Half-year Report

RNS Number : 0061N
Baronsmead Venture Trust PLC
27 May 2022
 

Baronsmead Venture Trust plc

Half-yearly report for the six months ended 31 March 2022

The Directors of Baronsmead Venture Trust plc are pleased to announce the unaudited half-yearly financial report for the six months to 31 March 2022. Copies of the half-yearly report can be obtained from the following website:  www.baronsmeadvcts.co.uk .

 

Our investment objective

· Baronsmead Venture Trust plc (the "Company") is a tax efficient listed company which aims to achieve long-term investment returns for private investors, including tax-free dividends.

 

Investment policy

· To invest primarily in a diverse portfolio of UK growth businesses, whether unquoted or traded on AIM.

· Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value.

 

Dividend policy

· The Board will, wherever possible, seek to pay two dividends to shareholders in each calendar year, typically an interim in September and a final dividend following the Annual General Meeting in February.

· The Board will use, as a guide, when setting the dividends for a financial year, a sum representing 7 per cent. of the opening NAV of that financial year.

 

Key elements of the business model

Access to an attractive, diverse portfolio


Baronsmead Venture Trust plc gives shareholders access to a diverse portfolio of growth businesses.

 

The Company will make investments in growth businesses, whether unquoted or traded on AIM, which are substantially based in the UK in accordance with the prevailing VCT legislation. Investments are made selectively across a range of sectors.

 

The Manager's approach to investing


The Manager endeavours to select the best opportunities and applies a distinctive selection criteria based on:

 

 

· Primarily investing in parts of the economy which are experiencing long term structural growth

· Businesses that demonstrate, or have the potential for, market leadership in their niche

· Management teams that can develop and deliver profitable and sustainable growth

· Companies with the potential to become an attractive asset appealing to a range of buyers at the appropriate time to sell

 

In order to ensure a strong pipeline of opportunities, the Manager invests in building deep sector knowledge and networks and undertakes significant proactive marketing to target companies in preferred sectors. This approach generates a network of potentially suitable businesses with which the Manager maintains a relationship ahead of possible investment opportunities.

 

The Manager as an influential shareholder


The Manager is an engaged and supportive shareholder (on behalf of the Company) in both unquoted and significant quoted investments.

 

For unquoted investments, representatives of the Manager often join the investee board. The role of the Manager with investees is to ensure that strategy is clear, the business plan can be implemented and the management resources are in place to deliver profitable growth. The aim is to build on the business model and grow the company into an attractive target which can be sold or potentially floated in the medium term.

 

 

Financial highlights

 

444.5p   NAV total return to shareholders for every 100.0p invested at launch (April 1998).

 

NAV per share decreased 10.8 per cent. to 70.4p, before the deduction of dividends, in the six months to 31 March 2022.

 

£37.5mn   Funds raised in the period (before costs).

 

£11.2mn  Realised proceeds in the period, returning 2.1x cost.

 

 

 

 

Cash returned to shareholders

 

The table below shows the cash returned to shareholders that invested in Baronsmead Venture Trust plc dependent on their subscription cost, including the income tax available to be reclaimed on the subscription.

 

Year subscribed

Cash invested

 (p)

Income tax reclaim

(p)

 

Net cash invested

(p)

Cumulative dividends

paid#

 (p)

Return on cash invested# (%)

1998 (April)

100.0

20.0

80.0

176.9

196.9

1999 (May)

102.0

20.4

81.6

173.4

190.0

2000 (February)

137.0

27.4

109.6

170.2

144.2

2000 (March)

130.0

26.0

104.0

170.2

150.9

2004 (October) - C shares*

100.0

40.0

60.0

125.6

165.6

2009 (April)

91.6

27.5

64.1

109.0

149.0

2012 (December)

111.8

33.5

78.3

83.5

104.7

2014 (March)

103.8

31.1

72.7

66.0

93.6

2016 (February)

102.8

30.8

72.0

51.5

80.1

2017 (October)

94.8

28.4

66.3

33.5

65.4

2019 (February)

84.2

25.3

58.9

27.0

62.1

2019 (November)

76.8

23.0

53.8

19.5

55.4

2020 (January)

82.4

24.7

57.7

19.5

53.7

2020 (February)

80.1

24.0

56.1

16.0

50.0

2020 (March)

63.8

19.1

44.7

16.0

55.1

2020 (November)

