TIDMBMD
RNS Number : 4602C
Baronsmead Second Venture Trust PLC
13 June 2023
Baronsmead Second Venture Trust plc
Half-yearly report for the six months ended 31 March 2023
The Directors of Baronsmead Second Venture Trust plc are pleased
to announce the unaudited half-yearly financial report for the six
months to 31 March 2023. Copies of the half-yearly report can be
obtained from the following website: www.baronsmeadvcts.co.uk
Our investment objective
-- Baronsmead Second Venture Trust plc (the "Company") is a tax
efficient listed company which aims to achieve long-term investment
returns for private investors, including tax free dividends.
Investment policy
-- To invest primarily in a diverse portfolio of UK growth
businesses, whether unquoted or traded on the Alternative
Investment Market ("AIM").
-- Investments are made selectively across a range of sectors in
companies that have the potential to grow and enhance their
value.
Dividend policy
-- The Board will, where possible, seek to pay two dividends to
shareholders in each financial year, typically an interim dividend
in September and a final dividend following the Annual General
Meeting.
-- The Board will use, as a guide, when setting the dividends
for a financial year, a sum representing 7 per cent. of the opening
NAV of that financial year.
Key elements of the business model
Access to an attractive, diverse portfolio
The Company gives shareholders access to a diverse portfolio of
growth businesses.
The Company will make investments in growth businesses, whether
unquoted or traded on AIM, which are substantially based in the UK
in accordance with the prevailing VCT legislation. Investments are
made selectively across a range of sectors.
The Manager's approach to investing
The Manager endeavours to select the best opportunities and
applies a distinctive selection criteria based on:
-- Primarily investing in parts of the economy which are
experiencing long-term structural growth.
-- Businesses that demonstrate, or have the potential for, market leadership in their niche.
-- Management teams that can develop and deliver profitable and sustainable growth.
-- Companies with the potential to become an attractive asset
appealing to a range of buyers at the appropriate time to sell.
In order to ensure a strong pipeline of opportunities, the
Manager invests in building deep sector knowledge and networks and
undertakes significant proactive marketing to interesting target
companies in preferred sectors. This approach generates a network
of potentially suitable businesses with which the Manager maintains
a relationship ahead of possible investment opportunities.
The Manager as an influential shareholder
The Manager is an engaged and supportive shareholder (on behalf
of the Company) in both unquoted and significant quoted
investments. For unquoted investments, representatives of the
Manager often join the investee board. The role of the Manager with
investees is to ensure that strategy is clear, the business plan
can be implemented and that management resources are in place to
deliver profitable growth. The intention is to build on the
business model and grow the company into an attractive target, for
it to be either sold or potentially floated in the medium term.
Strategic report
Financial highlights
NAV per share decreased 1.8% per cent. to 61.0p, before the
deduction of dividends, in the six months to 31 March 2023.
323.2p Net Asset Value ("NAV") total return to shareholders for
every 100.0p invested at launch (January 2001).
GBP4.6mn Investments made into two new and three follow-on
opportunities during the period (Unquoted: GBP3.4mn, Quoted:
GBP1.2mn).
GBP25.0mn raised in the period (before costs).
Cash returned to shareholders by date of Investment
The chart below shows the cash returned to shareholders based on
the subscription price and the income tax reclaimed on
subscription.
Cumulative dividends
Cash invested Income tax reclaim Net cash invested paid (#)
Year subscribed (p) (p) (p) (p) Return on cash invested (#) (%)
2001 (January) 100.00 20.00 80.00 162.55 182.6
============== =================== =================== ===================== ================================
2005 (March) - C
share* 100.00 40.00 60.00 117.69 157.7
============== =================== =================== ===================== ================================
2010 (March) 103.10 30.93 72.17 114.25 140.8
============== =================== =================== ===================== ================================
2012 (December) 117.40 35.22 82.18 96.25 112.0
============== =================== =================== ===================== ================================
2014 (March) 112.40 33.72 78.68 76.25 97.8
============== =================== =================== ===================== ================================
2016 (February) 107.20 32.16 75.04 59.75 85.7
============== =================== =================== ===================== ================================
2017 (October) 97.48 29.24 68.24 39.75 70.8
============== =================== =================== ===================== ================================
2019 (February) 85.30 25.59 59.71 32.25 67.8
============== =================== =================== ===================== ================================
2019 (November) 78.90 23.67 55.23 24.75 61.4
============== =================== =================== ===================== ================================
2020 (January) 84.80 25.44 59.36 24.75 59.2
============== =================== =================== ===================== ================================
2020 (February) 82.50 24.75 57.75 21.25 55.8
============== =================== =================== ===================== ================================
2020 (March) 64.30 19.29 45.01 21.25 63.0
============== =================== =================== ===================== ================================
2020 (November) 77.90 23.37 54.53 18.25 53.4
============== =================== =================== ===================== ================================
2020 (December) 80.90 24.27 56.63 18.25 52.6
============== =================== =================== ===================== ================================
2021 (January) 84.40 25.32 59.08 18.26 51.6
============== =================== =================== ===================== ================================
2021 (February) 82.20 24.66 57.54 14.75 47.9
============== =================== =================== ===================== ================================
2021 (March) 84.90 25.47 59.43 14.75 47.4
============== =================== =================== ===================== ================================
2021 (December) 88.10 26.43 61.67 11.75 43.3
============== =================== =================== ===================== ================================
2022 (January) 87.10 26.13 61.97 11.75 43.5
============== =================== =================== ===================== ================================
2022 (March) 76.60 22.98 53.62 8.25 40.8
============== =================== =================== ===================== ================================
2023 (January) 68.19 1 20.46 47.73 5.25 37.7
============== =================== =================== ===================== ================================
2023 (March) 65.72 2 19.72 46.00 2.25 33.4
============== =================== =================== ===================== ================================
The total return could be higher for those shareholders who were
able to defer a capital gain on subscription and the net sum
invested may be less.
