TIDMBGUK
RNS Number : 7358P
Baillie Gifford UK Growth Fund PLC
12 June 2020
RNS Announcement
Baillie Gifford UK Growth Fund plc
Legal Entity Identifier: 549300XX386SYWX8XW22
Unaudited Preliminary Results for the year to 30 April 2020
-----------------------------------------------------------
Over the year to 30 April 2020, the Company's net asset value
per share (NAV) total return was negative 12.5% compared to a
negative total return of 16.7% for the FTSE All Share index. The
share price total return for the same period was negative
14.6%.
3/4 The notable contributors to the relative outperformance
were: Genus (world leading animal genetics company); Boohoo.com
(online fashion retailer); Just Eat Takeaway.com (operator of
online and mobile market place for takeaway food); and, Ultra
Electronics (aerospace and defence systems provider).
3/4 Four new positions were initiated over the year (Farfetch,
Creo Medical, Games Workshop and 4imprint) and four exited (Jupiter
Fund Management, Ted Baker, M&G and Carnival). Annual turnover
was 5.4% and no gearing was deployed during the period.
3/4 The net revenue return for the year was 3.75p per share
(2019: 5.12p). A final dividend of 3.10p per share is being
recommended to give a total for the year of 3.10p (2019: 2.95p
Final and 1.50p Interim). The dividend is now paid by way of a
single final payment and is approximately the minimum permissible
to maintain investment trust status.
3/4 As a consequence of Covid-19, companies are in an extremely
challenging operating environment. The portfolio in aggregate is
comprised of holdings that are well capitalised and have lower than
average debt compared to the rest of the market.
3/4 Despite the opaque macro backdrop, the Board and Managers
remain convinced that exceptional UK growth companies can exploit
their competitive positions over the long-term and take advantage
of the opportunities that follow severe economic dislocation.
Total return information is sourced from Baillie
Gifford/Refinitiv. See disclaimer at the end of this announcement.
For a definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Baillie Gifford UK Growth Fund plc invests to achieve capital
growth predominantly from investment in UK equities with the aim of
providing a total return in excess of the FTSE All-Share Index.
The Company is managed by Baillie Gifford & Co, an Edinburgh
based fund management group with around GBP246 billion under
management and advice as at 11 June 2020.
Past performance is not a guide to future performance. Baillie
Gifford UK Growth Fund plc is a listed UK company. The value of its
shares and any income from them can fall as well as rise and
investors may not get back the amount invested. The Company is
listed on the London Stock Exchange and is not authorised or
regulated by the Financial Conduct Authority. You can find up to
date performance information about Baillie Gifford UK Growth Fund
plc at www.bgukgrowthfund.com ++ See disclaimer at the end of this
announcement.
++ Neither the contents of the Managers' website nor the
contents of any website accessible from hyperlinks on the Managers'
website (or any other website) is incorporated into, or forms part
of, this announcement.
For further information please contact:
Anzelm Cydzik, Baillie Gifford & Co
Tel: 0131 275 2000
Mark Knight, Four Communications
Tel: 0203 697 4200 or 07803 758810
The following is the unaudited preliminary statement of annual
results for the year to 30 April 2020 which was approved by the
Board on 11 June 2020.
Chairman's Statement
Covid-19
In these uncertain times, my fellow Directors and I would like
to take this opportunity to extend our thoughts to all affected by
recent events, and our gratitude to those working tirelessly for
the benefit of all.
Your Board has been monitoring how the Managers and other
service providers have been responding to developments and has
sought assurances that, operationally, they are acting responsibly
towards their employees whilst maintaining appropriate standards of
service to the Company. The portfolio managers in turn have
continued to seek similar assurances from the companies held in the
portfolio.
Annual General Meeting ('AGM')
It is intended that the Company's AGM will be held on Wednesday
5 August 2020 at 12.00 noon at the offices of Baillie Gifford, 1
Greenside Row, Edinburgh, EH1 3AN. Whilst normally inviting
shareholders to attend, this doesn't seem possible at the current
time, so shareholders are encouraged to submit their votes by proxy
rather than attempt to do so in person. The meeting itself will
involve the minimum number of people necessary for it to be quorate
so anyone not authorised to attend will be declined entry for
health reasons. Should the situation change, further information
will be made available through the Company's website at
www.bgukgrowthfund.com and the London Stock Exchange regulatory
news service.
Performance
For the year to 30 April 2020, the Company's net asset value
('NAV') total return (capital and income) was negative 12.5%
compared to a negative 16.7% for the FTSE All-Share Index total
return.
The Company's share price total return over the same period was
negative 14.6%. Whilst disappointing to see a fall in value, it is
good to see our quality portfolio outperforming the broader market
in these difficult times.
The longer-term prospects for our companies look exciting. The
Managers' review below highlights some of the interesting
developments in the portfolio as well as some of the issues
faced.
Stewardship
As long-term 'actual' investors, the portfolio managers' focus
is on promoting the best long-term performance outcomes for the
businesses in which they invest, actively engaging with companies
on those issues which could impact their long-term potential and
supporting actions which they believe will maximise returns in
future years. As part of the investment research process,
consideration is given to relevant environmental, social and
governance issues and the impact these may have on future
returns.
