Final Results

Strategic Equity Capital PLC

RESULTS FOR THE YEAR ENDED 30 JUNE 2020

The Directors of Strategic Equity Capital plc are pleased to announce the Company’s results for the year ended 30 June 2020.




Capital Return

As at
30 June
2020

As at
30 June
2019



% change

Net asset value (“NAV”) per Ordinary share

239.74p

265.12p

(9.6)%

Ordinary share price

195.75p

229.50p

(14.7)%

Discount of Ordinary share price to NAV

(18.3)%

(13.4)%

-

Average discount of Ordinary share price to NAV for the year


(16.6)%


(15.2)%


-

Total assets (£000)

152,114

172,443

(11.8)%

Equity Shareholders’ funds (£000)

151,747

169,037

(10.2)%

Ordinary shares in issue with voting rights

63,296,844

63,759,589

(0.7)%

   




Performance

Year ended
30 June
2020

Year ended
30 June
2019

NAV total return for the year

(9.1)%

2.2%

Share price total return for the year

(13.8)%

4.8%

Ongoing charges

1.11%

1.10%

Ongoing charges (including performance fee)

1.11%

1.39%

Revenue return per Ordinary share

0.38p

2.11p

Dividend yield

0.6%

0.7%

Proposed final dividend for the year

1.25p

1.50p

   


Year’s Highs/Lows

High

Low

NAV per Ordinary share

297.3p

185.9p

Ordinary share price

259.0p

140.5p

Chairman’s Statement

Introduction

It is hard to envisage a more extraordinary year in this Company’s history. The effects of Covid-19 have been pronounced and far-reaching, on an international, national and portfolio level. Decisive steps had already been taken by the Board before the onset of the pandemic to strengthen the Company’s portfolio management with the appointment of a new investment manager, Gresham

House Asset Management Limited (“GHAM”). However, in a direct response to the protracted effects of the pandemic, more stock specific action is also anticipated.

Covid-19

If not only as an historic record it would seem remiss not to comment first on the major and quite exceptional event of the year.

In March, the FTSE All-Share Index experienced its sharpest four week fall since November 1987, as the Covid-19 pandemic spread and panic set in. As time has passed, we are beginning to understand the damage this virus has wrought, not only on the global economy but also on society as a whole.

It is astonishing how quickly we have all adapted to a new way of life. However, whether it is an acceptable way to continue to live our lives is another matter. Einstein noted that one of his greatest fears was that, over time, technology would develop to a point where face-to-face human interaction was no longer necessary. We seem to have got to this point in a rapid and most unexpected way with the help of the internet and the cloud providing us with video conferencing, online shopping and even a virtual visit to the local doctors’ surgery, in a manner not thought possible just 6 months ago.

The response in the economy and stock market has been an explosion in the growth and share prices of many of the major global technology companies, particularly in the US. In a blink we have cut out many steps in the path to the new age economy and, although it is too early to be sure, it is unlikely that we shall ever go back fully to where we were. New practices such as working from

home, at least for part of the time, will become the norm.

The challenge to our investment team is to identify companies that can benefit from the changes that Covid-19 has brought from those that cannot. Our strategic public equity approach means that we can also assist our portfolio companies in taking advantage of the changed economic landscape where a more traditional approach cannot.

Performance

Over the financial year ending 30 June 2020, the Company’s NAV per share (on a total return basis) decreased by 9.1%. The FTSE Small Cap ex Investment Trusts Total Return Index (“FTSE Small Cap Index”) decreased by 12.3%. Across the same period, the share price of the Company fell by 13.8% on a total return basis.

Discount Management

Despite this strong relative NAV performance, the Company’s shares traded at a stubbornly wide discount to NAV which, at least in part, was due to the fact that the UK smaller companies sector remained unloved.

The discount was also more volatile than in previous years, even before the events of March. The average discount to NAV of the Company’s shares over the past twelve months was 16.6%, compared to the equivalent figure of 15.2% for the prior year. The discount ranged from 11.8% to 27.1% at the height of the sell-off in March.

The Board believes that performance is the key factor to reduce the persistent discount to NAV at which the Company’s shares trade: if performance can be improved the discount will narrow. The Company has a new manager (GHAM) and a new lead portfolio manager (Ken Wotton, with Adam Khanbhai as co-manager). The Board believes that these changes will lead to improved

performance over the coming years, with the Company benefitting from GHAM’s depth of resource, experience of strategic public equity investing, and the strong performance track record of the GHAM team using this approach over the past 20 years. Notwithstanding this, the Board continues to monitor closely the discount to NAV at which the Company’s shares trade. During the year the Company acquired 462,745 shares at an average 15.3% discount to NAV.

Dividend

For the year ended 30 June 2020 the basic revenue return per share was 0.38p (2019: 2.11p). The net decline of over 80% is mainly a result of dividend cuts and suspensions that were announced by many investee companies, largely in March and April, as a result of Covid-19. As a consequence of this fall in earnings, the portfolio has failed to match last year’s investment income and insufficient

earnings remain after expenses and costs to pay a covered dividend at last year’s level. Of course, investment trusts have the ability to pay dividends, drawing in part or whole, from their revenue reserves. This can help smooth changes in dividend payments particularly in difficult years.

Although the Company’s objective is to achieve absolute returns principally through capital growth, the Board acknowledges that in the current climate of widespread dividend cuts, anything that it can do to help support the Company’s dividend is likely to be well received by shareholders. After due consideration and given the size of our existing revenue reserves, the Board has decided to propose a dividend amounting to the average paid during the last two years.

Accordingly, the Board is proposing a final dividend of 1.25p per share for the year ending 30 June 2020 (2019: 1.5p per share, 2018: 1.0p per share), payable on 18 November 2020 to shareholders on the register as at 16 October 2020. Following this distribution, the Company will have revenue reserves of £1,042,789 (equivalent to 1.65p per share).

Development of the Company

As announced in March, following a major strategic review of the Company’s management arrangements conducted with the help of our brokers, Investec Bank Plc, the Board appointed GHAM as investment manager and AIFM. Jeff Harris and Adam Khanbhai, the Company’s portfolio managers at GVQIM, joined GHAM as part of the transaction.

