REG - Baronsmead Second VT - Half-yearly Report
11/06/2024 07:00
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RNS Number : 8783R Baronsmead Second Venture Trust PLC 11 June 2024
Baronsmead Second Venture Trust plc
Half-yearly report for the six months ended 31 March 2024
The Directors of Baronsmead Second Venture Trust plc are pleased to announce
the unaudited half-yearly financial report for the six months to 31 March
2024. Copies of the half-yearly report can be obtained from the following
website: www.baronsmeadvcts.co.uk (http://www.baronsmeadvcts.co.uk/) .
Our investment objective
* Baronsmead Second Venture Trust plc (the "Company") is a tax efficient listed
company which aims to achieve long-term positive investment returns for
private investors, including tax free dividends.
Investment policy(1)
* To invest primarily in a diverse portfolio of UK growth businesses, whether
unquoted or traded on the Alternative Investment Market ("AIM").
* Investments are made selectively across a range of sectors in companies that
have the potential to grow and enhance their value.
Dividend policy(2)
* The Board will, where possible, seek to pay two dividends to shareholders in
each financial year, typically an interim dividend in September and a final
dividend following the Annual General Meeting in February/March.
* The Board will use, as a guide, when setting the dividends for a financial
year, a sum representing 7 per cent. of the opening net asset value of that
financial year.
1. This is a summary of the Company's investment policy that is set out on
page 99 of the Company's Annual Report and Financial Statements for the year
ended 30 September 2023.
2. This is a summary of the Company's dividend policy that is set out on page
36 of the Company's Annual Report and Financial Statements for the year ended
30 September 2023.
Key elements of the business model
Access to an attractive, diverse portfolio
The Company 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 interesting 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 that management resources are in
place to deliver profitable growth. The intention 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
329.7p Net Asset Value ("NAV") total return to shareholders for every 100.0p
invested at launch (January 2001).
NAV per share increased 3.8 per cent. to 57.7p before the deduction of
dividends in the six months to 31 March 2024.
£25.0mn raised in the period (before costs).
£7.3mn Investments made into four new and six follow-on opportunities during
the period. (Unquoted: £6.2mn, Quoted: £1.1mn).
Cash returned to shareholders
The table below shows the cash returned to shareholders that invested in
Baronsmead Second Venture Trust plc dependent on their subscription cost,
including the income tax available to be reclaimed on the subscription.
Year subscribed Cash invested Income tax reclaim Cumulative dividends Return on cash invested(#) (%)
(p) (p) Net cash invested paid(#)
(p) (p)
2001 (January) 100.00 20.00 80.00 166.55 186.6
2005 (March) - C Share* 100.00 40.00 60.00 121.12 161.1
2010 (March) 103.09 30.93 72.16 118.25 144.7
2012 (December) 117.40 35.22 82.18 100.25 115.4
2014 (March) 112.40 33.72 78.68 80.25 101.4
2016 (February) 107.20 32.16 75.04 63.75 89.5
2017 (October) 97.48 29.24 68.24 43.75 74.9
2019 (February) 85.30 25.59 59.71 36.25 72.5
2019 (November) 78.90 23.67 55.23 28.75 66.4
2020 (January) 84.80 25.44 59.36 28.75 63.9
2020 (February) 82.50 24.75 57.75 25.25 60.6
2020 (March) 64.30 19.29 45.01 25.25 69.3
2020 (November) 77.90 23.37 54.53 22.25 58.6
2020 (December) 80.90 24.27 56.63 22.25 57.5
2021 (January) 84.40 25.32 59.08 22.25 56.4
2021 (February) 82.20 24.66 57.54 18.75 52.8
2021 (March) 84.90 25.47 59.43 18.75 52.1
2021 (December) 88.10 26.43 61.67 15.75 47.9
2022 (January) 87.10 26.13 60.97 15.75 48.1
2022 (March) 76.60 22.98 53.62 12.25 46.0
2023 (January) 68.19† 20.46 47.73 9.25 43.6
2023 (March) 65.72† 19.72 46.00 6.25 39.5
2023 (April) 62.96† 18.89 44.07 6.25 39.9
2024 (January) 61.05† 18.32 42.74 4.00 36.6
2024 (February) 60.63† 18.19 42.44 1.75 32.9
2024 (April) 60.67† 18.20 42.47 1.75 32.9
The total return could be higher for those shareholders who were able to defer
a capital gain on subscription and the net sum invested may be less.