The portfolio managers invest in companies at different stages
in their evolution and across different industries and are wary of
prescriptive policies and rules, believing that these can run
counter to thoughtful and beneficial corporate stewardship. The
approach adopted therefore favours a small number of simple
stewardship principles which help shape interactions with
companies. These principles, along with their core investment
principles, are set out below.
Share Buy-backs and Issuance from Treasury
No shares were bought back during the year to 30 April 2020. At
the forthcoming AGM, the Board will ask shareholders to renew the
mandate to repurchase up to 14.99% of the outstanding shares. The
share buy-back policy seeks to operate in the best interests of
shareholders by taking into account the relative level of the
Company's share price discount to NAV when compared with peer group
trusts, the absolute level of discount, volatility in the level of
discount and the impact from share buy-back activity on the
long-term liquidity of the Company's issued shares.
The Board also believes that the Company benefits from the
flexibility of being able to re-issue any shares that might be held
in treasury and is therefore looking to renew the annual issuance
authority. At present there are 10,396,700 shares, 6.9% of the
Company's issued share capital as at 30 April 2020, held in
treasury. To avoid any dilution to existing investors, these would
only be re- issued at a premium to NAV and after associated
costs.
Gearing
During the year, the Company replaced its Scotiabank GBP35
million revolving one year credit facility with a GBP20 million
revolving credit facility with National Australia Bank. This new
facility contains the option to increase the amount borrowed to
GBP35 million. No borrowings were drawn in the period and this
continues to be the position.
The Board sets internal guidelines for the portfolio managers'
use of gearing which are altered from time to time but are subject
to net effective gearing not representing more than 20% of
shareholders' funds.
Earnings and Dividends
The net revenue return per share for the year was 3.75p, versus
5.12p in 2019. A final dividend of 3.10p per share, payable on 12
August 2020 to shareholders on the register as at 10 July 2020, is
being recommended. Shareholders should not rely on receiving a
regular or growing level of income from the Company as its priority
is capital growth. Any dividend paid will be by way of a single
final payment and the Board expects that such dividends would
represent approximately the minimum permissible to maintain
investment trust status.
Diversity Policy
The Board believes that maintaining a diversity of thought and
experience on the Board, and at an operational level within Baillie
Gifford, represents the best way of discharging its
responsibilities to shareholders. In furtherance of this belief,
the Board will look for the best ways to increase the diversity of
gender, ideas, professional experiences and cultural backgrounds to
which the Company is exposed.
The Board will continue to monitor diversity on an ongoing
basis, having regard to developments in Corporate Governance Code
and wider market practice, and seek to ensure that the Company
retains the benefits of a diversity of thought and experience going
forward. As circumstances allow, the Company will continue to look
for opportunities to broaden the diversity to which the Company is
exposed, in furtherance of this commitment.
Financial Conduct Authority ('FCA') Value Assessment
Shareholders might be aware that new FCA rules require
Alternative Investment Fund Managers to assess the overall value
that their authorised unit trusts and open-ended funds deliver to
investors. Although these rules do not apply to investment trusts,
it should be noted that, over the course of the Company's financial
year, the Company's Committees and Board assessed various costs
levied by third party service providers as well as the Managers and
Secretaries, and the quality of service received. I can therefore
report that at present it is the Board's view that charges levied
by third parties and the Managers and Secretaries are
reasonable.
Outlook
The long-term ramifications of Covid-19 on the UK and global
economies are unknown, but it is likely that in the short-term the
trading environment for many companies will be exceptionally
challenging. On top of this, whilst the UK has left the European
Union, the risks of a disorderly Brexit remain high.
The Board and Managers have attempted to consider the
implications of such matters sensibly and dispassionately and
remain convinced that exceptional UK growth companies are still
able to exploit their competitive strengths over the long-term and
take advantage of the opportunities that follow severe economic
dislocation. Patient investors should, therefore, be rewarded in
due course.
Carolan Dobson
Chairman
11 June 2020
For a definition of terms, see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
The Managers' Core Investment Principles
Investment Philosophy
The following are the three core principles underpinning our
investment philosophy. We have a consistent, differentiated
long-term investment approach to managing UK equities that should
stand investors in the Company in good stead:
Growth
We search for the few companies which have the potential to grow
substantially and profitably over many years. Whilst we have no
insight into the short-term direction of a company's share price,
we believe that, over the longer term, those companies which
deliver above average growth in cash flows will be rewarded with
above average share price performance and that the power of
compounding is often under-appreciated by investors. Successful
investments will benefit from a rising share price and also from
income accumulated over long periods of time.
Patience
Great growth companies are not built in a day. We firmly believe
that investors need to be patient to fully benefit from the scale
of the potential. Our investment time horizon, therefore, spans
decades rather than quarters and our portfolio turnover, at 5.4%,
is significantly below the UK industry average. This patient,
long-term approach affords a greater chance for the superior growth
and competitive traits of companies to emerge as the dominant
influence on their share prices and allows compounding to work in
the investors' favour.
Active Investment Management
It is our observation that many investors pay too much attention
to the composition of market indices and active managers should
make meaningful investments in their best ideas regardless of the
weightings of the index. For example, we would never invest in a
company just because it is large or to reduce risk. As a result,
shareholders should expect the composition of the portfolio to be
significantly different from the benchmark. This differentiation is
a necessary condition for delivering superior returns over time and
shareholders should be comfortable tolerating the inevitable ups
and downs in short-term relative performance that will follow from
that.