GHAM assumed responsibility for the Company’s portfolio and became the Company’s AIFM on 21 May. Since the end of May, the GHAM Investment Committee (comprising, amongst others Tony Dalwood and Ken Wotton) together with Jeff and Adam have conducted a thorough review of the Company’s portfolio with particular emphasis on the impact of the changing backdrop posed by Covid-19. Ken Wotton heads the Public Equity investment team at GHAM and also manages the top quartile LF Gresham House UK Micro Cap Fund and the LF Gresham House UK Multi Cap Income Fund. Prior to joining GHAM Ken had, for 11 years, led the public equity investment team at the mid-market, UK private equity firm Livingbridge.

Following the review of the Company’s portfolio, Ken has been appointed as lead manager to the Company and will work alongside Adam Khanbhai. The Board has been impressed with Ken’s extensive knowledge of the companies held in the portfolio and his ideas of where we should be heading. Although changes to the portfolio are anticipated, in these uncertain times we expect this to be an evolution over time rather than a wholesale restructuring.

Jeff Harris has left GHAM to pursue new opportunities. The Board are extremely grateful to Jeff for his contribution to SEC over the years and wish him every success in his next venture.

Whilst, as recently announced by Gresham House plc (“Gresham House”), the joint venture that had been proposed between Aberdeen Standard Investments (“ASI”) and Gresham House will no longer take place, GHAM is expected shortly to enter into a distribution and marketing agreement with ASI pursuant to which ASI will provide certain marketing and distribution services to the Company.

Meanwhile Gresham House has confirmed its commitment to purchase shares in the Company as previously agreed, and the first purchases have already been made with more to follow over the coming months.

The Company’s investment process remains unchanged following the appointment of GHAM and Ken. However, the team is now much better resourced benefiting from a substantial increase in resource and access to an enhanced and powerful network of skilled professionals that underpins idea generation, investment evaluation, due diligence and risk management.

Despite all the challenges caused to working practices by Covid-19 as well as to the stock market, the transition of the management arrangements to Gresham House has been smooth and I am pleased to report that all operational areas of the Company have continued to function well.

The Board

There has been no change to the Board of Directors during the year.

Gearing and Cash Management

The Company has maintained its policy of operating without a banking loan facility. The Board in conjunction with the Investment Manager periodically reviews this policy. The Board, together with the Investment Manager, has a conservative approach to gearing because of the concentrated nature of the portfolio. No gearing has been in place at any point during the period. Cash balances are generally maintained to take advantage of suitable investment opportunities as they arise.

Annual General Meeting

This year’s AGM will be held on Wednesday, 11 November 2020. Owing to the restrictions imposed by the UK Government because of Covid-19, this year’s AGM will follow an unusual format, as Shareholders will not be permitted to be present. Attendance will be limited to the minimum number of Directors and officers sufficient to form a quorum. Shareholders are strongly encouraged to vote by proxy and to ask any questions in advance (by email to the Company Secretary at cosec@patplc.co.uk). The Company or its Investment Manager will then reply to each question as appropriate.

Outlook

With such uncertainty around, both economically and politically, forecasts are not currently worth much. The result of the US presidential election in November will have some effect on the longer term geopolitical situation, but in the short-term Covid-19 seems a far more important issue to contend with. Meanwhile, by November Brexit negotiations should have reached a major conclusion with the possibility of a hard Brexit remaining.

The Covid-19 pandemic and the issue of how to deal with it raise many economic, social and moral issues. As time goes on and if the situation is not brought under control, the impact on the global economy could have deep and long-term repercussions, which may result in a political shift of opinion unimaginable just 6 months ago. The arrival of a vaccine must be the hoped for panacea but

the longer it takes to arrive, the longer it will take to reverse the damage caused by the virus, if indeed it can be fully reversed.

The Investment Manager’s review of our portfolio has already highlighted how the Covid-19 crisis has impacted companies across the economy in varying ways, some positively but most negatively. Despite the challenging backdrop, the Directors and Investment Manager believe that many opportunities exist for successful investment, especially where the Manager can stimulate change at portfolio companies.

Recovery will not follow a straight line. Hope and despair will undoubtedly influence the mood of the stock market, as they always have. However, we are confident that our investment team, with its considerable support, will be able to weather the storm. The fundamental portfolio review led by Ken Wotton has already shone a torch, in a highly objective manner, on each of our holdings. We are confident that this approach will, over time, lead to the creation of a portfolio of holdings each capable of dealing well with the future and where the engagement of the investment manager can create additional value.

The Board, once again, thanks you for your continued support.

Richard Hills

Chairman

30 September 2020

The Investment Manager’s Report

Investment Strategy

Our strategy is to invest in publicly quoted companies which we believe will increase their value through strategic, operational or management initiatives based on a private equity approach to quoted companies. We follow a practice of constructive corporate engagement and aim to work with management teams in order to enhance shareholder value. We attempt to build a consensus with other stakeholders and prefer to work alongside like-minded co-investors as leaders, followers or supporters.

We are long-term investors and typically aim to hold companies for the duration of rolling three-year investment plans that include an entry and exit strategy and a clearly identified route to value creation. The duration of these plans can be shortened by transactional activity or lengthened by adverse economic conditions. Before investing we undertake an extensive due diligence process, assessing market conditions, management and stakeholders. Our investments are underpinned by valuations, which we derive using private equity-based techniques. These include a focus on cash flows and the potential value of the company to trade or financial buyers. The outputs of this approach deliver investments with the following characterisations; mispriced cash flow, strategic value and strategic change.

We believe that smaller companies provide the greatest opportunity for our investment style as they are relatively under-researched, often have more limited resources, and frequently can be more attractively valued.

The track record of this approach from the Gresham House team has the potential to generate favourable risk adjusted returns for shareholders over the long term.

Market Background

Peak to trough, the index declined 43% over the course of the period, reminiscent of the 47% move in 2008/9. A lot has been said about the last twelve months being one of ‘two halves’, pre and post pandemic, with some truth in that assertion. The first part of the period saw an uptick in markets following the convincing outcome of the UK General Election and more certainty delivered over the Brexit negotiations. However, the last week of February saw a sharp and precipitous decline in financial markets the world over as countries deal with the Covid-19 pandemic. Much has been said and written about this event. It is of course unprecedented in nature and has had a near-term impact on financial markets and everyone’s lives. One datapoint to illustrate its direct effect, is the aggregate decline in Small Cap earnings for FY20, which, Liberum estimate will decline in aggregate over 50%. It is very likely that there will be long lasting economic and social ramifications. Against this backdrop, the FTSE Smaller Companies ex-Investment Trust Index (“the index”) fell 12.3% on a total return basis over the past twelve months.

