TIDMBMD
RNS Number : 0896A
Baronsmead Second Venture Trust PLC
27 May 2021
Baronsmead Second Venture Trust plc
Half-yearly report for the six months ended 31 March 2021
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 2021. Copies of the half-yearly report can be
obtained from the following website: www.baronsmeadvcts.co.uk .
Our Investment Objective
-- Baronsmead Second Venture Trust plc is a tax efficient listed
company which aims to achieve long-term investment returns for
private investors, including tax free dividends.
Investment Policy
-- To invest primarily in a diverse portfolio of UK growth
businesses, whether unquoted or traded on AIM.
-- Investments are made selectively across a range of sectors in
companies that have the potential to grow and enhance their
value.
Dividend Policy
-- The Board will, wherever possible, seek to pay two dividends
to Shareholders in each calendar year, typically an interim
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
NAV of that financial year.
Key elements of the business model
Access to an attractive, diverse portfolio
Baronsmead Second Venture Trust plc gives shareholders access to
a diverse portfolio of growth businesses.
The Company will make investments in growth businesses, whether
unquoted or traded on AIM, which are substantially based in the UK
in accordance with the prevailing VCT legislation. Investments are
made selectively across a range of sectors.
The Manager's approach to investing
The Manager endeavours to select the best opportunities and
applies a distinctive selection criteria based on:
-- Primarily investing in parts of the economy which are
experiencing long-term structural growth.
-- Businesses that demonstrate, or have the potential for, market leadership in their niche.
-- Management teams that can develop and deliver profitable and sustainable growth.
-- Companies with the potential to become an attractive asset
appealing to a range of buyers at the appropriate time to sell.
In order to ensure a strong pipeline of opportunities, the
Manager invests in building deep sector knowledge and networks and
undertakes significant proactive marketing to 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 the 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 able
to be either sold or potentially floated in the medium term.
Financial Highlights
+18.4% Net Asset Value (NAV) per share increased 18.4 per cent.
to 83.1p in the six months to 31 March 2021, before deduction of
dividends.
371.9p NAV total return to shareholders for every 100.0p
invested at launch (January 2001).
GBP9.9m Realised proceeds in the period, returning 3.0x
cost.
GBP32.4m Funds raised in the period (before costs).
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 tax available to be reclaimed on the
subscription.
Cumulative
Net cash invested dividends
Cash invested Income tax reclaim (p) paid # Return on cash
Year subscribed (p) (p) (p) invested # (%)
2001 (January) 100.0 20.0 80.0 150.8 170.8
============= ================== =================== =================== ===================
2005 (March) - C
share* 100.0 40.0 60.0 107.6 147.6
============= ================== =================== =================== ===================
2010 (March) 103.1 30.9 72.2 102.5 129.4
============= ================== =================== =================== ===================
2012 (December) 117.4 35.2 82.2 84.5 102.0
============= ================== =================== =================== ===================
2014 (March) 112.4 33.7 78.7 64.5 87.4
============= ================== =================== =================== ===================
2016 (February) 107.2 32.2 75.0 48.0 74.8
============= ================== =================== =================== ===================
2017 (October) 97.5 29.2 68.2 28.0 58.7
============= ================== =================== =================== ===================
2019 (February) 85.3 25.6 59.7 20.5 54.0
============= ================== =================== =================== ===================
2019 (November) 78.9 23.7 55.2 13.0 46.5
============= ================== =================== =================== ===================
2020 (January) 84.8 25.4 59.4 13.0 45.3
============= ================== =================== =================== ===================
2020 (February) 82.5 24.8 57.7 9.5 41.6
============= ================== =================== =================== ===================
2020 (March) 64.3 19.3 45.0 9.5 44.8
============= ================== =================== =================== ===================
2020 (November) 77.9 23.4 54.5 6.5 38.4
============= ================== =================== =================== ===================
2020 (December) 80.9 24.3 56.6 6.5 38.1
============= ================== =================== =================== ===================
2021 (January) 84.4 25.3 59.1 6.5 37.7
============= ================== =================== =================== ===================
2021 (February) 82.2 24.7 57.5 3.0 33.7
============= ================== =================== =================== ===================
2021 (March) 84.9 25.5 59.4 3.0 33.6
============= ================== =================== =================== ===================
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 3.0p per share payable10
September 2021.