Portfolio construction flows from the investment beliefs stated
above.
The Managers' Stewardship Principles
We have a responsibility to behave as supportive and
constructively engaged long-term investors. Our approach favours a
small number of simple principles which help shape our interactions
with companies:
Prioritisation of long-term value creation
We encourage company management and their boards to be ambitious
and focus their investments on long-term value creation.
Sustainable business practices
We look for companies to act as responsible corporate citizens,
working within the spirit and not just the letter of the laws and
regulations that govern them.
Fair treatment of stakeholders
We believe it is in the long-term interests of companies to
maintain strong relationships with all stakeholders, treating
employees, customers, suppliers, governments and regulators in a
fair and transparent manner.
A constructive and purposeful board
We believe that boards play a key role in supporting corporate
success and representing the interests of minority
shareholders.
Long-term focused remuneration with stretching targets
We look for remuneration policies that are simple, transparent
and reward superior strategic and operational endeavour.
Managers' Report
================
The impact of the Covid-19 pandemic will likely be felt for some
years to come. It has had tragic consequences for many families
to-date whilst also shining a light on a number of professions that
historically have always worked tirelessly for the good of society
without the deserved recognition. We extend our sympathies to those
that have suffered bereavement and our thanks to those vital
workers that have carried out their duties in exceptionally
difficult times. Considering the current tragic backdrop, it seems
rather trivial to remind people that investment for the long-term
remains our core professional focus, assimilating events and
considering the implications for the portfolio, but professionally
this is what we must do.
Although one can never say never, when writing future reports,
we think it will be hard to match the events of the 12 months to
30(th) April 2020 for escalating drama. In the interim report we
referred to the first half of the financial year as "tumultuous"
with Brexit negotiations and global trade war concerns dominating
headlines. So how on earth can one describe the events of the
second half? Firstly, a snap UK election resulting in a
surprisingly large Conservative majority that initially cheered
markets and directly led to 'Brexit' actually happening, with the
UK leaving the European Union at the end of January. But even those
historic events were in turn superseded by the coronavirus
(Covid-19) pandemic that led to most countries in the world forcing
their citizens into lockdown and a collapse in economic activity.
The UK stock market, in particular, suffered in this latter phase
and, as the Chairman noted in her report, we ended in negative
territory for the year.
Rather than speculate and blether on (a Scottish phrase) at
length about the consequences of current events where the most
intellectually honest, if slightly unsatisfactory, response to
fellow shareholders is "we simply don't know", we think a more
useful analysis is to answer 'what have you done, what are you
doing and where are you going?' Particularly in regard to the
latter point, whilst we have said in the past that we have no
crystal ball, it is reasonable to ask how our investment framework
helps us think about the current extraordinarily difficult and
uncertain environment for companies.
What have we done?
The main thing to say about the last twelve months is that we
have stayed true to our investment principles which, as always, are
separately shown above. In our minds, there is a strong temptation
to start reacting to near term events unless one has the discipline
of a consistent investment process. Despite the distractions of the
last twelve months we are, and remain, bottom up stock pickers with
a long-term investment horizon, meaning that portfolio turnover has
remained low. We have said previously that performance over
short-term periods will be random. Consequently, we should not draw
out significant conclusions of the portfolio outperforming over
this twelve-month period, particularly as we downplayed the
significance of the portfolio underperforming over the first half
in the interim report. Such ups and downs are to be expected with a
portfolio that looks very different from the index. What we can say
is that despite some significant share price falls we remain
unenthused about large parts of the UK markets, such as energy and
banking, as we continue to believe the long-term prospects in those
areas are unexciting for growth investors.
Nevertheless, we remained alert to new opportunities and prior
to the crisis bought new holdings in Farfetch (discussed in the
interim report), Games Workshop and a small holding in Creo
Medical. Games Workshop is a well-established retailer of its own
fantasy games (such as Warhammer) and model figures that
enthusiastic gamers buy and paint themselves. Over thirty years the
business has built a fantastic amount of intellectual property and
nurtured a loyal and passionate customer base. While this is always
going to be a niche hobby, the growing interest in the fantasy area
has, we think, stimulated additional demand for its products. Over
the last few years, the current management team has made some well
thought out tweaks to the business model that have been very
successful, such as letting the company's independent wholesalers
also sell the product online, simplifying the rules book to make
the game more accessible to new customers, increased new product
introductions and also engaged digitally with the gaming community.
This latter change has generated significant goodwill and
strengthened the relationship Games Workshop has with its community
of gamers. We are excited about the remaining growth potential for
the hobby, particularly internationally, as well as the scope to
build a large and profitable IP licensing business. The latter will
take time and patience, but we think the returns to long-term
shareholders are potentially significant.
Creo Medical is one of the most exciting smaller companies we
have come across in the recent past. It designs and manufactures
new and highly innovative endoscopes which enable physicians to
take this technology outside of the purely investigative/diagnostic
realm into the operating theatre and use it effectively in
therapeutic applications. Although Creo is still at an early stage
of its development, and therefore with associated risks, there is
growing evidence that its products are transformative to patient
care in a range of cancers (starting with gastrointestinal
indications), allowing for significantly quicker recovery, reduced
hospital stays and lower recurrence rates. A recent liquidity event
- the company raised some funding to accelerate the
distribution/commercialisation of its product suite - allowed us to
buy a small holding.
