TIDMSVM
SVM UK EMERGING FUND PLC
(the "Fund")
HALF YEARLY REPORT
(FOR THE SIX MONTHS TO 30 SEPTEMBER 2022)
A copy of the Half Yearly Report will be available to download from the
Manager's website at www.svmonline.co.uk and a copy will shortly be available
for inspection at the National Storage Mechanism at https://data.fca.org.uk/#/
nsm/nationalstoragemechanism in due course. Copies are also available at 7
Castle Street, Edinburgh EH2 3AH, the registered office of the Fund.
HIGHLIGHTS
Net asset value return of -27.1% compared to a -12.8% return in the IA UK All
Companies Sector Average Index.
Over the five years to 30 September 2022, net asset value fell -23.8% and the
share price -14.9%, against the IA UK All Companies Sector Average Index return
of 3.2%.
Positive contributions from 4Imprint Group, Beazley, Ideagen and Aveva Group.
Portfolio emphasises exposure to cash generating, scalable businesses with a
competitive edge that can protect margins and deliver growth.
"Long term capital growth from investments in smaller UK companies. Its aim is
to outperform the IA UK All Companies Sector Average Index on a total return
basis"
Financial Highlights
Total Return 10 Years
Performance to 6 months 3 years 5 Years
30 September
2022
Net Asset Value -27.1% -26.3% -23.8% 71.5%
Share Price -21.7% -21.3% -14.9% 71.3%
Comparator Index -12.8% -2.4% 3.2% 60.5%
*
* The comparator index for the Fund was changed to the IA UK All Companies
Sector Average Index from 1 October 2013 prior to which the FTSE AIM Index was
used.
CHAIRMAN'S STATEMENT
Over the six months to 30 September 2022, the Company's net asset value fell
27.1% to 82.0p per share, compared to a return of -12.8% in the IA UK All
Companies Sector Average Index. Over the six months, the share price returned
-21.7%. In the five years to 30 September 2022, net asset value returned
-23.8% and the share price -14.9%, against the IA UK All Companies Sector
Average return of 3.2%. The Company's net asset value increased slightly since
the period under review to 86.2p at 31 October 2022.
Over the period, UK equities fell sharply, with much of that move coming in
September. The share prices of smaller and medium sized companies fared worse
than shares of the largest global businesses. The portfolio emphasises growth
strategies and has low exposure to some of the areas in favour in the period
such as energy, mining and the major pharmaceutical groups.
The strongest contributions to performance over the period were 4Imprint Group,
Ideagen, Beazley, Aveva Group and AB Dynamics. In July, compliance software
group, Ideagen, agreed a takeover by a private equity firm. In September,
industrial software business, Aveva, agreed a takeover by Schneider Electric,
subject to shareholder approval. Merger and acquisition activity may point to
recognition that share prices of some successful British businesses have become
attractive as acquisitions, particularly when the weakness of sterling is taken
into account. Negatives included Hilton Food Group, Dechra Pharmaceuticals, XP
Power, Watches of Switzerland, FDM Group and Alpha FX Group. Additional
investment was made in Dechra Pharmaceuticals. To fund this and reduce the
effective market exposure of the portfolio, Impax Asset Management, Volex,
ASOS, ITM Power and Seeing Machines were sold in part or whole.
During the period, in contrast with share price weakness, most portfolio
company trading updates were encouraging. Smaller and medium sized companies
typically have more flexibility to adapt and the portfolio emphasises
businesses generating cash. This should reduce risks of unforeseen fundraising
or profits disappointments. The Managers favour businesses that are leaders in
their area or which can defend margins through innovation.
On a range of measures, the fall has brought UK equities down to a significant
valuation gap with many other world markets, a relative valuation last reached
in 1989. It does appear that the UK economy will move into recession over the
next few months but the disparity is extreme.
The portfolio focuses on resilient growing businesses, with low exposure to
commodities, oil and banks. Portfolio investments are typically scalable
businesses with a competitive edge. The Fund remains fully invested with
minimal gearing.
