TIDMHRI
RNS Number : 4204G
Herald Investment Trust PLC
19 July 2023
HERALD INVESTMENT TRUST plc
(the "Company")
LEI NUMBER: 213800U7G1ROCTJYRR70
HALF-YEARLY FINANCIAL REPORT ANNOUNCEMENT
For the six months ended 30 June 2023
INVESTMENT OBJECTIVE AND POLICY
Herald Investment Trust plc's (Herald or the Company) objective
is to achieve capital appreciation through investments in smaller
quoted companies in the areas of telecommunications, multimedia and
technology (TMT). Investments may be made across the world. The
business activities of investee companies will include information
technology, broadcasting, printing and publishing and the supply of
equipment and services to these companies. The Company's investment
policy is set out in full on page 34 of the Company's annual report
and nancial statements for the year ended 31 December 2022 and
remains unchanged.
INTERIM MANAGEMENT REPORT
The directors are required to provide an Interim Management
Report in accordance with the Financial Conduct Authority (FCA)
Disclosure Guidance and Transparency Rules (DTR). The directors
consider that the Chairman's Statement on pages 3 and 4 of this
half-yearly report, provides details of the important events which
have occurred during the six months ended 30 June 2023 and their
impact on the financial statements. The statement on Related Party
Transactions, the Statement of Directors' Responsibilities and the
Chairman's Statement together constitute the Interim Management
Report of the Company for the six month period ended 30 June 2023.
The outlook for the Company for the remaining six months of the
year ending 31 December 2023 is discussed in the Chairman's
Statement.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks facing the Company, including the board's
assessment thereof and mitigation factors, are detailed in the
annual report and financial statements for the year ended 31
December 2022 on pages 35 and 36 of the Strategic Report. Market
risk, liquidity risk and credit risk are discussed in detail in
note 17 of the Company's annual report and financial statements for
the year ended 31 December 2022. Principal risks facing the Company
include the following: strategic risk (risk as an investor in
smaller companies); market, economic and geopolitical risks (with
these three risks covering currency risk, interest rate risk and
other price risk including, but not limited to liquidity, price,
valuation, TMT, small cap, and political developments); investment
management risks (including liquidity of the portfolio and key
person risks); third party service provider operational risks
(failure of service providers and cyber risk); emerging/external
risk (failure to have in place procedures that assist in
identifying new or familiar risks that become apparent in new or
unfamiliar conditions). Other risks are also considered: gearing
risk (the use of borrowings can magnify the impact of falling
markets); discount volatility; operational risk; emerging/external
risks (climate change and global pandemic risk); and regulatory
risk (the loss of investment trust status or a breach of applicable
legal and regulatory requirements).
In the view of the board, the principal risks and uncertainties
facing the business are broadly the same as those in the published
annual report and financial statements for the year ended 31
December 2022, and these risks and uncertainties remain applicable
to the remaining six months of the year.
The annual report can be obtained free of charge from the
Manager, Herald Investment Management Limited ("HIML") (see contact
details on page 15) and is available on its website:
www.heralduk.com.
RELATED PARTY TRANSACTIONS
Details of the related party transactions were provided in the
annual report and financial statements for the year ended 31
December 2022. There have been no changes to the related party
transactions described in the annual report that could have a
material effect on the financial position or performance of the
Company.
GOING CONCERN
The directors have undertaken a review of the Company's
financial position and ability to continue as a going concern. This
review took account of continuing global tensions - for example
between China and the US over Taiwan, the war in Ukraine and
climate change. These uncertainties have created supply chain
disruption and exacerbated inflationary pressures worldwide. The
Company's principal risks are market-related and the current market
conditions have demonstrated the resilience of the Company and its
investment objective and policy. The board considers that there are
no material uncertainties that call into question the Company's
ability to continue as a going concern for at least twelve months
from the date of approval of these financial statements and the
board is confident that the Company will be able to continue in
operation and meet its liabilities as they fall due. Consequently,
the financial statements continue to be prepared on a going concern
basis.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We con rm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared
in accordance with FRS 104 'Interim Financial Reporting' and gives
a true and fair view of the assets, liabilities, financial position
and profit of the Company;
b) the half-yearly financial report and interim management
report includes a fair review of the information required by
Disclosure Guidance and Transparency Rule 4.2.7R; and
c) the half-yearly financial report includes a fair review of
the information required by Disclosure Guidance and Transparency
Rule 4.2.8R (disclosure of related party transactions and changes
therein). There have been no such transactions that have materially
affected the financial position of the Company.