What are we doing?
Since the coronavirus outbreak, the focus of our discussions
(now over Zoom calls rather than in person) has continued to be on
finding and owning the most promising UK growth businesses over a
five-year plus horizon. This means that we are simultaneously
looking for new opportunities while also carefully appraising the
resilience of our existing investments in the face of current
events and asking ourselves if the long-term case has in any way
been impaired. One painful decision we took in the early stages of
the crisis was to sell the holding in the cruise ship operator
Carnival, despite the shares having already fallen significantly.
In this particular case, we had concerns that growing the cruise
market may prove challenging when a semblance of normality returns
while, in the short-term, the balance sheet of the business was
uncomfortably laden with debt, not a promising position when
revenues are rapidly drying up. Interestingly, subsequent to our
sale, Carnival has attempted to shore up its balance sheet with a
mixture of expensive debt and equity which will undoubtedly dilute
the upside for shareholders in the business should a cheerful
scenario of recovery for cruising come to pass. On the flipside, we
bought a new holding in 4imprint, a company which we have liked for
some time but where valuation has been a stumbling block. 4imprint
distributes promotional products used by businesses (primarily in
the United States) as a form of advertising or as gifts to
customers and employees. It operates in a large and extremely
fragmented market and, through investments in marketing and its
sales force, it has been gaining market share over many years from
its smaller and less efficient competitors. The current lockdown
measures have resulted in an extremely challenging operating
environment. However, the business has a very robust financial
position and should withstand the storm. If the 2009 downturn is an
example, the company will emerge stronger and continue to
significantly outgrow its underlying market.
Where are we going?
Perhaps the most important question of the three we asked
ourselves is this final one. Neither of your portfolio managers are
fans of trying to draw lessons from the last crisis, as some
commentators have done. This smacks to us of generals trying to
fight the last war. In reality, all crises are unique and
complicated in their origins and we have been considering whether
some of the broad themes that many of our holdings play into still
ring true. What we would venture is that much of our thinking here
is tentative and may change as more information comes to light. The
most important theme by far is the growing digitisation of the
economy and our belief that many growth businesses are trying to
capitalise on this. Our view is that the current crisis is akin to
a shock that will likely accelerate this trend. From our own
business to others that we own or observe, necessity is forcing
organisations to adopt digital ways of working. This can be painful
but in the long-term can unlock significant productivity gains and
opportunities for smart management teams. Our holdings in FDM Group
and First Derivatives are, we believe, well-placed to benefit from
enterprises in many different industries increasing investments in
their technology infrastructure. The current crisis will also
likely further entrench the "digital" habits of consumers and boost
demand for our consumer technology platforms and retailers such as
Just Eat Takeaway.com, Farfetch and Boohoo.com. We also remain
enthusiastic about the strong network effects underpinning the
dominant positions of Rightmove and Autotrader. In this severe and
sudden downturn in activity in their end markets, however, both
businesses have rightly realised that their competitive positions
are best served by being financially supportive of their own
customers, estate agent and second-hand car dealers respectively.
Our mindset in both these cases is to back this policy of
short-term financial pain in order to safeguard long-term
opportunities.
We cannot wish away the fact that it is likely that the most
dramatic recession in UK history is pending and will cause damage
whose effects are not clear. That explains why, despite the Board
being supportive of us utilising the additional firepower of our
borrowing facilities, we have so far been cautious in gearing the
portfolio. One final point is worth noting. As growth investors,
dividends do not hold centre stage in our approach and in our view
should only flow from the profits and cash flow generated after
appropriate investment back into the business. The current dividend
crisis in the UK, with an unprecedented decline in pay-outs to
shareholders, is therefore of less interest to us. Indeed, in
several cases, we have been supportive of decisions by companies to
suspend dividends given the economic difficulties and the necessity
to protect the business and position themselves for the
opportunities that may arise.
While we remain optimistic about the overall quality and
superior growth potential of the companies in portfolio, we must
acknowledge the greater than usual element of uncertainty. What
gives us some confidence, if one is prepared to look beyond the
immediate crisis, is that we have a high degree of confidence in
the management teams of our business. In communication with many of
them over recent weeks, our message has been simple: please try to
do the right thing for the long-term interests of your business and
try to do right by your other stakeholders such as staff, suppliers
and customers. This is not easy, but rather like our investment
style, we think by attempting to focus on the fundamentals of
long-term success, the odds of a positive outcome are tilted in
your favour. And to our fellow shareholders, we would like to thank
you for your continued patience and support and look forward to
updating you on our future progress.
Baillie Gifford & Co Limited
Managers & Secretaries
11 June 2020
Past performance is not a guide to future performance.
For a definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Total return information is sourced from Refinitiv/Baillie
Gifford and relevant underlying index providers. See disclaimer at
the end of this announcement.