* Dividends paid to C shareholders post conversion have been
adjusted by the conversion ratio (0.85642528).
# Includes interim dividend of 2.25p per share payable 8
September 2023.
Shares were allotted pursuant to the 2023 Offer at individual
prices for each investor in accordance with the allotment formula
as set out in each Offer's Securities Note.
1. Average effective offer price based on allotment prices
between 67.6p and 71.5p.
2. Average effective offer price based on allotment prices
between 64.8p and 67.9p.
Chair's statement
The UK economic backdrop continued to be challenging through the
end of 2022 and into the first quarter of 2023. Inflation and
interest rates remained at high levels and there was much
uncertainty across the financial markets. This led to uncertainty
in the debt markets and a liquidity squeeze. This was compounded in
the first quarter of 2023 by the collapse of Silicon Valley Bank
and then of Credit Suisse, which led to fears of a more widespread
banking sector contagion. Consumer and business confidence remains
fragile.
Against this backdrop, the quoted portfolio delivered strong
growth in the last quarter of 2022 as markets recovered from the
declines seen earlier in the year. This continued into the first
quarter of 2023 with some hopes of inflation and the cost-of-living
crisis easing. This partially offset the declines from the
uncertainty generated by the concerns within the banking sector and
recessionary fears. The Manager continues to believe that, in
aggregate, the fundamentals of the underlying portfolio companies
remain robust and the growth prospects for the majority of investee
companies continue to be positive over the medium term. The
portfolio also remains relatively defensively positioned with high
levels of diversification. The portfolio contains over 85 direct
investments, both quoted and unquoted assets, and a bias towards
sectors which have more resilient, contracted or recurring revenue
streams.
The Board is declaring an interim dividend of 2.25p to be paid
on 8 September 2023 to shareholders on the register as of 11 August
2023. The Board is aware that dividends are an important part of
the total return to the shareholders' investment in the Company.
Over the period, there were no capital proceeds realised from the
sale, or partial sale, of any portfolio companies. The Board has
considered the capital reserves available along with potential
known realisations and has made the decision to slightly reduce the
interim dividend amount compared to recent years. The Board
continues to aim to achieve its dividend policy objective of an
annual yield of 7.0 per cent of opening NAV.
I must, of course, remind shareholders that payment dates and
the amount of future dividends depend on the level and timing of
profitable realisations and cannot be guaranteed.
Results
During the six months to 31 March 2023, the Company's NAV per
share decreased 1.8 per cent. from 62.1p to 61.0p after the payment
of a final dividend of 3.0p per share on 3 March 2023. The table
below breaks down the movement in NAV over the six months.
Pence per
ordinary
share
----------------------------------------------- ----------
NAV as at 1 October 2022 (after deducting the
final dividend of 3.0p) 62.1
----------------------------------------------- ----------
Valuation decrease (1.8 per cent.) (1.1)
----------------------------------------------- ----------
NAV as at 31 March 2023 61.0
----------------------------------------------- ----------
Over the two months to 31 May 2023, NAV was 62.6p per share, a
2.6 per cent. increase over the NAV as at 31 March 2023. This was
driven by firmer quoted markets.
Portfolio review
The table below provides a summary of each asset class and the
return generated during the period under review.
Number
NAV % of % return
* of investees in the
Asset class (GBPmn) NAV* companies** period***
Unquoted 48 23 41 (14)
--------- ------ ------------- -----------
AIM-traded companies 78 37 46 2
--------- ------ ------------- -----------
LF Gresham House UK Micro Cap
Fund 25 12 48 7
--------- ------ ------------- -----------
LF Gresham House UK Multi Cap
Income Fund 20 9 40 7
--------- ------ ------------- -----------
LF Gresham House UK Smaller Companies
Fund 11 5 38 4
--------- ------ ------------- -----------
Liquid assets(#) 29 14 N/A 2
--------- ------ ------------- -----------
Total 211 100 213 (2)
--------- ------ ------------- -----------
* By value at 31 March 2023.