On behalf of the board
ANDREW JOY
CHAIRMAN
18 July 2023
SUMMARY OF PERFORMANCE
At Performance
inception At At since Performance
16 February 30 June 31 December 31 December since
Capital return 1994 2023 2022 2022 inception
--------------------------------------------------- ------------ --------- ------------ ------------ ------------
Net asset value per ordinary share (including
current year revenue)(A) 98.7p 2,094.4p 2,099.1p -0.2% 2,022.0%
Net asset value per ordinary share (excluding
current year revenue)(A) 98.7p 2,091.8p 2,098.8p -0.3% 2,019.4%
Share price 90.9p 1,750.0p 1,782.0p -1.8% 1,825.2%
Numis Smaller Companies plus AIM (ex. investment
companies) Index 1,750.0 5,199.9 5,406.8 -3.8% 197.1%
Russell 2000(R) Technology Index (small cap) (in
sterling terms) 688.7* 4,446.4 3,814.1 16.6% 545.6%
--------------------------------------------------- ------------ --------- ------------ ------------ ------------
(A) Alternative Performance Measure (APM).
* At 9 April 1996 being the date funds were first available for international investment.
The Russell 2000(R) Technology Index (small cap) was rebased
during 2009 following some minor adjustments to its constituents.
The rebased index is used from 31 December 2008 onwards.
Past performance is not a reliable indicator of future
returns.
CHAIRMAN'S STATEMENT
I was honoured to take over as chairman from Tom Black following
the Company's AGM in April 2023. Although the Company has had to
contend with significant headwinds which have affected its
performance more recently, since inception the Company has an
outstanding record which is attributable both to the choice of
sector on which it focuses, namely TMT, and to the stock picking
skills of the team at our Manager, led by Katie Potts since
1994.
For the first half of 2023, it is disappointing to report a
decline in net assets per ordinary share of 0.2%. However,
underlying trading across the diverse portfolio of investee
companies has generally been sound and met expectations. There were
a handful of exceptions in the UK, but more overseas. Drilling into
the portfolio there is an unusual divergence in returns by
geography and size as shown in the table below, in contrast to the
twelve months to 31 December 2022, when results were relatively
uniform.
Regional IRR Returns IRR - All IRR - Investments with IRR - Investments with
H1- 30 June 2023 investments mkt cap >USD 3$bn mkt cap <USD 3$bn
---------------------------------------- ------------- ----------------------- -----------------------
UK -11.5% 11.1% -12.7%
North America 21.4% 53.5% 0.6%
Asia Pacific 7.5% 18.3% 4.1%
EMEA -3.0% 77.6% -13.2%
---------------------------------------- ------------- ----------------------- -----------------------
Total Company -0.2% 43.0% -8.5%
---------------------------------------- ------------- ----------------------- -----------------------
Net liquid assets and government bonds GBP115.8m - -
---------------------------------------- ------------- ----------------------- -----------------------
Total net assets GBP1,253.0m GBP252.5m GBP884.7m
---------------------------------------- ------------- ----------------------- -----------------------
IRR - Internal Rate of Return
The UK has been particularly poor (return of -11.5%), North
America particularly good (+21.4%), Asia satisfactory (+7.5%) and
EMEA a small decline (-3.0%). However, there is also a stark
divergence between the holdings which exceed $3bn market
capitalisations and those below. In every region the returns from
these larger companies are both positive and significantly better
than the overall returns. Although there is some success bias, this
difference largely reflects the collapse in liquidity in the
smaller companies market. For context, there are 26 holdings with a
market capitalisation in excess of $3bn with an aggregate value of
GBP252.5m at the period end and the remaining holdings are in
smaller companies with an aggregate value of GBP884.7m. In the
technology sector there has been a strong bounce from the start of
the year in the very large global technology companies, and in May
the mid-cap companies saw a recovery too. The increasing presence
of ETFs and index tracking funds which do not participate in
smaller companies is contributing to liquidity challenges at the
smaller end.
