Statement Re Quarterly NAV
Schroder British Opportunities Trust plc
Announcement of Net Asset Value as at 31 December 2022
Schroder British Opportunities trust plc (the "Company") today announces its unaudited net asset value ("NAV") as £75.9 million or 102.8 pence per share as at 31 December 2022, following the quarterly valuation of the Company's private equity holdings. This represents an increase of 2.2% based on the NAV per share as at 30 September 2022 (100.6 pence per share). The Company's daily NAV calculation re-values the public asset holdings on a daily basis, and the private equity holdings quarterly post period end.
This 2.2% comprised:
o Public holdings: 1.6%
o Private holdings including cash received due to the closing of the merger between Waterlogic and Culligan: 0.9%
o Gain on share buybacks 0.1%
o Operating expenses: -0.4%
Economic backdrop
UK equities rose over the quarter, helped in part by the country emerging from its September 'mini-budget' crisis. A new Prime Minister and the decision by the Bank of England to reduce the pace of interest rate hikes helped the market recover from the mid-autumn low.
Portfolio
As at 31 December 2022, the Company had 34 holdings; 9 private and 25 public companies. During the period, the Company exited its positions in Euromoney and Genuit Group.
Financial performance
|
Attribution Analysis (£m) |
Public |
Private |
Cash |
Other |
NAV |
|
Value at 30.09.2022 |
26.3 |
45.5 |
5.1 |
(2.3) |
74.6 |
|
Investments |
0.6 |
- |
(0.6) |
- |
- |
|
Realisations for cash |
(2.4) |
(2.4) |
4.8 |
- |
- |
|
Fair value gains |
1.2 |
0.4 |
- |
- |
1.6 |
|
Costs and other movements |
- |
- |
(0.3) |
- |
(0.3) |
|
Value at 31.12.2022 |
25.7 |
43.5 |
9.0 |
(2.3) |
75.9 |
Source: Schroders
The Company's public holdings grew in value by 4.6% (£1.2m). The main contributors were Volution and Watches of Switzerland, offset by reductions in GB Group and MaxCyte.
The Company's private holdings saw an increase in value of 0.9% (£0.4m). A major contributor was Waterlogic due to the completion of the merger between Waterlogic and Culligan International in November, which led to the Company receiving a £2.4m cash dividend. Another positive contributor was EasyPark, which had record transaction and monthly active user volumes in Q4. Detractors were Cera Care and Rapyd. Cera Care continues to execute well, closing on a number of bolt-on acquisitions, however, like-for-like revenue was marginally weaker in the quarter resulting in a valuation write down. Rapyd continues to deliver strong revenue growth and is well capitalised but multiple compression in its comparator group weighed heavily on its quarterly valuation.
Investment activity
During the period, we exited two of our public equity holdings; Euromoney (subject to a takeover approach) and Genuit Group. We also reduced positions in Judges Scientific and Keywords Studios, whilst adding to existing positions in Volution and Sosandar. There is a strong pipeline of private investments identified.
Top 10 holdings
|
Holding |
Fair value as at 31 December 2022 (£'000) |
% of total investments |
Fair value as at 30 September 2022 (£'000) |
% of total investments |
|
Rapyd |
9,260 |
13.4 |
10,102 |
14.1 |
|
Cera Care |
7,021 |
10.1 |
8,131 |
11.3 |
|
Pirum |
5,568 |
8.0 |
5,568 |
7.8 |
|
Waterlogic |
4,579 |
6.6 |
6,973 |
9.7 |
|
Mintec |
4,653 |
6.7 |
4,360 |
6.1 |
|
EasyPark |
4,035 |
5.8 |
2,814 |
3.9 |
|
CFC |
3,512 |
5.1 |
2,576 |
3.6 |
|
Learning Curve |
2,503 |
3.6 |
2,505 |
3.5 |
|
Graphcore |
2,326 |
3.4 |
2,506 |
3.5 |
|
Watches of Switzerland |
1,919 |
2.8 |
1,574 |
2.2 |
Source: Schroders
Outlook
The current economic environment is challenging and many company valuations are trading close to historic lows. In a number of cases there is a disconnect between an investment company's share price and the value of its portfolio holdings, and that is certainly the case here. Many of the companies in our portfolio are performing well but the impact of the economic environment, where growth capital is out of favour due to interest rate uncertainty, has resulted in the Company continuing to trade at a significant discount to NAV. In the view of the Board and the Portfolio Managers, this discount is unjustly high.
The Company had £7.6 million in cash as at 15 March 2023, and therefore is well positioned to take advantage of attractive investment opportunities.
Our differentiated public-private equity strategy enables us to continue to invest without boundaries, thus providing access to a broader investable universe. We believe this differentiates Schroder British Opportunities Trust from other investment trusts and provides us with an advantage.
Why invest in Schroder British Opportunities Trust?
Broad opportunity set
The trust takes full advantage of its broad investment universe. The Portfolio Managers can scour both private and public markets for the brightest growth prospects.
Profitability
The trust focuses on quality businesses that are profitable and exhibit strong cash flow conversion. Those that are yet to reach that milestone have strong balance sheets and healthy cash runways.
Unrivalled access
The team's strong network of co-investment partners in the private equity space developed over 25 years gives it unrivalled access to the most attractive investment opportunities. More than 175 professionals work for Schroders in private equity and venture capital investing, and they draw on a network of more than 100 specialist European general partners and private equity managers to source the best private equity deals[i]
Unparalleled insight
In managing the Company, the public equities and private equity teams do not invest in isolation. They have an open and ongoing dialogue - sharing research, insight and experience - which gives them a full view of the landscape in which companies operate and makes them more informed investors. The wealth of knowledge that exists across public and private equity teams aids better investment decision-making.
Active ownership
Engaging with company management and co-investors allows the team to support strategic planning and promote sustainability. Schroders has long contended that responsible business practices enhance the long-term value of investments and benefit all stakeholders.
Double discount
The UK public equity market is cheap relative to history and many international markets. At the same time, the discount at which shares in the Company trade has recently widened in line with higher-risk strategies in its peer group, significantly undervaluing its private equity portfolio. At such depressed levels, new investors in the Company have the potential to achieve a double discount.
Private Equity Valuation Process
Whilst we are acutely aware of the healthy scepticism around valuations of private investments, particularly at a time of falling public equity valuations, the Company benefits from a robust fully independent valuation process drawing on a dedicated six person valuation team embedded in a 50+ FTE operations team set across three continents. The valuation framework benefits from a two layer valuation oversight structure and considers best practices from International Private Equity & Venture Capital valuation and the American Institute of Certified Public Accountants Valuation Guidelines. Wherever possible valuations take account of public market comparable valuation metrics and at 31 December 2022, 7 of the nine private investments were valued by reference to public market metrics, with 2 of the more recent investments referencing transaction valuations. The Company's private investments are in the small and mid-size buyout and growth space.The Company does not invest in large buyout, turnaround, seed or venture capital areas of the market where valuations are inherently more difficult to assess.
Enquiries :
|
Schroder Investment Management Limited Paula Lockwood (Company Secretarial) Augustine Chipungu (PR)
|
020 7658 6000
|
|
Peel Hunt Alex Howe, Chris Bunstead, Ed Welsby, Richard Harris (Sales) |
020 7418 8900 |
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. The securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.
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