Chairman's statement
The six months to 31 March 2021 saw strong performance from our
AIM-traded investments, which provided a 31.0 per cent. return in
the period. There was also positive progress from our unquoted
investments, including the successful realisation of Ten10.
I am delighted to report that, during the period, the Company
successfully raised GBP32.4m, before costs, through its largest
offer for subscription in the history of the fund.
The Board is also pleased to declare an interim dividend of 3.0p
to be paid on 10 September 2021. The dividend will be paid from
realised capital profits generated from the sale of portfolio
companies.
Results
During the six months to 31 March 2021, the Company's NAV per
share increased 18.4 per cent. from 70.2p to 83.1p after the
payment of a final dividend of 3.5p per share on 5 March 2021. The
table below shows this increase in NAV, which was due to a
combination of a strong performance across the unquoted
investments, AIM-traded investments and equity funds.
Pence per
ordinary
share
----------------------------------------------- ----------
NAV as at 1 October 2020 (after deducting the
final dividend of 3.5p) 70.2
----------------------------------------------- ----------
Valuation increase (18.4 per cent.) 12.9
----------------------------------------------- ----------
NAV as at 31 March 2021 83.1
----------------------------------------------- ----------
The 30 April 2021 NAV was 87.8p, a 5.7 per cent. increase driven
by further uplifts in the value of the quoted portfolio during the
month.
Portfolio review
The table below provides a summary of each asset class and the
return generated during the period under review.
Results
NAV Number of % return in
Asset class (GBPm) % of NAV* investees** the period***
Unquoted 52 22 35 12
-------- ---------- ------------- ---------------
AIM and LSE-traded
companies 94 40 42 31
-------- ---------- ------------- ---------------
LF Gresham House
UK Micro Cap Fund 31 13 48 32
-------- ---------- ------------- ---------------
LF Gresham House
UK Multi Cap Income
Fund 4 2 47 15
-------- ---------- ------------- ---------------
LF Gresham House
UK Smaller Companies
Fund 4 2 48 40
-------- ---------- ------------- ---------------
Liquid assets(#) 52 21 - -
-------- ---------- ------------- ---------------
Total 237 100 - -
-------- ---------- ------------- ---------------
* By value at 31 March 2021.
**Includes investee companies with holdings by more than one
fund. Total number of individual companies held is 178.
***Return includes interest received on unquoted realisations
during the period.
(#) Represents cash, OEICs and net current assets.
The value of the unquoted portfolio increased 12.4 per cent. in
the six months to 31 March 2021. Continued trading momentum in
software and e-commerce investments, together with a bounce back in
demand within several businesses initially impacted by COVID-19,
drove the portfolio performance. The gains recognised in these
assets were partially offset by write downs in investments
operating in the consumer, travel, or housing markets, which are
still being negatively impacted by lockdown and
travel restrictions.
Public markets have continued to recover from lows 12 months
ago, driven by the speed of the vaccination rollout, growth in
economic activity and further Government support and investment
programmes. Healthcare, education and technology investments were
the key contributors to the strong performance of the direct AIM
investments and the Equity Fund portfolios over the period. The AIM
portfolio recorded growth of 31.0 per cent. in the period,
outperforming relevant comparable indices, while the Micro Cap
Fund, Multi Cap Income Fund and Smaller Companies Fund grew in
value by 32.2, 15.0 and 40.1 per cent. over the period
respectively.
Investments and Divestments
The Company's investments and divestments during the period are
set out in the tables below.
Investments
I am pleased to report that the Company made four new
investments totalling GBP5.6m and three follow-on investments with
a combined value of GBP1.7m in the six months to 31 March 2021.
Below are descriptions of the new investments made:
-- eConsult (unquoted) develops and operates a digital
consultation platform used in both GP surgeries and hospitals.
-- RevLifter (unquoted) provides software that helps e-commerce
companies optimise website conversion by offering tailored
promotions to customers by using advanced behavioural
analytics.
-- Counting Up (unquoted) is the leading UK provider of unified
banking and accounting software to micro-businesses. Counting Up
develops and operates the software which provides an all-in-one
financial tool for small business users.
-- Metrion Biosciences (unquoted) is a UK-based Contract
Research Organisation focused on delivering a range of high-quality
ion channel drug discovery services.
