TIDMATS TIDMTTM

RNS Number : 7954V

Artemis Alpha Trust PLC

16 December 2021

ARTEMIS ALPHA TRUST PLC (the "Company")

LEI: 549300MQXY2QXEIL3756

Half-Yearly Financial Report for the six months ended 31 October 2021

This announcement contains regulated information

Chairman's Statement

In the half-year under review market volatility continued with concerns over inflation and interest rates adding to the uncertainty over new variants of the virus.

In the six months to 31 October 2021 your Company's net asset value per share and share price (on a total return basis) fell by 5.4% and 2.1% respectively, ending the period at 447.13p (NAV per share) and 430.5p (share price). The FTSE All-Share Index rose by 5.4% over the same period.

The challenging environment led to a dip in relative performance over the period, with some of the stocks that had performed strongly last year displaying weakness. Companies whose prospects are dependent on the reopening of economies, such as airlines and serviced offices, have generally performed poorly. Those companies which have been beneficiaries of the pandemic, such as food delivery, have also been marked down if the market's high expectations have not been met.

More detailed information on the performance of our portfolio is set out in the Investment Manager's Review which follows.

Earnings and dividends

Revenue earnings per share for the half-year were 3.22p, an increase of 102.5% on the comparable period last year, reflecting a recovery from the low levels of investment income received in 2020. The Board has today declared a first interim dividend of 2.14p per ordinary share (2020: 2.11p) which will be paid on 20 January 2022 to shareholders on the register as at 24 December 2021. This increase of 1.5% over the equivalent interim dividend paid in January 2021 keeps the Company on track with our policy of growing dividends in line or at a rate greater than the UK CPI inflation rate of the preceding financial year (1.5% as at 30 April 2021).

General Meeting / Triennial tender offer

On 11 November 2021, the Company held a General Meeting for shareholders to consider the Board's recommendation to suspend the 2021 tender offer and, instead, implement a continuous share repurchase programme. This was passed overwhelmingly with a 99.18% vote in favour of the resolution. The Board believes that the more dynamic and concerted programme which is now in place will provide shareholders with more predictable liquidity and a more stable and reduced discount.

Share buy backs

Over the period, the discount to NAV narrowed from 7.1% to 3.7% at 31 October 2021. The Company bought back 2.5 million shares at a total cost of GBP11.2 million and an average discount of 6.0%. One million of those shares were repurchased in the week following the announcement of the proposed suspension of the 2021 tender offer and the new buy-back policy. The volume and frequency of buy-backs reduced after the initial activity with a further 0.75 million shares bought back after the period end.

At the date of this report, the share price stood at 395.50p, representing a discount of 6.2%.

Gearing

During the half-year, the Company increased its use of contracts for difference to achieve gearing, which stood at 13.1% at the period end. This offers a more cost-efficient method than a more conventional bank loan as well as providing a revenue stream.

Outlook

While many of the reasons for the volatility in markets over the half-year are still evident, the new Omicron variant and heightened geopolitical tensions have added to the sense of uncertainty already prevalent. We expect the portfolio to continue to be buffeted, in the short term, by the changes of mood in the market place but anticipate equally that it will deliver better performance over the medium to longer term.

Duncan Budge

Chairman

15 December 2021

Investment Manager's Review

In the six-month period, the Company's NAV declined by 5.4% compared to a 5.4% increase in the FTSE All-Share index.

The macroeconomic environment was influenced by the following factors:

 
      --   Inflation - rising energy costs and mismatches in the labour 
            market have created shortages and higher-than-expected 
            inflation. Although some factors are proving transitory, 
            uncertainty remains over the persistency of higher inflation. 
      --   Interest rates - strong economies and supply-side bottlenecks 
            have brought forward expectations for interest-rate rises 
            with the potential to impact asset prices and consumer 
            incomes. Central bankers have (so far) demonstrated reluctance 
            to act. 
      --   Pandemic - the Delta variant delayed the reopening of many 
            economies and caused disruption to supply chains and labour 
            mobility. Booster roll-outs and the embracing of "endemic" 
            policies suggest that economies remain on a path towards 
            normality. 
      --   Chinese economy - slowed due to the adoption of 'zero-Covid' 
            policies and a regulatory shift that has had an impact 
            on a number of sectors, including real-estate and technology. 
      --   Corporate profitability - has remained strong; robust demand 
            has been an enabler of pricing power and efficiency improvements 
            have offset higher costs. 
 

It was a challenging six-month period for performance. This was not what one might have expected given that the portfolio is balanced across a range of factors (e.g. UK domestic/overseas earners, growth/value, and cyclicals/defensives).