75.2

22.6

52.6

13.0

47.3

2020 (December)

78.0

23.4

54.6

13.0

46.7

2021 (January)

81.3

24.4

56.9

13.0

46.0

2021 (February)

78.8

23.6

55.2

9.5

  42.1

2021 (March)

80.9

24.3

56.6

9.5

41.7

2021 (December)

83.1

24.9

58.2

6.5

37.8

2022 (January)

82.4

24.7

57.7

6.5

37.9

2022 (March)

72.6

21.8

50.8

3.0

34.1

 

* Share dividend calculated using conversion ratio of 0.9657, which is the rate the C shares were converted into ordinary shares

 *Includes interim dividend of 3.0p per share payable on 9 September 2022.

 

 

 

Chairman's statement

Fiona Miller Smith

Chairman

This is my first statement as Chair of Baronsmead Venture Trust plc following my appointment in March 2022. I am delighted to have been appointed Chair and look forward to working with both my Board colleagues and the Manager for the long-term benefit of our shareholders.

 

As mentioned in the Company's annual report and flagged in other recent communications to shareholders, the Board anticipated increased levels of volatility in public markets and greater levels of uncertainty heading into 2022 as the economy continued to emerge from COVID-19. This sentiment was further exacerbated by a step change in geopolitical risk in Europe, slowing economic growth and the expectation of a prolonged period of higher inflation.

 

These headwinds have been reflected predominately in the softer performance of the AIM traded investments within the portfolio in the six months to 31 March 2022. Despite the drop in the value of the portfolio over the period, the Manager believes that, in aggregate, the fundamentals of the underlying portfolio companies remain robust and the growth prospects for the majority of investee companies continue to be positive. The portfolio also remains defensively positioned with high levels of diversification. The portfolio contains over 80 direct investments, both quoted and unquoted assets, and a bias towards sectors which have more resilient, contracted or recurring revenue streams.

 

The Board is pleased to declare an interim dividend of 3.0p to be paid on 9 September 2022 to shareholders on the register as of 12 August 2022. The dividend will be paid from realised capital profits generated from the successful sales of portfolio companies. Over the period, capital proceeds of £11.2mn were realised from the sale, or partial sale, of four portfolio companies. The combined return from these sales was 2.1x invested cost.

 

I must of course remind shareholders that payment dates and the amount of future dividends depend on the level and timing of profitable realisations and cannot be guaranteed.

 

Results

During the six months to 31 March 2022, the Company's NAV per share decreased 10.8 per cent. from 78.9p to 70.4p after the payment of a final dividend of 3.5p per share on 4 March 2022. The table below breaks down the movement in NAV over the six months.

 

 

 

Pence per ordinary share

NAV as at 1 October 2021   (after deducting the final dividend of 3.5p)

78.9

Valuation d ecrease (10.8 per cent.)

(8.5)

NAV as at 31 March 2022

70.4



 

 

The 30 April 2022 NAV was 71.1p, a 1.0 per cent. increase from 31 March 2022.

 

Portfolio review

The table below provides a summary of each asset class and the return generated during the period under review.

 

Asset class

NAV*

(£mn)

% of NAV*

Number of investees companies**

% return in the period***

Unquoted

48

22

35

(5)

AIM- traded companies

64

29

51

(17)

LF Gresham House UK Micro Cap Fund

33

15

48

(16)

LF Gresham House UK Multi Cap Income Fund

8

4

46

(1)

Gresham House UK Smaller Companies Fund

13

5

44

(7)

Liquid assets #

57

25

-

-

Total

223

100

224

-

 

*By value at 31 March 2022.
**Includes investee companies with holdings by more than one fund. Total number of individual companies held is 175.
***Return includes interest received on unquoted realisations during the period.

#   Represents cash, OEICs and net current assets.

 

The value of the unquoted portfolio decreased 5 per cent. in the six months to 31 March 2022. The drop in value of the unquoted portfolio was driven by a combination of softer trading performance in several e-commerce assets and a general de-rating of valuation multiples in the consumer and marketing services sectors. These declines were partially offset by uplifts in healthcare investments which continue to grow strongly and to benefit from the long-term structural growth drivers in this market.