* Dividends paid to C shareholders post conversion have been adjusted by
the conversion ratio (0.85642528).
# Includes interim dividend of 1.75p per share payable 9 September 2024.
† Average effective offer price. Shares were allotted pursuant to the 2023
& 2024 Offers at individual prices for each investor in accordance with
the allotment formula as set out in each Offers Securities Note.
Chair's statement
I am pleased to announce that, despite the volatile market conditions
witnessed over the last six months, the Company's net asset value increased by
2.1p per share to 57.7p. As described more fully below, the strong performance
of the Company's listed portfolio outweighed the weakness in the value of the
Company's unquoted investments and this once again highlights the benefits of
the Company's investment policy of having a combination of unquoted and listed
assets. This approach supports the Company's aim of providing a more
consistent total return to shareholders over the medium to long term. After
the period end, the NAV has continued to increase through further good
performance of the listed portfolio, as reported on below.
Over the six months to 31 March 2024, whilst the Bank of England base rate
remained at 5.25%, the highest level in 15 years, hostilities in the Middle
East intensified global uncertainty. However, continued reductions in headline
inflation and the stable base rate supported a rebound in UK equity
performance during the latter part of 2023, with markets pricing in
expectations of continued moderating inflation and falling interest rates in
2024. In the first months of 2024, inflation fell by more than many economists
predicted but the benefits were felt unevenly across the UK equity market.
Large cap stocks outperformed their smaller counterparts over the period and
this was partly attributable to investors' lack of confidence in this section
of the market and the further outflows of money from UK funds investing in
smaller cap companies.
As we enter the new quarter, it's fair to say that consumer and business
confidence remain fragile with elevated macroeconomic and geopolitical
uncertainty expected to continue to drive market volatility over the coming
months. However, your Board continues to believe 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 over the medium term.
Results
During the six months to 31 March 2024, the Company's NAV per share increased
3.8 per cent. from 55.6p to 57.7p after the payment of a final dividend of
2.25p per share on 8 March 2024. The table below breaks down the movement in
NAV over the 6 months.
Pence per ordinary share
NAV as at 1 October 2023 (after deducting the final dividend of 2.25p) 55.6
Valuation increase (3.8 per cent.) 2.1
NAV as at 31 March 2024 57.7
The Board is pleased to report as at 31 May 2024, the NAV was 59.8p per share,
a 3.6 per cent. increase over the NAV as at 31 March 2024. This was driven by
firmer quoted markets and further increases in the value of the Company's
listed investments.
Dividends
The Board has declared an interim dividend of 1.75p per share to be paid on 9
September 2024 to shareholders on the register as of 9 August 2024. The Board
is aware that dividends are an important part of the total return to the
shareholders' investment in the Company. As such, the Board is aiming to
achieve its dividend policy objective of an annual yield of 7.0 per cent.
based on the NAV at the beginning of the financial year. I must of course
remind shareholders this is not a guarantee and that payment dates and the
amount of future dividends depend on the level and timing of profitable
realisations.
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 investee companies** % return in the period***
Unquoted 53 25 40 (4)
AIM- traded companies 83 38 42 8
WS Gresham House UK Equity Funds 68 32 90 8
Liquid assets(#) 11 5 N/A 3
Total 215 100 172 4
* By value at 31 March 2024.
** Includes investee companies held in more than one fund. Total number of
individual companies held is 159.
*** Return includes interest received on unquoted realisations during the
period.