The key factors impacting its performance were:

 
      --   Cyclical holdings geared towards a reopening of economies 
            performed poorly as the return to normality was delayed 
            (easyJet, Ryanair and IWG) 
      --   Pandemic winners showing any weakness in their earnings 
            momentum or blemishes in their performance were punished 
            (Just Eat, Hornby, Delivery Hero and Nintendo) 
      --   UK housebuilders delivered strong earnings but their shares 
            failed to re-rate due to concerns over the impact of rising 
            interest rates (Redrow, Bellway and Springfield) 
      --   We had limited exposure to some of the best performing 
            sectors of the market (energy, mining and financials) 
            and an absence of takeover bids. 
 

We have made only limited changes to our holdings; the portfolio that has found this year difficult is broadly the same one that performed strongly last year. Although we have undoubtedly made mistakes (both recognised and yet-to-be revealed), we feel that many of our holdings have been treated more harshly than their fundamentals warrant. We have taken certain actions to enhance the portfolio's value as we see it and retain considerable flexibility in the form of liquidity to take further action as opportunities arise.

Portfolio developments

Retail (14.3% of NAV) is our largest sector exposure following a strong share-price performance from Frasers Group. The company's core sports business (Sports Direct) is benefiting from its multi-year efforts to elevate its branded product offering by investing in digital and physical assets. Better access to popular products is leading to rising sales densities at a time when operating costs have been reduced through rent savings and investments in warehouse automation. The company is successfully leveraging its merchandising expertise and extensive infrastructure to rapidly grow Flannels, its luxury retail fascia.

Currys is also benefiting from the investments it has made in recent years to improve its customer value proposition, with recent evidence of market-share gains indicating that the strategy is proving successful. The company announced a target to deliver over GBP250m in free cash flow per annum and a GBP75m share buyback given its improving financial position.

Food delivery (12.2%) was our most costly sector exposure as both Delivery Hero and Just Eat declined. Growth in this industry has been more robust than many would have predicted given the 'reopening' of economies: Just Eat is forecast to grow orders by 45% in 2021 and Delivery Hero by 60%. Weakness in their shares reflects concerns over rising competitive intensity and the return on the significant investment that both businesses are making to build their on-demand logistics networks. We continue to regard the operating losses they incurred (less than 1.5% of gross platform transaction value for both companies) as a long-term investment made through the income statement. The industry remains early in its adoption cycle and we see various levers for it to improve profitability (such as dynamic delivery fees, advertising, and new verticals) over time. Just Eat now trades on approximately 6x underlying earnings assuming management's guidance for mature margins.

Our positions in airlines (11.8%) have lagged the broader cyclical recovery as the sector was hurt by travel restrictions, particularly in the UK where testing requirements were onerous. Although the recovery of the sector has been delayed, we continue to see strong prospects for EasyJet and Ryanair. EasyJet raised GBP1.2bn of equity in September, which we felt was more than necessary at the time, but has left it well-capitalised with over GBP4.4bn in liquidity. We increased the number of shares we held by 30% through selling some rights and adding 0.5% to the weighting. The company has structurally reduced its cost base and made a significant reallocation of planes towards higher-yielding routes in its slot-restricted network. Ryanair, meanwhile, has demonstrated remarkable resilience, which is testament to its strong management and operating culture. The business has taken advantage of the reduction in industry capacity to increase its own growth plans, with guidance for passenger volumes in 2026 having risen from 200m to 225m.

UK housebuilding (11.6%) has seen strong demand despite the end of the stamp duty holiday and the curtailment of Help to Buy. This points to a permanent benefit to the sector from hybrid working habits. Supply chains are being well managed and overall cost inflation has been offset by price increases. Both Redrow and Bellway have seen earnings estimates revised positively through the year (+36%/+23%). The strength of cash flow generation has been such that despite higher investments in land to grow future volumes, neither company carry debt. Share-price performance has been lacklustre due to the prospect of rising interest rates and a government levy for cladding. The latter was resolved with the Autumn Budget (4% additional tax). Prospects for the sector appear strong given low valuations and robust fundamentals.

Dignity (10.7%) has undergone significant strategic change in the period. We supported a change in management and a revised strategy that is aimed at leveraging the company's unique vertical integration in the industry with its positions in pre-need funerals, at-need funerals and crematoria. The revised strategy is focused on improving value for customers to grow volume across all three divisions. In May, we conducted several visits to Dignity funeral branches and crematoria with members of its management team. We came back with a stronger understanding of the quality of the group's assets, many of which we feel are irreplicable, and reassured that our assumptions for operational improvements are reasonable. In our view, valuation and strategy should be inextricably linked, and to this extent we have been disappointed that the potential for the new strategy to create value is not being reflected in the company's equity value.

Our positions in video games & hobbies (9.0%) were the second-largest sector detractor, giving up last year's strong performance. Nintendo felt the impact of chip shortages, which constrained the supply of its hardware meaning there will be fewer consoles sold this year (c24m) than last year (28m) despite robust demand. Revisions to earnings have been limited as software volumes have remained strong and the pipeline is promising. There have been positive strategic developments and we feel the significance of these may have been overlooked. The company executed a $1bn stock repurchase in August and recently announced a multi-year $4.5bn investment in software development and online subscription capabilities. We find this encouraging in the context of concerns that are often raised about the capital allocation efficiency of Japanese corporates.