The divergent regional performance reflects higher valuations in
overseas markets and lower valuations in the UK market as measured
by the weighted average price-to-earnings ratio ('P/E') for the
Company's portfolio using Bloomberg forecasts in each of the
regional segments:-
Price to Earnings YE 31/12/2022 PE 30/06/2023 % Change
------------------- --------------- -------------- ---------
UK 16.7 15.3 -8.4%
North America 17.9 24.0 34.1%
Asia Pacific 16.9 20.8 23.1%
EMEA 24.1 26.3 9.1%
------------------- --------------- -------------- ---------
The poor UK performance reflects stock market conditions more
than poor investee company fundamentals, as reflected in a 8.4%
decline in average P/E. Only three stocks of significance have had
issues on a fundamental basis - WANdisco, IQE and NCC. Collectively
they have yielded a negative return of GBP19.0m. Next 15, Telecom
Plus and ZOO Digital have also collectively delivered a high
negative return of GBP18.9m, whilst the negative return on the
entire UK portfolio was GBP67m. Within this figure the top positive
contributors included Diploma, discoverIE , IQGeo and Volex whose
collective return was only GBP7.7m. The portfolio is evidently
suffering from more sellers than buyers and underperformed the more
general Numis Smaller Companies plus AIM (ex. investment companies)
Index which declined 2.2%. The cash withdrawals from the UK market
are leading to market inefficiencies and attractive valuations.
In contrast, the North American portfolio has returned 21.4% in
GBP, and 27.3% in USD. However, this reflects a rise in the average
P/E by one third. There was a big divergence between the holdings
with a market capitalisation in excess of $3bn and the smaller
ones. Significantly 77% (GBP47.1m) of the North American return was
made by the stellar performance of Super Micro Computer. This has
benefitted both from increased visibility with investors, and from
the excitement relating to artificial intelligence. The second-best
performer was Arlo Technologies, a security camera service, which
increased in value by GBP5.1m. No other holding stands out
positively or negatively. The only surprise is how dull the returns
have been versus the large cap stocks. The Russell 1000 (R)
Technology Index (large cap) return of 40.8% dwarfs the return of
the Russell 2000(R) Technology Index (small cap) (in sterling
terms) of 16.7%. Against this index the 21.4% portfolio return was
satisfactory. There is no doubt that the Northern California area
including Silicon Valley and the Bay area has been damaged by
Covid. It has at least taken the heat out of the labour market.
The positive return of 7.5% in the Asian portfolio is remarkable
given the strength of GBP relative to the Asian currencies, the
most extreme being the appreciation of 15.6% against the Yen.
Furthermore, there have been widespread profit downgrades, and the
average P/E has risen by nearly a quarter.
The EMEA return of -3.0% was salvaged by an excellent
performance by long-held BE Semiconductors Industries which
increased in value by GBP12.4m, propelled by demand for its hybrid
bonding technology, which is used in high performance
semiconductors. Alas this return was offset by negative returns of
the holdings below $3bn market capitalisations, where
unsurprisingly the return was similar to the UK. The credit squeeze
is as evident in Europe as it is in the UK, while Germany is more
exposed to the manufacturing sector which is in recession.
The selling pressure seen in the UK portfolio has also been
reflected in the Company's shareholder base. There has been a
higher rate of share repurchases with 2.3m (3.8%) shares bought
back for cancellation for an aggregate cost of GBP43.5m. Cash
balances were carefully accumulated when valuations were high,
benefitting from quantitative easing and the strength of the
technology sector, but now we see very attractive valuations
emerging. The Manager has been approached in relation to 61
secondary fund raisings and participated in 20 of these with an
aggregate value of GBP14.4m. Of these, only three were new
names.
In the eight years up to 31 December 2022, 132 investee
companies were exited on take-overs with an aggregate value of
GBP594.0m. Of these 57 were UK listed (Including AIM) and
coincidentally an identical number were listed in North America,
and of this combined total, 49 were acquired by private equity. In
the first half of 2023 however, there have only been two takeovers,
one in the US and one in Asia: both to private equity. It appears
the Company has been providing late-stage venture capital and often
exiting to US based private equity. Now that debt markets are so
tight the reduced rate of takeovers is inevitable. However,
companies funded with equity are more secure in challenging
economic conditions and debt is not in aggregate material for the
investments held by the Company.