** Includes investee companies with holdings by more than one
fund. Total number of individual companies held is 164.
*** Return includes interest received on unquoted realisations during the period.
(#) Represents cash, OEICs and net current assets. % return in
the period relates only to the OEICs.
The value of the unquoted portfolio decreased 14.2 per cent. in
the six months to 31 March 2023. The drop in value was driven by a
combination of lower benchmark market comparables and softening
trading performance of the investee companies as a result of the
decline in consumer confidence.
The value of the Company's portfolio of investments directly
held in AIM-traded companies increased 1.8 per cent. in the six
months to 31 March 2023. The value of the Company's investment into
the LF Gresham House UK Micro Cap Fund ("Micro Cap") increased by
7.4 per cent., the LF Gresham House UK Smaller Companies Fund
("Small Cap") increased by 4.2 per cent. and the LF Gresham House
UK Multi Cap Income Fund ("Multi Cap") increased by 7.2 per cent.
in the period. This was primarily due to positive news flow across
the portfolio being well received by the markets with a number of
trading updates demonstrating better than expected financial
performance.
Investments and divestments
The Company's investments and divestments during the period are
set out below.
Investments
I am pleased to report that the Company made two new investments
totalling GBP1.4mn and three follow-on investments with a combined
value of GBP3.3mn in the six months to 31 March 2023. Below are
descriptions of the new investments made:
-- Cognassist (unquoted) - a platform for supporting those with learning needs.
-- Connect Earth (unquoted) - help businesses track their carbon emissions.
-- Patchworks (unquoted) - a platform for connecting businesses' applications.
-- Seeen (quoted) - a video technology business.
-- Oberon (quoted) - wealthy advisory service for individuals and businesses.
Following the period end, two further follow-on investments were
made into Airfinty and Panthera Biopartners, totalling GBP1.2mn,
and a new unquoted investment of GBP0.8mn was made into Dayrize, a
platform for assessing the sustainability of products.
Realisations
There were no realisations during the period. However, Glisser,
a provider of conference and educational software provider and
CMME, a specialist mortgage broker, went into administration. Both
businesses had experienced very challenging trading conditions over
the past year and their valuations had already been written
down.
Following the period end, in the unquoted portfolio; Evotix was
acquired resulting in a gross money multiple of 0.7x original cost;
the deferred consideration from the sale of Key Travel in 2018 was
received, resulting in a gross money multiple of 3.2x original
cost; and also the earn-out consideration from the Pho realisation
which, in addition to the proceeds received at the time of the
realisation, resulted in a gross money multiple of 3.1x original
cost. In the quoted portfolio, we continued to top-slice Cerillion
plc resulting in proceeds of GBP0.7mn.
Fundraising
I am pleased to report that, during the period, the Company
successfully raised GBP25.0mn (before costs) through an offer for
subscription which became fully subscribed in April 2023. The
Directors are pleased to welcome the 1,007 new shareholders who
invested during the offer period and are appreciative of the
continued support of 442 pre--existing shareholders.
The Board will consider whether to raise new funds in the
2023/24 tax year. This will be determined by the Company's cashflow
and its anticipated requirements to fund new and follow-on
investments over the next two to three years. The Board appreciates
that shareholders would like ample notice of its fundraising
intentions and will ensure that shareholders are informed of any
such fundraising at the earliest practical time.
Consumer Duty
The Financial Conduct Authority ("FCA") has introduced the
concept of Consumer Duty, the rules and principles which come into
effect in July 2023. Consumer Duty is an advance on the existing
concept of 'treating customers fairly' and looks to ensure good
outcomes for purchasers of investment products. As a listed entity,
Baronsmead Second Venture Trust plc, alongside other investment
companies, are not themselves subject to Consumer Duty.
Instead, in their role as promoter of the investment Manager to
the Company, it is Gresham House, and any other FCA regulated
parties associated with your investment in the Company, that must
uphold the principles behind the Consumer Duty. To that end, the
Board is working with Gresham House to review the information that
should be provided to assist investors and their advisers to
discharge their obligations under Consumer Duty.
VCT Regulation - Financial Heath Test
Since the various VCT rule changes in both 2015 and 2018, VCT
qualifying investments have become focussed on smaller, younger
companies. As a result, when the Manager makes a new investment,
they expect to make further follow-on investments as the investee
company progresses and where the business case for the investment
is justified. These follow-on investments are subject to the same
VCT compliance rules as new deals and both rely on certain criteria
being met, including the Financial Health Test.