Hornby has seen some impact from higher shipping costs and from bottlenecks delaying products. Demand for the group's hobby products is growing from a higher base. The opportunity for it to build direct relationships with its customers remains substantial and nascent - direct-to-consumer sales account for less than 15% of revenue. Investments made in product and technology over recent years should start to drive this ratio higher, and bring with it substantial profitability improvements.

Our investments in Chinese technology companies (8.5%) Alibaba and Prosus have been hurt by negative developments in the Chinese economy and in regulation. Both companies are highly innovative and possess some of the strongest market positions in the digital economy globally. We remain open-minded, but have so far retained our view that greater regulation should not significantly damage the values of their businesses as their high returns are derived from visible network effects common to scaled platforms. Alibaba continues to invest in its ecosystem of companies and Tencent to re-deploy its profits into adjacent technology companies globally, which we view as evidence that our investment thesis remains intact.

UK banks (5.7%) performed well in the period. Credit impairment remains benign and loan demand is steady, leading to strong capital generation. Following last year's dividend hiatus, Lloyds has considerable excess capital with a core equity tier 1 ratio of 17.2%. The investment case is evolving as expected, with the only concern that a restoration of pricing power remains dependent on interest-rate rises.

IWG (5.5%), the operator of serviced offices, continues to recover albeit with occupancy and revenues improving at a slower rate than first hoped. The company should be a net beneficiary of increased hybrid working, although evidence in the short term remains mixed. Management's intent to shift to a capital-light, franchising strategy remains evident and could considerably increase returns for the business.

GlaxoSmithKline (5.4%) has recovered encouragingly from a poor first quarter as it became clear that volumes for the company's leading shingles vaccine was being impacted by the rollout of Covid vaccines. Cost reduction and management of input-price inflation has led to better-than-expected earnings in recent quarters. The company's capital markets day in June demonstrated the potential for a more focused approach to investing in its pipeline to lead to sustainable earnings growth in years to come. The combination of self-help measures and pressure to demonstrate improvements from activist investors means the company's prospects appear attractive ahead of the spin-off of its consumer staples division in 2022.

Plus500 (5.4%) has reported robust results with revenues remaining 50% ahead of pre-pandemic levels, indicating that customers it acquired last year are staying with it for longer than many expected. New management have increased levels of reinvestment into the business from a position of strength, given that net cash balances are over $780m.

Reaction Engines (4.0%, unquoted) was positively revalued after a new institution invested in the company. Total funds raised in the most recent round are in excess of 10% of the company's share capital. The business is developing new applications for its heat exchanger in decarbonisation technologies using ammonia and hydrogen.

EssilorLuxottica (3.7%) has been a strong performer with sales recovering to above 2019 levels sooner than expected. The deal to acquire Grandivision, a large chain of retail stores across Europe, is progressing. The developments in advancing augmented and virtual reality technologies, particularly by Facebook, have the potential to be a tailwind as the company is the largest manufacturer of lenses globally.

 
 Key Sector Exposures 
 Weighting   Sector                 Companies 
            ---------------------  ----------------------------- 
 14.3%       General retail         Frasers Group, Currys 
            ---------------------  ----------------------------- 
                                    Delivery Hero, Just 
 12.2%       Food delivery           Eat Takeaway.com 
            ---------------------  ----------------------------- 
 11.8%       Airlines               Easyjet, Ryanair 
            ---------------------  ----------------------------- 
 11.6%       Housebuilding          Redrow, Bellway, Springfield 
            ---------------------  ----------------------------- 
 10.7%       Funerals               Dignity 
            ---------------------  ----------------------------- 
 9.0%        Videogames & hobbies   Nintendo, Hornby 
            ---------------------  ----------------------------- 
 8.5%        China technology       Prosus, Alibaba 
            ---------------------  ----------------------------- 
 5.7%        Banking                Lloyds 
            ---------------------  ----------------------------- 
 5.5%        Serviced offices       IWG 
            ---------------------  ----------------------------- 
 5.5%        Pharmaceuticals        GlaxoSmithKline 
            ---------------------  ----------------------------- 
 5.4%        Trading platform       Plus500 
            ---------------------  ----------------------------- 
 4.0%        Defence                Reaction Engines 
            ---------------------  ----------------------------- 
 3.7%        Consumer staples       EssilorLuxottica 
            ---------------------  ----------------------------- 
 2.4%        Financial services     Singer Capital Markets 
            ---------------------  ----------------------------- 
 

Activity

We sold positions in Meta Platforms (formerly Facebook), Fevertree and Barclays. Facebook and Fevertree were sold due to a judgement that an increase in their valuation multiples had reduced the potential upside, making alternatives more attractive. Barclays was sold as our enthusiasm over the prospects for its investment banking operations has waned and because we harbour some concerns over the disruptive potential of 'buy-now, pay-later' companies on its credit card division.