Following the period end, a new quoted investment of GBP0.7m was
made into Crimson Tide, a workforce management
software-as-a-service provider.
The Investment Manager performs an assessment of environmental,
social and governance ("ESG") factors and stewardship
responsibilities in the selection of new investments and continues
to monitor ESG considerations in its existing portfolio.
Realisations
Proceeds of GBP2.6m were received during the period from sales
of quoted investments, including:
-- Cerillion plc - we reduced the position size by GBP1.9m,
realising 4.2x the original sum invested.
-- Collagen Solutions plc - a full exit through a takeover offer
for the company. The portfolio received GBP0.7m from the exit,
realising 1.3x the original sum invested.
There continues to be good levels of liquidity in public markets
and the Investment Manager has made a select number of divestments
within the quoted portfolio where share prices have rallied
strongly since the initial decline in markets, following the first
national lockdown in March last year.
From the unquoted portfolio, the sale of the investment in Ten10
successfully completed in October 2020. The sale returned total
proceeds of GBP7.3m resulting in a total money multiple of 3.7x
original investment cost.
Following the end of the financial period there has been a
takeover of Wey Education, resulting in the full realisation of the
Company's investment, returning 13.6x cost and delivering proceeds
of GBP7.1m.
COVID-19 impact
COVID-19 has had a material impact on UK businesses over the
last year and has caused significant volatility and disruption to
the global economy. The pandemic has presented operational risks
for the Company, but these have been well managed and the Board
continues to be pleased by the response and resilience of key
service providers during this difficult time.
Although there are now several approved vaccines in circulation,
there is still the risk of another wave of infections, which could
lead to a further period of uncertainty and volatility in markets.
We are encouraged by the Manager's ongoing engagement with
portfolio companies and the focus on investing in businesses with
strong fundamental characteristics which should continue to grow
consistently through the economic cycle.
Dividends
The Board is pleased to declare an interim dividend of 3.0p per
share for the year to 30 September 2021. This will be paid on 10
September 2021 to shareholders on the register as of 13 August
2021.
I must of course remind shareholders that the payment date and
the amount of future dividends depends on the level and timing of
profitable realisations and cannot be guaranteed.
Fundraising
During the period, the Company successfully raised GBP32.4m
(before costs) through an offer for subscription which became fully
subscribed in March 2021. The Directors are pleased to welcome the
1,000 new shareholders who invested for the first time and to thank
the 940 existing shareholders who continue to support the
Company.
The Board will consider whether to raise new funds in the
2021/22 tax year which will be determined by the Company's cashflow
and its anticipated requirements to fund new investments over the
next two. The Board appreciates that shareholders would like as
much notice as possible of its fundraising intentions and will
ensure that shareholders are informed as soon as possible.
Change of auditor
The audit and risk committee has considered the external audit
arrangements and has held an audit tender process in early 2021.
Following the conclusion of this process, the audit committee has
appointed BDO LLP as the Company's auditor and KPMG LLP will retire
with effect from 28 May 2021. KPMG's resignation letter will be
sent to the Company's shareholders alongside this half-yearly
report.
Director changes
We are pleased to have appointed Graham McDonald as a new
independent Non-Executive Director at the Company's Annual General
Meeting in February 2021. Graham was the former Global Head of
Private Equity and Venture Capital at Aberdeen Standard Investments
and we believe that his extensive private equity experience and
market knowledge will be invaluable to our Company.
Shareholder scam warning
We are aware that some of our shareholders have received
unsolicited phone calls or correspondence concerning their
investment in the Company.
Shareholders are advised to be very wary of any unsolicited
advice, offers to buy shares at a discount or offers for free
company reports.
Please note that none of the Investment Manager, Company or the
Company's Registrar, Computershare, would make unsolicited
telephone calls to shareholders. Any calls made would relate only
to official documentation already circulated to shareholders and
never in respect of investment "advice".
If you are in any doubt about the veracity of an unsolicited
phone call, please call either the Company or the Registrar at the
numbers provided below.
Outlook
The economic outlook in the UK continues to improve as COVID-19
restrictions ease and consumer confidence recovers. The March
Budget also included an extension of Government support and
investment in infrastructure and the technology sector to help
rebuild the UK economy. While most economic commentators expect the
economy to rebound strongly over the next two quarters, the
longer-term impact of the pandemic remains uncertain. Any
additional wave of the virus could lead to the reintroduction of
restrictions and the possibility of further volatility in both
public markets and revenues within some portfolio companies.
