Interim / Quarterly Report • Nov 6, 2020
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
September 2020 Half Yearly Report SVM UK EMERGING FUND plc Half Yearly Report 2020
| Total Return Performance to 30 September 2020 |
6 months | 3 years | 5 Years | 10 Years |
|---|---|---|---|---|
| Net Asset Value | +28.4% | -2.5% | +31.4% | +51.7% |
| Share Price | +1.4% | -11.8% | +17.4% | +44.9% |
| Benchmark Index * | +12.8% | -8.2% | +17.0% | +31.0% |
* The benchmark index for the Fund was changed to the IA UK All Companies Sector Average Index from 1 October 2013 prior to which the FTSE AIM Index was used.
Half Yearly Report 2020
Over the six months to 30 September 2020, the Company's net asset value gained 28.4% to 105.0p per share, compared to a return of 12.8% in the benchmark, the IA UK All Companies Sector Average Index. Over the six months, the share price rose 1.4%. Over the five years to 30 September 2020, net asset value has gained 31.4% and the share price 17.4%, against a benchmark return of 17.0%. The Company's net asset value was 104.71p at 31 October 2020 (total return, Lipper data).
The period under review began after a sharp stockmarket fall, resulting from the disruption caused by COVID-19, but over the six months many shares rebounded. Most portfolio investments rose following government and Bank of England support for the worst hit sectors. Higher unemployment remains a risk for the UK economy; lower inflation and interest rates are now likely. More recently, market concerns with regard to a successful Brexit have resurfaced.
The strongest contributions to performance over the period were from Ocado, 4Imprint Group, Rentokil Initial, Games Workshop and Gamma Communications. Laggards included Workspace Group, Beazley and Creo Medical Group. During the six months, travel and property sector exposure was reduced; EasyJet, Trainline, Workspace, IWG and WH Smith were sold. New investments were made in manufacturing and industrial services; Avon Rubber, Aveva, and DiscoverIE Group. We expect many businesses to increase focus on resilience and sustainability; shortening supply chains and strengthening their online capability.
The investment strategy of the Company involves focusing on growing businesses benefiting from structural change in the economy. Typically, these have pricing power within their chosen niche. Companies that were already well invested in technology and able to make good use of customer data have seen an acceleration of change this year. Businesses are demanding more enterprise support services, assisting cloud data, mobile services and virtual operations. Suppliers of these technologies were typically already disrupters in their sectors and have proven their agility in offering differentiated services in scalable ways.
The crisis has heightened the contrast between legacy businesses and well-adapted agile disruptors. Changes in tastes are often slow to evolve, but persistent once set. At the centre of this trend is a shift in sentiment to the home environment and wellbeing. This investment theme could shape the economy for some time and the portfolio includes a number of businesses expected to benefit from these trends.
The portfolio focuses on resilient growing businesses, with low exposure to commodities, oil and banks. These are typically scalable businesses with a competitive edge. The Fund remains fully invested with some additional gearing.
Peter Dicks Chairman 6 November 2020
The investment objective of SVM UK Emerging Fund plc (the "Fund" or the "Company") is long term capital growth from investments in smaller UK companies. Its aim is to outperform the IA UK All Companies Sector Average Index on a total return basis
The Fund aims to achieve its objective and to diversify risk by investing in shares and related instruments, controlled by a number of limits on exposures. Appropriate guidelines for the management of the investments, gearing and financial instruments have been established by the Board. This is an abridged version of the Fund's investment policy. The full investment policy can be found in the Strategic Report within the Fund's latest Annual Report & Accounts.
The Directors are responsible for preparing the Half Yearly Report in accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
(disclosure of related party transactions and changes therein).
(iii) No related party transactions have taken place during the first six months of the year that have materially affected the financial position of the Fund during the period and there have been no changes in the related party transactions described in the Annual Report & Accounts for the year end 31 March 2020 that could do so.
The Directors consider that the Half Yearly Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Fund's performance and strategy,
The Half Yearly Report has not been audited or reviewed by the Fund's auditors.
By Order of the Board Peter Dicks Chairman 6 November 2020
| Six months to 30 September 2020 |
Six months to 30 September 2019 |
|||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Net gain on investments at fair value | - | 1,464 | 1,464 | - | 73 | 73 |
| Income | 20 | - | 20 | 94 | - | 94 |
| Investment management fees | - | (22) | (22) | - | (26) | (26) |
| Other expenses | (73) | - | (73) | (45) | - | (45) |
| (Loss)/gain before finance costs and taxation |
(53) | 1,442 | 1,389 | 49 | 47 | 96 |
| Finance costs | (5) | - | (5) | (11) | - | (11) |
| (Loss)/gain on ordinary activities before taxation |
(58) | 1,442 | 1,384 | 38 | 47 | 85 |
| Taxation | - | - | - | - | - | - |
| (Loss)/Gain attributable to ordinary shareholders |
(58) | 1,442 | 1,384 | 38 | 47 | 85 |
| (Loss)/Gain per Ordinary Share | (0.96)p | 24.05p | 23.09p | 0.63p | 0.78p | 1.41p |
| Year ended 31 March 2020 (audited) |
|||||
|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
|||
| Net loss on investments at fair value | - | (1,633) | (1,633) | ||
| Income | 137 | - | 137 | ||
| Investment management fees | - | (52) | (52) | ||
| Other expenses | (120) | - | (120) | ||
| Gain/(loss) before finance costs and taxation |
17 | (1,685) | (1,668) | ||
| Finance costs | (24) | - | (24) | ||
| Loss on ordinary activities before taxation |
(7) | (1,685) | (1,692) | ||
| Taxation | - | - | - | ||
| Loss attributable to ordinary shareholders |
(7) | (1,685) | (1,692) | ||
| Loss per Ordinary Share | (0.12)p | (28.08)p | (28.20)p |
The Total column of this statement is the profit and loss account of the Fund. All revenue and capital items are derived from continuing operations. No operations were acquired or discontinued in the year. A Statement of Comprehensive Income is not required as all gains and losses of the Fund have been reflected in the above statement.