List of Investments as at 30 April 2020 (unaudited)
====================================================
Name Business Fair Value % of
GBP'000 total
assets
========================= ============================================ ============== ==========
Basic Materials
Rio Tinto Metals and mining company 6,764 2.6
Speciality high-performance chemicals
Victrex manufacturer 4,633 1.7
============== ==========
11,397 4.3
============== ==========
Consumer Goods
Diageo International drinks company 7,823 3.0
Games Workshop
Group Toy manufacturer and retailer 6,484 2.4
Burberry Luxury goods retailer 5,554 2.1
============== ==========
19,861 7.5
============== ==========
Consumer Services
Just Eat Operator of online and mobile market
Takeaway.com place for takeaway food 11,178 4.2
Advertising portal for second hand
Auto Trader Group cars in the UK 9,895 3.7
Boohoo.com Online fashion retailer 9,705 3.7
HomeServe Domestic insurance 9,004 3.4
Professional publications and information
RELX provider 8,574 3.2
Rightmove UK's leading online property portal 8,088 3.1
Manufacturer and distributor of kitchens
Howden Joinery to trade customers 7,554 2.9
Inchcape Car wholesaler and retailer 4,903 1.9
Euromoney Institutional
Investor Specialist publisher 2,611 1.0
Mitchells & Butlers Pub and restaurant operator 2,106 0.8
Technology platform for the global
Farfetch fashion industry 2,041 0.8
4imprint Direct marketer of promotional merchandise 1,984 0.8
============== ==========
77,643 29.5
============== ==========
Financials
St. James's Place UK wealth manager 9,129 3.5
Hargreaves Lansdown UK retail investment platform 8,967 3.4
Prudential International life insurer 8,596 3.3
Insurance and investment management
Legal & General company 6,639 2.5
Helical Property developer 6,533 2.5
Provides platform services to financial
IntegraFin clients 6,309 2.4
Provider of retirement income products
Just Group and services 4,370 1.6
Technology focused venture capital
Draper Esprit firm 3,451 1.3
IG Group Spread betting website 3,245 1.2
Hiscox Property and casualty insurance 2,834 1.1
AJ Bell Investment platform 2,792 1.0
62,865 23.8
======= =====
Healthcare
World leading
animal
genetics
Genus company 10,899 4.1
Online
platform
selling
antibodies
to life
science
Abcam researchers 10,829 4.1
Designer and
manufacturer
of medical
Creo Medical equipment 593 0.3
-------------------------------- ---------------------------------------------------
22,321 8.5
================================ ===================================================
Industrials
World leading
metrology
Renishaw company 9,121 3.4
Aerospace and
Ultra defence
Electronics company 7,569 2.9
Specialist
Halma engineer 6,704 2.5
Distributor
of
consumable
Bunzl products 6,266 2.4
Construction
equipment
rental
Ashtead company 5,884 2.2
Supplier of
ventilation
Volution Group products 5,210 2.0
Recruitment
PageGroup consultancy 4,098 1.6
Heat
treatment
and
materials
Bodycote testing 4,019 1.5
James Fisher Specialist
& Sons service
provider to
the
global marine
and energy
industries 2,270 0.9
Power systems
Rolls-Royce manufacturer 2,157 0.8
53,298 20.2
================================ ===================================================
Technology
IT consultant
First and software
Derivatives developer 6,560 2.5
Provider of
professional
services
focusing on
information
FDM Group technology 5,848 2.2
================================ ===================================================
12,408 4.7
================================ ===================================================
Total Equities 259,793 98.5
Net Liquid Assets 3,866 1.5
Total Assets 263,659 100.0
=============================== ================================ ===================================================
Stocks highlighted in bold are the 20 largest holdings.
Income Statement (unaudited)
For the year ended 30 April 2020 For the year ended 30 April 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================================== =========== =========== ========== =========== =========== ==========
Net losses on investments - (42,210) (42,210) - (6,850) (6,850)
Currency losses - (9) (9) - - -
Income 6,562 - 6,562 8,658 - 8,658
Investment management fee (438) (1,021) (1,459) (239) (556) (795)
Other administrative expenses (463) - (463) (689) - (689)
========================================== =========== =========== ========== =========== =========== ==========
Net return before finance costs and
taxation 5,661 (43,240) (37,579) 7,730 (7,406) 324
Finance costs of borrowings (17) (40) (57) (20) (47) (67)
========================================== =========== =========== ========== =========== =========== ==========
Net return on ordinary activities before
taxation 5,644 (43,280) (37,636) 7,710 (7,453) 257
Tax on ordinary activities - - - - - -
========================================== =========== =========== ========== =========== =========== ==========
Net return on ordinary activities after
taxation 5,644 (43,280) (37,636) 7,710 (7,453) 257
========================================== =========== =========== ========== =========== =========== ==========
Net return per ordinary share (note 4) 3.75p (28.75p) (25.00p) 5.12p (4.95p) 0.17p
========================================== =========== =========== ========== =========== =========== ==========
The Board of Baillie Gifford UK Growth Fund plc is recommending
to the Annual General Meeting of the Company to be held on 5 August
2020 the payment of a final dividend of 3.10p (2019 - 2.95p) per
ordinary share making a total of 3.10p (2019 - 4.45p) paid and
proposed for the year ended 30 April 2020.
The total column of this statement is the profit and loss
account of the Company. The supplementary revenue and capital
return columns are prepared under guidance published by the
Association of Investment Companies.
All revenue and capital items in this statement derive from
continuing operations.
A Statement of Comprehensive Income is not required as all gains
and losses of the Company have been reflected in the above
statement.
The accompanying notes at the end of this announcement are an
integral part of the Financial Statements.