 

The value of the Company's portfolio of investments directly held in AIM-traded companies decreased 17 per cent. In the six months to 31 March 2022. The value of the Company's investment into the LF Gresham House UK Micro Cap Fund ("Micro Cap") decreased by 16 per cent., the LF Gresham House UK Smaller Companies Fund decreased by 7 per cent. and the LF Gresham House Multi Cap Income Fund decreased by 1 per cent. This was primarily due to volatility-driven negative sentiment surrounding inflationary pressures, expectations of interest rate rises and the cost of living squeeze in the UK. The ongoing war in Ukraine continues to weigh-in on global equity markets, with the effect particularly pronounced in UK and European equities. Despite this, the Board strongly believes that our investments in the Company's quoted portfolio can provide long term benefits for shareholders. For example, the Company's investment in the Micro Cap fund has achieved a ten year return of 306 per cent. and a return since its inception in 2009 of 453 per cent.

 

 

 

Investments and divestments

 

The Company's investments and divestments during the period are set out below.

 

Investments

I am pleased to report that the Company made five new investments totalling £7.9mn and two follow-on investments with a combined value of £1.7mn in the six months to 31 March 2022. Below are descriptions of the new investments made:

 

· Aptamer (quoted) - platform providing antibody alternatives to the pharma industry across a range of applications.

 

· Oberon (quoted) - corporate advisory business providing advice, asset management and deal arrangement services.

 

· Popsa (unquoted) - provider of a mobile app that lets users design photo albums digitally and have them delivered in print.

 

· Proximity Insight (unquoted) -platform used by front-line sales associates of omni-channel retailers to better engage and transact with their customers.

 

· Skillcast (quoted) - provider of staff compliance training.

 

Following the period end, four further follow-on investments were made, totalling £3.9mn, and a new unquoted investment of £0.9mn was made into Bidnamic, a market leading provider of Google shopping management software.

 

Realisations

Proceeds of £3.6m were received during the period from sales of quoted investments, including:

 

· Cerillion plc - top-slicing delivered proceeds of £1.2mn, equating to a money multiple of 11.4x.

 

· Cloudcall Group plc - takeover by Xplorer Capital Management resulting in proceeds of £2.4mn and a money multiple of 0.9x.

 

 

From the unquoted portfolio, the sale of the investment in Carousel successfully completed in February 2022. The sale returned proceeds of £7.6mn, which, in addition to the loan-note interest received during the lifetime of the investment, resulted in a total gross money multiple of 5.0x original investment cost.

 

Fundraising

I am pleased to report that during the period the Company successfully raised £37.5mn (before costs) through an offer for subscription which became fully subscribed in February 2022. The Board are pleased to welcome the new shareholders who invested for the first time and to thank the existing  shareholders who continue to support the Company.

The Board will consider whether to raise new funds in the 2022/23 tax year. This will be determined by the Company's cashflow and its anticipated requirements to fund new and follow-on investments over the next two to three years. The Board appreciates that shareholders would like plenty of notice of its fundraising intentions and will ensure that shareholders are informed of any such fundraising at the earliest practical time.

Venture capital industry

I would also like to draw attention to the UK Parliamentary inquiry into the venture capital industry, launched in April 2022. The Committee will be examining the regulation around venture capital, the role of key bodies and how the industry can be strengthened. The Board and Manager welcome the opportunity to provide the inquiry with the information they are seeking on how VCTs provide small UK businesses with funding to assist with their growth and development.

Board succession

As announced on 15 February 2022, Peter Lawrence has retired as Chairman of the Company. The Board would like to thank Mr Lawrence for his dedication, wisdom and considerable contributions to the Board since joining the Company. He has provided exemplary leadership as the Company has grown, and we wish him all the very best for the future.

Investment Manager

The Board is pleased to see the integration progress made by the Investment Manager following the  acquisition of the VCT business of Mobeus Equity Partners LLP in September 2021. The Board believes the enlarged team enhances the Manager's ability to identify, make and manage attractive early-stage unquoted investments. This should benefit the Company through more consistent and increased rates of investment, which, in turn, should feed through to the delivery of attractive long-term returns for the Company's shareholders.

Following the successful integration, Fund Manager Bevan Duncan has decided to pursue a new career path as Chief Operating Officer at an early stage, high growth technology company. The Board would like to wish him every success in his next role and are reassured by the depth and experience of the wider team to continue to deliver for investors. Trevor Hope will be Managing Director for the private equity team, working closely with Ken Wotton, Managing Director of Public Equity, who  continues to be responsible for the quoted portfolio within the Baronsmead VCTs. Clive Austin remains Managing Director of VCT portfolio with responsibility for portfolio and asset management alongside Ed Wass, a highly experienced portfolio partner.