Peter Dicks
Chairman
4 November 2022
INVESTMENT OBJECTIVE and POLICY
The investment objective of SVM UK Emerging Fund plc (the "Fund" or the
"Company") is long term capital growth from investments in medium-sized and
smaller UK companies. Its aim is to outperform the IA UK All Companies Sector
Average Index on a total return basis
The Fund aims to achieve its objective and to diversify risk by investing in
shares and related instruments, controlled by a number of limits on exposures.
Appropriate guidelines for the management of the investments, gearing and
financial instruments have been established by the Board. This is an abridged
version of the Fund's investment policy. The full investment policy can be
found in the Strategic Report within the Fund's latest Annual Report &
Accounts.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Half Yearly Report in
accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
the condensed set of financial statements have been prepared in accordance with
the Financial Reporting Council Statement 104 "Interim Financial Reporting" on
a going concern basis, taking in to account guidance on Covid-19, and give a
true and fair view of the assets, liabilities, financial position and gain or
loss of the Fund;
(ii) the Half Yearly Report includes a fair review of the information
required by the Disclosure and Transparency Rules DTR 4.2.7R (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 financial year); and DTR 4.2.8R (disclosure of related party
transactions and changes therein that could have a material effect on the
financial position or performance of the Fund during the first six months of
the current financial year).
(iii) No related party transactions have taken place during the first
six months of the year that have materially affected the financial position of
the Fund during the period and there have been no changes in the related party
transactions as described in the Annual Report & Accounts for the year end 31
March 2022 that could do so.
The Directors consider that the Half Yearly Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Fund's performance and strategy,
The Half Yearly Report has not been audited or reviewed by the Fund's auditors.
By Order of the Board
Peter Dicks
Chairman
4 November 2022
UNAUDITED ACCOUNTS
Income Statement
Six months to 30 September Six months to 30 September
2022 2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net (loss)/gain on investments - (1,787) (1,787) - 1,283 1,283
at fair value
Income 61 - 61 56 - 56
Investment management fees - (22) (22) - (32) (32)
Other expenses (72) - (72) (61) - (61)
(Loss)/gain before finance (11) (1,809) (1,820) (5) 1,251 1,246
costs and taxation
Finance costs (9) - (9) (7) - (7)
(Loss)/gain on ordinary (20) (1,809) (1,829) (12) 1,251 1,239
activities before taxation
Taxation - - - - - -
(Loss)/gain attributable to (20) (1,809) (1,829) (12) 1,251 1,239
ordinary shareholders
(Loss)/gain per Ordinary Share (0.33)p (30.18)p (30.51)p (0.20)p 20.87p 20.67p
Year ended 31 March 2022
(audited)
Revenue Capital Total
£'000 £'000 £'000
The Total column of
Net loss on investments at - (641) (641) this statement is the
fair value profit and loss
account of the Fund.
Income 94 - 94 All revenue and
capital items are
Investment management fees - (61) (61) derived from
continuing
Other expenses (127) - (127) operations. No
operations were
Loss before finance costs and (33) (702) (735) acquired or
taxation discontinued in the
year. A Statement of
Finance costs (14) - (14) Comprehensive Income
is not required as all
Loss on ordinary activities gains and losses of
before taxation (47) (702) (749) the Fund have been
reflected in the above
Taxation - - - statement.