The Financial Health Test is not something new and was primarily
introduced as an anti-abuse regulation. However, following
amendment to HMRC's guidance, there has been an effective
tightening of the interpretation of the Financial Health Test. This
is resulting in the restriction of potential follow-on VCT
investment to support certain portfolio companies. This has the
potential to negatively impact shareholders' returns as a result of
portfolio companies going into administration when they might
otherwise have gone on to be successful. Furthermore, as this is an
industry wide issue, this measure increases the uncertainties small
companies face at a particularly difficult time and may well result
in unnecessary job losses and hardship to employees and their
families and has the potential to reduce the overall tax efficiency
of the VCT scheme as a whole.
The Board continues to monitor developments in this area
carefully and supports the representations being made by the AIC
and the VCTA to HMRC and HM Treasury to seek a change to HMRC's
guidance in this area.
Outlook
The Board expects that market conditions will remain volatile
throughout 2023. It is likely that UK inflation will ease - whilst
remaining higher than Bank of England forecasts. Nonetheless, there
remains a material possibility of recession in the UK.
However, the portfolio is well diversified, and is largely
positioned in sectors of the economy which the Board expects will
benefit from long-term structural growth tailwinds. Whilst the
geopolitical and economic context for the next year is liable to be
challenging, experience suggests that investing through the cycle
can often produce superior returns. This can also provide an
opportunity for the Company to make high quality investments and
build strategic stakes in businesses with great potential for the
future. This applies to both new investments and further
investments in the portfolio. There are good prospects in the
pipeline across a variety of themes and sectors. The Company
remains suitably capitalised and the Manager is well resourced to
support investment into new and existing portfolio companies, which
is expected to drive value creation and steady dividend payments to
shareholders over the long-term.
Sarah Fromson
Chair
12 June 2023
Investments in the period
Book
cost
Company Location Sector Activity GBP'000
Unquoted investments
New
=====================================================================================================
A platform for supporting
Newcastle Healthcare those with learning
Cognassist UK Ltd upon Tyne & Education needs 902
============ =================== ============================ ==========
Helps businesses track
Connect Earth Ltd London Business Services their carbon emissions 451
============ =================== ============================ ==========
Follow on
Patchworks Integration A platform for connecting
Ltd Nottingham Technology businesses' applications 2,080
============ =================== ============================ ==========
Total unquoted investments 3,433
==========
AIM-traded investments
Follow - on
SEEEN plc London Technology A wide technology business 659
============ =================== ============================ ==========
Wealth advisory service
Oberon Investments for individuals and
Group plc London Business services businesses 531
============ =================== ============================ ==========
Total AIM-traded investments 1,190
==========
Total investments in the period 4,623
==========
Realisations in the period
There were no realisations in the period.
Responsibility statement of the Directors in respect of the
half-yearly financial report
Half-yearly report
The important events that have occurred during the period under
review, the key factors influencing the financial statements and
the principal uncertainties for the remaining six months of the
financial year are set out in the Chair's statement and the
Strategic report.
The principal risks facing the Company are mostly unchanged
since the date of the Company's Annual Report for the financial
year ended 30 September 2022 and continue to be as set out in that
Report on pages 18 and 19.
Risks faced by the Company include but are not limited to; loss
of approval as a Venture Capital Trust, legislative risk,
investment performance risk, risk of economic, political and other
external factors, regulatory and compliance risk and operational
risk. The Board considers the aftermath of the COVID-19 pandemic
and the Russian invasion of Ukraine to be factors which permeate
these risks, and their impacts for the remaining six months of the
year continue to be kept under review.
Responsibility statement
Each director confirms that to the best of their knowledge:
the condensed set of financial statements has been prepared in
accordance with FRS 104 Interim Financial Reporting Standards and
gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company.
This half-yearly report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The half-yearly report was approved by the Board of Directors on
12 June 2023 and was signed on its behalf by Ms Sarah Fromson,
Chair.
Sarah Fromson
Chair
12 June 2023
Condensed income statement
For the six months to 31 March 2023 (Unaudited)
Six months to Six months to Year to
31 March 2023 31 March 2022 30 September 2022
--------------------- -----
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
Losses on
investments 5 - (2,132) (2,132) - (27,719) (27,719) - (48,771) (48,771)
Income 1,201 - 1,201 961 - 961 4,951 - 4,951
Investment
management fee (620) (1,860) (2,480) (706) (2,116) (2,822) (1,367) (4,101) (5,468)
Other expenses (357) - (357) (359) - (359) (669) - (669)
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
Profit/(loss)
before taxation 224 (3,992) (3,768) (104) (29,835) (29,939) 2,915 (52,872) (49,957)
Taxation on
ordinary
activities - - - - - - (263) 263 -
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
Profit /(loss) for
the period, being
total
comprehensive
income for the
period after
taxation 224 (3,992) (3,768) (104) (29,835) (29,939) 2,652 (52,609) (49,957)
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
Return per ordinary
share:
Basic and Diluted 2 0.07p (1.21p) (1.14p) (0.4p) (10.04p) (10.08p) 0.85p (16.85p) (16.00p)
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
All items in the above statement derive from continuing
operations.