Outlook

The macro-economic environment has undoubtedly become more challenging over the past six months. The Board and Manager are planning for further market volatility, ongoing pressure on companies' operating margins due to rising costs and weaker consumer demand together with supply chain disruption and shortages of talent within portfolio companies. The Manager is regularly engaging with portfolio company management teams to forecast cash headroom, scenario  plan and more generally reduce execution risk over the next 12 months.

However, the portfolio remains highly diversified, and is largely positioned in parts of the economy which the Board expects will have long-term structural growth tailwinds. The volatility and disruption also provide good opportunities to invest in earlier stage, higher growth companies that are quickly moving to exploit changes in their target markets. The Company remains suitably capitalised and the Manager is well resourced to support investment into new and existing portfolio companies, which will drive value creation and ultimately dividend payments to shareholders over the long-term.

Fiona Miller Smith

Chairman

26 May 2022

 

Investments in the period

 

Company

Location

Sector

Activity

Book cost

£'000

Unquoted investments

New

Popsa Holdings Ltd 

Surrey

Technology 

Mobile-first photobook app provider

3,120

Proximity Insight Holdings Ltd 

London 

Technology

Platform for front-line sales associates of omni-channel retailers to engage with customers.

1,148

Follow on

Airfinity Ltd

London

Healthcare & education

Provides real time life science intelligence as a subscription service

960

RevLifter Ltd

London

Technology

AI platform using advanced behavioural analytics to deliver tailored promotions to users

719

Total unquoted investments

5,947

AIM-traded Investments

New

Aptamer Group plc

Yorkshire 

Healthcare & education

Platform providing antibody alternatives to the pharma industry.

2,206

Skillcast Group plc 

London

Healthcare & education

Compliance e-learning and regulatory technology services

753

Oberon Investments Group plc

London

Business Services

Corporate advisory business

658

Total AIM-traded investments

3,617

Total investments in the period

9,564

 

Realisations in the period

 

Company

 

First investment

date

Original book cost   #

£'000

Proceeds  

£'000

 

Overall multiple return

Unquoted realisations


Carousel Logistics Ltd 

Full trade sale

Oct 13

1,910

7,636

5.0*

Total unquoted realisations

 

 

1,910

7,636

5.0*

AIM-traded realisations


Cloudcall Group plc

Take over

Apr 14

2,630

2,373

0.9

Cerillion plc 

Market sale

Nov 15

106

1,205

11.4

Mi-Pay Group plc 

Liquidated

Dec 05

800

11

0.0

Total AIM-traded realisations

 

 

3,536 

3,589 

1.0

Total realisations in the period

 

 

5,446

11,225

2.1

#  Residual book cost at realisation date.

‡ Proceeds at time of realisation including interest.

*  Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods.

† Deferred consideration of £15,000 was also received in respect of Glide which had been sold in a prior period.

 


 

Responsibility statement of the Directors in respect of the half-yearly financial report

 

Half-yearly report

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal uncertainties for the remaining six months of the financial year are set out in the Chairman's statement and the Strategic report.

 

The principal risks facing the Company are mostly unchanged since the date of the Company's Annual Report for the financial year ended 30 September 2021 and continue to be as set out in that Report on pages 18 and 19.

Risks faced by the Company include but are not limited to; loss of approval as a Venture Capital Trust, investment performance risk, legislative risk, regulatory and compliance risk, operational risk, and economic and political risk. The Board considers the COVID-19 pandemic and the Russian

invasion of Ukraine to be factors which permeate these risks, and their impacts for the remaining six months of the year continue to be kept under review.

Responsibility statement

 

Each Director confirms that to the best of their knowledge:

· This half-yearly report includes a fair review of the information required by:

 

a)  DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of  important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b)  DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party  transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

The half-yearly report was approved by the Board of Directors on 26 May 2022 and was signed on its behalf by Ms Fiona Miller Smith, Chairman.