(#)( )Represents cash, cash liquidity funds and net current assets. % return
in the period relates only to the cash liquidity funds.
The value of the unquoted portfolio decreased 3.8 per cent. in the six months
to 31 March 2024. The drop in value was driven by the reduction in value of
one key asset, with the remaining portfolio showing an increase in value over
the period.
The value of the Company's portfolio of investments directly held in
AIM-traded companies increased 8.2 per cent. in the six months to 31 March
2024. The value of the Company's investment into the WS Gresham House UK Micro
Cap Fund ("Micro Cap") increased by 6.7 per cent., the WS Gresham House UK
Smaller Companies Fund increased by 9.2 per cent. and the WS Gresham House UK
Multi Cap Income Fund ("Multi Cap Income") increased by 7.4 per cent. in the
period. This was primarily due to positive news flow from individual companies
across the portfolio being well received by the markets with a number of
trading updates demonstrating better than expected financial performance.
In the Manager's regular reporting to the Board, the Directors were pleased to
learn that in the 6 months to 31 March 2024, a number of companies in our
listed portfolio reported in-line or positive news flow in terms of their
financial performance. This is welcome given the economic and political
environment which we are facing.
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 four new investments totalling
£4.4mn and six follow-on investments with a combined value of £2.9mn in the
six months to 31 March 2024. Below are descriptions of the new investments
made:
· Azarc (unquoted) - Cross‑border customs automation software
provider
· CitySwift (unquoted) - Passenger transport data and scheduling
software provider
· Ozone API (unquoted) - Open banking software developer
· SciLeads (unquoted) - Life Sciences data and lead generation
provider
Following the period end, a total of £2.1mn was invested as follows:
* follow-on investment of £0.2mn into Rockfish, a chain of fish restaurants,
which is in our unquoted portfolio
* follow-on investment of £0.2mn into Yappy, a supplier of customisable pet
products, which is in our unquoted portfolio
* follow-on investment of £0.5mn into Counting, a banking and software provider
for small businesses, which is in our unquoted portfolio
* new unquoted investment of £1.2mn into OnSecurity Technology, a penetration
testing provider
Realisations
During the period, in the unquoted portfolio, Funding Xchange, a SME lending
marketplace, was acquired resulting in a gross money multiple of 0.1x original
cost and Armstrong Craven, a recruitment company, went into administration.
The business had experienced very challenging trading conditions over the past
year and its valuation had already been written down to zero.
In the listed portfolio, Gresham House was acquired via a recommended cash
offer resulting in a gross money multiple of 3.9x original cost. The Manager
also continued to take profits from partial sales of the Company's holding of
Cerillion plc resulting in proceeds of £4.1mn, and a gross money multiple of
21.0x original cost.
Fundraising
I am pleased to report that, shortly after the period end, the Company
successfully raised £25.0mn (before costs) through an offer for subscription
which became fully subscribed in April 2024. The Directors are pleased to
welcome the 800 new shareholders who invested during the offer period and are
appreciative of the continued support of 556 pre-existing shareholders.
The Board will consider whether to raise new funds in the 2024/25 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.
Consumer Duty
The FCA's Consumer Duty came into force on 31 July 2023 and, in summary,
requires firms to which this applies to act to deliver good outcomes for their
retail customers. The Consumer Duty regulations apply to the regulated and
ancillary activities of all FCA authorised firms under the Financial Services
and Markets Act 2000, the Payment Services Regulations 2017 and the Electronic
Money Regulations 2011. The Company is not a FCA authorised firm and
accordingly does not fall within scope of these regulations. However, the
Company's Manager, Gresham House Asset Management Ltd, being an FCA authorised
firm, is covered by the regulations and the Board is cognisant of the
Manager's obligations to comply with the Consumer Duty. The Board receives
regular updates from the Manager on the delivery of its obligations under the
Consumer Duty and is satisfied that the Manager is complying with all
appropriate regulation.