We increased positions in Alibaba, Prosus, Just Eat and Nintendo as we felt that their share-price declines provided an attractive opportunity for the reasons outlined above. We increased the holding in Currys as we judged its fundamentals to be improving in contrast to lacklustre share-price performance.

We did not start any new positions in the period and the number of holdings in the portfolio has thus fallen to 25. We are actively considering a number of positions and expect the number of holdings to rise in time. Gearing levels have been maintained at approximately 10% with the period-end figures being higher than that due to the timing of share repurchases. The proportion of net assets in liquid and very liquid holdings is 79%.

Outlook

The following working assumptions have informed portfolio construction and will be subject to change in what has proven to be a dynamic environment:

 
      --   GDP growth - nominal GDP growth to remain resilient as 
            excess savings support consumption, particularly in the 
            UK. 
      --   Reopening - Covid will follow a bumpy path towards becoming 
            endemic with uncertainty over timing due to the Omicron 
            variant. 
      --   Interest rates - short-term movements are intertwined 
            with pandemic developments. In the medium-term, interest 
            rates are likely rise to reflect a normalisation of policy. 
            The key uncertainty is how far they will rise. 
      --   Digitalisation - will remain a key force for change across 
            most industries, with a risk that this factor is being 
            temporarily overlooked as pricing power for many industries 
            has been restored by the peculiar macroeconomic conditions 
            that currently prevail. 
 

The key risks that we are monitoring are 1) the potential for energy prices to rise further given tight markets and geopolitical risks and 2) a loss of confidence in central bankers leading to a material upward shift in real rates.

Overall, we believe the portfolio is well-positioned with its mix of exposure to beneficiaries of reopening, UK consumption plays, structural growth plays and idiosyncratic recovery stories. Together, we think they trade at a significant discount to their intrinsic value.

We have taken steps to enhance the portfolio's value in the year to date, and retain considerable flexibility to respond to future opportunities and risks with a liquid underlying portfolio. With persistent uncertainty comes higher volatility and, historically, these have been the situations in which we have added the most value.

John Dodd, Kartik Kumar

Fund Managers

Artemis Fund Managers Limited

15 December 2021

Top 15 holdings

 
                                                                             Valuation     % of 
 Name                     Sector                    Shares       Price       (GBP)         NAV 
-----------------------  ------------------------  -----------  ----------  ------------  ----- 
 Dignity                  Consumer Discretionary     2,400,000     GBP7.08    16,992,000   10.7 
 Frasers Group            Consumer Discretionary     2,500,000     GBP6.44    16,087,500   10.1 
 easyJet                  Consumer Discretionary     1,900,000     GBP6.23    11,837,000    7.4 
 Delivery Hero            Consumer Discretionary       113,000   EUR107.35    10,241,167    6.4 
 Redrow                   Consumer Discretionary     1,475,000     GBP6.45     9,516,700    6.0 
 Just Eat Takeaway.com    Technology                   175,000    EUR52.40     9,170,000    5.8 
 Lloyds Banking 
  Group                   Financial                 18,000,000     GBP0.50     9,039,600    5.7 
 IWG                      Industrials                2,825,000     GBP3.10     8,743,375    5.5 
 GlaxoSmithKline          Health Care                  575,000    GBP15.09     8,674,450    5.4 
 Plus500                  Financials                   650,000    GBP13.17     8,557,250    5.4 
 Nintendo, ADR            Consumer Discretionary       200,000      $55.25     8,061,281    5.1 
 Alibaba Group Holding 
  (long CFD)              General Retailers             59,000     $164.92     7,098,508    4.5 
 Ryanair Holdings         Consumer Discretionary       490,000    EUR16.74     6,925,011    4.4 
                          Household Goods & 
 Bellway (long CFD)        Home Construction           200,000    GBP33.13     6,626,000    4.2 
 Reaction Engines         Industrials                  160,833    GBP40.00     6,433,320    4.0 
-----------------------  ------------------------  -----------  ----------  ------------  ----- 
 

Condensed income statement

 
                                            Six months ended 31 October 
                                                        2021                                                           Six months ended 31 October 2020                                              Year ended 30 April 2021 
                                                     (unaudited)                                                                  (unaudited)                                                                (audited) 
                                      Revenue                     Capital                   Total                  Revenue                  Capital                   Total                  Revenue                  Capital                   Total 
                                      GBP'000                     GBP'000                 GBP'000                  GBP'000                  GBP'000                 GBP'000                  GBP'000                  GBP'000                 GBP'000 
 