The profit and loss account has benefitted from reduced costs
and a significant increase in interest income, however there has
been a marginal decrease in dividends. There remains a retained
deficit on the income account so no dividend is expected for some
time. The share price has moved broadly in line with the Net Asset
Value per share, with the discount to Total Shareholders' Funds
moving to 16.4% at 30 June 2023 from 15.1% at the start of the
year.
The geopolitical and economic environment remains disturbing,
which the weight of government debt to be financed globally
overhangs. Nevertheless, in an environment of limited global growth
with the probability of recession as major economies adjust to
higher interest rates, our Manager continues to believe that the
TMT sector has strong relative attractions. A good example would be
the positive returns for the Company from its exposure to the
beneficiaries of potential artificial intelligence growth. As a
result the Board continues to view the medium-term prospects with
confidence.
ANDREW JOY
CHAIRMAN
18 July 2023
TOP TWENTY EQUITY HOLDINGS
At 30 June 2023
Value % of total
Company Business GBP'000 assets
----------------------------- ---------------------------------------------------------------- -------- -----------
Super Micro Computer Leading server and storage vendor 56,883 4.5
Diploma Distributor of components and systems 27,768 2.2
BE Semiconductor Industries Supplier of semiconductor assembly equipment 25,591 2.1
YouGov International opinion data surveys and analytics 20,577 1.6
Silicon Motion Technology* Develops controllers used with flash memory 20,206 1.6
Next 15 Digital media communications provider 19,942 1.6
Idox Developer of information management software 19,810 1.6
Descartes Systems Cloud-based logistics and supply chain management solutions 17,653 1.4
Advanced optical, electro-mechanical, and electronic
Fabrinet manufacturing services 16,959 1.4
Leading global supplier of power and connectivity-related
Volex solutions 16,560 1.3
Telecom Plus Provider of telecommunications and other utilities 13,782 1.1
Bango Supplier of mobile payment and marketing solutions 12,949 1.0
Nordic Semiconductor Wireless semiconductor technology 12,919 1.0
discoverIE Manufacturer of customised electronic components 12,676 1.0
Radware Developer of application delivery and cyber security solutions 12,202 1.0
Subtitling, dubbing and media localisation software and
ZOO Digital services 11,909 1.0
Esker Developer of process automation software 11,909 1.0
SPS Commerce Solutions to automate data exchange with trading partners 11,707 1.0
Pegasystems Develops applications for sales, marketing and operations 11,680 0.9
Seeing Machines Driver monitoring technology 10,562 0.8
----------------------------- ---------------------------------------------------------------- -------- -----------
364,244 29.1
---------------------------------------------------------------------------------------------- -------- -----------
* American Depositary Receipt.
GEOGRAPHICAL SPREAD OF INVESTMENTS
(Distribution of total assets)
At At
30 June 31 December
2023 2022
--------------------------------- -------- ------------
Net Liquid Assets* & Government
Bonds 9.2% 12.1%
Asia 11.6% 11.2%
North America 27.2% 21.8%
EMEA** 10.9% 10.8%
UK 41.1% 44.1%
*Cash, current assets and liabilities.