Performance Review

Whilst 2020 started positively for the portfolio with the net asset value (“NAV”) and share price reaching all-time highs in January, over the twelve months to the end of June the NAV declined by 9.1% in total return terms. Whilst this builds on the Trust’s record of relative capital preservation, a decline in NAV is always disappointing and, in our view, belies strategic progress being made by portfolio companies prior to the pandemic.

Given the severe shock to the markets experienced since March, various companies saw their share prices fall in the second half of the year detracting from the NAV. Equiniti, a larger holding, was impacted by the cut in base rates and seizure of capital markets activity. Holdings such as Wilmington, Hostelworld and Tribal saw disruption given shutdowns and the consequent impact on face to face events, travel and education attendance. On the positive side, and following strong historical performance, the share price of Ergomed increased a further 85% following strong trading. Huntsworth, a new investment in the period, was subsequently acquired at a premium by a private-equity buyer. There was also strong performance from Alliance Pharma and Strix, two defensive businesses with undervalued cash flows. 

Portfolio Review

The portfolio remained highly focused with a total of 20 holdings and the top 10 accounted for 68% of the NAV at the end of the financial period. 9% of the NAV was held in cash and cash equivalents at the year end.

Over the course of the year, the positions in Eckoh, Oxford Metrics, EMIS, Dialight and Huntsworth were exited. The investments delivered IRRs of 47%, 34%, 15%, -41% and 76% respectively. The first three were sold on valuation grounds, Dialight saw a thesis violation and Huntsworth was taken private at an attractive share price premium by Clayton, Dubilier & Rice.

Changes in sector weightings have seen exposure to Healthcare increase from 22.5% to 34.7% following strong performances from Ergomed and Clinigen. Technology has reduced from 16.8% to 7.8% following some realisations. Financial Services has increased from 19.2% to 23.8% with other holdings primarily across the Media, Industrials and Financials sectors.

Top 10 Investee Company Review (as at 30 June 2020)

Clinigen

Description

Is a speciality pharmaceutical and services company, its primary activities include: acquiring, licencing and revitalising hospital-only critical care medicines; and providing patient access to its own or other pharmaceutical companies’ products, whether to meet unmet medical needs or for use in clinical trials. The company grew rapidly post listing in 2012, both organically and through targeted acquisitions. Over the course of our investment, the company has undertaken investment to deliver an international platform of services across the patient and drug life-cycle and delivered strong shareholder returns.

Thesis

The company operates in an area of structural growth and is not exposed to the economic cycle as demonstrated by recent (and historical) trading. It is estimated that 80% of the world’s population continues to have limited or no access to the right medicines, at a time when physician and patient knowledge and requirement for appropriate medicines is enhancing. Clinigen established an ethical and commercial market for unlicensed medicines around 10 years ago and is a market leader in this space.

Developments in the period

More recently, cash flow has been depressed through M&A and further investment in Proleukin, a mature product currently being investigated in a number of clinical trials. Following a sharp de-rating around the onset of the Covid-19 pandemic, the holding was increased given the relative resilience of its business, the valuation at the bottom of its listed range and the opportunity to de-gear the balance sheet transferring value to equity holders over the long term. 

Equiniti

Description

Is a business services company providing administration, processing payments services and technology products typically to large publicly listed companies in the UK and US. It is one of the three main share registrars for UK quoted companies. It administers company benefits schemes and share savings schemes. It also provides software and services to help manage the administration of company and public sector pension funds. Following a buyout by Advent the company added to its product and service capability through a number of targeted acquisitions.

Thesis

The business has a strong combination of stable, long-term, non-discretionary corporate services alongside offering proprietary technology-based solutions to growing regulatory requirements. This enables the business to generate strong underlying margins and cash flows. The company has entrenched leading market positions in the UK and now the US with the potential to create strategic value. Following a period of investment and headwinds to the business, the company has potential to re-rate or, if value is not recognised on the public market, to become a takeover target.

Developments in the period

Cash flow has been depressed by the integration of the US business and more recently reductions in interest rates and weak end markets. Whilst entering 2020, the company appeared well set to continue the improved cash generation from the end of 2019, the cut in base rates and collapse of capital markets has had a deleterious impact on the company. These challenges have been navigated without the need for external support and while maintaining a strong customer and market position.

Tyman

Description

Is a leading international supplier of engineered components to the door and window industry in the new build and repair and maintenance (RMI) markets. Around two-thirds of its profits are from North America.

Thesis

The company has, through organic and inorganic investment, increased its market leadership, strengthened the product proposition and delivered strong historic returns on investment. The company has the potential to replicate its North American manufacturing template to its operations in Europe and the Rest of the World to achieve material efficiencies, and is well placed to benefit from a recovery of U.S. single family housing activity to long term historical levels. As a result of market concerns around the cyclicality of the business and balance sheet leverage the shares currently trade at depressed levels relative to history. The new management must demonstrate a return to consistent organic growth to unlock the potential value of the business.

Developments in the period

The early part of the period started poorly with new management announcing operational issues in North America. Subsequently, the company has improved service delivery and navigated the challenges posed by Covid-19 well, managing to maintain strong customer service and has continued to bring gearing levels down through strong cost discipline and cash performance.

Ergomed

Description

Is a pharmaceutical services company. The company operates across 55 countries and has provided and managed clinical development, trial management and pharmacovigilance services for over 100 clients across the pharmaceuticals industry.

Thesis

Our investment in 2018 was premised on strategic change; the company ceasing co-development activities which delivered no return on investment, and encouraging the company to divest of its clinical research services and pharmacovigilance divisions which we believed to be valuable strategic assets in high growth niches of the healthcare space.

Developments in the period

Over the past 18 months, the company has significantly strengthened its management team and board of directors and a clearer focus on its core competences has yielded impressive results. The company believes there is additional value to be created through further integrating the two divisions and taking share in the global CRO market. We have materially reduced our position at a significant profit but retain a holding in what we believe is a highly strategic asset in a long term structurally growing market.

Medica

Description

Is the leading provider of teleradiology services in the UK, providing outsourced interpretation and reporting of MRI, CT and plain film X-ray images, primarily to the NHS hospital radiology departments. This includes both out-of-hours (aka ‘Nighthawk’) and routine reporting. Formerly owned by Close Brothers Private Equity, following a 2013 buyout the company listed on the London Stock Exchange in 2017. 