| As at 30 September 2020 (unaudited) £'000 |
As at 31 March 2020 (audited) £'000 |
As at 30 September 2019 (unaudited) £'000 |
|
|---|---|---|---|
| Fixed Assets | |||
| Investments at fair value through profit or loss | 6,278 | 4,463 | 6,668 |
| Total Current Assets | 227 | 745 | 138 |
| Creditors: amounts falling due within one year | (212) | (299) | (121) |
| Net current assets | 15 | (446) | 17 |
| Total assets less current liabilities | 6,293 | 4,909 | 6,685 |
| Capital and Reserves | 6,293 | 4,909 | 6,685 |
| Equity shareholders' funds | 6,293 | 4,909 | 6,685 |
| Net asset value per Ordinary Share | 104.97p | 81.88p | 111.51p |
| Share capital |
Share premium |
Special reserve |
Capital redemption reserve |
Capital reserve |
Revenue reserve |
Total | |
|---|---|---|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 April 2020 | 300 | 314 | 5,136 | 27 | (492) | (376) | (4,909) |
| Gain/(Loss) attributable to shareholders |
- | - | - | - | 1,442 | (58) | 1,384 |
| As at 30 September 2020 |
300 | 314 | 5,136 | 27 | 950 | (434) | 6,293 |
| Share capital £'000 |
Share premium £'000 |
Special reserve £'000 |
Capital redemption reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|---|
| As at 1 April 2019 | 300 | 314 | 5,144 | 27 | 1,193 | (369) | 6,609 |
| Ordinary shares repurchased |
- | - | (8) | - | - | - | (8) |
| Loss attributable to shareholders |
- | - | - | - | (1,685) | (7) | (1,692) |
| As at 31 March 2020 | 300 | 314 | 5,136 | 27 | (492) | (376) | 4,909 |
| Share capital £'000 |
Share premium £'000 |
Special reserve £'000 |
Capital redemption reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|---|
| As at 1 April 2019 | 300 | 314 | 5,144 | 27 | 1,193 | (369) | 6,609 |
| Ordinary shares repurchased |
- | - | (9) | - | - | - | (9) |
| Gain attributable to shareholders |
- | - | - | - | 47 | 38 | 85 |
| As at 30 September 2019 |
300 | 314 | 5,135 | 27 | 1,240 | (331) | 6,685 |
| Stock | Market Exposure 2020 £000 |
% of Net Assets |
Sector analysis as at 30 September 2020 Sector |
% of Gross Exposure |
|
|---|---|---|---|---|---|
| 1 | Ocado Group | 343 | 5.5 | Industrials | 20.4 |
| 2 | Hilton Food Group | 261 | 4.1 | Consumer Discretionary | 19.1 |
| 3 | Rentokil Initial | 241 | 3.8 | Technology | 15.3 |
| 4 | Unite Group | 231 | 3.6 | Consumer Staples | 11.8 |
| 5 | Alpha Financial Markets | 211 | 3.4 | Financials | 9.6 |
| 6 | Knights Group | 208 | 3.3 | Real Estate | 6.5 |
| 7 | Dechra Pharmaceuticals | 192 | 3.1 | Healthcare | 5.8 |
| 8 | Gamma Communications | 179 | 2.8 | Consumer Services | 4.7 |
| 9 | 4Imprint Group | 177 | 2.8 | Telecommunications | 3.6 |
| 10 | FDM Group Holdings | 168 | 2.7 | Energy | 2.4 |
| Ten largest investments | 2,211 | 35.1 | Consumer Goods | 0.8 | |
| 11 | JD Sports Fashion * | 152 | 2.4 | Total | 100.0 |
| 12 | Games Workshop Group | 148 | 2.4 | ||
| 13 | Experian | 146 | 2.3 | ||
| 14 | Renishaw * | 128 | 2.0 | ||
| 15 | Codemasters | 127 | 2.0 | ||
| 16 | Learning Technologies Group | 126 | 2.0 | ||
| 17 | Just Eat Takeaway * | 123 | 2.0 | ||
| 18 | Keystone Law Group | 120 | 1.9 | ||
| 19 | Ceres Power Holdings | 117 | 1.9 | ||
| 20 | Draper Espirit | 116 | 1.8 | ||
| Twenty largest investments | 3,514 | 55.8 | |||
| 21 | Flutter Entertainment * | 116 | 1.8 | ||
| 22 | XP Power | 111 | 1.8 | ||
| 23 | Globaldata | 107 | 1.7 | ||
| 24 | Johnson Service Group | 103 | 1.6 | ||
| 25 | Computacenter | 98 | 1.6 | ||
| 26 | Manolete Partners | 98 | 1.6 | ||
| 27 | Dunelm Group | 98 | 1.6 | ||
| 28 | Asos * | 97 | 1.5 | *Includes Contract for Difference ("CFD") | |
| 29 | Beazley Group | 96 | 1.5 | ||
| 30 | Team17 Group | 92 | 1.5 | ||
| Thirty largest investments | 4,530 | 72.0 | Market exposure for equity investments held is the same as fair value and for CFDs held is |
||
| Other investments (38 holdings) | 2,351 | 37.4 | the market value of the underlying shares to | ||
| Total investments | 6,881 | 109.4 | which the portfolio is exposed via the contract. | ||
| CFD positions exposure | (750) | (11.9) | The investment portfolio is grossed up to | ||
| CFD unrealised gains | 147 | 2.3 | include CFDs and the net CFD position is then | ||