Fiona Miller Smith

Chairman

26 May 2022

Condensed Income Statement (unaudited)

For the six months to 31 March 2022

 


Six months to
31 March 2022

Six months to
31 March 2021

Year to 30 September 2021

 

Notes

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000












(losses) /gains on investments

5

-

(23,346)

(23,346)

-

31,241

31,241

-

49,591

49,591

Income


735

-

735

436

-

436

3,058

-

3,058

Investment management fee

 

(505)

(1,513)

(2,018)

(471)

(1,414)

(1,885)

(1,009)

(3,028)

(4,037)

Performance fee

 

-

-

-

-

(286)

(286)

-

(1,941)

(1,941)

Other expenses

 

(361)

-

(361)

(342)

-

(342)

(618)

-

(618)

(Loss)/profit before taxation

 

(131)

(24,859)

(24,990)

(377)

29,541

29,164

1,431

44,622

46,053

Taxation on ordinary activities

 

-

-

-

-

-

-

(104)

104

-

(Loss)/profit for the period, being the total comprehensive income for the period after taxation

 

(131)

(24,859)

(24,990)

(377)

29,541

29,164

1,327

44,726

46,053

Return per ordinary share:

 

 

 

 







Basic and Diluted

2

(0.05p)

(8.54p)

(8.59p)

(0.15p)

11.72p

11.57p

 

0.51p

 

17.08p

 

17.59p

 

 

 

All items in the above statement derive from continuing operations.

 

There are no recognised gains and losses other than those disclosed in the Income Statement.

 

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the realised and unrealised profit or loss on investments and the proportion of the management fee charged to capital.

 

The total column of this statement is the unaudited Statement of Total Comprehensive Income of the Company prepared in accordance with the Financial Reporting Standard ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies ("AIC SORP").

 

Condensed statement of changes in equity

For the six months to 31 March 2022 (unaudited)

 


 

Non-distributable reserves

Distributable reserves

Total

£'000

Notes

Called-up share capital

£'000

Share

premium  £'000

Revaluation

reserve

£'000

Capital

reserve £'000

Revenue

reserve

£'000

At 1 October 2021


29,501

76,711

68,763

46,248

1,640

222,863

Profit/(loss) on ordinary activities after taxation


-

-

(28,972)

4,113

(131)

(24,990)

Net proceeds of share issues, share buybacks & sale of shares from treasury

 

 

    3

4,704

31,724

-

(850)

-

35,578

Dividends paid

    4

-

-

-

(10,435)

(307)

(10,742)

At 31 March 2022

 

34,205

108,435

39,791

39,076

1,202

222,709

 

For the six months to 31 March 2021 (Unaudited)



Non-distributable reserves

Distributable reserves

Total

£'000

Notes

Called-up share capital

£'000

Share

Premium

  £'000

Revaluation

reserve

£'000

Capital

reserve £'000

Revenue

reserve

£'000

At 1 October 2020


25,268

49,397

29,590

58,399

2,180

164,834

Profit/(loss) after taxation


-

-

26,534

2,998

(377)

29,164

Net proceeds of share issues, share buybacks & sale of shares from treasury

 

 

3

4,232

27,314

-

(784)

-

30,762

Dividends paid

4

-

-

-

(8,177)

(1,055)

(9,232)

At 31 March 2021


29,500

76,711

56,133

52,436

748

215,528

 

For the year ended 30 September 2021 (Audited)

 



Non-distributable reserves

Distributable reserves

Total

£'000

Notes

Called-up share capital

£'000

Share

premium 

£'000

Revaluation

reserve

£'000

Capital

reserve £'000

Revenue

reserve

£'000

At 1 October 2020

 

25,268

49,397

29,590

58,399

2,180

164,834

Profit after taxation

 

-

-

39,173

5,553

1,327

46,053

Net proceeds of share issues, share buybacks & sale of shares from treasury


4,233

27,314

-

(2,221)

-

29,326

Dividends paid


-

-

-

(15,483)

(1,867)

(17,350)

At 30 September 2021

 

29,501

76,711

68,763

46,248

1,640

222,863


 







 

 

 

 

Condensed Balance Sheet

As at 31 March 2022 (Unaudited)

 


 

Notes

 

As at

31 March

2022

£'000

As at
 31 March 2021

£'000

As at
30 September 2021

£'000






Fixed assets


 



Unquoted investments

5

48,012

44,698

52,012

Traded on AIM

5

64,041

71,151

77,380

Collective investment vehicles

5

67,459

58,155

79,400

Listed on LSE

5

24

25

24

Investments

5

179,536

174,029

208,816



 



Current assets


 