Thesis

The demand for radiology services in the UK is growing rapidly driven by the increasing sophistication and clinical application of medical imaging, compounded by an ageing population with increasing incidence of chronic conditions and cancer that require ongoing monitoring. The NHS struggles to meet this demand internally due to a severe (and long term) shortage of qualified radiologists. Medica’s technology platform and roster of over 400 consultant radiologists addresses this issue safely and economically, enabling the company to deliver consistently high (double digit) levels of growth. Although the company has delivered a strong financial performance since IPO, growing revenues over 60% between 2016 and 2019, this has not been reflected in the progression of the share price. We believe the combination of this high growth, long term customer relationships and a high margin, low capital operating model is highly valuable and underappreciated by the market.

Developments in the period

A new, high quality CEO and CFO were appointed early in the period, a development we view very favourably and which coincides with a number of positive strategic developments. These include establishing a presence in Australia and initiating investment in technology to increase the efficiency and flexibility of the company’s reporting platform; both of which will increase the strategic value of the company in our view. Later in the period Covid-19 related disruption to NHS hospitals led to reduced emergency admissions and clinical procedures. This has had a material impact on trading in the short term, however the company has taken this opportunity to strengthen relationships with its NHS customers. The company has a strong net cash balance sheet and is very well positioned to benefit as healthcare activity in the UK returns to more normalised levels.

Tribal

Description

Is a global provider of products and services to the international education, training and learning markets. Today, the company focuses its activities on student records and administration systems and quality review inspection services.

Thesis

Tribal is a strategically valuable and high-quality asset, albeit one in a relatively mature market. The company is executing well on a strategy to reduce its overheads and develop its next generation cloud-based software platform, Tribal Edge which will enable the business to capitalise on its leading positions in the UK, Australian and NZ markets. The benefits from these initiatives are yet to be fully reflected in its financial metrics, and will further increase its potential value to a strategic acquirer. Given the recurring nature of its revenues, its high-quality long-term customer base and market leading position we believe the company should generate higher margins and warrant a substantially higher rating than it does today.

Developments in the period

The business traded well through the latter half of 2019 with notable wins in Australia and the Middle East. A contract dispute with a licensing partner was also concluded in early 2020, which whilst costing the firm almost £9m, does provide certainty and remove what had been an anchor to the share price over the preceding 12+ months. Given the disruption to the education sector caused by Covid-19 the business has been reassuringly resilient, with relatively modest downgrades predominately due to delays in some service contracts. Recent updates have been encouraging with the software business resilient and education services successfully mitigating some of the impact by shifting to an online delivery model where possible. The business has a net cash balance sheet. The shares continue to trade at a deep discount with significant long-term upside in our view.

XPS Pensions

Description

Is the only listed defined benefit pensions specialist in the UK. The company offers pensions actuarial, administration, compliance and advisory services. Formerly owned by Close Brothers Private Equity, the company listed on the LSE in 2017.

Thesis

Following a large merger with Punter Southall, the company warned on profits mid-way through 2019 and suffered a material de-rating. We initiated our position at this point as we believe the quality and longevity of the cash flows to be very attractive and mispriced at its prevailing valuation. The company has a largely predictable core business with the opportunity to enhance returns through continued market share gains, supportive regulatory tailwinds and accretive bolt-on acquisitions. Consolidation in the market (merger between Aon and Willis Towers Watson, and Mercer and JLT) provides further opportunity for XPS to take market share over the medium term.

Developments in the period

The company regained its poise following the disappointments of early 2019. Underlying growth returned with strong cash conversion. The company has also maintained a healthy 5% dividend yield through the Covid-19 pandemic.

Alliance Pharma

Description

Is a global specialty pharmaceuticals business that focuses on growing, through acquisition, a high quality portfolio of niche, mature, out of patent pharmaceutical products. These include prescription medicines, as well as consumer focused over the counter products.

Thesis

The company owns a portfolio of mature pharmaceutical products that have strong positions in niche markets with defensive characteristics. Alliance Pharma does not invest in R&D (given all products are mature and out of patent), and outsources manufacturing and distribution activities, which enables high margins and a strong cash generation profile. Over recent years the business has established a portfolio of four ‘International Star Brands’ which have delivered high growth and improved the overall financial profile of the group. Further bolt on product acquisitions are likely.

Developments in the period

2019 was the first year since 2006 that the company did not undertake any acquisitions, instead focusing on integrating the Nizoral brand acquired from J&J in 2018, implementing a new ERP system and delivering growth from the existing product portfolio. Pleasingly, the company delivered growth ahead of consensus with star brands Kelocote, Macushield and Nizoral leading the way, growing 38%, 18% and 14% respectively. Whilst some understandable disruption was experienced due to Covid-19, trading has been relatively resilient and the business remained profitable and cash generative in H1 2020 and its balance sheet remains healthy.

Wilmington

Description

Is a B2B media business that provides business information, training and events products. The company consists of a portfolio of brands that focus on niche sectors including risk (i.e. insurance), compliance, banking, accounting, legal services, healthcare providers and pharmaceuticals.

Thesis

Wilmington generates high teens EBITA margins, high teens+ ROCE and good cash conversion. More than 80% of revenues in the main publishing and information divisions are delivered digitally, typically on a subscription basis, and with high levels of client retention. Growth has been held back in recent years and we believe the presence of a new chairman, CEO and CFO will improve the company’s execution and management of the portfolio to drive shareholder value. Given its strong position in attractive markets it is capable of mid-single digit organic growth; delivery of this against very modest current market expectations could support a substantial re-rating of the stock. In the absence of a re-rating, we believe the company has the potential to become a takeover target.

Developments in the period

The business returned to modest organic growth over the course of 2019 with an improving trend half-on-half and with all three divisions of the business demonstrating growth. This trajectory validates the operational improvements the new management team have put in place over the last 6 months. Forward indicators were positive in the early parts of 2020, however the company has been impacted by Covid-19 as the ability to run face to face training and events has been curtailed. These areas together represent c.40% of the company’s revenue, although the company has been successful in mitigating some of this through cost savings and delivering training online. Encouragingly, more recent updates show the business performing to the upper end of the range of post-Covid-19 expectations and successfully renegotiating banking covenants to enable sufficient financial flexibility to trade through a prolonged period of disruption. We continue to monitor the situation closely, however we are optimistic that a leaner, more digitally focused and more valuable company can emerge from the crisis in the period to come.