Balance Sheet (unaudited)
At 30 April 2020 At 30 April 2019
GBP'000 GBP'000
====================================================== ================ ================
Fixed assets
Investments held at fair value through profit or loss 259,793 300,207
====================================================== ================ ================
Current assets
Debtors 746 1,487
Cash and cash equivalents 3,512 4,488
====================================================== ================ ================
4,258 5,975
====================================================== ================ ================
Creditors
Amounts falling due within one year (392) (447)
====================================================== ================ ================
Net current assets 3,866 5,528
====================================================== ================ ================
Net assets 263,659 305,735
====================================================== ================ ================
Capital and reserves
Share capital 40,229 40,229
Share premium account 9,875 9,875
Capital redemption reserve 19,759 19,759
Warrant exercise reserve 417 417
Share purchase reserve 60,433 60,433
Capital reserve 120,725 164,005
Revenue reserve 12,221 11,017
====================================================== ================ ================
Shareholders' funds 263,659 305,735
====================================================== ================ ================
Net asset value per ordinary share* 175.2p 203.1p
====================================================== ================ ================
Ordinary shares in issue (note 8) 150,520,484 150,520,484
====================================================== ================ ================
* See Glossary of Terms and Alternative Performance Measures at the end of this announcement.
The accompanying notes at the end of this announcement are an
integral part of the Financial Statements.
Statement of Changes in Equity (unaudited)
For the year ended 30 April 2020
Share
premium Capital Warrant Share
Share account redemption exercise purchase Capital Revenue Shareholders'
capital GBP'000 reserve reserve reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== ======== ============ =========== =========== =========== =========== =========== =============
Shareholders'
funds at 1
May 2019 40,229 9,875 19,759 417 60,433 164,005 11,017 305,735
Dividends paid
during the
year (note 5) - - - - - - (4,440) (4,440)
Net return on
ordinary
activities
after
taxation
(note 4) - - - - - (43,280) 5,644 (37,636)
Shareholders'
funds at 30
April 2020 40,229 9,875 19,759 417 60,433 120,725 12,221 263,659
============== ======== ============ =========== =========== =========== =========== =========== =============
For the year ended 30 April 2019
Share Capital Warrant Share
Share premium redemption exercise purchase Capital Revenue Shareholders'
capital account reserve reserve reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== ======== =========== =========== =========== =========== =========== ============ =============
Shareholders'
funds at 1
May 2018 40,229 9,875 19,759 417 60,433 171,458 10,081 312,252
Dividends paid
during the
year (note 5) - - - - - - (6,774) (6,774)
Net return on
ordinary
activities
after
taxation
(note 4) - - - - - (7,453) 7,710 257
Shareholders'
funds at 30
April 2019 40,229 9,875 19,759 417 60,433 164,005 11,017 305,735
============== ======== =========== =========== =========== =========== =========== ============ =============
The accompanying notes at the end of this announcement are an
integral part of the Financial Statements.
Cash Flow Statement (unaudited)
===============================
For the year ended 30 April
2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
==================================================== ======== ======= ========= ========
Cash flows from operating activities
Net return on ordinary activities before taxation (37,636) 257
Net losses on investments 42,210 6,850
Currency losses 9 -
Finance cost of borrowings 57 67
Changes in debtors and creditors 686 258
Cash from operations 5,326 7,432
Interest paid (57) (72)
==================================================== ======== ======= ========= ========
Net cash inflow from operating activities 5,269 7,360
==================================================== ======== ======= ========= ========
Cash flows from investing activities
Acquisitions of investments (16,917) (313,132)
Disposals of investments 15,121 325,392
Net cash (outflow)/inflow from investing activities (1,796) 12,260
==================================================== ======== ======= ========= ========
Cash flows from financing activities
Bank loan repaid - (12,000)
Equity dividends paid (4,440) (6,774)
==================================================== ======== ======= ========= ========
Net cash outflow from financing activities (4,440) (18,774)
==================================================== ======== ======= ========= ========
(Decrease)/increase in cash and cash equivalents (967) 846
Exchange movements (9) -
Cash and cash equivalents at start of year 4,488 3,642
==================================================== ======== ======= ========= ========
Cash and cash equivalents at end of year* 3,512 4,488
==================================================== ======== ======= ========= ========
* Cash and cash equivalents represent cash at bank and
short-term money market deposits repayable on demand.
The accompanying notes at the end of this announcement are an
integral part of the Financial Statements.
Notes to the Condensed Financial Statements (unaudited)
=======================================================
1. The Financial Statements for the year to 30 April 2020 have been prepared in accordance with
FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. The
accounting policies adopted are consistent with those of the previous financial year.
=================================================================================================
2. Income 2020 2019
GBP'000 GBP'000
================================================== ====================== =====================
Income from investments
UK dividends 6,544 8,648
Other income
Deposit interest 18 10
====================================================== ====================== =====================
Total income 6,562 8,658
====================================================== ====================== =====================
Investment Management Fee
================================================== ====================== =====================
3. 2020 2020 2020 2019 2019 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================ =============== =============== ======== ============ ======== ===========
Investment
management fee 438 1,021 1,459 239 556 795
-------------------- --------------- --------------- -------- ------------ -------- -----------
Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been
appointed as the Company's Alternative Investment Fund Manager ('AIFM') and Company Secretary.
Baillie Gifford & Co Limited has delegated portfolio management services to Baillie Gifford
& Co. Dealing activity and transaction reporting has been further sub-delegated to Baillie
Gifford Overseas Limited and Baillie Gifford Asia (Hong Kong) Limited.