| Net current assets | 15 | 0.2 | deducted in arriving at the net asset total. | ||
| Net assets | 6,293 | 100.0 |
| Sector analysis as at 30 September 2020 Sector |
% of Gross Exposure |
|---|---|
The principal risks facing the Fund relate to the investment in financial instruments and include market, liquidity, credit and interest rate risk. Additional risks faced by the Fund are investment strategy, share price discount, accounting, legal and regulatory, operational, corporate governance and shareholder relations, and financial. The Board seeks to mitigate and manage these risks through continuous review, policy setting and enforcement of contractual obligations. The Board receives both formal and informal reports from the Managers and third party service providers addressing these risks. An explanation of these risks and how they are mitigated is explained in the 2020 Annual Report, which is available on the Manager's website: www.svmonline.co.uk. These principal risks and uncertainties have not changed from those disclosed in the 2020 Annual Report.
The Board, having made appropriate enquiries, has a reasonable expectation that the Fund has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, it continues to adopt the going concern basis in preparing the financial statements.
The number of shares in issue at 30 September 2020 was 5,995,000 (2019 – 5,995,000).
Return per share is based on a weighted average of 5,995,000 (2019 – 6,004,672) ordinary shares in issue during the period.
Total return per share is based on the total gain for the period of £1,384,000 (2019 – gain of £85,000). Capital return per share is based on the capital gain for the period of £1,442,000 (2019 – gain of £47,000). Revenue return per share is based on the revenue loss after taxation for the period of £58,000 (2019 - gain of £38,000).
Investments have been classified using the fair value hierarchy:
| September | March | |
|---|---|---|
| 2020 | 2020 | |
| £000 | £000 | |
| Classification of financial instruments | ||
| Level 1 | 6,131 | 4,455 |
| Level 2 | 147 | 8 |
| Level 3 – 2 investments (March 2020 – 2) | - | - |
Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments whose fair value is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets. The CFD positions are the sole Level 2 investments at 30 September 2020 and 31 March 2020.
Level 3 reflects financial instruments whose fair value is determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable market transactions in the same instrument and not based on available observable market data.
Number of CFD holdings at 30 September 2020: 9 (31 March 2020: 9)
| CFD positions | September | March |
|---|---|---|
| 2020 | 2020 | |
| £000 | £000 | |
| Gross exposure | 750 | 514 |
| Net exposure | 750 | 514 |
| Unrealised gains | 147 | 8 |
| Unrealised losses | 92 | 224 |
The gearing ratio is 11.4% at 30 September 2020 (31 March 2020: 16.5%). The gearing figure indicates the extra amount by which the shareholders' funds would change if total assets (including CFD position exposure and netting off cash and cash equivalents) were to rise or fall. A figure of zero per cent means that the Company has a nil geared position.
unaudited. The accounts for the year to 31 March 2020, on which the auditors issued an unqualified report, have been lodged with the Registrar of Companies and did not contain a statement required under Section 498 of the Companies Act 2006.
Peter Dicks (Chairman) Ian Gray (appointed 6 March 2020) Jeremy Harris (appointed 15 August 2019)
SVM Asset Management Limited 6 th Floor 7 Castle Street Edinburgh EH2 3AH Telephone: +44 (0) 0131 226 6699 Facsimile: +44 (0) 131 226 7799 Email: [email protected] Web: www.svmonline.co.uk
Computershare Investor Services plc Edinburgh House 4 North St Andrew Street Edinburgh EH2 1HU Telephone: +44 (0) 370 702 0003
Johnston Carmichael LLP 7-11 Melville Street Edinburgh EH3 7PE
Custodians State Street Bank & Trust Company
Registered Number SC211841
Company Website www.svmonline.co.uk
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.