Brooks Macdonald

Description

Is an investment and wealth management services provider. The company provides a range of investment management services and advice to individuals, pension funds, institutions, charities and trusts. It also provides offshore fund management and administration services. The company manages £13.7bn of assets from offices across the UK and the Channel Islands.

Thesis

The company has historically had one of the strongest rates of organic growth in its sector given its relationship with independent financial advisers and its large exposure to self-invested personal pension schemes. New management have undertaken ‘catch-up’ investment to fit the increased size of the group and are now focusing on growing the group margin and matching the performance of the international business to the successful onshore business. The company is highly cash generative and has a healthy net cash balance.

Developments in the period

Financial markets were weak over the period impacting the share price. Despite this, the company continues to improve its operating margin and deliver strong cash generation. In November, the company announced the acquisition of Cornelian Asset Managers for a post cost synergy P/E multiple of 7x. The acquisition strengthens the Group’s intermediary distribution reach and adds multi-asset funds to its range. 

Portfolio as at 30 June 2020

Date of first Cost Valuation % of invested portfolio at
30 June
% of invested portfolio at
30 June

% of net
Company Sector Classification Investment £000 £000 2020 2019 assets
Clinigen Healthcare Jul 2014 16,511 20,646 14.9% 7.1% 13.6%
Equiniti Financial Services Mar 2016 18,039 13,522 9.8% 13.3% 8.9%
Tyman Construction & Apr 2007 12,150 10,079 7.3% 7.2% 6.6%
Materials
Ergomed Healthcare Apr 2018 4,077 10,033 7.3% 6.1% 6.6%
Medica Healthcare Mar 2017 10,646 9,747 7.1% 5.4% 6.4%
Tribal Technology Dec 2014 12,901 9,678 7.0% 7.1% 6.4%
XPS Financial Services Jul 2019 8,764 8,961 6.5% 6.0%
Alliance Pharma Healthcare May 2017 5,669 7,324 5.3% 4.9% 4.8%
Wilmington Media Oct 2010 11,942 7,001 5.1% 7.0% 4.6%
Brooks Macdonald Financial Services Jun 2016 7,483 6,953 5.0% 5.0% 4.6%
Hostelworld Travel & Leisure Oct 2019 9,137 5,662 4.1% 3.7%
Benchmark Healthcare Jun 2019 5,881 4,955 3.6% 1.1% 3.3%
Hyve Media May 2020 4,610 4,625 3.3% 3.0%
Strix Industrial Goods & May 2019 3,439 4,235 3.1% 1.7% 2.8%
Services
Harworth Property Jul 2016 2,813 3,401 2.5% 3.6% 2.2%
JTC Financial Services Jun 2019 2,584 3,305 2.4% 0.9% 2.2%
Numis Financial Services Oct 2017 3,100 3,192 2.3% 2.1% 2.1%
4imprint Media Feb 2006 643 2,693 1.9% 6.9% 1.8%
Proactis Technology Nov 2017 9,308 2,137 1.5% 1.2% 1.4%
Vintage I Unquoted Investment Mar 2007 2 9 0.0% 0.4% 0.0%
Total Investments 138,158 91.0%
Cash and cash equivalents
13,901

9.2%
Net current liabilities (312) (0.2%)
Total shareholders’ funds 151,747 100.0%

Portfolio as at 30 June 2020 – Sector split by industry

Sector Percentage
Healthcare 34.7
Financial Services 23.8
Media 9.4
Net cash 9.0
Technology 7.8
Construction & Materials 6.6
Travel & Leisure 3.7
Industrial Goods & Services 2.8
Property 2.2

Portfolio as at 30 June 2020 – Size split by market capitalisation

Size Percentage
Greater than £500m 26.5
£300m - £500m 18.6
£100m - £300m 40.8
Less than £100m 5.1
Net cash 9.0

Unquoted Investment

Over the period, the Company received a capital distribution of £0.3m from Vintage I. The outstanding commitment relating to Vintage I is €1,560,000 and its adviser has communicated that it does not expect to make any further net draw downs. The IRR on this investment over the last 13 years has shown the benefits from such a differentiated investment approach.

Outlook

The current backdrop is unprecedented. The indiscriminate impact of Covid-19 enforced lock downs and travel restrictions have started to flow through to the ‘real economy’ with a precipitous 20.4% fall in UK GDP in Q2 - the largest quarterly fall in GDP since records began in 1955. This was led by record falls in services, manufacturing and construction sectors which were badly impacted by government restrictions. The consumer environment also deteriorated with the number of hours worked down 18%, and a sharp decline in private consumption, down 23%. This was despite record levels of monetary and fiscal stimulus. A similar situation is mirrored in key economies around the globe. Gold has reached an all-time high over $2,000 illustrating a flight to safe-haven assets. However, interest rates are also at historic lows and, in the UK, particularly in smaller companies, there are highly supportive valuations. Whilst uncomfortable, history has found that uncomfortable times are often good times to invest in equities.

Covid-19 has led to deep changes in long-established economic and social protocols which has left few companies unscathed. Pleasingly, our portfolio companies have largely demonstrated agility in delivering products and services to customers and their financial positions have proven stronger than worst fears at the onset of the pandemic. Exposure to areas such as healthcare, support services and technology provide some defence to the broader macro risks and this was reflected in a resilient relative performance through a period of turmoil. Quality businesses with strong market positions and strong IP always have value in our view and this gives us a degree of confidence as we look ahead.

The length, severity and long-term impact of Covid-19 remains difficult to accurately forecast at this stage for anyone. There will doubtless be many second (and third) order implications which are still emerging, and we suspect there will be further bumps and potholes in the road to recovery. We maintain a healthy cash position which is strategically valuable in times like this. Such extraordinary times are, we strongly believe, likely to create a number of attractive long-term investment opportunities, both within the portfolio and in the broader market. An engaged investment approach based on private equity techniques has shown that through cycles superior investment performance can be generated.


Ken Wotton/Adam Khanbhai
Gresham House Asset Management
30 September 2020

Gresham House Asset Management Limited  020 3837 6270
Ken Wotton
Adam Khanbhai

Investec Bank plc (Corporate broker)  020 7597 4000
Lucy Lewis


The Company’s Statement of Comprehensive Income, Statement of Changes in Equity, Balance Sheet, and Statement of Cash Flows follow.