** EMEA stands for Europe, Middle East and Africa.
TOP FIVE WINNERS AND LOSERS
For the six months ended 30 June 2023 in sterling terms
(millions)
TOP 5 WINNERS
----------------------------- -----
Super Micro Computer 47.1
BE Semiconductor Industries 12.4
Arlo Technologies 5.1
SPS Commerce 4.1
Pegasystems 3.2
TOP 5 LOSERS
---------------------- -----
WANdisco -9.4
Next 15 -9.1
IQE -6.0
Nordic Semiconductor -5.8
ZOO Digital -4.8
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
For the six months ended For the six months ended
30 June 2023 30 June 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- -------- --------- ----------- -------- ---------- -----------
Realised gains on investments - 14,003 14,003 - 34,023 34,023
Movements in unrealised gains on investments - (22,325) (22,325) - (478,873) (478,873)
(Losses)/gains on foreign exchange - (1,815) (1,815) - 4,943 4,943
Income 8,715 - 8,715 6,938 - 6,938
Investment management fee - note 3 (6,390) - (6,390) (7,070) - (7,070)
Other administrative expenses (482) (5) (487) (501) (4) (505)
------------------------------------------------- -------- --------- ----------- -------- ---------- -----------
Profit/(loss) before taxation 1,843 (10,142) (8,299) (633) (439,911) (440,544)
Taxation (293) - (293) (288) - (288)
------------------------------------------------- -------- --------- ----------- -------- ---------- -----------
Profit/(loss) after taxation 1,550 (10,142) (8,592) (921) (439,911) (440,832)
------------------------------------------------- -------- --------- ----------- -------- ---------- -----------
Profit/(loss) per ordinary share - note 4 2.54p (16.63)p (14.09)p (1.44)p (689.90)p (691.34)p
------------------------------------------------- -------- --------- ----------- -------- ---------- -----------
Weighted average number of ordinary shares in
issue during the period 60,963,329 63,765,245
------------------------------------------------- -------- --------- ----------- -------- ---------- -----------
The total column of this statement is the profit and loss
account of the Company, prepared in accordance with UK Accounting
Standards.
The profit/(loss) after taxation is the total comprehensive
income and therefore no additional statement of comprehensive
income is presented. The supplementary revenue and capital columns
are presented for information purposes in accordance with the
Statement of Recommended Practice issued by the Association of
Investment Companies. All items in the above statement derive from
continuing operations of the Company. No operations were acquired
or discontinued in the period.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited)
As at As at
30 June 31 December
2023 2022
(unaudited) (audited)
GBP'000 GBP'000
--------------------------------------------------------------------- ------------ ------------
Fixed assets
Investments held at fair value through profit or loss 1,198,719 1,224,513
Current assets
Cash and cash equivalents 54,478 80,442
Other receivables 2,820 1,308
--------------------------------------------------------------------- ------------ ------------
57,298 81,750
Current liabilities
Other payables (3,053) (1,215)
--------------------------------------------------------------------- ------------ ------------
(3,053) (1,215)
Net current assets 54,245 80,535
--------------------------------------------------------------------- ------------ ------------
TOTAL NET ASSETS 1,252,964 1,305,048
--------------------------------------------------------------------- ------------ ------------
Capital and reserves
Called up share capital 14,956 15,543
Share premium 73,738 73,738
Capital redemption reserve 6,996 6,409
Capital reserve 1,163,753 1,217,387
Revenue reserve (6,479) (8,029)
--------------------------------------------------------------------- ------------ ------------
TOTAL SHAREHOLDERS' FUNDS 1,252,964 1,305,048
--------------------------------------------------------------------- ------------ ------------
NET ASSET VALUE PER ORDINARY SHARE (including current year revenue) 2,094.4p 2,099.1p
NET ASSET VALUE PER ORDINARY SHARE (excluding current year revenue) 2,091.8p 2,098.8p
--------------------------------------------------------------------- ------------ ------------
Ordinary shares in issue (number) 59,825,770 62,173,223
--------------------------------------------------------------------- ------------ ------------
CONDENSED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
For the six months ended 30 June 2023
Capital Total
Called up Share redemption Capital Revenue Shareholders'
share capital premium reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------------- -------- ----------- ----------- -------- --------------
Shareholders' funds at
1 January 2023 15,543 73,738 6,409 1,217,387 (8,029) 1,305,048
(Loss)/profit after taxation - - - (10,142) 1,550 (8,592)
Shares purchased for
cancellation - note
7 (587) - 587 (43,492) - (43,492)
------------------------------ -------------- -------- ----------- ----------- -------- --------------
Shareholders' funds at
30 June 2023 14,956 73,738 6,996 1,163,753 (6,479) 1,252,964
------------------------------ -------------- -------- ----------- ----------- -------- --------------
For the six months ended 30 June 2022
Capital Total
Called up Share redemption Capital Revenue Shareholders'