VCT Regulation - Financial Health Test
Since the various VCT rule changes in both 2015 and 2018, VCT qualifying
investments have become focussed on smaller, younger companies. As a result,
when the Manager makes a new investment, they expect to make further follow-on
investments as the investee company progresses and where the business case for
the investment is justified. These follow-on investments are subject to the
same VCT compliance rules as new deals and both rely on certain criteria being
met, including the Financial Health Test.
The Financial Health Test is not something new and was primarily introduced as
an anti-abuse regulation. However, following amendment to HMRC's guidance,
there has been an effective tightening of the interpretation the Financial
Health Test. This is resulting in the restriction of potential follow-on VCT
investment to support certain portfolio companies.
This has the potential to negatively impact shareholders' returns as a result
of portfolio companies going into administration when they might otherwise
have gone on to be successful. Furthermore, as this is an industry wide issue,
this measure increases the uncertainties small companies face at a
particularly difficult time and may well result in unnecessary job losses and
hardship to employees and their families and has the potential to reduce the
overall tax efficiency of the VCT scheme as a whole.
In December 2023, the Venture Capital Trust Association ("VCTA") held a
meeting with government officials to discuss the recent difficulties with the
application of the new guidance. The meeting was successful with the
government officials acknowledging the difficulties. They clarified that going
forward, while the 50% rule (i.e. amount of raised capital converted to
retained losses) will remain the first line of assessment of financial health,
businesses will be given the opportunity to explain why they should be
recognised as financially healthy even if they do not meet this rule.
The Board continues to monitor developments in this area carefully and
supports the representations being made by the Association of Investment
Companies ("AIC") and the VCTA to HMRC and HM Treasury.
Outlook
The Board expects that elevated macroeconomic and global and domestic
political uncertainty, including anaemic UK economic growth and upcoming
elections in the UK in July and US in November, will continue to drive market
volatility over the coming months. Global investors remain particularly
sensitive to new inflation data and shifting central bank commentary on
interest rates, while conflicts in the Ukraine and the Middle East threaten
regional stability.
Against this, the Company's portfolio remains highly diversified and is
largely positioned in sectors which the Manager expects to provide long-term
growth potential. We remain committed to investing through the economic cycle
as experience suggests that this can produce superior returns over the longer
term. This can also provide an opportunity for the Company to make high
quality investments and build strategic stakes in businesses with great
potential at attractive prices. This applies to both new investments and
follow-on investments in the portfolio. The Manager continues to see a good
pipeline of potential investments and the Board is confident that the Company
remains suitably resourced to support investment into new and existing
portfolio companies.
Sarah Fromson
Chair
10 June 2024
Investments in the period
Company Location Sector Activity Book cost £'000
Unquoted investments
New
Ozone Financial Technology Ltd London Technology Open banking infrastructure provider 1,847
Huddl Mobility Ltd (trading as CitySwift) Ireland Technology SaaS product for bus operators and local authorities to aggregate, cleanse and 938
access insight from data from across their bus networks
SciLeads Ltd London Technology A data‑intelligence platform that enables companies operating within Life 915
Science verticals to identify, track and convert potential customers
Azarc.io Inc London Technology Automating customs declarations 652
Follow-on
Patchworks Integration Ltd London Technology Leading integration platform for fast‑growing retail and ecommerce 910
businesses
Metrion Biosciences Ltd Cambridgeshire Healthcare & education Ion channel drug discovery and safety assessment services provider 548
Focal Point Positioning Ltd Cambridgeshire Technology A research and development focused technology business focusing on global 227
navigation and satellite systems
Orri Ltd London Healthcare & education Provider of intensive day care treatments for eating disorders 114
Total unquoted investments 6,151
AIM-traded investments
Follow-on
Eden Research plc Oxfordshire Business services Developer of biological fungicides and bio equivalents 895