The Investment Management Agreement between the AIFM and the Company sets out the matters
over which the Managers have authority in accordance with the policies and directions of,
and subject to restrictions imposed by, the Board. The Investment Management Agreement is
terminable on not less than six months' notice or on shorter notice in certain circumstances.
Compensation would only be payable if termination occurred prior to the expiry of the notice
period. The annual management fee is 0.5% of net assets, calculated and payable quarterly.
For the financial year ended 30 April 2019, in order to offset the costs of repositioning
the portfolio following its appointment as AIFM, Baillie Gifford agreed to waive its management
fee for the year to the extent of GBP732,000 (approximately equal to six months' management
fee payable to Baillie Gifford based on the Company's net asset value on 29 June 2018).
=================================================================================================
4. Net Return per 2020 2020 2019 2019 2019
Ordinary Share 2020 Revenue Capital Total Revenue Capital Total
================ =============== =============== ======== ============ ======== ===========
Net return on
ordinary activities 3.75p (28.75p) (25.00p) 5.12p (4.95p) 0.17p
==================== =============== =============== ======== ============ ======== ===========
Revenue return per ordinary share is based on the net revenue return on ordinary activities
after taxation of GBP5,644,000 (2019 - GBP7,710,000), and on 150,520,484 (2019 - 150,520,484)
ordinary shares, being the weighted average number of ordinary shares in issue during each
year.
Capital return per ordinary share is based on the net capital loss for the financial year
of GBP43,280,000 (2019 - net capital loss of GBP7,453,000), and on 150,520,484 (2019 -
150,520,484)
ordinary shares, being the weighted average number of ordinary shares in issue during each
year.
There are no dilutive or potentially dilutive shares in issue.
=================================================================================================
5. Ordinary Dividends 2020 2019 2020 2019
GBP'000 GBP'000
================================================== ======== ============ ======== ===========
Amounts recognised as distributions in the year:
Previous year's final dividend (paid 6 August 2019) 2.95p 3.00p 4,440 4,516
Interim dividend - 1.50p - 2,258
====================================================== ======== ============ ======== ===========
2.95p 4.50p 4,440 6,774
====================================================== ======== ============ ======== ===========
Also set out below are the total dividends paid and proposed in respect of the financial year,
which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010
are considered. The revenue available for distribution by way of dividend for the year is
GBP5,644,000 (2019 - GBP7,710,000).
2020 2019 2020 2019
GBP'000 GBP'000
Dividends paid and payable in respect of the year:
Interim dividend - 1.50p - 2,258
Proposed final dividend (payable 12 August 2020) 3.10p 2.95p 4,666 4,440
================================================================= ======== ======= ========== ==========
3.10p 4.45p 4,666 6,698
================================================================= ======== ======= ========== ==========
If approved, the final dividend of 3.10p will be paid on 12 August 2020 to all shareholders
on the register at the close of business on 10 July 2020. The ex-dividend date is 9 July 2020.
6. At 30 April 2020, The Company has a one year GBP20 million unsecured floating rate facility
with National Australia Bank which expires on 8 July 2020. There were no drawings under this
facility at 30 April 2020. Negotiations are underway to replace this facility on expiry.
7. Transaction costs incurred on the purchase and sale of investments are added to the purchase
costs or deducted from the sales proceeds, as appropriate. During the year, transaction costs
on purchases amounted to GBP51,000 (2019 - GBP1,476,000) and transaction costs on sales amounted
to GBP8,000 (2019 - GBP90,000).
8. The Company's authority permits it to hold shares bought back 'in treasury'. Such treasury
shares may be subsequently either sold for cash (at a premium to, net asset value per ordinary
share) or cancelled. At 30 April 2020 the Company had authority to buy back 22,563,020 ordinary
shares. During the years to 30 April 2020 and to 30 April 2019, no ordinary shares were bought
back. Under the provisions of the Company's Articles of Association share buy-backs are funded
from the capital reserve.
9. The financial information set out above does not constitute the Company's statutory accounts
for the year ended 30 April 2020 or 2019. The financial information for 2019 is derived from
the statutory accounts for 2019 which have been delivered to the Registrar of Companies. The
Auditors have reported on the 2019 accounts, their report was (i) unqualified; (ii) did not
include a reference to any matters to which the Auditors drew attention by way of emphasis
without qualifying their report; and (iii) did not contain a statement under sections 498(2)
or (3) to 497 of the Companies Act 2006. The statutory accounts for 2020 will be finalised
on the basis of the financial information presented in this preliminary announcement and will
be delivered to the Registrar of Companies in due course.
10. The Annual Report and Financial Statements will be available on the Company's website www.bgukgrowthfund.com
on or around 3 July 2020.
None of the views expressed in this document should be construed
as advice to buy or sell a particular investment.
Glossary of Terms and Alternative Performance Measures (APM)
Total Assets
Total assets less current liabilities, before deduction of all borrowings.
Net Asset Value
Net Asset Value (NAV) is the value of total assets less liabilities (including borrowings).
The NAV per share is calculated by dividing this amount by the number of ordinary shares in
issue (excluding treasury shares).
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities, excluding borrowings.