share capital premium reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------------- -------- ----------- ----------- -------- --------------
Shareholders' funds
at
1 January 2022 16,189 73,738 5,763 1,673,351 (8,164) 1,760,877
Loss after taxation - - - (439,911) (921) (440,832)
Shares purchased for
cancellation - note
7 (390) - 390 (32,658) - (32,658)
---------------------- -------------- -------- ----------- ----------- -------- --------------
Shareholders' funds
at
30 June 2022 15,799 73,738 6,153 1,200,782 (9,085) 1,287,387
---------------------- -------------- -------- ----------- ----------- -------- --------------
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
For the six For the six
months ended months ended
30 June 30 June
2023 2022
GBP'000 GBP'000
---------------------------------------------------- ------------- -------------
Cash flow from operating activities
Loss before finance costs and taxation (8,299) (440,544)
Adjustments for losses on investments 8,322 444,850
Purchase of investments (95,624) (87,453)
Sale of investments 113,878 100,719
Return of capital - 1,192
Increase in receivables (523) (272)
Increase/(decrease) in payables 2 (320)
Amortisation of fixed income book cost (736) (25)
Effect of foreign exchange rate changes 1,815 (4,943)
Overseas tax on overseas income (301) (384)
---------------------------------------------------- ------------- -------------
Net cash inflow from operating activities 18,534 12,820
---------------------------------------------------- ------------- -------------
Cash flow from financing activities
Shares purchased for cancellation - note 7 (42,683) (32,658)
---------------------------------------------------- ------------- -------------
Net cash outflow from financing activities (42,683) (32,658)
---------------------------------------------------- ------------- -------------
Net decrease in cash and cash equivalents (24,149) (19,838)
Cash and cash equivalents at start of the period 80,442 74,551
Effect of foreign exchange rate changes (1,815) 4,943
---------------------------------------------------- ------------- -------------
Cash and cash equivalents at the end of the period 54,478 59,656
---------------------------------------------------- ------------- -------------
Comprised of:
Cash and cash equivalents 54,478 59,656
---------------------------------------------------- ------------- -------------
Cash flow from operating activities includes interest received
of GBP1,232,000 (2022 - GBP302,000) and dividends received of
GBP5,851,000 (2022 - GBP5,955,000).
As the Company did not have any long-term debt at both the
current and prior six month period end, no reconciliation of the
net debt position is presented.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1 FINANCIAL STATEMENTS
The condensed financial statements for the six months to 30 June
2023 within the half-yearly financial report comprise the
statements set out on pages 7 to 10 together with the related notes
on pages 11 to 13. The condensed financial statements do not
constitute statutory accounts as defined in sections 434 to 436 of
the Companies Act 2006 and have not been audited. Financial
information in relation to the year ended 31 December 2022 has been
extracted from the statutory accounts which have been filed with
the Registrar of Companies. The auditor's report on those accounts
was unqualified and did not contain a statement under Section 498
(2) or (3) of the Companies Act 2006.
The Company's assets, which largely consist of investments in
quoted securities, exceed its liabilities significantly. All
borrowings require the prior approval of the board. Gearing levels
are reviewed by the board on a regular basis. In accordance with
the Company's articles of association, shareholders have the right
to vote on the continuation of the Company every three years with
the next vote being in April 2025. The Board continues to monitor
the impact of the Covid pandemic and the war in Ukraine on the
Company as it evolves. No material events have been identified that
may cast significant doubt about the Company's ability to continue
as a going concern for at least the next twelve months from the
date this half-yearly financial report is published. The condensed
financial statements have been prepared on a going concern basis
and it is the directors' opinion that the Company has adequate
resources to continue in operational existence for the foreseeable
future.
2 ACCOUNTING POLICIES
The condensed financial statements have been prepared in
accordance with applicable United Kingdom Accounting Standards and
applicable law (UK Generally Accepted Accounting Practice),
including FRS 102 The Financial Reporting Standard applicable in
the UK and Republic of Ireland, FRS 104 Interim Financial Reporting
and 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.
The accounting policies applied for the condensed financial
statements are as set out in the Company's annual report and
financial statements for the year ended 31 December 2022.
3 INVESTMENT MANAGEMENT FEE
Herald Investment Management Limited is appointed investment
manager under a management agreement which is terminable on twelve
months' notice. The management fee is 1.0% per annum of the
Company's net asset value (excluding current year net revenue)
based on middle market prices up to GBP1.25bn and 0.8% per annum on
amounts beyond this level. The management fee is levied on all
assets.