PCI‑PAL plc London Technology Secure payment services provider 239
Total AIM-traded investments 1,134
Total investments in the period(#) 7,285
# Includes unquoted and AIM investments only.
Company First investment date Original book cost(#) £'000 Proceeds(‡ ) Overall multiple return (x) IRR (%)
£'000
Unquoted realisations
Funding Xchange Ltd Full trade sale Nov 19 795 50 0.1 0.0
Armstrong Craven Ltd Written off Jun 13 664 - 1.1* 1.6
Total unquoted realisations 1,459 50
AIM-traded realisations
Cerillion plc Market sale Jul 15 196 4,127 21.0 44.3
Gresham House plc Takeover Nov 14 137 530 3.9 15.9
Total AIM - traded realisations 333 4,657
Total realisations in the period** 1,792 4,707
Realisations in the period
Liquidation proceeds of £114k were received during the period from InterQuest
Group plc, which was written off in September 2023.
(#) 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.
** Includes unquoted and AIM investments only.
Responsibility statement of the Directors in respect of the half-yearly 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 Chair's statement and the
Strategic report.
The principal risks facing the Company are unchanged since the date of the
Company's Annual Report for the financial year ended 30 September 2023 and
continue to be as set out in that Report on pages 22 and 23.
Risks faced by the Company include but are not limited to; loss of approval as
a Venture Capital Trust, legislative risk, investment performance risk, risk
of economic, political and other external factors, regulatory and compliance
risk and operational risk. The Board considers the conflicts in Ukraine and
the Middle East 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:
* the condensed set of financial statements has been prepared in accordance with
FRS 104 Interim Financial Reporting Standards and gives a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company.
* 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 10 June 2024
and was signed on its behalf by Ms Sarah Fromson, Chair.
Sarah Fromson
Chair
10 June 2024
Condensed income statement
For the six months to 31 March 2024 (Unaudited)
Six months to Six months to Year to
31 March 2024
31 March 2023
30 September 2023
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Gains/(losses) on investments 5 - 8,029 8,029 - (2,132) (2,132) - (4,284) (4,284)
Income 2,100 - 2,100 1,201 - 1,201 3,082 - 3,082
Investment management fee (593) (1,779) (2,372) (620) (1,860) (2,480) (1,252) (3,758) (5,010)
Other expenses (387) - (387) (357) - (357) (700) - (700)
Profit /(loss) before taxation 1,120 6,250 7,370 224 (3,992) (3,768) 1,130 (8,042) (6,912)
Taxation - - - - - - - - -
Profit/(loss) for the period, being total comprehensive income for the period 1,120 7,370 224 (3.992) (3,768) 1,130 (8,042) (6,912)
6,250
Return per ordinary share:
0.31p 1.71p 2.02p 0.07p (1.21p) (1.14p)
Basic and Diluted 2 0.33p (2.32p) (1.99p)
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 2024 (Unaudited)
Non-distributable reserves Distributable reserves
Called-up share capital Share Revaluation Capital Revenue
£'000 premium reserve reserve £'000 reserve
£'000 £'000 £'000 Total
£'000
At 1 October 2023 39,628 - 23,062 144,092 2,877 209,659
- - 5,700 550 1,120 7,370
Profit after taxation
Net proceeds of share issues, share buybacks & sale of shares from 1,347 6,666 - (1, 627) - 6,386
treasury
Dividends paid - - - (7,965) (371) (8,336)
Share premium cancellation costs - - - (4) - (4)
At 31 March 2024 40,975 6,666 28,762 135,046 3,626 215,075
For the six months to 31 March 2023 (Unaudited)
Non-distributable reserves Distributable reserves
Called-up share capital Share Revaluation Capital Revenue
£'000 premium reserve reserve £'000 reserve
£'000 £'000 £'000 Total