Debtors


80

108

91

Cash at bank


44,304

42,849

17,453



 





 





44,384

42,957

17,453

Creditors   (amounts falling due within one year)


(1,211)

(1,458)

(3,497)



 



Net current assets


43,173

41,499

14,047



 



Net assets


222,709

215,528

222,863



 



Capital and reserves


 



Called-up share capital


34,205

29,500

29,501

Share premium


108,435

76,711

76,711

Capital reserve


39,076

52,436

46,248

Revaluation reserve

5

39,791

56,133

68,763

Revenue reserve


1,202

748

1,640



 



Equity shareholders' funds


222,709

215,528

222,863

 


 



Net asset value per share


70.37p

79.16p

82.40p

Number of ordinary shares in circulation


316,473,613

272,255,245

270,458,280

 


Condensed Statement of Cash Flows

For the six months to 31 March 2022 (unaudited)

 


Six
months to
31 March 2022

£'000

Six
months to
31 March
2021

£'000

Year

to
30 September 2021

£'000





Net cash outflow from operating activities

(3,765)

(1,159)

(1,057)

Net cash inflow/(outflow) from investing activities

6,076

11,497

(4,802)

Net cash inflow/(outflow) before financing activities

2,311

10,338

(5,859)

Net cash inflow from financing activities

24,540

21,469

12,270


 



Increase in cash

26,851

31,807

6,411


 



Reconciliation of net cash flow to movement in net cash

 



Increase in cash

26,851

31,807

6,411

Opening cash at bank and on deposit

17,453

11,042

11,042


 



Closing cash at bank and on deposit

44,304

42,849

17,453


 



Reconciliation of (loss) / profit before taxation to net cash outflow from operating activities

 



(Loss)/profit before taxation

(24,990)

29,164

46,053

(Losses)/gains on investments

23,346

(31,241)

(49,591)

Changes in working capital and other non-cash items

(2,121)

918

2,481


 



Net cash outflow from operating activities

(3,765)

(1,159)

(1,057)

 

Notes to the financial statements

For the six months to 31 March 2022 (Unaudited)

 

1 Basis of preparation

 

The condensed financial statements for the six months to 31 March 2022 comprise the unaudited statements set out on pages 10 to 13 together with the related notes on pages 14 to 17. The Company applies FRS 102 and the AIC's Statement of Recommended Practice ('the SORP') for its annual financial statements. The condensed financial statements for the six months to 31 March 2022 have therefore been prepared in accordance with FRS 104 'Interim Financial Reporting' and the principles of the SORP. They have been prepared on a going concern basis. The accounts have been prepared on the same basis as the accounting policies set out in the Company's Annual Report and Financial Statements for the year ended 30 September 2021.

 

The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in sections 434 - 436 of the Companies Act 2006. The half-yearly financial report for the six months ended 31 March 2022 and for the six months ended 31 March 2021 have been neither audited nor reviewed by the Company's auditors. The information for the year to 30 September 2021 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the auditor for the audited financial statements for the year to 30 September 2021 was: (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

No statutory accounts in respect of any period after 30 September 2021 have been reported on by the Company's auditors or delivered to the Registrar of Companies.

 

Copies of the half-yearly financial report have been made available to shareholders and are available from Gresham House,  80 Cheapside, London, EC2V 6EE.

 

2  Performance and shareholder returns

Return per share is based on a weighted average of 290,940,471 ordinary shares in issue (31 March 2021 - 252,148,059 ordinary shares; 30 September 2021 - 261,864,661 ordinary shares).


Earnings for the first six months to 31 March 2022 should not be taken as a guide to the results of the full financial year to 30 September 2022.

 

3.  Called-up share capital

 

Allotted, called-up and fully paid:

 

Ordinary shares

£'000

295,007,034 ordinary shares of 10p each listed at 30 September 2021

29,501

47,038,607 ordinary shares of 10p each issued during the period

4,704

342,045,641 ordinary shares of 10p each listed at 31 March 2022

34,205

24,548,754 ordinary shares of 10p each held in treasury at 30 September 2021

(2,455)

1,984,274 ordinary shares of 10p each repurchased during the period and held in treasury

(198)

961,000 ordinary shares of 10p each sold from treasury during the period

96

25,572,028 ordinary shares of 10p each held in treasury at 31 March 2022

(2,557)

316,473,613 ordinary shares of 10p each in circulation* at 31 March 2022

31,648

*   carrying one vote each


 

During the six months to 31 March 2022, the Company issued 47,038,607 shares at net proceeds of £36,428,000 (after costs). During the same period, the Company purchased 1,984,274 shares to be held in treasury at a cost of £1,506,000. The Company also sold 961,000 treasury shares at a cost of £656,000. At 31 March 2022 the Company held 25,572,028 ordinary shares in treasury. Shares may be sold out of treasury below Net Asset Value as long as the discount at issue is narrower than the average discount at which the shares were bought into treasury.