Loss attributable to ordinary
shareholders (47) (702) (749)
Loss per Ordinary Share
(0.78)p (11.71)p (12.49)p
UNAUDITED ACCOUNTS
Balance Sheet
As at As at As at
30 September 31 March 30 September
2022 2022 2021
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Fixed Assets
Investments at fair value through profit 4,318 6,408 8,416
or loss
Total current assets 1,264 773 433
Creditors: amounts falling due within (666) (436) (116)
one year
Net current assets 598 337 317
Total assets less current liabilities 4,916 6,745 8,733
Capital and Reserves 4,916 6,745 8,733
Equity shareholders' funds 4,916 6,745 8,733
Net asset value per Ordinary Share 82.00p 112.51p 145.67p
UNAUDITED ACCOUNTS
Statement of Changes in Equity
For the period to 30 September 2022
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2022 300 314 5,136 27 1,501 6,745
(533)
Loss attributable - - - -
to shareholders (1,809) (20) (1,829)
As at 30 September 300 314 5,136 27 (308) (553) 4,916
2022
For the year to 31 March 2022
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2021 300 314 5,136 27 2,203 (486) 7,494
Loss attributable - - - -
to shareholders (702) (47) (749)
As at 31 March 2022 300 314 5,136 27 1,501 (533) 6,745
For the period to 30 September 2021
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2021 300 314 5,136 27 2,203 7,494
(486)
Gain/(loss) - - - - 1,251 (12) 1,239
attributable to
shareholders
As at 30 September 300 314 5,136 27 3,454 (498) 8,733
2021
UNAUDITED ACCOUNTS
Investment Portfolio as at 30 September 2022
Market % of Net Sector analysis as at % of Gross
Exposure Assets 30 September 2022 Exposure
Stock 2022
£000 Sector
1 4Imprint Group 321 6.5 Consumer Discretionary 23.3
2 Alpha FX Group 283 5.8 Industrials 20.8
3 Watches Of Switzerland 189 3.8 Consumer Discretionary 16.1
Group*
4 Beazley Group 176 3.6 Financials 11.2
5 Unite Group 173 3.5 Communication Services 11.0
6 Dechra Pharmaceuticals 165 3.4 Healthcare 8.1
7 Kape Technologies 140 2.8 Real Estate 6.0
8 Experian 133 2.7 Consumer Staples 2.7
9 Rentokil Initial 132 2.7 Materials 0.8
10 Kin And Carta* 111 2.3 Total 100.0
Ten largest investments 1,823 37.1
11 Kainos Group 111 2.3
12 Keystone Law Group 110 2.2
13 FDM Group Holdings 103 2.2
14 Flutter Entertainment* 99 2.0
15 Marlowe 98 2.0
16 JD Sports Fashion* 94 1.9
17 Oxford Instruments 89 1.8
18 Games Workshop Group 84 1.7
19 Ashtead Group 84 1.7
20 Computacenter 80 1.6
Twenty largest investments 4.327 49.5
21 Renishaw* 80 1.6
22 Instem 80 1.6
23 Jet2 79 1.6
24 Hilton Food Group 78 1.6
25 Aveva Group 78 1.6
26 Microlise Group 73 1.5
27 Impax Asset Management 73 1.5
Group
28 Renew 72 1.5 *Includes Contract for Difference
("CFDs")
29 Londonmteric Property 70 1.4
30 Entain* 68 1.4 Market exposure for equity
investments held is the same as
Thirty largest investments 3,526 71.7 fair value and for CFDs held is
the market value of the
Other investments (36 holdings) 1,547 31.5 underlying shares to which the
portfolio is exposed via the
Total investments 5,073 103.2 contract. The investment
portfolio is grossed up to
CFD positions (755) (15.4) include CFDs and the net CFD
position is then deducted in
CFD unrealised gains - - arriving at the net asset total.
Net current assets 598 12.2
Net assets 4,916 100.0
UNAUDITED ACCOUNTS
Risks and Uncertainties
The major risks inherent within the Fund are market risk, liquidity risk,
credit risk and interest rate risk. It has an established environment for the
management of these risks which are continually monitored by the Manager.
Appropriate guidelines for the management of its financial instruments and
gearing have been established by the Board of Directors. It has no foreign
currency assets and therefore does not use currency hedging. It does not use
derivatives within the portfolio with the exception of CFDs. An explanation of
these risks and how they are mitigated is explained in the 2022 Annual Report,
which is available on the Manager's website: www.svmonline.co.uk. These
principal risks and uncertainties have not changed from those disclosed in the
2022 Annual Report.
Going Concern
The Board, having made appropriate enquiries has a reasonable expectation that
the Fund has adequate resources and sufficient liquidity to continue in
operational existence for the foreseeable future, a period of not less than 12
months from the date of this report. This conclusion takes in to account the
Directors' assessment of the continuing risks and impacts from the COVID-19
pandemic, the geopolitical risks relating to the conflict between Russia and
Ukraine and economic factors that are influencing the current market
volatility, such as rising inflation, interest rates and supply chains.
