will be paid on 31 January 2024 to those
shareholders on the register at close of business on 5 January 2024.
5. Analysis of retained earnings - capital
As at 31 October As at 31 October As at 30 April
2023 2022 2023
£'000 £'000 £'000
Retained earnings - 108,016 79,536 110,047
capital (realised)
Retained earnings - (24,073) 413 (13,712)
capital (unrealised)
83,943 79,949 96,335
6. Investment in subsidiary undertaking
% of ordinary Principal Registered Country of
share capital activity Office incorporation
held and operation
Alpha Securities 100 Investment 57-59 St James's England and
Trading Limited dealing Street, London, SW1A Wales
1LD
Investment in the subsidiary undertaking is held at fair value, which is deemed
to be its net assets. It holds a portfolio of listed investments for short term
appreciation which are measured at their quoted bid prices.
As at 31 As at 31 October As at 30 April
October 2022 2023
2023 £'000 £'000
£'000
Historic book cost of - - -
investment in subsidiary
undertaking
Opening fair value adjustment 4,264 4,231 4,231
Opening valuation 4,264 4,231 4,231
Increase/(decrease) in fair 96 (148) 33
value adjustment
Closing valuation 4,360 4,083 4,264
Other payables includes an intercompany loan to Alpha Securities Trading Limited
of £3,727,000 (31 October 2022: £3,707,000; 30 April 2023: £3,546,000).
7. Comparative information
The financial information for the six months ended 31 October 2023 and 31
October 2022 has not been audited and does not constitute statutory financial
statements as defined in Section 234 of the Companies Act 2006.
The information for the year ended 30 April 2023 has been extracted from the
Audited Annual Report for the year ended 30 April 2023. These financial
statements contained an unqualified auditor's report and have been lodged with
the Registrar of Companies and did not contain a statement required under
Section 498 of the Companies Act 2006.
8. Related party transactions
The amounts paid to the Investment Manager are disclosed in the Condensed income
statement. However, the existence of an independent Board of Directors
demonstrates that the Company is free to pursue its own financial and operating
policies and therefore, under IAS 24: Related Party Disclosures, the Investment
Manager is not considered to be a related party.
9. Fair value hierarchy
IFRS 7 `Financial Instruments: Disclosures' requires an entity to provide an
analysis of investments held at fair value through profit and loss using a fair
value hierarchy that reflects the significance of the inputs used in making the
measurements of fair value. The hierarchy used to analyse the fair values of
financial assets is set out below.
Level 1 - investments with quoted prices in an active market;
Level 2 - investments whose fair value are based directly on observable current
market prices or are indirectly derived from market prices; and
Level 3 - investments whose fair value are determined using a valuation
technique based on assumptions that are not supported by observable current
market prices or are not based on observable market data.
The investments held at the Statement of Financial Position date fell into the
categories, Level 1, Level 2 and Level 3. The values in these categories are
summarised as part of this note. Any investments that are delisted or suspended
from a listed stock exchange are transferred from Level 1 to Level 3.
(Unaudited) As at (Unaudited) As at (Audited) As at
31 October 2023 31 October 2022 30 April 2023
Assets Liabilities Assets Liabilities Assets Liabilities
£'000 £'000 £'000 £'000 £'000 £'000
Level 1 91,895 - 89,911 - 97,797 -
Level 2 77 (489) 277 (66) 2,187 (106)
Level 3 11,395 - 12,175 - 12,182 -
103,367 (489) 102,363 (66) 112,166 (106)
The valuation of the Level 3 investments would not be significantly different
had reasonably possible
alternative valuation bases been applied.
Details of the movements in Level 3 assets during the six months ended 31
October 2023 are set out in the table below.
£'000
Level 3 investments
Opening book cost 14,068
Opening fair value adjustment (1,886)
Opening valuation 12,182
Movements in the period:
Purchases at cost -
Sales - proceeds (409)
- realised losses on sales (4,793)
Decrease in fair value adjustment 4,415
Closing valuation 11,395
Closing book cost 8,866
Closing fair value adjustment 2,529
11,395
Copies of the Half-Yearly Financial Report for the six months ended 31 October
2023 will be sent to shareholders shortly and will be available from the
registered office at Cassini House, 57 St James's Street, London SW1A 1LD as
well as on the website,artemisalphatrust.co.uk (http://artemisonline.co.uk/).
A copy of the Half Yearly Financial Report will also be submitted to the
National Storage Mechanism and will soon be available for inspection
athttps://data.fca.org.uk/#/nsm/nationalstoragemechanism
Artemis Fund Managers Limited
Company Secretary
For further information, please contact:
Artemis Fund Managers Limited
Telephone: 0131 225 7300
21 December 2023
This information was brought to you by Cision http://news.cision.com
END
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December 21, 2023 02:01 ET (07:01 GMT)
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