There are no recognised gains and losses other than those
disclosed in the Income Statement.
The revenue column of the Income Statement includes all income
and expenses. The capital column accounts for the realised and
unrealised profit or loss on investments and the proportion of the
management fee charged to capital.
The total column of this statement is the unaudited Statement of
Total Comprehensive Income of the Company prepared in accordance
with the Financial Reporting Standard ("FRS"). The supplementary
revenue return and capital return columns are prepared in
accordance with the Statement of Recommended Practice issued by the
Association of Investment Companies ("AIC SORP").
Condensed statement of changes in equity
Non-distributable reserves Distributable reserves
----------------------
Called-up share Revaluation Revenue
capital Share reserve Capital reserve Total
GBP'000 premium GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
---------------------- --------------------- ---------------- ----------- ---------------- -------- ------------
At 1 October 2022 35,789 106,099 18,834 49,142 3,122 212,986
(Loss)/profit on
ordinary activities
after taxation - - (3,433) (559) 224 (3,768)
Net proceeds of share
issues, share
buybacks & sale of
shares from treasury 1,933 10,718 - (771) - 11,880
Dividends paid - - - (9,116) (1,013) (10,129)
---------------------- --------------------- ---------------- ----------- ---------------- -------- ------------
At 31 March 2023 37,722 116,817 15,401 38,696 2,333 210,969
---------------------- --------------------- ---------------- ----------- ---------------- -------- ------------
For the six months to 31 March 2023 (Unaudited)
For the six months to 31 March 2022 (Unaudited)
Non-distributable reserves Distributable reserves
----------------------
Called-up share Revaluation Revenue
capital Share reserve Capital reserve Total
GBP'000 premium GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
---------------------- --------------------- ---------------- ----------- ---------------- -------- ------------
At 1 October 2021 31,206 74,231 77,481 63,698 1,758 248,374
(Loss)/ profit after
taxation - - (34,540) 4,705 (104) (29,939)
Net proceeds of share
issues, share
buybacks & sale of
shares from treasury 4,583 31,868 - (1,050) - 35,401
Dividends paid - - - (10,465) (308) (10,773)
---------------------- --------------------- ---------------- ----------- ---------------- -------- ------------
At 31 March 2022 35,789 106,099 42,941 56,888 1,346 243,063
---------------------- --------------------- ---------------- ----------- ---------------- -------- ------------
For the year ended 30 September 2022 (Audited)
Non-distributable reserves Distributable reserves
----------------------
Called-up share Revaluation Revenue
capital Share reserve Capital reserve Total
GBP'000 premiumGBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
---------------------- ---------------------- --------------- ----------- ---------------- -------- ------------
At 1 October 2021 31,206 74,231 77,481 63,698 1,758 248,374
(Loss)/Profit after
taxation - - (58,647) 6,038 2,652 (49,957)
Net proceeds of share
issues, share
buybacks & sale of
shares from treasury 4,583 31,868 - (1,302) - 35,149
Dividends paid - - - (19,292) (1,288) (20,580)
---------------------- ---------------------- --------------- ----------- ---------------- -------- ------------
At 30 September 2022 35,789 106,099 18,834 49,142 3,122 212,986
---------------------- ---------------------- --------------- ----------- ---------------- -------- ------------
Condensed balance sheet
As at 31 March 2023 (Unaudited)
As at As at As at
31 March 31 March 30 September
2023 2022 2022
Notes GBP'000 GBP'000 GBP'000
------------------------------------------------ ----- -----------------
Fixed assets
Unquoted investments 5 48,545 53,887 53,118
Traded on AIM 5 77,655 83,916 75,051
Collective investment vehicles 5 69,933 60,053 49,502
Listed on LSE 5 - 34 34
------------------------------------------------ ----- ----------------- --------------- ---------------
Investments 5 196,133 197,890 177,705
Current assets
Debtors 1,477 106 152
Cash at bank and on deposit 14,803 46,647 36,622
------------------------------------------------ ----- ----------------- --------------- ---------------
16,280 46,753 36,774
Creditors (amounts falling due within one year) (1,444) (1,580) (1,493)
------------------------------------------------ ----- ----------------- --------------- ---------------
Net current assets 14,836 45,173 35,281
------------------------------------------------ ----- ----------------- --------------- ---------------
Net assets 210,969 243,063 212,986
------------------------------------------------ ----- ----------------- --------------- ---------------
Capital and reserves
Called-up share capital 37,722 35,789 35,789
Share premium 116,817 106,099 106,099
Capital reserve 38,696 56,888 49,142
Revaluation reserve 5 15,401 42,941 18,834
Revenue reserve 2,333 1,346 3,122
------------------------------------------------ ----- ----------------- --------------- ---------------
Equity shareholders' funds 210,969 243,063 212,986
------------------------------------------------ ----- ----------------- --------------- ---------------
Net asset value per share 61.0p 74.2p 65.1p
Number of ordinary shares in circulation 345,640,159 327,596,768 327,288,384
------------------------------------------------ ----- ----------------- --------------- ---------------