£'000
At 1 October 2022 35,789 106,099 18,834 49,142 3,122 212,986
- - (3,433) (559) 224 (3,768)
(Loss)/profit after taxation
Net proceeds of share issues, share buybacks & sale of shares from 1,933 10,718 - (771) - 11,880
treasury
Dividends paid - - - (9,116) (1,013) (10,129)
At 31 March 2023 37,722 116,817 15,401 38,696 2,333 210,969
For the year ended 30 September 2023 (Audited)
Non-distributable reserves Distributable reserves Total
£'000
Called-up share capital Share Revaluation Capital Revenue
£'000 premium reserve reserve £'000 reserve
£'000 £'000 £'000
At 1 October 2022 35,789 106,099 18,834 49,142 3,122 212,986
Profit/(loss) after taxation - - 4,228 (12,270) 1,130 (6,912)
Net proceeds of share issues, share buybacks & sale of shares from 3,839 20,452 - (2,413) - 21,878
treasury
Dividends paid - - - (16,901) (1,375) (18,276)
Cancellation of share premium - (126,551) - 126,551 - -
Share premium cancellation costs - - - (17) - (17)
At 30 September 2023 39,628 - 23,062 144,092 2,877 209,659
Condensed balance sheet
As at 31 March 2024 (Unaudited)
As at As at
31 March
30 September 2023
Notes As at
2023 £'000
31 March
£'000
2024
£'000
Fixed assets
Unquoted investments 5 54,585 48,545 50,506
Traded on AIM 5 81,557 77,655 78,973
Collective investment vehicles 5 79,077 69,933 80,764
Investments 5 215,219 196,133 210,243
Current assets
Debtors 565 1,477 235
Cash at bank and on deposit 674 14,803 670
1,239 16,280 905
Creditors (amounts falling due within one year) (1,383) (1,444) (1,489)
Net current (liabilities)/assets (144) 14,836 (584)
Net assets 215,075 210,969 209,659
Capital and reserves
Called-up share capital 3 40,975 37,722 39,628
Share premium 6,666 116,817 -
Capital reserve 135,046 38,696 144,092
Revaluation reserve 5 28,762 15,401 23,062
Revenue reserve 3,626 2,333 2,877
Equity shareholders' funds 215,075 210,969 209,659
Net asset value per share 57.7p 61.0p 57.9p
Number of ordinary shares in circulation 372,888,416 345,640,159 362,253,166
Condensed statement of cash flows
For the six months to 31 March 2024 (Unaudited)
Six months to Six months to Year to
31 March
31 March
30 September
2023
2024
2023
£'000
£'000
£'000
Net cash outflow from operating activities (1,799) (2,035) (3,588)
Net cash inflow/(outflow) from investing activities 3,775 (21,534) (35,966)
Net cash inflow/(outflow) before financing activities 1,976 (23,569) (39,554)
Net cash (outflow)/inflow from financing activities (1,972) 1,750 3,602
Increase/(decrease) in cash 4 (21,819) (35,952)
Reconciliation of new cash flow to movement in net cash
Increase/(decrease) in cash 4 (21,819) (35,952)
Opening cash at bank and on deposit 670 36,622 36,622
Closing cash at bank and on deposit 674 14,803 670
Reconciliation of profit/(loss) before taxation
to net cash outflow from operating activities
Profit/(loss) before taxation 7,370 (3,768) (6,912)
(Gains)/losses on investments (8,029) 2,132 4,284
Changes in working capital and other non-cash items (1,140) (399) (960)
Net cash outflow from operating activities (1,799) (2,035) (3,588)
Notes to the financial statements
For the six months to 31 March 2024 (Unaudited)
1. Basis of preparation
The condensed financial statements for the six months to 31 March 2024
comprise the unaudited financial statements set out on pages 13 to 16 together
with the related notes on pages 17 to 20. The Company applies FRS 102 and the
AIC SORP for its annual financial statements. The condensed financial
statements for the six months to 31 March 2024 have therefore been prepared in
accordance with FRS 104 'Interim Financial Reporting' and the principles of
the AIC SORP. They have also been prepared on a going concern basis. The
financial statements 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 2023.