Accordingly, it continues to adopt the going concern basis in preparing the
financial statements.
Notes
1. The Financial Statements have been prepared on a going concern
basis in accordance with FRS 102 "Financial Reporting Standard applicable in
the UK and Republic of Ireland", FRS 104 "Interim Financial Reporting" and
under the Association of Investment Companies Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
("SORP") issued in April 2021. The Company is exempt from presenting a Cash
Flow Statement as a Statement of Changes in Equity is presented and
substantially all of the Company's investments are highly liquid and are
carried at market value. These financial statements have been prepared in
accordance with the accounting policies used for the financial year ended 31
March 2022.
2. During the period no shares were bought back (2021: no shares
were bought back during the period).
The number of shares in issue at 30 September 2022 was
6,005,000 (2021: 6,005,000).
Returns per share are based on a weighted average of 5,995,000
(2021: 5,995,000) ordinary shares, being the number of shares in issue during
the period excluding the 10,000 shares held in Treasury.
Total return per share is based on the total loss for the period of £1,829,000
(2021: gain of £1,239,000). Capital return per share is based on the capital
loss for the period of £1,809,000 (2021: gain of £1,251,000,000). Revenue
return per share is based on the revenue loss after taxation for the period of
£20,000 (2021: loss of £12,000).
UNAUDITED ACCOUNTS
3. All investments are held at fair value. At 30 September 2022 no
unlisted investments were held with value attributed (31 March 2022: same; 30
September 2021: same).
Investments have been classified using the fair value
hierarchy:
September 2022 March 2022
£ £
000 £ 000 £
000 000
Classification of financial Assets Liabilities Assets Liabilities
instruments
Level 1 4,318 6,408 -
Level 2 621 375
Level 3 - 2 investments (March 2022: - - -
2)
Level 1 reflects financial instruments quoted in an active
market.
Level 2 reflects financial instruments whose fair value is
evidenced by comparison with other observable current market transactions in
the same instrument or based on a valuation technique whose variables include
only data from observable markets. The CFD positions are the sole Level 2
investments at 30 September 2022 and 31 March 2022.
Level 3 reflects financial instruments whose fair value is
determined in whole or in part using a valuation technique based on assumptions
that are not supported by prices from observable market transactions in the
same instrument and not based on available observable market data.
4. The Board has granted the Manager a limited authority to invest
in CFDs to achieve some degree of gearing and/or hedging without incurring the
gross cost of the investment. The Board requires the Manager to operate within
certain risk limits, as detailed in the Annual Report. The following table
details the CFD positions:
Number of CFD holdings at 30 September 2022: 9 (31 March 2022: 11)
CFD positions September March
2022 2022
£000 £000
Gross exposure 755 1,136
Net exposure 755 1,136
Unrealised gains - -
Unrealised losses 621 375
The gearing ratio is 7.9% at 30 September 2022 (31 March 2022: 16.1%). The
gearing ratio indicates the extra amount by which the shareholders' funds would
change if total assets (including CFDs' position exposure and netting off cash
and cash equivalents) were to rise or fall. A figure of zero per cent means
that the Company has a nil geared position.
5. SVM Asset Management Limited provides investment management and
secretarial services to the Fund. The Manager is entitled to a fee for these
services, payable quarterly in arrears, equivalent to 0.75% per annum of the
total assets of the Fund, less current liabilities.
UNAUDITED ACCOUNTS
6. The above figures do not constitute full or statutory accounts
in terms of Sections 434 and 435 of the Companies Act 2006. All information
shown for the six months to 30 September 2022 is unaudited. The accounts for
the year to 31 March 2022, on which the auditors issued an unqualified report,
have been lodged with the Registrar of Companies and did not contain a
statement required under Section 498 of the Companies Act 2006.
For further information, please contact:
Colin McLean SVM Asset Management 0131 226 6699
Sally Moore Four Communications
020 3697 4200
END
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November 07, 2022 10:24 ET (15:24 GMT)
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