Statement of Comprehensive Income

Year ended 30 June 2020
Revenue Capital
return return Total
£'000 £'000 £'000
Investments
Losses on investments held at fair value
through profit or loss
- (15,551) (15,551)
- (15,551) (15,551)
Income 
Dividends 2,260 - 2,260
Interest 45 - 45
Total income 2,305 - 2,305
Expenses
Investment Manager’s fee
(1,134) - (1,134)
Other expenses (931) - (931)
Total expenses (2,065) - (2,065)
Net return before taxation 240 (15,551) (15,311)
Taxation - - -

Net return and total comprehensive income for the year
240 (15,551) (15,311)
Return per Ordinary share 0.38p (24.54)p (24.16)p

The total column of this statement represents the Statement of Comprehensive Income prepared in accordance with IFRS. The supplementary revenue and capital return columns are both prepared under guidance published by the AIC. All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.


Statement of Comprehensive Income

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Investments
Gains on investments held at fair value
through profit or loss
- 1,449 1,449
- 1,449 1,449
Income 
Dividends 3,116 - 3,116
Interest 73 - 73
Total income 3,189 - 3,189
Expenses
Investment Manager’s fee
(1,235) - (1,235)
Investment Manager’s performance fee - (484) (484)
Other expenses (576) - (576)
Total expenses (1,811) (484) (2,295)
Net return before taxation 1,378 965 2,343
Taxation - - -
Net return and total comprehensive income for the year 1,378 965 2,343
Return per Ordinary share 2.11p 1.48p 3.59p


Balance Sheet

As at
30 June 2020
As at
30 June 2019
£'000 £'000
Non-current assets
Investments held at fair value though profit or loss 138,158 154,888
Current assets
Trade and other receivables 55 1,244
Cash and cash equivalents 13,901 16,311
13,956 17,555
Total assets 152,114 172,443
Current liabilities
Trade and other payables (367) (3,406)
Net assets 151,747 169,037
Capital and reserves
Share capital 6,986 6,986
Share premium account 31,737 31,737
Special reserve 24,567 25,595
Capital reserve 84,359 99,910
Capital redemption reserve 2,264 2,264
Revenue reserve 1,834 2,545
Total shareholders’ equity 151,747 169,037
Net asset value per share 239.74p 265.12p
Ordinary shares in issue 63,296,844 63,759,589



Statement of Changes in Equity

For the year ended
30 June 2020

Share capital
Share premium
account

Special
reserve

Capital reserve
Capital redemption reserve
Revenue reserve


Total
£000 £000 £000 £000 £000 £000 £000
1 July 2019 6,986 31,737 25,595 99,910 2,264 2,545 169,037
Net return and total comprehensive income for the year - - - (15,551) - 240 (15,311)
Dividends paid - - - - - (951) (951)
Share buy-backs - - (1,028) - - - (1,028)
30 June 2020 6,986 31,737 24,567 84,359 2,264 1,834 151,747
For the year ended
30 June 2019

Share capital
Share premium
account

Special
reserve

Capital reserve
Capital redemption reserve
Revenue reserve


Total
£000 £000 £000 £000 £000 £000 £000
1 July 2018 6,986 31,737 32,521 98,945 2,264 1,828 174,281
Net return and total comprehensive income for the year - - - 965 - 1,378 2,343
Dividends paid - - - - - (661) (661)
Share buy-backs - - (6,926) - - - (6,926)
30 June 2019 6,986 31,737 25,595 99,910 2,264 2,545 169,037



Statement of Cash Flows

Year Ended 30 June Year Ended 30 June
2020 2019
£000 £000
Operating activities
Net return before taxation (15,311) 2,343
Adjustment for losses/(gains) on investments 15,554 (1,448)
Adjustment for revaluation of foreign currency balances (3) (1)
Operating cash flows before movements in working capital 240 894
Decrease/(increase) in receivables 77 (57)
(Decrease)/increase in payables (752) 433
Purchase of portfolio investments (59,880) (26,508)
Sales of portfolio investments 60,024 34,953
Net cash flow from operating activities (291) 9,715
Financing activities
Equity dividend paid (951) (661)
Shares bought back in the year (1,171) (6,838)
Net cash outflow from financing activities (2,122) (7,499)
(Decrease)/increase in cash and cash equivalents for year (2,413) 2,216
Cash and cash equivalents at the start of the year 16,311 14,094
Revaluation of foreign currency balances 3 1
Cash and cash equivalents at 30 June 13,901 16,311

Principal Risks and Uncertainties

The Board believes that the overriding risks to shareholders are events and developments which can affect the general level of share prices, including, for instance, inflation or deflation, economic recessions and movements in interest rates and currencies which are outside of the control of the Board.

The principal risks and uncertainties are set out on pages 15 and 16 of the Annual Report for the year ended 30 June 2020, which is available at www.strategicequitycapital.com.

Responsibility statement of the Directors in respect of the Annual Financial Report

We confirm that to the best of our knowledge:

  • the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
  • the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

We consider the Annual Report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

Going Concern

A continuation vote is proposed at each Annual General Meeting of the Company. In the event that any such resolution is not passed, the Directors will be required to bring forward proposals to liquidate, open-end or otherwise reconstruct the Company. The Directors have considered the application of the Statement of Recommended  Practice for Financial Statements of Investment Trust Companies and Venture Capital Trusts, which states that, even if an investment company is approaching a wind-up and shareholders have yet to vote on the issue and provided that the Board has not concluded that there is no realistic alternative to winding up the company, it will usually be more appropriate for the financial statements to be prepared on a going (rather than non-going) concern basis.

In assessing the Company’s ability to continue as a going concern the Directors have also considered the Company’s investment objective, detailed on the inside front cover, risk management policies, detailed on pages 15 and 16 of the Annual Report, capital management (see note 17 to the financial statements in the Annual Report), the nature of its portfolio and expenditure projections and believe that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and for at least 12 months from the date of this Report. In addition, the Board has had regard to the Company’s investment performance (see page 1 of the Annual Report), the price at which the Company’s shares trade relative to their NAV (see page 1 of the Annual Report) and ongoing investor interest in the continuation of the Company (including feedback from meetings and conversations with Shareholders by the Company’s advisers).