The financial information contained in this half‑yearly report does not
constitute statutory accounts as defined in sections 434 - 436 of the
Companies Act 2006. The half‑yearly report for the six months ended
31 March 2024 and for the six months ended 31 March 2023 have been neither
audited nor reviewed by the Company's Auditor. The information for the year to
30 September 2023 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 2023 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 2023 have been reported on by the Company's
Auditor or delivered to the Registrar of Companies.
The Company's half yearly report has been made available on the Company's
website (www.baronsmeadvcts.co.uk (http://www.baronsmeadvcts.co.uk) ) and sent
to shareholders where requested.
2. Performance and shareholder returns
Return per share is based on a weighted average of 365,445,232 ordinary shares
in issue (31 March 2023 - 330,678,751 ordinary shares; 30 September 2023 -
346,626,977 ordinary shares).
Earnings for the first six months to 31 March 2024 should not be taken as a
guide to the results of the full financial year to 30 September 2024.
3. Called-up share capital
The below table details the movement in called-up share capital during the
period.
Allotted, called-up and fully paid:
Ordinary shares £'000
396,279,533 ordinary shares of 10p each listed at 30 September 2023 39,628
13,468,470 ordinary shares of 10p each issued during the period 1,347
409,748,003 ordinary shares of 10p each listed at 31 March 2024 40,975
34,026,367 ordinary shares of 10p each held in treasury at 30 September 2023 (3,403)
2,833,220 ordinary shares of 10p each repurchased during the period and held (283)
in treasury
36,859,587 ordinary shares of 10p each held in treasury at 31 March 2024 (3,686)
372,888,416 ordinary shares of 10p each in circulation* at 31 March 2024 37,289
* Carrying one vote each.
During the six months to 31 March 2024 the Company issued 13,468,470 shares at
net proceeds of £7,957,000 (after costs). During the same period, the Company
purchased 2,833,220 shares to be held in treasury at a cost of £1,571,000
(including costs). The Company sold no shares from treasury. At 31 March 2024,
the Company held 36,859,587 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 372,888,416 ordinary shares in
circulation at 31 March 2024 (31 March 2023 - 345,640,159 ordinary shares; 30
September 2023 - 362,253,166 ordinary shares).
4. Dividends
The final dividend for the year ended 30 September 2023 of 2.25p per share
(2.15p capital, 0.10p revenue) was paid on 8 March 2024 to shareholders on
the register on 9 February 2024. The ex-dividend date was 8 February 2024.
During the year to 30 September 2023, the Company paid an interim dividend on
8 September 2023 of 2.25p per share (2.15p capital, 0.10p revenue).
An interim dividend of 1.75p per share has been declared for the year to 30
September 2024 and is payable on 9 September 2024 to shareholders on the
register as of 9 August 2024. The ex-dividend date is 8 August 2024.
5. Investments
All investments are initially recognised and 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 2023. 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 Collective Total
on AIM investment £'000
£'000 vehicles Unquoted
£'000 £'000
Opening book cost 64,431 65,537 57,213 187,181
Opening unrealised appreciation/(depreciation) 14,542 15,227 (6,707) 23,062
Opening fair value 78,973 80,764 50,506 210,243
Movements in the year:
Transfer between levels (1,650) - 1,650 -
Purchases at cost 1,134 11,604 6,151 18,889
Sale - proceeds (4,657) (17,120) (165) (21,942)
- realised gains on sales 759 - 164 923
Unrealised gains/(losses) realised during the year 3,535 - (2,129) 1,406
Increase/(decrease) in unrealised appreciation 3,463 3,829 (1,592) 5,700
Closing fair value 81,557 79,077 54,585 215,219
Closing book cost 63,552 60,021 62,884 186,457
Closing unrealised appreciation/(depreciation) 18,005 19,056 (8,299) 28,762
Closing fair value 81,557 79,077 54,585 215,219
Equity shares 81,557 - 23,478 105,035
Preference shares - - 20,997 20,997
Loan notes - - 10,110 10,110
Collective investment vehicles - 79,077 - 79,077
Closing fair value 81,557 79,077 54,585 215,219
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, traded on AIM or
collective investment vehicles.