However, the Board continues to believe that the portfolio is well
positioned to deliver robust investment performance over the
long-term and the Company remains well capitalised to actively
support the high growth, entrepreneurial businesses which will be
key in driving a sustainable economic recovery.
Sarah Fromson
Chairman
27 May 2021
Investments in the period
Book
cost
Company Location Sector Activity GBP'000
Unquoted investments
New
===============================================================================================
Online consultation provider
Healthcare used by GP practices and
eConsult Ltd Surrey & Education hospitals 2,599
=========== ============== ================================= ========
Ion channel drug discovery
Metrion Biosciences Healthcare and safety assessment services
Ltd Cambridge & Education provider 1,192
=========== ============== ================================= ========
Business Banking and accounting software
Counting Ltd London Services for small business 1,059
=========== ============== ================================= ========
A-I platform using advanced
behavioural analytics to
deliver tailored promotions
Revlifter Ltd London TMT to users 779
=========== ============== ================================= ========
Follow On
===============================================================================================
Business
Glisser Ltd London Services Audience engagement software 794
=========== ============== ================================= ========
Equipsme (Holdings) Business SME health insurance plans
Ltd London Services provider 238
=========== ============== ================================= ========
Total unquoted investments 6,661
========
AIM-traded investments
Follow on
CloudCall Group Cloud software and integrated
plc Leicester TMT communications 606
=========== ============== ================================= ========
Total AIM-traded investments 606
========
Total investments in the period 7,267
========
Realisations in the period
First Original Proceeds Overall
investment book cost ++ multiple
Company date GBP'000 GBP'000 return
Unquoted realisations
Full trade
Ten10 Group Limited sale Feb 15 2,331 7,254 3.7 *
============= ============ ========== ======== =========
Total unquoted realisations 2,331 7,254 3.7 *
========================== ========== ======== =========
AIM-traded realisations
Cerillion plc Market sale Nov 15 460 1,924 4.2
============= ============ ========== ======== =========
Collagen Solutions plc Takeover Mar 17 551 716 1.3
============= ============ ========== ======== =========
Total AIM-traded realisations 1,011 2,640 2.6
========================== ========== ======== =========
Total realisations in the
period 3,342 9,894 3.0
========================== ========== ======== =========
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 .
Responsibility statement of the directors in respect of the
half-yearly financial report
Half-yearly report
The important events that have occurred during the period under
review, the key factors influencing the financial statements and
the principal uncertainties for the remaining six months of the
financial year are set out in the Chairman's Statement and the
Strategic Report.
The principal risks facing the Company are substantially
unchanged since the date of the Company's Annual Report for the
financial year ended 30 September 2020 and continue to be as set
out in that Report on pages 18 and 19.
Risks faced by the Company include but are not limited to; loss
of approval as a Venture Capital Trust, investment performance
risk, legislative risk, regulatory and compliance risk, operational
risk, and economic and political risk. The Board considers the
COVID-19 pandemic and Brexit to be factors which permeate these
risks, and their impact is considered within the relevant risk
within the Annual Report.
Responsibility statement
Each director confirms that to the best of our knowledge:
-- the condensed set of nancial 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 rst six months of the nancial year and their impact on the
condensed set of nancial 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 rst
six months of the current nancial year and that have materially
affected the nancial position or performance of the entity 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
27 May 2021 and was signed on its behalf by Ms Sarah Fromson,
Chairman.