The Directors performed an assessment of the Company’s ability to meet its liabilities as they fall due. In performing this assessment, the Directors took into consideration the uncertain economic outlook in the wake of the Covid-19 pandemic including:

• cash and cash equivalents balances and the portfolio of readily realisable securities which can be used to meet short-term funding commitments;

• the ability of the Company to meet all of its liabilities and ongoing expenses from its assets;

• revenue and operating cost forecasts for the forthcoming year;

• the ability of third-party service providers to continue to provide services; and

• potential downside scenarios including stress testing the Company’s portfolio for a 30% fall in the value of the investment portfolio; a 50% fall in dividend income and a buy-back of 10% of the Company’s Ordinary share capital, the impact of which would leave the Company with a positive cash position.

Based on this assessment, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements, and therefore have prepared the financial statements on a going concern basis. Resolution 11 at this year’s Annual General Meeting represents the annual continuation vote by Shareholders on the Company’s future. The Board believes this resolution to be in the best interests of the Company and its members as a whole, and strongly recommends that Shareholders should vote in favour of Resolution 11 as each Director intends to do in respect of her or his own beneficial shareholdings.

Related Party Transactions

The amounts payable to the Investment Manager are disclosed in note 3. The amount due to the Investment Manager for management fees at 30 June 2020 was £nil (2019: £318,000). The amount due to the Investment Manager for performance fees at 30 June 2020 was £nil (2019: £484,000).

Fees paid to Directors are disclosed in the Directors‘ Remuneration Report on page 29 of the Annual Report. Full details of Directors‘ interests are set out on page 30 of the Annual Report.

Notes

1.1 Corporate information

Strategic Equity Capital plc is a public limited company incorporated and domiciled in the United Kingdom and registered in England and Wales under the Companies Act 2006 whose shares are publicly traded. The Company is an investment company as defined by Section 833 of the Companies Act 2006.

The Company carries on business as an investment trust within the meaning of Sections 1158/1159 of the UK Corporation Tax Act 2010.

The financial statements of Strategic Equity Capital plc for the year ended 30 June 2020 were authorised for issue in accordance with a resolution of the Directors on 30 September 2020.

1.2 Basis of preparation and statement of compliance

The financial statements of the Company have been prepared in accordance with IFRS issued by the International Accounting Standards Board (as adopted by the EU), interpretations issued by the International Financial Reporting Interpretations Committee, and applicable requirements of United Kingdom company law, and reflect the following policies which have been adopted and applied consistently. Where presentational guidance set out in the Statement of Recommended Practice (“SORP”) for investment trusts issued by the AIC in October 2019 is consistent with the requirements of IFRS, the Directors have sought to prepare financial statements on a basis compliant with the recommendations of the SORP.

The financial statements of the Company have been prepared on a going concern basis, on the assumption the continuation vote is passed by Shareholders at the forthcoming Annual General Meeting. The Board has also considered the impact of Covid-19 and believe this will have a limited financial impact on the Company’s operational resources and existence.

The Directors performed an assessment of the Company’s ability to meet its liabilities as they fall due. In performing this assessment, the Directors took into consideration the uncertain economic outlook in the wake of the Covid-19 pandemic including:

• cash and cash equivalents balances and the portfolio of readily realisable securities which can be used to meet short-term funding commitments;

• the ability of the Company to meet all of its liabilities and ongoing expenses from its assets;

• revenue and operating cost forecasts for the forthcoming year;

• the ability of third-party service providers to continue to provide services; and

• potential downside scenarios including stress testing the Company’s portfolio for a 30% fall in the value of the investment portfolio; a 50% fall in dividend income and a buy-back of 10% of the Company’s Ordinary share capital, the impact of which would leave the Company with a positive cash position.

Based on this assessment, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements, and therefore have prepared the financial statements on a going concern basis.

Convention

The financial statements are presented in Sterling, being the currency of the Primary Economic Environment in which the Company operates, rounded to the nearest thousand, unless otherwise stated to the nearest one pound.

Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business.

1.3 Accounting policies

The accounting policies used in the preparation of the Annual Report can be found on pages 41 to 45 of the Annual Report for the year ended 30 June 2020.

1.4 Adoption of new and revised accounting standards

The Directors confirm that none of the following newly effective standards have materially affected the Company’s financial statements:

Standard   Effective date

IFRS 16 Leases   1 January 2019

IFRIC 23 Uncertainty over Income Tax Treatments   1 January 2019

Amendments to IFRS 9 Financial Instruments   1 January 2019

Annual Improvements to IFRSs – 2015-2017 Cycle   1 January 2019

The Directors do not anticipate the adoption of the following standards will have a material impact on the Company’s financial statements:

Standard   Effective date

Amendments to References to the Conceptual Framework in IFRS Standards   1 January 2020

Amendment to IFRS 3 Business Combinations   1 January 2020

Amendments to IAS 1 and IAS 8   1 January 2020

Amendments to IFRS 7, IFRS 9 and IAS 39     1 January 2020

2. Income

Year ended 30 June 2020
Revenue Capital
return return Total
£'000 £'000 £'000
Income from investments   
UK dividend income 2,260 - 2,260
2,260 - 2,260
Other operating income
Liquidity interest 45 - 45
Total income 2,305 - 2,305

   

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Income from investments   
UK dividend income 3,116 - 3,116
3,116 - 3,116
Other operating income
Liquidity interest 73 - 73
Total income 3,189 - 3,189

3. Investment Manager’s fee

Year ended 30 June 2020
Revenue Capital
return return Total
£'000 £'000 £'000
Management fee 1,134 - 1,134
Performance fee - - -
1,134 - 1,134

   

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Management fee 1,235 - 1,235
Performance fee - 484 484
1,235 484 1,719

A basic management fee is payable to the Investment Manager at annual rate of 0.75% of the NAV of the Company. The basic management fee accrues daily and is payable quarterly in arrears.

The Investment Manager is also entitled to a performance fee, details of which are set out below.

The Company’s performance is measured over rolling three-year periods ending on 30 June each year, by comparing the NAV total return per share over a performance period against the total return performance of the FTSE Small Cap (ex Investment Companies) Index. A performance fee is payable if the NAV total return per share (calculated before any accrual for any performance fee to be paid in respect of the relevant performance period) at the end of the relevant performance period exceeds both: (i) the NAV per share at the beginning of the relevant performance period as adjusted by the aggregate amount of (a) the total return on the FTSE Small Cap (ex Investment Companies) Index (expressed as a percentage) and (b) 2.0% per annum over the relevant performance period

(“Benchmark NAV”); and (ii) the high watermark (which is the highest NAV per share by reference to which a performance fee was previously paid).