Condensed statement of cash flows
For the six months to 31 March 2023 (Unaudited)
Six months to Six months to
31 March 31 March Six months to
2023 2022 30 September 2022
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- -----------------
Net cash outflow from operating activities (2,035) (2,536) (1,872)
Net cash ( outflow) /inflow from investing activities (21,534) 12,689 12,058
Net cash ( outflow)/ inflow before financing activities (23,569) 10,153 10,186
Net cash inflow from financing activities 1,750 24,182 14,124
----------------------------------------------------------- ----------------- ------------------ ------------------
(Decrease)/ Increase in cash (21,819) 34,335 24,310
----------------------------------------------------------- ----------------- ------------------ ------------------
Reconciliation of net cash flow to movement in net cash
(Decrease)/ increase in cash (21,819) 34,335 24,310
Opening cash at bank and on deposit 36,622 12,312 12,312
----------------------------------------------------------- ----------------- ------------------ ------------------
Closing cash at bank and on deposit 14,803 46,647 36,622
----------------------------------------------------------- ----------------- ------------------ ------------------
Reconciliation of (loss)/ profit/ before taxation to net
cash outflow from operating activities
Loss on ordinary activities before taxation (3,768) (29,939) (49,957)
Losses on investments 2,132 27,719 48,771
Changes in working capital and other non-cash items (399) (316) (686)
----------------------------------------------------------- ----------------- ------------------ ------------------
Net cash outflow from operating activities (2,035) (2,536) (1,872)
----------------------------------------------------------- ----------------- ------------------ ------------------
Notes to the financial statements
For the six months to 31 March 2023 (Unaudited)
1. Basis of preparation
The condensed financial statements for the six months to 31
March 2023 comprise the unaudited financial statements set out on
pages 13 to 16 together with the related notes on pages 17 to 21.
The Company applies FRS 102 and the AIC SORP for its annual
Financial Statements. The condensed financial statements for the
six months to 31 March 2023 have therefore been prepared in
accordance with FRS 104 'Interim Financial Reporting' and the
principles of the SORP. They have also been prepared on a going
concern basis. The financial statements have been prepared on the
same basis as the accounting policies set out in the Company's
Annual Report and Financial Statements for the year ended 30
September 2022.
The financial information contained in this half-yearly
financial report does not constitute statutory accounts as defined
in sections 434 - 436 of the Companies Act 2006. The half-yearly
financial report for the six months ended 31 March 2023 and for the
six months ended 31 March 2022 have been neither audited nor
reviewed by the Company's Auditor. The information for the year to
30 September 2022 has been extracted from the latest published
audited financial statements, which have been filed with the
Registrar of Companies. The report of the Auditor for the audited
financial statements for the year to 30 September 2022 was: (i)
unqualified; (ii) did not include a reference to any matters to
which the Auditor drew attention by way of emphasis without
qualifying their report; and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006. No
statutory accounts in respect of any period after 30 September 2022
have been reported on by the Company's Auditor or delivered to the
Registrar of Companies.
Copies of the half-yearly financial report have been made
available to shareholders and are available from Gresham House, 80
Cheapside, London, EC2V 6EE.
2. Performance and shareholder returns
Return per share is based on a weighted average of 330,678,751
ordinary shares in issue (31 March 2022 - 297,083,965 ordinary
shares; 30 September 2022 - 312,132,990 ordinary shares).
Earnings for the first six months to 31 March 2023 should not be
taken as a guide to the results of the full financial year to 30
September 2023.
3. Called-up share capital
The below table details the movement in called-up share capital
during the period.
Allotted, called-up and fully paid:
Ordinary shares GBP'000
--------------------------------------------------------- -------
252, 3357,889,473 ordinary shares of 10p each listed
at 30 September 2022 35,789
19,335,239 ordinary shares of 10p each issued during
the period 1,933
377,224,712 ordinary shares of 10p each listed at
31 March 2023 37,722
--------------------------------------------------------- -------
30,601,089 ordinary shares of 10p each held in treasury
at 30 September 2022 (3,060)
2,264,464 ordinary shares of 10p each repurchased during
the period and held in treasury (226)
1,281,000 ordinary shares of 10p each sold from treasury
during the period 128
31,584,553 ordinary shares of 10p each held in treasury
at 31 March 2023 (3,158)
--------------------------------------------------------- -------
345,640,159 ordinary shares of 10p each in circulation*
at 31 March 2023 34,564
--------------------------------------------------------- -------
* carrying one vote each
During the six months to 31 March 2023 the Company issued
19,335,239 shares at net proceeds of GBP12,543,000 (after costs).