Sarah Fromson
Chairman
27 May 2021
Condensed Income Statement
For the six months to 31 March 2021 (Unaudited)
Six months to Six months to Year to
31 March 2021 31 March 2020 30 September 2020
--------------------- -----
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
Gains/(losses) on
investments 5 - 37,141 37,141 - (15,852) (15,852) - 8,680 8,680
Income 566 - 566 519 - 519 4,008 - 4,008
Investment
management fee (661) (1,983) (2,644) (529) (1,586) (2,115) (1,078) (3,235) (4,313)
Other expenses (377) - (377) (362) - (362) (674) - (674)
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
(Loss)/profit
before taxation (472) 35,158 34,686 (372) (17,438) (17,810) 2,256 5,445 7,701
Taxation on
ordinary
activities - - - - - - (275) 275 -
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
(Loss)/profit for
the period, being
the total
comprehensive
income for the
period after
taxation (472) 35,158 34,686 (372) (17,438) (17,810) 1,981 5,720 7,701
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
Return per ordinary
share:
Basic and Diluted 2 (0.18p) 13.23p 13.05p (0.16p) (7.35p) (7.51p) 0.82p 2.36p 3.18p
--------------------- ----- -------- -------- -------- -------- -------- -------- -------- -------- --------
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 2021 (Unaudited)
Non-distributable reserves Distributable Reserves
-----------------------
Share Revaluation Capital Revenue
Called-up share capital premium reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----- ----------------------- -------- ----------- ----------- ----------- ------------
At 1 October 2020 27,146 46,775 30,890 75,290 2,216 182,317
Profit/(loss) after
taxation - - 31,462 3,696 (472) 34,686
Net proceeds of share
issues, share buybacks
& sale of shares from
treasury 3 4,060 27,459 - (1,608) - 29,911
Dividends paid 4 - - - (8,354) (1,232) (9,586)
----------------------- ----- ----------------------- -------- ----------- ----------- ----------- ------------
At 31 March 2021 31,206 74,234 62,352 69,024 512 237,328
----------------------- ----- ----------------------- -------- ----------- ----------- ----------- ------------
For the six months to 31 March 2020 (Unaudited)
Non-distributable reserves Distributable Reserves
-----------------------
Called-up share Share Revaluation Capital Revenue
capital premium reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------ ---------------------- -------- ----------- ----------- ----------- ------------
At 1 October 2019 24,802 31,191 25,492 92,316 1,575 175,376
Loss after taxation - - (13,985) (3,453) (372) (17,810)
Net proceeds of share issues &
share buybacks 2,345 15,584 - (1,911) - 16,018
Dividends paid - - - (7,407) (1,093) (8,500)
------------------------------- ---------------------- -------- ----------- ----------- ----------- ------------
At 31 March 2020 27,147 46,775 11,507 79,545 110 165,084
------------------------------- ---------------------- -------- ----------- ----------- ----------- ------------
For the year ended 30 September 2020 (Audited)
Non-distributable reserves Distributable reserves
--------------------------
Share Revaluation Capital Revenue
Called-up share capital premium reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------ ----------------------- -------- ----------- ----------- ----------- --------
At 1 October 2019 24,802 31,191 25,492 92,316 1,575 175,376
Profit after taxation - - 5,398 322 1,981 7,701
Net proceeds of share issues,
share buybacks & sale of shares
from treasury 2,344 15,584 - (2,782) - 15,146
Other costs charged to capital - - - (1) - (1)
Dividends paid - - - (14,565) (1,340) 15,905)
---------------------------------- ----------------------- -------- ----------- ----------- ----------- --------
At 30 September 2020 27,146 46,775 30,890 75,290 2,216 182,317
---------------------------------- ----------------------- -------- ----------- ----------- ----------- --------
Condensed Balance Sheet
As at 31 March 2021 (Unaudited)
As at As at
31 March 31 March As at
2021 2020 30 September 2020
Notes GBP'000 GBP'000 GBP'000
------------------------------------------------ -----
Fixed assets
Unquoted investments 5 52,113 45,107 46,442
Traded on AIM 5 94,364 61,218 74,081
Collective investment vehicles 5 54,503 46,317 59,367
Listed on LSE 5 36 - 42
------------------------------------------------ ----- --------------- --------------- ------------------
Investments 5 201,016 152,642 179,932
Current assets
Debtors 110 2,258 571
Cash at bank 37,767 11,543 3,108
------------------------------------------------ ----- --------------- --------------- ------------------
37,877 13,801 3,679
Creditors (amounts falling due within one year) (1,565) (1,359) (1,294)
------------------------------------------------ ----- --------------- --------------- ------------------
Net current assets 36,312 12,422 2,385
------------------------------------------------ ----- --------------- --------------- ------------------
Net assets 237,328 165,084 182,317
------------------------------------------------ ----- --------------- --------------- ------------------
Capital and reserves
Called-up share capital 31,206 27,147 27,146
Share premium 74,234 46,775 46,775
Capital reserve 69,024 79,545 75,290
Revaluation reserve 5 62,352 11,507 30,890
Revenue reserve 512 110 2,216