 

Excluding treasury shares, there were 316,473,613 ordinary shares in issue at 31 March 2022 (31 March 2021 - 272,255,245 ordinary shares; 30 September 2021 - 270,458,280 ordinary shares).

 

4.  Dividends

The final dividend for the year ended 30 September 2021 of 3.5p per share (3.4p capital, 0.1p revenue) was paid on 4 March 2022 to shareholders on the register on 4 February 2022. The ex-dividend date was 3 February 2022.

 

During the year to 30 September 2021, the Company paid an interim dividend in September 2021 of 3.0p per share (2.7p capital, 0.3p revenue).

5.  Investments

All investments are initially recognised subsequently measured at fair value. Changes in fair value are recognised in the Income Statement.

 

The methods of fair value measurement are classified into a hierarchy based on reliability of the information used to determine the valuation.

 

· Level 1 - Fair value is measured based on quoted prices in an active market.

· Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices.

· Level 3 - Fair value is measured using a valuation technique that is not based on data from an observable market.

 

The valuation of unquoted investments contained within level 3 of the Fair Value hierarchy involves key assumptions dependent upon the valuation methodology used. The primary methodologies applied are:

 

-  Cost of recent investment

-  Earnings Multiple

-  Offer Less 10 per cent

 

The earnings multiple approach involves more subjective inputs than the cost of recent investment and offer approaches and therefore presents a greater risk of over or under estimation. Key assumptions for the earnings multiple approach are the selection of comparable companies and the use of either historic or forecast revenue or earnings, as considered most appropriate. Other assumptions include the appropriateness of the discount magnitude applied for reduced liquidity and other qualitative factors. These assumptions are described in more detail in note 2.3 in the Company's Report and Financial Statements for the year to 30 September 2021. The techniques used in the valuation of unquoted investments have not changed materially since the date of that Report.

 

 

Level 1

Level 2

Level 3

 


Traded

on AIM

£'000

 

Traded

on LSE

£'000

Collective

investment

vehicles

£'000

 

 

Unquoted

£'000

Total

£'000

Opening book cost

47,079

2,315

51,111

39,548

140,053

Opening unrealised appreciation/(depreciation)

30,301

(2,291)

28,289

12,464

68,763

Opening fair value

77,380

24

79,400

52,012

208,816

Movements in the period:






Purchases at cost

3,617

-

7,541

5,947

17,105

Sale - proceeds

(3,578)

-

(12,000)

(7,461)

(23,039)

Sale - realised gains/ (losses) on sales

1,322

-

-

(1,766)

(444)

Unrealised gains realised during the period

(396)

-

-

6,466

6,070

Decrease in unrealised appreciation

(14,304)

-

(7,482)

(7,186)

(28,972)

Closing fair value

64,041

24

67,459

48,012

179,536

Closing book cost

48,044

2,315

46,652

42,734

139,745

Closing unrealised appreciation/(depreciation)

15,997

(2,291)

20,807

5,278

39,791

Closing fair value

64,041

24

67,459

48,012

179,536

Equity shares

64,041

24

-

25,778

89,843

Preference Shares

-

-

-

13,209

13,209

Loan notes

-

-

-

9,025

9,025

Collective investment vehicles

-

-

67,459

-

67,459

Closing fair value

64,041

24

67,459

48,012

179,536

 

6.  Other required disclosures

 

6.1  Segmental reporting

The Company has one reportable segment being investing in primarily a portfolio of UK growth businesses, whether unquoted or traded on AIM.

 

6.2  Principal risks and uncertainties

The Company's financial instruments consist of equity and fixed interest investments, cash balances and liquid resources. Its principal risks are therefore market risk, price risk, credit risk and liquidity risk. Other risks faced by the Company include loss of approval as a Venture Capital Trust, legislative, investment performance, economic, political and other external factors, regulatory and compliance and operational risks. These risks, and the way in which they are managed, are described in more detail in the Principal Risks & Uncertainties table within the Strategic Report section in the Company's Report and Financial Statements for the year to 30 September 2021. The Board continues to regularly to review the risk environment in which the Company operates.