  Investment 
  income                                1,616                           -                   1,616                    1,011                        -                   1,011                    3,147                        -                   3,147 
Total revenue                           1,616                           -                   1,616                    1,011                        -                   1,011                    3,147                        -                   3,147 
                   --------------------------  --------------------------  ----------------------  -----------------------  -----------------------  ----------------------  -----------------------  -----------------------  ---------------------- 
(Losses)/gains on 
 investments                                -                    (10,387)                (10,387)                        -                   18,550                  18,550                        -                   59,998                  59,998 
Net 
 (losses)/gains 
 on derivatives                             -                       (454)                   (454)                        -                    (845)                   (845)                        -                    4,767                   4,767 
Currency 
 (losses)/gains                             -                       (110)                   (110)                        -                      368                     368                        -                      609                     609 
                   --------------------------  --------------------------  ----------------------  -----------------------  -----------------------  ----------------------  -----------------------  -----------------------  ---------------------- 
Total 
 income/(loss)                          1,616                    (10,951)                 (9,335)                    1,011                   18,073                  19,084                    3,147                   65,374                  68,521 
                   --------------------------  --------------------------  ----------------------  -----------------------  -----------------------  ----------------------  -----------------------  -----------------------  ---------------------- 
Expenses 
Investment 
 management 
 fee                                    (123)                       (491)                   (614)                     (81)                    (325)                   (406)                    (196)                    (785)                   (981) 
Other expenses                          (235)                         (5)                   (240)                    (182)                      (7)                   (189)                    (411)                     (15)                   (426) 
                   --------------------------  --------------------------  ----------------------  -----------------------  -----------------------  ----------------------  -----------------------  -----------------------  ---------------------- 
Profit/(loss) 
 before 
 finance costs 
 and 
 tax                                    1,258                    (11,447)                (10,189)                      748                   17,741                  18,489                    2,540                   64,574                  67,114 
Finance costs                             (3)                        (15)                    (18)                      (3)                     (12)                    (15)                      (7)                     (28)                    (35) 
                   --------------------------  --------------------------  ----------------------  -----------------------  -----------------------  ----------------------  -----------------------  -----------------------  ---------------------- 
Profit/(loss) 
 before 
 tax                                    1,255                    (11,462)                (10,207)                      745                   17,729                  18,474                    2,533                   64,546                  67,079 
Tax                                      (45)                           -                    (45)                    (114)                        -                   (114)                    (210)                        -                   (210) 
                   --------------------------  --------------------------  ----------------------  -----------------------  -----------------------  ----------------------  -----------------------  -----------------------  ---------------------- 
Profit/ (loss) 
 and 
 total 
 comprehensive 
 income/(expense) 
 for the period                         1,210                    (11,462)                (10,252)                      631                   17,729                  18,360                    2,323                   64,546                  66,869 
                   --------------------------  --------------------------  ----------------------  -----------------------  -----------------------  ----------------------  -----------------------  -----------------------  ---------------------- 
Earnings/(loss) 
 for the period                         3.22p                    (30.55)p                (27.33)p                    1.59p                   44.79p                  46.38p                    5.92p                  164.56p                 170.48p 
                   --------------------------  --------------------------  ----------------------  -----------------------  -----------------------  ----------------------  -----------------------  -----------------------  ---------------------- 
 

The total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with International Financial Reporting Standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations.

All income is attributable to the equity shareholders of Artemis Alpha Trust plc. There are no minority interests.

Condensed statement of financial position

 
 
                                                    31 October                  31 October               30 April 
                                                          2021                        2020                   2021 
                                                   (unaudited)                 (unaudited)              (audited) 
                                                       GBP'000                     GBP'000                GBP'000 
Non-current assets 
Investments                                            150,887                     138,752                175,991 
Investment in subsidiary 
 undertaking                                             3,610                       3,670                  3,230 
                                     -------------------------  --------------------------  --------------------- 
                                                       154,497                     142,422                179,221 
Current assets 
Derivative assets                                          355                         309                    162 
Other receivables                                        2,512                         548                    848 
Cash and cash equivalents                                7,149                          11                  6,477 
                                     -------------------------  --------------------------  --------------------- 
                                                        10,016                         868                  7,487 
                                     -------------------------  --------------------------  --------------------- 
Total assets                                           164,513                     143,290                186,708 
                                     =========================  ==========================  ===================== 
Current liabilities 
Derivative liabilities                                   (303)                        (57)                  (478) 
Collateral pledged                                     (2,030)                        (50)                  (830) 
Other payables                                         (3,016)                     (3,598)                (3,572) 
Total Liabilities                                      (5,349)                     (3,705)                (4,880) 
                                     -------------------------  --------------------------  --------------------- 
Net assets                                             159,164                     139,585                181,828 
                                     -------------------------  --------------------------  --------------------- 
 
  Equity attributable to equity 
  holders 
Share capital                                              373                         396                    382 
Share premium                                              676                         676                    676 
Special reserve                                         29,515                      46,181                 40,738 
Capital redemption reserve                                 217                         194                    208 
Retained earnings - revenue                              2,809                       1,919                  2,788 
Retained earnings - capital                            125,574                      90,219                137,036 
Total equity                                           159,164                     139,585                181,828 
                                     -------------------------  --------------------------  --------------------- 
Net asset value per ordinary 
 share                                                 447.15p                     352.66p                476.17p 
 