------------------------------------------------ ----- --------------- --------------- ------------------
Equity shareholders' funds 237,328 165,084 182,317
------------------------------------------------ ----- --------------- --------------- ------------------
Net asset value per share 83.07p 66.44p 73.74p
Number of ordinary shares in circulation 258,692,452 248,485,874 247,251,570
Condensed Statement of cash flows
For the six months to 31 March 2021 (Unaudited)
Six Six
months to months to Year to
31 March 2021 31 March 2020 30 September 2020
GBP'000 GBP'000 GBP'000
------------------------------------------------------------
Net cash outflow from operating activities (1,670) (1,919) (1,339)
Net cash inflow/(outflow) from investing activities 16,050 (3,127) (6,023)
Equity dividends paid (9,586) (8,500) (15,905)
------------------------------------------------------------ ---------------- ------------------ ------------------
Net cash inflow/(outflow) before financing activities 4,794 (13,546) (23,267)
Net cash inflow from financing activities 29,865 14,097 15,383
------------------------------------------------------------ ---------------- ------------------ ------------------
Increase/(decrease) in cash 34,659 551 (7,884)
------------------------------------------------------------ ---------------- ------------------ ------------------
Reconciliation of net cash flow to movement in net cash
Increase/(decrease) in cash 34,659 551 (7,884)
Opening cash at bank and on deposit 3,108 10,992 10,992
------------------------------------------------------------ ---------------- ------------------ ------------------
Closing cash at bank and on deposit 37,767 11,543 3,108
------------------------------------------------------------ ---------------- ------------------ ------------------
Reconciliation of profit/(loss) before taxation to net cash
outflow from operating activities
Profit/(loss) before taxation 34,686 (17,810) 7,701
Gains/(losses) on investments (37,141) 15,852 (8,680)
Changes in working capital and other non-cash items 785 39 (360)
------------------------------------------------------------ ---------------- ------------------ ------------------
Net cash outflow from operating activities (1,670) (1,919) (1,339)
------------------------------------------------------------ ---------------- ------------------ ------------------
Notes to the financial statements
For the six months to 31 March 2021 (Unaudited)
1. Basis of preparation
The condensed financial statements for the six months to 31
March 2021 comprise the unaudited financial statements together
with the related notes. The Company applies FRS 102 and the AIC's
Statement of Recommended Practice ('the SORP') for its annual
Financial Statements. The condensed financial statements for the
six months to 31 March 2021 have therefore been prepared in
accordance with FRS 104 'Interim Financial Reporting' and the
principles of the SORP. They have been prepared on a going concern
basis. The 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
2020.
The financial information contained in this half-yearly
financial report does not constitute statutory accounts as defined
in sections 434 - 436 of the Companies Act 2006. The half-yearly
financial report for the six months ended 31 March 2021 and for the
six months ended 31 March 2020 have been neither audited nor
reviewed by the Company's auditors. The information for the year to
30 September 2020 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 2020 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 2020
have been reported on by the Company's auditors or delivered to the
Registrar of Companies.
Copies of the half-yearly financial report have been made
available to shareholders and are available from Gresham House,
Octagon Point, 5 Cheapside, London EC2V 6AA.
2. Performance and shareholder returns
Return per share is based on a weighted average of 265,723,554
ordinary shares in issue (31 March 2020 - 237,173,550 ordinary
shares; 30 September 2020 - 242,461,220 ordinary shares).
Earnings for the first six months to 31 March 2021 should not be
taken as a guide to the results of the full financial year to 30
September 2021.
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 GBP'000
--------------------------------------------------------- -------
252, 2271,466,654 ordinary shares of 10p each listed
at 30 September 2020 27,146
40,593,158 ordinary shares of 10p each issued during
the period 4,060
312,059,812 ordinary shares of 10p each listed at 31
March 2021 31,206
--------------------------------------------------------- -------
24,215,084 ordinary shares of 10p each held in treasury
at 30 September 2020 (2,421)
2,672,276 ordinary shares of 10p each repurchased during
the period and held in treasury (268)
520,000 ordinary shares of 10p each sold from treasury
during the period 52
26,367,360 ordinary shares of 10p each held in treasury
at 31 March 2021 (2,637)
--------------------------------------------------------- -------
285,692,452 ordinary shares of 10p each in circulation*
at 31 March 2021 28,569
--------------------------------------------------------- -------
* carrying one vote each
During the six months to 31 March 2021, the Company issued
40,593,158 shares at net proceeds of GBP31,515,000 (after costs).