6.2 Principal risks and uncertainties
The Company's assets consist of equity and fixed interest investments, shares
in collective investment schemes, cash 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 and uncertainties table within the Strategic report
section in the Company's Annual Report and Financial Statements for the year
ended 30 September 2023. The Board continues to regularly 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, accounting, administrative and custodian services to the Company.
Under the management agreement, the Manager receives a fee of 2.5 per cent.
per annum of the net assets of the Company up to and including £209,658,860
(being the total net assets of the Company as at 30 September 2023) and 2.0
per cent. per annum of the amount by which the net assets of the Company
exceed £209,658,860. 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 ended 30 September 2023. During
the period the Company has incurred management fees of £2,372,000 (31 March
2023 - £2,480,000; 30 September 2023 - £5,010,000) and secretarial and
accounting fees of £89,000 (31 March 2023 - £80,000; 30 September 2023 -
£167,000) payable to the Manager. No performance fee has been accrued at 31
March 2024 (31 March 2023 - £nil; 30 September 2023 - £nil). 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 2023.
Under the terms of an Offer for Subscription, launched on 4 December 2023, the
Manager was entitled to fees of 4.50% of the investment amount received from
investors. This amount totalled £693,000, including the amounts allotted in
April 2024, out of which all the costs associated with the allotments were
met.
6.4 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.
6.5 Post balance sheet events
The following events occurred between the balance sheet date and the signing
of these financial statements:
* The 30 April 2024 NAV of 58.6p was announced on 7 May 2024 and the 31 May 2024
NAV of 59.8p was announced on 6 June 2024. 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.
* Purchased 0.6mn Ordinary Shares of 10.0p on 2 April 2024 at a price of 55.2p
per share to be held in Treasury.
* Purchased 1.4mn Ordinary Shares of 10.0p on 24 May 2024 at a price of 55.6p
per share to be held in Treasury.
* 27.7mn shares were issued on 3 April 2024 at allotment prices between 59.7p
and 62.6p under the current Offer.
* One new investment, into OnSecurity Technology, completed in June 2024
totalling £1.2mn.
* Three follow-on investments, into Yappy, Rockfish and Counting, completed
between April to May 2024, totalling £1.0mn.
* Partial realisations in Cerillion were made in May 2024, realising proceeds of
£1.8mn and making a return of 21.0x cost.
* Realised Gama Aviation in May 2024, receiving proceeds of £0.6mn and making a
return of 0.6x cost.
Directors Brokers
Sarah Fromson (Chair)† Panmure Gordon & Co(‡)
Malcolm Groat* 40 Gracechurch Street
Graham McDonald London EC3V 0BT
Tim Farazmand(#) Tel: 020 7886 2500
Secretary Auditor
Gresham House Asset Management Ltd BDO LLP
55 Baker Street
Registered Office London W1U 7EU
5 New Street Square
London EC4A 3TW Solicitors
Howard Kennedy LLP
Investment Manager 1 London Bridge
Gresham House Asset Management Ltd London SE1 9BG
5 New Street Square
London EC4A 3TW VCT Status Adviser
Tel: 020 7382 0999 PricewaterhouseCoopers LLP
1 Embankment Place
Registered Number London WC2N 6RH
04115341
Website
Registrars and Transfer Office www.baronsmeadvcts.co.uk (http://www.baronsmeadvcts.co.uk/)
The City Partnership (UK) Ltd
The Mending Rooms
Park Valley Mills
Meltham Road
Huddersfeld HD4 7BH
Tel: 01484 240 910
Corporate information
(†) Chair of the Nomination Committee.
(*) Senior Independent Director and Chair of the Audit & Risk Committee.
(#) Chair of the Management Engagement and Remuneration Committee.
(‡) Merger between Liberum and Panmure Gordon completed May 2024.
LEI: 2138008D3WUMF6TW8C28
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