 

Condensed statement of changes in equity

 
                                            Six months ended 31 October 2021 (unaudited) 
                              ------------------------------------------------------------------------ 
                                                                          Retained earnings 
                              --------  --------  --------  -----------                       -------- 
                                                                Capital 
                                 Share     Share   Special   redemption 
                               capital   premium   reserve      reserve    Revenue   Capital     Total 
                               GBP'000   GBP'000   GBP'000      GBP'000    GBP'000   GBP'000   GBP'000 
                              --------  --------  --------  -----------  ---------  --------  -------- 
At 1 May 2021                      382       676    40,738          208      2,788   137,036   181,828 
Total comprehensive 
 income: 
Profit/(loss) for 
 the period                          -         -         -            -      1,210  (11,462)  (10,252) 
Transactions with 
 owners recorded 
 directly to equity: 
Repurchase and cancellation 
 of ordinary shares                (9)         -   (4,091)            9          -         -   (4,091) 
Repurchase of ordinary 
 shares into treasury                -         -   (7,132)            -          -         -   (7,132) 
Dividends paid                       -         -         -            -    (1,189)         -   (1,189) 
                              --------  --------  --------  -----------  ---------  --------  -------- 
At 31 October 2021                 373       676    29,515          217      2,809   125,574   159,164 
                              ========  ========  ========  ===========  =========  ========  ======== 
 
 
 
                                       Six months ended 31 October 2020 (unaudited) 
                        ------------------------------------------------------------------------ 
                                                                    Retained earnings 
                        --------  --------  --------  -----------                       -------- 
                                                          Capital 
                           Share     Share   Special   redemption 
                         capital   premium   reserve      reserve    Revenue   Capital     Total 
                         GBP'000   GBP'000   GBP'000      GBP'000    GBP'000   GBP'000   GBP'000 
                        --------  --------  --------  -----------  ---------  --------  -------- 
At 1 May 2020                396       676    46,181          194      2,517    72,490   122,454 
Total comprehensive 
 income: 
Profit for the 
 period                        -         -         -            -        631    17,729    18,360 
Transactions 
 with owners recorded 
 directly to equity: 
Dividends paid                 -         -         -            -    (1,229)         -   (1,229) 
                        --------  --------  --------  -----------  ---------  --------  -------- 
At 31 October 
 2020                        396       676    46,181          194      1,919    90,219   139,585 
                        ========  ========  ========  ===========  =========  ========  ======== 
 
 
 
                                              Year ended 30 April 2021 (audited) 
                        ---------------------------------------------------------------------------- 
                                                                       Retained earnings 
                        --------  --------  --------                                        -------- 
                                                          Capital 
                           Share     Share  Special    redemption 
                         capital   premium   reserve      reserve      Revenue     Capital     Total 
                         GBP'000   GBP'000   GBP'000      GBP'000      GBP'000     GBP'000   GBP'000 
                        --------  --------  --------  -----------  -----------  ----------  -------- 
At 1 May 2020                396       676    46,181          194        2,517      72,490   122,454 
Total comprehensive 
 income: 
Profit for the 
 period                        -         -         -            -        2,323      64,546    66,869 
Transactions 
 with owners recorded 
 directly to equity: 
Repurchase and 
 cancellation 
 of ordinary shares         (14)         -   (5,443)           14            -           -   (5,443) 
Dividends paid                 -         -         -            -      (2,052)           -   (2,052) 
                        --------  --------  --------  -----------  -----------  ----------  -------- 
At 30 April 2021             382       676   40,738           208        2,788     137,036   181,828 
                        ========  ========  ========  ===========  ===========  ==========  ======== 
 
 

Condensed statement of cash flows

 
                                              Six months ended  Six months ended  Year ended 
                                                    31 October        31 October    30 April 
                                                          2021              2020        2021 
                                                   (unaudited)       (unaudited)   (audited) 
                                                       GBP'000           GBP'000     GBP'000 
Operating activities 
(Loss)/profit before tax                              (10,207)            18,474      67,079 
Interest payable                                            18                15          35 
Losses/(gains) on investments                           10,387          (18,550)    (59,998) 
Net losses/(gains) on derivatives                          454               845     (4,767) 
Currency losses/(gains)                                    110             (368)       (609) 
Increase in other receivables                             (79)             (177)       (307) 
Increase/(decrease) in other payables                        5              (23)          81 
Net cash inflow from operating activities 
 before interest and tax                                   688               216       1,514 
Interest paid                                             (18)              (15)        (35) 
Irrecoverable overseas tax suffered                       (45)             (114)       (210) 
Net cash inflow from operating activities                  625                87       1,269 
Investing activities 
Purchase of investments                               (13,101)          (29,705)    (51,278) 
Sales of investments                                    27,097            24,739      51,912 
(Purchase)/sales of derivatives                        (2,672)             (471)       5,057 
Collateral pledged                                       1,200             (170)         610 
Net cash inflow)/(outflow) from investing 
 activities                                             12,524           (5,607)       6,301 
Financing activities 
Repurchase of ordinary shares into treasury            (6,940)                 -           - 
Repurchase and cancellation of ordinary 
 shares                                                (4,091)                 -     (5,443) 
Dividends paid                                         (1,189)           (1,229)     (2,052) 
(Decrease)/increase in inter-company 
 loan                                                    (147)               332         411 
Utilisation of bank overdraft                                -               678           - 
Net cash outflow from financing activities            (12,367)             (219)     (7,084) 
Net decrease/(increase) in net debt                        782           (5,739)         486 
Net funds at the start of the period                     6,477             5,382       5,382 
Effect of foreign exchange rate changes                  (110)               368         609 
Net funds at the end of the period                       7,149                11       6,477 
Cash and cash equivalents                                7,149                11       6,477 
 