During the same period, the Company purchased 2,264,464 shares to
be held in treasury at a cost of GBP1,430,000 (including costs).
The Company also sold 1,281,000 shares from treasury for proceeds
of GBP767,000. At 31 March 2023, the Company held 31,584,553
ordinary shares in treasury. Shares may be sold out of treasury
below Net Asset Value as long as the discount at issue is narrower
than the average discount at which the shares were bought into
treasury.
Excluding treasury shares, there were 345,640,159 ordinary
shares in circulation at 31 March 2023 (31 March 2022 - 327,596,768
ordinary shares; 30 September 2022 - 327,288,384 ordinary
shares).
4. Dividends
The final dividend for the year ended 30 September 2022 of 3.0p
per share (2.7p capital, 0.3p revenue) was paid on 3 March 2023 to
shareholders on the register on 3 February 2023. The ex-dividend
date was 2 February 2023.
During the year to 30 September 2022, the Company paid an
interim dividend on 9 September 2022 of 3.0p per share (2.7p
capital, 0.3p revenue).
5. Investments
All investments are initially recognised and subsequently
measured at fair value. Changes in fair value are recognised in the
Income Statement.
The methods of fair value measurement are classified into a
hierarchy based on reliability of the information used to determine
the valuation.
-- Level 1 - Fair value is measured based on quoted prices in an active market.
-- Level 2 - Fair value is measured based on directly observable
current market prices or indirectly being derived from market
prices.
-- Level 3 - Fair value is measured using a valuation technique
that is not based on data from an observable market.
The valuation of unquoted investments contained within level 3
of the Fair Value hierarchy involves key assumptions dependent upon
the valuation methodology used. The primary methodologies applied
are:
-- Cost of recent investment.
-- Earnings multiple.
-- Offer less 10 per cent.
The earnings multiple approach involves more subjective inputs
than the cost of recent investment and offer approaches and
therefore presents a greater risk of over or under estimation. Key
assumptions for the earnings multiple approach are the selection of
comparable companies and the use of either historic or forecast
revenue or earnings, as considered most appropriate. Other
assumptions include the appropriateness of the discount magnitude
applied for reduced liquidity and other qualitative factors. These
assumptions are described in more detail in note 2.3 in the
Company's Report and Financial Statements for the year to 30
September 2022. The techniques used in the valuation of unquoted
investments have not changed materially since the date of that
report.
Level 1 Level 2 Level 3
------------------- ----------- ----------
Collective
Traded Listed investment
on AIM on LSE vehicles Unquoted Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- -------- --------- ----------- ---------- --------
Opening book cost 63,764 3,429 36,557 55,121 158,871
Opening unrealised appreciation/(depreciation) 11,287 (3,395) 12,945 (2,003) 18,834
----------------------------------------------- -------- --------- ----------- ---------- --------
Opening fair value 75,051 34 49,502 53,118 177,705
----------------------------------------------- -------- --------- ----------- ---------- --------
Movements in the year:
Purchases at cost 1,190 - 39,738 3,433 44,361
Sale - proceeds - - (22,500) (1,301) (23,801)
- realised gains on
sales - - - 1,301 1,301
Change in unrealised
appreciation/ (depreciation) 1,414 (34) 3,193 (8,006) (3,433)
----------------------------------------------- -------- --------- ----------- ---------- --------
Closing fair value 77,655 - 69,933 48,545 196,133
----------------------------------------------- -------- --------- ----------- ---------- --------
Closing book cost 64,954 3,429 53,795 58,554 180,732
Closing unrealised appreciation/(depreciation) 12,701 (3,429) 16,138 (10,009) 15,401
----------------------------------------------- -------- --------- ----------- ---------- --------
Closing fair value 77,655 - 69,933 48,545 196,133
----------------------------------------------- -------- --------- ----------- ---------- --------
Equity shares 77,655 - - 23,697 101,352
Preference shares - - - 18,842 18,842
Loan notes - - - 6,006 6,006
Collective investment
vehicles - - 69,933 - 69,933
----------------------------------------------- -------- --------- ----------- ---------- --------
Closing fair value 77,655 - 69,933 48,545 196,133
----------------------------------------------- -------- --------- ----------- ---------- --------
6. Other required disclosures
6.1 Segmental reporting
The Company has one reportable segment being investing in
primarily a portfolio of UK growth businesses, whether unquoted or
traded on AIM.
6.2 Principal risks and uncertainties
The Company's assets consist of equity and fixed interest
investments, shares in collective investment schemes, cash and
liquid resources. Its principal risks are therefore market risk,
price risk, credit risk and liquidity risk. Other risks faced by
the Company include loss of approval as a Venture Capital Trust,
legislative, investment performance, economic, political and other
external factors, regulatory and compliance and operational risks.