During the same period, the Company purchased 2,672,276 shares to
be held in treasury at a cost of GBP2,005,000 (including costs).
The Company also sold 520,000 shares from treasury for proceeds of
GBP401,000. At 31 March 2021, the Company held 26,367,360 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 285,692,452 ordinary
shares in issue at 31 March 2021 (31 March 2020 - 248,485,874
ordinary shares; 30 September 2020 - 247,251,570 ordinary
shares).
4. Dividends
The final dividend for the year ended 30 September 2020 of 3.5p
per share (3.05p capital, 0.45p revenue) was paid on 5 March 2021
to shareholders on the register on 5 February 2021. The ex-dividend
date was 4 February 2021.
During the year to 30 September 2020, the Company paid an
interim dividend on 11 September 2020 of 3.0p per share (2.9p
capital, 0.1p revenue).
5. Investments
All investments are initially recognised subsequently measured
at fair value. Changes in fair value are recognised in the Income
Statement.
The methods of fair value measurement are classified into a
hierarchy based on reliability of the information used to determine
the valuation.
-- Level 1 - Fair value is measured based on quoted prices in an active market.
-- Level 2 - Fair value is measured based on directly observable
current market prices or indirectly being derived from market
prices.
-- Level 3 - Fair value is measured using a valuation technique
that is not based on data from an observable market.
The valuation of unquoted investments contained within level 3
of the Fair Value hierarchy involves key assumptions dependent upon
the valuation methodology used. The primary methodologies applied
are:
- Rebased Cost
- Earnings Multiple
- Offer Less 10 per cent.
The earnings multiple approach involves more subjective inputs
than the Rebased Cost 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 2020. 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
---------------------------------
Collective
Traded Traded Listed investment
on AIM on AIM on LSE vehicles Unquoted Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- ----------
Opening book cost 54,095 6,513 3,429 45,418 39,587 149,042
Opening unrealised
appreciation/(depreciation) 17,433 (3,960) (3,387) 13,949 6,855 30,890
---------------------------------- -------- --------- --------- ----------- ---------- --------
Opening fair value 71,528 2,553 42 59,367 46,442 179,932
---------------------------------- -------- --------- --------- ----------- ---------- --------
Movements in the
period:
Transfer between
levels 6,513 (6,513) - - - -
Purchases at cost 606 - - 1,500 6,661 8,767
Sale - proceeds (2,640) - - (15,453) (6,731) (24,824)
- realised gains/(losses)
on sales 100 - - - (2) 98
Unrealised gains
realised during the
year 1,481 - - - 4,100 5,581
Increase/(decrease)
in unrealised appreciation/
(depreciation) 16,776 3,960 (6) 9,089 1,643 31,462
---------------------------------- -------- --------- --------- ----------- ---------- --------
Closing fair value 94,364 - 36 54,503 52,113 201,016
---------------------------------- -------- --------- --------- ----------- ---------- --------
Closing book cost 60,155 - 3,429 31,465 43,615 138,664
Closing unrealised
appreciation/(depreciation) 34,209 - (3,393) 23,038 8,498 62,352
---------------------------------- -------- --------- --------- ----------- ---------- --------
Closing fair value 94,364 - 36 54,503 52,113 201,016
---------------------------------- -------- --------- --------- ----------- ---------- --------
Equity shares 94,364 - 36 - 30,452 124,852
Preference Shares - - - - 7,864 7,864
Loan notes - - - - 13,797 13,797
Collective investment
vehicles - - - 54,503 - 54,503
---------------------------------- -------- --------- --------- ----------- ---------- --------
Closing fair value 94,364 - 36 54,503 52,113 201,016
---------------------------------- -------- --------- --------- ----------- ---------- --------
The AIM-traded investments held in Level 2 as at 30 September
2020 have been transferred to Level 1 after recent trading activity
in the period.
6. Other required disclosures
6.1 Segmental reporting
The Company has one reportable segment being investing in
primarily a portfolio of UK growth businesses, whether unquoted or
traded on AIM.