The Investment Manager is entitled to 10% of any excess of the NAV total return over the higher of the Benchmark NAV per share and the high watermark. The aggregate amount of the Management Fee and the Performance Fee in respect of each financial year of the Company shall not exceed an amount equal to 1.4% per annum of the NAV of the Company as at the end of the relevant financial period.

A performance fee of £nil been accrued in respect of the year ended 30 June 2020 (30 June 2019: £484,000).

As noted in the Chairman’s Statement the Company appointed GHAM as Investment Manager with effect from 21 May 2020.  GHAM have agreed that no management fees will be payable by the Company for the first six months following their appointment.

4. Other expenses

Year ended 30 June 2020
Revenue Capital
return return Total
£'000 £'000 £'000
Secretarial services 148 - 148
Auditors’ remuneration for:
Audit services* 30 - 30
Directors’ remuneration 142 - 142
Other expenses^ 611 - 611
931 - 931

   

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Secretarial services 117 - 117
Auditors’ remuneration for:
Audit services* 24 - 24
Directors’ remuneration 131 - 131
Other expenses 304 - 304
576 - 576

*No non-audit fees were incurred during the year

^ Other expenses include £359,000 of costs in relation to the change in Investment Manager. 

5. Taxation

Year ended 30 June 2020
Revenue Capital
return return Total
£'000 £'000 £'000
Corporation tax at 19.00% - - -
- - -

   

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Corporation tax at 19.00% - - -
- - -

The Company is subject to corporation tax at 19.00%. As at 30 June 2020 the total current taxation charge in the Company’s revenue account is lower than the standard rate of corporation tax in the UK.

6. Return per Ordinary share

Year ended 30 June 2020
Revenue Capital
return return Total
pence pence Pence
Return per Ordinary share 0.38 (24.54) (24.16)
0.38 (24.54) (24.16)
Year ended 30 June 2019
Revenue Capital
return return Total
pence pence Pence
Return per Ordinary share 2.11 1.48 3.59
2.11 1.48 3.59

Returns per Ordinary share are calculated based on 63,362,889 (30 June 2019: 65,305,594) being the weighted average number of Ordinary shares, excluding shares held in treasury, in issue throughout the year.

7. Investments

30 June 2020
£000
Investment portfolio summary:
Quoted investments at fair value through profit or loss 138,149
Unquoted investments at fair value through profit or loss 9
138,158

   

30 June 2019
£000
Investment portfolio summary:
Quoted investments at fair value through profit or loss 154,260
Unquoted investments at fair value through profit or loss 628
154,888

Under IFRS 13, the Company is required to classify fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in measuring the fair value of each asset. The fair value hierarchy has the following levels:

Investments whose values are based on quoted market prices in active markets are classified within level 1 and include active listed equities.

The definition of level 1 inputs refers to ‘active markets’, which is a market in which transactions take place with sufficient frequency and volume for pricing information to be provided on an ongoing basis. Due to the liquidity levels of the markets in which the Company trades, whether transactions take place with sufficient frequency and volume is a matter of judgement, and depends on the specific facts and circumstances. The Investment Manager has analysed trading volumes and frequency of the Company’s portfolio and has determined these investments as level 1 of the hierarchy.

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. As level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

Level 3 instruments include private equity, as observable prices are not available for these securities the Company has used valuation techniques to derive the fair value. In respect of unquoted instruments, or where the market for a financial instrument is not active, fair value is established by using recognised valuation methodologies, in accordance with IPEV Valuation Guidelines.

Level 3 investments consist of an investment in a private equity fund of funds managed by 3i (‘the Fund’) and is valued at the Company’s attributable proportion of the reported Fund Net Asset Value in accordance with the IPEV Valuation Guidelines. The Net Asset Value of the Fund is derived from the Fair Value of the underlying funds based on the most recent financial statements of the underlying funds adjusted for any subsequent cash movements to and from the underlying funds.

The underlying funds primarily invest in private companies which are recorded at cost or Fair Value derived from private equity valuation models and techniques. The main inputs into the valuation models of the underlying funds include industry performance, company performance, quality of management, the price of the most recent financing round or prospects for the next financing round, exit opportunities which are available, liquidity preference and net present value analysis.

The level in the fair value hierarchy within which the fair value measurement is categorised is determined on the basis of the lowest level input that is significant to the fair value of the investment.

The following table analyses within the fair value hierarchy the Company’s financial assets and liabilities (by class) measured at fair value at 30 June 2020.

Financial instruments at fair value through profit or loss

30 June 2020 Level 1
£000
Level 2
£000
Level 3
£000
Total 
£000 
Equity investments and limited partnership interests 138,149 - 9 138,158
Liquidity funds - 7,456 - 7,456
Total 138,149 7,456 9 145,614

   

30 June 2019 Level 1
£000
Level 2
£000
Level 3
£000
Total 
£000 
Equity investments and limited partnership interests 154,260 - 628 154,888
Liquidity funds - 15,513 - 15,513
Total 154,260 15,513 628 170,401

There were no transfers between levels for the year ended 30 June 2020 (2019: none).

8. Nominal Share capital

Number £000
Allotted, called up and fully paid Ordinary shares
of 10p each:
Ordinary shares in circulation at 30 June 2019 69,858,891 6,986
Shares held in Treasury at 30 June 2019 (6,099,302) (610)
Ordinary shares in issue per Balance Sheet at 30 June 2019 63,759,589 6,376
Shares bought back during the year to be held in Treasury (462,745) (46)
Ordinary shares in issue per Balance Sheet at 30 June 2020 63,296,844 6,330
Shares held in Treasury at 30 June 2020 6,562,047 656
Ordinary shares in circulation at 30 June 2020 69,858,891 6,986

9. Capital commitments and contingent liabilities

The Company has a commitment to invest €1,560,000 in Vintage I (30 June 2019: €1,560,000).

These are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Full audited accounts for the year to 30 June 2020 will be sent to shareholders in October 2020 and will be available for inspection at 1 Finsbury Circus, London EC2M 7SH, the registered office of the Company. The full annual report and accounts will be available on the Company’s website www.strategicequitycapital.com

The audited accounts for the year ended 30 June 2020 will be lodged with the Registrar of Companies.

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