These risks, and the way in which they are managed, are described
in more detail in the principal risks and uncertainties table
within the Strategic report section in the Company's Annual Report
and Accounts for the year ended 30 September 2022. The Board
continues to regularly review the risk environment in which the
Company operates.
6.3 Related parties
Gresham House Asset Management Ltd (the "Manager") manages the
investments of the Company. The Manager also provides or procures
the provision of secretarial, accounting, administrative and
custodian services to the Company. Under the management agreement,
the Manager receives a fee of 2.5 per cent. per annum of the net
assets of the Company. This is described in more detail under the
heading 'The Investment Management Agreement' within the Strategic
Report in the Company's Annual Report and Accounts for the year
ended 30 September 2022. During the period the Company has incurred
management fees of GBP2,480,000 (31 March 2022 - GBP2,822,000; 30
September 2022 - GBP5,468,000) and secretarial and accounting fees
of GBP80,000 (31 March 2022 - GBP76,000; 30 September 2022 -
GBP149,000) payable to the Manager. No performance fee has been
accrued at 31 March 2023 (31 March 2022 - GBPnil; 30 September 2022
- GBPnil). This is described in more detail under the heading
'Performance fees' within the Strategic Report in the Company's
Annual Report and Financial Statements for the year to 30 September
2022.
6.4 Going Concern
After making enquiries, and bearing in mind the nature of the
Company's business and assets, the Directors consider that the
Company has adequate resources to continue in operational existence
for the foreseeable future. In arriving at this conclusion, the
Directors have considered the Company's cash balances, the
liquidity of the Company's investments and the absence of any
gearing. The Directors are therefore also satisfied that the
Company has adequate financial resources to continue in operation
for at least the next 12 months and that, accordingly, it is
appropriate to adopt the going concern basis in preparing the
financial statements.
6.6 Post balance sheet events
The following events occurred between the balance sheet date and
the signing of these financial statements:
-- The 30 April 2023 NAV of 62.3p was announced on 5 May 2023
and the 31 May 2023 NAV of 62.6p was announced on 6 June 2023. At
the date of publishing this report, the Board is unaware of any
matter that will have caused the NAV per share to have changed
significantly since the latest NAV.
-- 19mn shares were issued on 3 April 2023 at allotment prices
between 61.8p and 65.2p under the current offer.
-- Purchased 1.2mn Ordinary Shares of 10.0p on 5 April 2023 at a
price of 57.0p per share to be held in Treasury.
-- Follow-on investment, into Airfinity Ltd, completed in April 2023 totalling GBP0.7mn.
-- Follow-on investment, into Panthera Biopartners, completed in June 2023 totalling GBP0.5mn.
-- Follow-on investments, into LF Gresham House UK Multi Cap
Income Fund, completed in April and May 2023, totalling
GBP0.5mn.
-- Follow-on investments, into LF Gresham House UK Smaller
Companies Fund, completed in April and May 2023, totalling
GBP4.5mn.
-- One new investment, into Dayrize B.V., completed in May 2023 totalling GBP0.8mn.
-- Partial realisation of MXC Capital in April, as part of a
tender offer, realising proceeds of GBP0.02mn and making a return
of 0.6x cost.
-- Partial realisations in Cerillion plc were made in April and
May, realising proceeds of GBP0.7mn and making a return of 15.8x
cost.
-- Received earn-out proceeds of GBP1.4mn from Pho in May 2023,
which was realised in July 2021, making a total return of 3.1x
cost.
-- Realised Evotix in May 2023, receiving proceeds of GBP0.8mn
and making a return of 0.7x cost.
-- Received deferred proceeds of GBP0.4mn from Key Travel in May
2023, which was realised in May 2018, making a total return of 3.2x
cost.
Corporate Information Registrars and Transfer Office
Computershare Investor Services plc
Directors The Pavilions
Sarah Fromson (Chair) Bridgwater Road
Malcolm Groat* Bristol BS99 6ZZ
Graham McDonald Tel: 0800 923 1534
Tim Farazmand (#)
Brokers
Secretary Panmure Gordon & Co
Gresham House Asset Management Ltd One New Change
London EC4M 9AF
Registered Office Tel: 020 7886 2500
5 New Street Square
London EC4A 3TW Auditor
BDO LLP
Investment Manager 55 Baker Street
Gresham House Asset Management Ltd LondonW1U 7EU
5 New Street Square
London EC4A 3TW
Tel: 020 7382 0999 Solicitors
Dickson Minto
Registered Number Broadgate Tower
04115341 20 Primrose Street
London EC2A 2EW
VCT Status Adviser
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Website
www.baronsmeadvcts.co.uk
Chair of the Nomination Committee.
* Senior Independent Director and
Chair of the Audit & Risk Committee.
# Chair of the Management Engagement
and Remuneration Committee.
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END
IR GPUBWQUPWGQP
(END) Dow Jones Newswires
June 13, 2023 02:00 ET (06:00 GMT)
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