6.2 Principal risks and uncertainties
The Company's 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 & Uncertainties table
within the Strategic Report section in the Company's Annual Report
and Accounts for the year to 30 September 2020. The Board continues
to regularly review the risk environment in which the Company
operates.
The COVID-19 pandemic has presented the Company with immediate
risks in respect of the performance and valuation of portfolio
companies and operational risks such as the resilience of third
party providers. These risks are discussed further in the
Chairman's statement.
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. This is described in more detail under the
heading 'The Management Agreement' within the Strategic Report in
the Company's Annual Report and Accounts for the year ended 30
September 2020. During the period the Company has incurred
management fees of GBP2,644,000 (31 March 2020 - GBP2,115,000; 30
September 2020 - GBP4,313,000) and secretarial and accounting fees
of GBP71,000 (31 March 2020 - GBP87,000; 30 September 2020 -
GBP175,000) payable to the Manager. No performance fee has been
accrued at 31 March 2021 (31 March 2020 - GBPnil; 30 September 2020
- GBPnil). 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
2020.
A related party relationship exists between Baronsmead Second
Venture Trust and Happy Days Consultancy Limited, owing to the
significant influence deemed to be held over the operations of the
company. As at 31 March 2021, the loan balance stood at
GBP6,617,000, including GBP2,855,000 of capitalised interest, as
provided for in the Agreement with the company.
A related party relationship exists between Baronsmead Venture
Trust and Storyshare Holdings Limited, owing to the significant
influence held over the operations of the company.
6.4 Investment in associates
The Company has made the presumption that the following holdings
are investments in associates, owing to the proportion of equity
held and representation on the board representing significant
influence over the operations of the company. The investments held
are held as part of an investment portfolio, and are therefore
measured at fair value through profit and loss, as detailed in note
7 rather than using the equity method, as permitted by Section 14
of FRS 102:
Name Location Class of % of Equity Profit Net Assets Results
Shares (GBPm) (GBPm) for year
held ended
Happy Days 31 December
Consultancy UK A Ordinary 30.8 (1.3) (9.7) 2019(1)
(1) Latest published set of financial statements available at
Companies House.
6.5 Going Concern
The Board has considered a detailed assessment of the company's
ability to meet its liabilities as they fall due, including stress
and liquidity tests which modelled the effects of substantial falls
in markets and significant reductions in market liquidity
(including further stressing the current economic conditions caused
by the COVID-19 pandemic) on the Company's assets and liabilities.
In light of the results of these tests, the Company's cash
balances, the liquidity of the Company's investments and the
absence of any gearing, the Directors are satisfied that the
Company has adequate financial resources to continue in operation
for at least the next 12 months and that, accordingly, it is
appropriate to adopt the going concern basis in preparing the
financial statements.
6.6 Post balance sheet events
The following events occurred between the balance sheet date and
the signing of these financial statements:
-- The 30 April 2021 NAV of 87.8p was announced on 07 May 2021.
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.
-- Full realisation: a takeover of Wey Education completed on 25
May 2021, realising proceeds of GBP7.1m and returning 13.6x
invested cost.
Corporate Information
Registrars and Transfer Office
Directors Computershare Investor Services PLC
Sarah Fromson (Chair) The Pavilions
Malcolm Groat* Bridgwater Road
Graham McDonald Bristol BS99 6ZZ
Tim Farazmand (#) Tel: 0800 923 1534
Secretary Brokers
Gresham House Asset Management Ltd Panmure Gordon & Co
One New Change
Registered Office London EC4M 9AF
5 New Street Square Tel: 020 7886 2500
London EC41 3TW
Auditor
Investment Manager BDO LLP
Gresham House Asset Management Ltd 55 Baker Street
5 New Street Square London
London EC41 3TW W1U 7EU
020 3875 9862
Registered Number Solicitors
04115341 Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London EC2A 2EW
VCT Status Adviser
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Website
www.baronsmeadvcts.co.uk
Chair of the Nomination Committee.
* Senior Independent Director and
Chairman of the Audit & Risk Committee.
(#) Chairman of the Management Engagement
and Remuneration Committee.
LEI 2138008D3WUMF6TW8C28
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END
IR BSGDUGXDDGBR
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May 27, 2021 10:35 ET (14:35 GMT)
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