Discount/Premium (APM)
As stockmarkets and share prices vary, an investment trust's share price is rarely the same
as its NAV. When the share price is lower than the NAV per share it is said to be trading
at a discount. The size of the discount is calculated by subtracting the share price from
the NAV per share and is usually expressed as a percentage of the NAV per share. If the share
price is higher than the NAV per share, it is said to be trading at a premium.
2020 2019
========================================== ========================= ================================
Closing NAV per share 175.2p 203.1p
Closing share price 161.5p 192.0p
------------------------------------------ ------------------------- --------------------------------
Discount (7.8%) (5.5%)
========================================== ========================= ================================
Total Return (APM)
The total return is the return to shareholders after reinvesting the net dividend on the date
that the share price goes ex-dividend.
=======================================================================================================
2020 2020 2019 2019
NAV Share NAV Share
Price Price
========================================= ================= ======= ============== ====== ========
Closing NAV per share/share price (a) 175.2p 161.5p 203.1p 192.0p
Dividend adjustment factor* (b) 1.0143 1.0155 1.0236 1.0255
Adjusted closing NAV per share/share
price (c = a x b) 177.7p 164.0p 207.9p 196.9p
Opening NAV per share/share price (d) 203.1p 192.0p 207.5p 187.5p
========================================= ================= ======= ============== ====== ========
Total return (c ÷ d) - 1 (12.5%) (14.6% ) 0.2% 5.0%
========================================= ================= ======= ============== ====== ========
* The dividend adjustment factor is calculated on the assumption that the dividends of 2.95p
(2019 - 4.50p) paid by the Company during the year were reinvested into shares of the Company
at the cum income NAV per share/share price, as appropriate, at the ex-dividend date.
=======================================================================================================
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a percentage of
the average net asset value. The ongoing charges have been calculated on the basis prescribed
by the Association of Investment Companies.
A reconciliation from the expenses detailed in the Income Statement above is provided below.
=======================================================================================================
2020 2019
============================================================ ======= ============== ================
Investment management fee GBP1,459,000 GBP795,000
Other administrative expenses GBP463,000 GBP689,000
------------------------------------------------------------ ------- -------------- ----------------
Total expenses (a) GBP1,922,000 GBP1,484,000
Average net asset value (b) GBP292,419,000 GBP293,237,000
============================================================ ======= ============== ================
Ongoing Charges ((a) ÷ (b) expressed as a percentage) 0.66% 0.51%
============================================================ ======= ============== ================
Glossary of Terms and Alternative Performance Measures (APM)
(unaudited) (Ctd)
Baillie Gifford and Co Limited was appointed on 29 June 2018 and agreed to waive its management
fee for the year ended 30 April 2019 to the extent of GBP732,000 (approximately equal to six
months' management fee payable to Baillie Gifford based on the Company's net asset value on
29 June 2018). The calculation for 2019 is therefore not representative of future management
fees. The reconciliation below shows the ongoing charges figure if the waived management fee
is included in the ongoing charges calculation.
2019
=============================================================================== ======= ======================
Investment management fee GBP795,000
Investment management fee waived during the year GBP732,000
Other administrative expenses GBP689,000
=============================================================================== ======= ======================
Total expenses (a) GBP2,216,000
Average net asset value (b) GBP293,237,000
=============================================================================== ======= ======================
Ongoing Charges ((a) ÷ (b) expressed as a percentage) 0.76%
========================================================================================= ======================
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an investment trust
can borrow money to invest in additional investments for its portfolio. The effect of the
borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the
shareholders' assets grow proportionately more because the debt remains the same. But if the
value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance
performance in rising markets but can adversely impact performance in falling markets.
Equity gearing is the Company's borrowings adjusted for cash and cash equivalents as a percentage
of shareholders' funds.
Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds.
The Company currently has no borrowings drawn down.
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers (AIFM) Directive, leverage is
any method which increases the Company's exposure, including the borrowing of cash and the
use of derivatives. It is expressed as a ratio between the Company's exposure and its net
asset value and can be calculated on a gross and a commitment method. Under the gross method,
exposure represents the sum of the Company's positions after the deduction of sterling cash
balances, without taking into account any hedging and netting arrangements. Under the commitment
method, exposure is calculated without the deduction of sterling cash balances and after certain
hedging and netting positions are offset against each other.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio
that differs from its comparative index. It is calculated by deducting from 100 the percentage
of the portfolio that overlaps with the comparative index. An active share of 100 indicates
no overlap with the index and an active share of zero indicates a portfolio that tracks the
index.
Automatic Exchange of Information
In order to fulfil its obligations under UK Tax Legislation relating to the automatic exchange
of information, the Company is required to collect and report certain information about certain
shareholders.
The legislation will require investment trust companies to provide personal information to
HMRC on certain investors who purchase shares in investment trusts. As an affected company,
Baillie Gifford UK Growth Fund plc will have to provide information annually to the local
tax authority on the tax residencies of a number of non-UK based certificated shareholders
and corporate entities.
Shareholders, excluding those whose shares are held in CREST, who come on to the share register
will be sent a certification form for the purposes of collecting this information.
For further information, please see HMRC's Quick Guide: Automatic Exchange of Information
- information for account holders
https://www.gov.uk/government/publications/exchange-of-information-account-holders
.
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END
FR UAVNRRUUNAAR
(END) Dow Jones Newswires
June 12, 2020 02:00 ET (06:00 GMT)
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