 
 

Notes to the half-yearly financial report

   1.       Accounting policies 

The Half-Yearly Financial Report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', the provisions of the Companies Act 2006 and with the guidance set out in the Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts ("SORP") issued by the Association of Investment Companies in October 2019.

The accounting policies remain the same as disclosed in the Annual Financial Statements for the year ended 30 April 2021.

   2.       Earnings/(loss) per ordinary share 
 
                                              Six months   Six months 
                                                   ended        ended  Year ended 
                                              31 October   31 October    30 April 
                                                    2021         2020        2021 
                                             -----------  -----------  ---------- 
Earnings/(loss) per ordinary share is 
 based on: 
Revenue earnings (GBP'000)                         1,210          631       2,323 
Capital (loss)/earnings (GBP'000)               (11,462)       17,729      64,546 
                                             -----------  -----------  ---------- 
Total (loss)/earnings (GBP'000)                 (10,252)       18,360      66,869 
                                             ===========  ===========  ========== 
Weighted average number of ordinary shares 
 in issue during the period                   37,522,202   39,580,474  39,224,610 
                                             ===========  ===========  ========== 
 
 
   3.       Net asset value per ordinary share 
 
                                              As at        As at       As at 
                                         31 October   31 October    30 April 
                                               2021         2020        2021 
                                        -----------  -----------  ---------- 
Net asset value per ordinary share is 
 based on: 
Net assets (GBP'000)                        159,164      139,585     181,828 
                                        -----------  -----------  ---------- 
Number of shares in issue at the end 
 of the period                           35,594,974   39,580,474  38,185,474 
                                        ===========  ===========  ========== 
 

During the period, the Company repurchased and cancelled 925,000 shares and repurchased 1,665,500 shares into treasury (six months ended 31 October 2020: no shares were repurchased or cancelled into treasury and year ended 30 April 2021: repurchased and cancelled 1,395,000 shares).

   4.       Dividends 
 
 
                                 Six months   Six months 
                                      ended        ended  Year ended 
                                 31 October   31 October    30 April 
                                       2021         2020        2021 
                                    GBP'000      GBP'000     GBP'000 
                               ------------  -----------  ---------- 
Final dividend for the year 
 ended                                1,189        1,229       1,229 
30 April 2021 - 3.19p (2020: 
 3.10p) 
First interim dividend for 
 the year ended                           -            -         823 
30 April 2021 - 2.11p 
                                      1,189        1,229       2,052 
                               ============  ===========  ========== 
 

A first interim dividend for the year ending 30 April 2022 of 2.14p per ordinary share has been declared. This will be paid on 20 January 2022 to those shareholders on the register at close of business on 24 December 2021.

   5.       Analysis of retained earnings - capital 
 
                                    As at        As at      As at 
                               31 October   31 October   30 April 
                                     2021         2020       2021 
                                  GBP'000      GBP'000    GBP'000 
                              -----------  -----------  --------- 
Retained earnings - capital 
 (realised)                       115,940       84,823    125,155 
Retained earnings - capital 
 (unrealised)                       9,634        5,396     11,881 
                              -----------  -----------  --------- 
                                  125,574       90,219    137,036 
                              -----------  -----------  --------- 
 
   6.       Reconciliation of liabilities arising from financial activities 
 
                                                              Balance at 
                           1 May    Transactions  Cash flow   31 October 
                            2021   in the period   payments         2021 
                         GBP'000         GBP'000    GBP'000      GBP'000 
                       ---------  --------------  ---------  ----------- 
Repurchase of shares 
 into treasury 
treasury                       -           7,132    (6,940)          192 
Repurchase of shares 
 for treasury 
cancellation                   -           4,091    (4,091)            - 
Dividends paid                 -           1,189    (1,189)            - 
Intercompany loan              -             147      (147)            - 
                       ---------  --------------  ---------  ----------- 
                               -          12,559   (12,367)          192 
                       ---------  --------------  ---------  ----------- 
 
   7.       Comparative information 

The financial information for the six months ended 31 October 2021 and 31 October 2020 has not been audited and does not constitute statutory financial statements as defined in Section 234 of the Companies Act 2006.