4 NET RETURN PER ORDINARY SHARE
Six months Six months
ended ended
30 June 30 June
2023 2022
GBP'000 GBP'000
-------------------------------------------- ----------- -----------
Revenue profit/(loss) after taxation 1,550 (921)
Capital loss after taxation (10,142) (439,911)
-------------------------------------------- ----------- -----------
Total net return (8,592) (440,832)
-------------------------------------------- ----------- -----------
Weighted average number of ordinary shares 60,963,329 63,765,245
-------------------------------------------- ----------- -----------
Net return per ordinary share is based on the above totals of
revenue and capital and the weighted average number of ordinary
shares in issue during each period.
There are no dilutive or potentially dilutive shares in
issue.
5 DIVIDS
In accordance with FRS 102 Section 32 'Events After the End of
the Reporting Period', the final dividend payable on ordinary
shares is recognised as a liability when approved by shareholders.
Interim dividends are recognised only when paid.
No dividends were paid for the year ended 31 December 2022
(2021: same), nor declared for the interim (2022: same).
6 FINANCIAL INSTRUMENTS
The Company's investments as disclosed in the Company's balance
sheet, are valued at fair value.
Nearly all of the Company's portfolio of investments are in the
Level 1 category as defined in FRS 102.
The three levels set out in FRS 102 are as follows:
Level 1: The unadjusted quoted price in an active market for
identical assets or liabilities that the entity can access at the
measurement date.
Level 2: Inputs other than quoted prices included within Level 1
that are observable (i.e. developed using market data) for the
asset or liability, either directly or indirectly.
Level 3: Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
The investment manager considers observable data to be the
market data that is readily available, regularly distributed or
updated, reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant
market.
The analysis of the valuation basis for the financial
instruments based on the hierarchy is as follows:
As at As at
30 June 31 December
2023 2022
GBP'000 GBP'000
------------------- ---------- ------------
Level 1 1,184,536 1,210,776
Level 3 14,183 13,737
------------------- ---------- ------------
Total investments 1,198,719 1,224,513
------------------- ---------- ------------
The fair value of listed security investments is bid value.
Investments on the Alternative Investment Market are included at
their bid value. The fair value of unlisted investments uses
valuation techniques determined by the directors on the basis of
latest information in line with the relevant principles of the
International Private Equity and Venture Capital Valuation
Guidelines.
7 SHARE CAPITAL
At the AGM held on 18 April 2023 the Company's authority to buy
back up to 14.99% of its issued share capital at that date was
renewed. In the six months to 30 June 2023 a total of 2,347,453 (30
June 2022 - 1,558,317) ordinary shares of 25p each were bought back
and cancelled at a total cost of GBP43,492,156 (30 June 2022 -
GBP32,657,770). At 30 June 2023 the Company had authority to buy
back a further 8,364,694 ordinary shares.
8 FIXED ASSET INVESTMENTS
During the period, cost of purchases amounted to GBP96,651,000
(30 June 2022 - GBP88,065,000) and proceeds of sales amounted to
GBP114,858,000 (30 June 2022 - GBP98,663,000).
Six months Six months
ended ended
30 June 30 June
2023 2022
GBP'000 GBP'000
--------------------------- ----------- -----------
Transaction costs
Commission costs:
Purchases 109 164
Sales 138 116
--------------------------- ----------- -----------
Total commission costs 247 280
Custody transaction costs 5 4
Other transaction costs 40 61
--------------------------- ----------- -----------
Total transaction costs 292 345
--------------------------- ----------- -----------
STATUS OF THIS REPORT
These interim financial statements are not the Company's
statutory accounts for the purposes of section 434 of the Companies
Act 2006. They are unaudited. The half-yearly financial report will
be made available to the public at the registered office of the
Company.
The report will also be available on the Company's website
www.heralduk.com
The information for the year ended 31 December 2022 has been
extracted from the last published audited financial statements,
unless otherwise stated. The audited financial statements have been
delivered to the Registrar of Companies. The auditor reported on
those accounts and their report was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under sections 498(2) or 498(3) of the Companies Act
2006.
For further information contact:
Apex Listed Companies Services (UK) Limited
Tel: 020 3327 9270
END
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END
IR BUGDRGUBDGXI
(END) Dow Jones Newswires
July 19, 2023 02:00 ET (06:00 GMT)
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