 

6.3  Related parties

Gresham House Asset Management Ltd ('the Manager') manages the investments of the Company. The Manager also provides or procures the provision of secretarial, administrative and custodian services to the Company. Under the management agreement, the Manager receives a fee of 2.0 per cent. per annum of the net assets of the Company. This is described in more detail under the heading 'The management agreement' within the Strategic Report in the Company's Annual Report and Financial Statements for the year to 30 September 2021. During the period the Company has incurred management fees of £2,018,000 (31 March 2021 - £1,885,000; 30 September 2021 - £4,037,000) and secretarial fees of £69,000 (31 March 2021 - £62,000; 30 September 2021 - £126,000) payable to the Manager. A performance fee of £nil has been accrued at 31 March 2022 (31 March 2021 - £286,000; 30 September 2021 - £1,941,000). This is described in more detail under the heading 'Performance fees' within the Strategic Report in the Company's Annual Report and Financial Statements for the year to 30 September 2021.

 

A related party relationship exists between the Company and Happy Days Consultancy Ltd, owing to the significant influence deemed to be held over the operations of the company. As at 31 March 2022, the loan balance stood at £2,872,000, including £918,000 of capitalised interest, as provided for in the Agreement with the company.

6.4  Investment in associates

The Company has made the presumption that the following holding is an investment in an associate, owing to the proportion of equity held and representation on the board representing significant influence over the operations of the company. The investment is held as part of an investment portfolio, and is therefore measured at fair value through profit and loss, as detailed in note 5 rather than using the equity method, as permitted by Section 14 of FRS 102

 

Name

Location

Class of Shares held

% of Equity

Profit (£m)

Net Assets (£m)

Results for year ended

Happy Days Consultancy Ltd

UK

A Ordinary & B Ordinary

29.2%

(3.0)

(12.7)

31 December 2020 1

 

 

1   Latest published set of financial statements available at Companies House.

 

 

6.5  Going Concern

After making enquiries and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion, the Directors have considered the Company's cash balances, the liquidity of the Company's investments and the absence of any gearing. The Directors are therefore also satisfied that the Company has adequate financial resources to continue in operation for at least the next 12 months and that, accordingly, it is appropriate to adopt the  going concern basis in preparing the financial statements.

6.6   Post balance sheet events

The following events occurred between the balance sheet date and the signing of these financial statements:

· The 30 April 2021 NAV of 71.1p was announced on 6 May 2022. At the date of publishing this report, the Board is unaware of any matter that will have caused the NAV per share to have changed significantly since the latest NAV.

 

· Two follow-on investments, into Tribe and Panthera, completed in April 2022 totalling £2.7mn.

 

· Two further follow-on investments, into Yappy and Glisser, completed in May 2022 totalling £1.2mn.

 

 

· One new investment, into Bidnamic, completed in May 2022 totalling £0.9mn.

 

Corporate Information

Directors

Fiona Miller Smith (Chairman)

Les Gabb*

Susannah Nicklin Δ

Michael Probin†

 

Secretary

Gresham House Asset Management Ltd

 

Registered Office

5 New Street Square

London EC41 3TW

 

Investment Manager

Gresham House Asset Management Ltd

5 New Street Square

London EC4 3TW

Tel: 020 7382 0999

 

Registered Number

03504214

 

Registrars and Transfer Office

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol BS99 6ZZ

Tel: 0800 923 1533

 

Brokers

Panmure Gordon & Co

One New Change

London EC4M 9AF

Tel: 020 7886 2500

 

Auditor

BDO LLP

55 Baker Street

London W1U 7EU

 

Solicitors

Dickson Minto

Broadgate Tower

20 Primrose Street

London EC2A 2EW

 

VCT Status Adviser

PricewaterhouseCoopers LLP

1 Embankment Place

London WC2N 6RH

 

Website

www.baronsmeadvcts.co.uk

 

Δ Senior Independent Director

*  Chairman of the Audit Committee

† Chairman of the Nomination Committee

† Chairman of the Management Engagement and Remuneration Committee

LEI: 213800VQ1PQHOJXDDQ88

 

 

 

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