The information for the year ended 30 April 2021 has been extracted from the Audited Financial Statements for the year ended 30 April 2021. These financial statements contained an unqualified auditor's report and have been lodged with the Registrar of Companies and did not contain a statement required under Section 498 of the Companies Act 2006.

   8.       Related party transactions 

The amounts paid to the Investment Manager are disclosed in the Condensed income statement. However, the existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under IAS 24: Related Party Disclosures, the Investment Manager is not considered to be a related party.

   9.       Fair value hierarchy 

IFRS 7 'Financial Instruments: Disclosures' requires an entity to provide an analysis of investments held at fair value through profit and loss using a fair value hierarchy that reflects the significance of the inputs used in making the measurements of fair value. The hierarchy used to analyse the fair values of financial assets is set out below.

Level 1 - investments with quoted prices in an active market;

Level 2 - investments, including contracts for difference, whose fair value is based directly on observable current market prices or is indirectly derived from market prices; and

Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or are not based on observable market data.

The investments held at the balance sheet date fell into the categories, Level 1, Level 2 and Level 3. The values in these categories are summarised as part of this note. Any investments that are delisted or suspended from a listed stock exchange are transferred from Level 1 to Level 3.

 
 
          (Unaudited)                 (Unaudited)                 (Audited) 
                As at                       As at                     As at 
           31 October                  31 October                  30 April 
                 2021                        2020                      2021 
               Assets    Liabilities       Assets    Liabilities     Assets    Liabilities 
              GBP'000        GBP'000      GBP'000        GBP'000    GBP'000 
          -----------  -------------  -----------  -------------  ---------  ------------- 
 
Level 1       138,440              -      128,034              -    165,313              - 
Level 2           355          (303)          309           (57)        162          (478) 
Level 3        12,447              -       10,718              -     10,678              - 
Total         151,242          (303)      139,061           (57)    176,153          (478) 
          ===========  =============  ===========  =============  =========  ============= 
 

The valuation of the Level 3 investments would not be significantly different had reasonably possible alternative valuation bases been applied.

 
Details of the movements in Level 3 assets during the 
 six months ended 31 October 2021 are set out in the table 
 below.                                                      GBP'000 
                                                             ------- 
Level 3 investments 
Opening book cost                                             16,221 
Opening fair value adjustment                                (5,543) 
                                                             ------- 
Opening valuation                                             10,678 
                                                             ======= 
Movements in the period: 
Purchases at cost                                                 63 
Sales - proceeds                                                (57) 
        - realised losses on sales                           (2,258) 
Increase in fair value adjustment                              4,021 
                                                             ------- 
Closing valuation                                             12,447 
                                                             ------- 
Closing book cost                                             13,969 
Closing fair value adjustment                                (1,522) 
                                                             ------- 
                                                              12,447 
                                                             ======= 
 

Statement of Principal Risks and Uncertainties

Pursuant to DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, the principal risks faced by the Company include general market risk, regulatory, operational and financial risks. These risks, which have not materially changed since the Annual Financial Report for the year ended 30 April 2021, and the way in which they are managed, are described in more detail in the Annual Financial Report which is available at artemisalphatrust.co.uk.

Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report

The Directors confirm that to the best of their knowledge, in respect of the Half-Yearly Financial Report for the six months ended 31 October 2021:

 
      --   the condensed set of financial statements has been prepared 
            in accordance with IAS 34 'Interim Financial Reporting' 
            issued by the International Accounting Standards Board 
            as adopted by the EU; 
      --   having considered the expected cash flows and operational 
            costs of the Company for the 18 months from the period 
            end, the Directors are satisfied that the Company has adequate 
            resources to continue in operational existence for the 
            foreseeable future. For this reason, the going concern 
            basis of accounting continues to be used in the preparation 
            of the Half-Yearly Financial Report; 
      --   the interim management report includes a fair review of 
            the information required by: 
            (a) Disclosure Guidance and Transparency Rule 4.2.7R (indication 
            of important events during the first six months; and a 
            description of the principal risks and uncertainties for 
            the remaining six months of the year); and 
            (b) Disclosure Guidance and Transparency Rule 4.2.8R (related 
            party transactions). 
 

The Half-Yearly Financial Report for the six months ended 31 October 2021 was approved by the Board and the above responsibility statement was signed on its behalf by:

Duncan Budge

Chairman

15 December 2021

Copies of the Half-Yearly Financial Report for the six months ended 31 October 2021 will be sent to shareholders shortly and will be available from the registered office at Cassini House, 57 St James's Street, London SW1A 1LD as well as on the website, artemisfunds.com .

A copy of the Half Yearly Financial Report will also be submitted to the National Storage Mechanism and will soon be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

Artemis Fund Managers Limited

Company Secretary

For further information, please contact:

Artemis Fund Managers Limited

Telephone: 0131 225 7300

16 December 2021

[END]

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