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DUNEDIN ENTERPRISE INVESTMENT TRUST PLC
Interim / Quarterly Report • Sep 16, 2022
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Interim / Quarterly Report
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RNS Number : 6479Z
Dunedin Enterprise Inv Trust PLC
16 September 2022
For release 16 September 2022
Dunedin Enterprise Investment Trust PLC
Half year ended 30 June 2022
Dunedin Enterprise Investment Trust PLC, the private equity investment trust which specialises in investing in UK mid-market buyouts, announces its results for the half year ended 30 June 2022.
Financial Highlights:
· Net asset value total return: 4.0%
· Net asset value per share at 30 June 2022: 567.5p, after 14.5p dividend (558.8p at 31/12/21)
· Share price at 30 June 2022: 502p (473p at 31/12/21)
· Realisations: £8.6m in the half year
· Post half year sale of RED
· £156.8m returned to shareholders since 2012
Comparative Total Return Performance (%)
| Periods to 30 June 2022 | Net asset value (per share) | Share price | FTSE Small Cap (ex Inv Cos) Index |
|
| Six months | 4.0 | 9.4 | -15.8 | |
| One year | 20.5 | 54.8 | -14.6 | |
| Three years | 51.9 | 46.6 | 23.7 | |
| Five years | 95.3 | 180.3 | 20.2 | |
| Ten years | 100.0 | 230.7 | 179.9 |
For further information please contact:
| Graeme Murray Dunedin LLP 07813 138367 |
Chairman's Statement
The total return in the half year to 30 June 2022 was 4.0% in terms of net asset value per share which increased from 558.8p to 567.5p in the half year. This is stated after allowing for a second interim dividend of 12.6p (paid in March 2022) and a final dividend of 1.9p (paid in May 2022), both relating to the year ended 31 December 2021.
The share price total return was 9.4% during the period under review. The price of 502p at 30 June 2022 represented a discount of 11.5% to the net asset value of 567.5p per share. The latest share price available was 520p, representing a discount of 8.4%.
Portfolio
The realisation of Incremental, the market-leading IT services platform, was completed in March 2022, generating proceeds of £7.9m. The investment was valued at £5.6m at 31 December 2021. Further proceeds are expected to be received from the sale as a result of an earn-out provision.
The sale of our remaining holding in CitySprint, the same day courier, was completed in January 2022 with proceeds received of £1.5m.
Following the half year it was announced that Dunedin Buyout Fund II LP has entered into a legally binding agreement to realise the investment in RED, the provider of SAP contract and permanent staff. The transaction is subject to funding and regulatory approvals and is expected to complete in the second half of 2022. The investment in RED was valued at £23.7m in the Preliminary Unaudited Net Asset Value at 30 June 2022 published on 1 August 2022. Proceeds from the sale are expected to amount to £23.7m. There are also future potential proceeds from an earn-out arrangement which are dependent upon RED achieving profit targets in the year to 31 March 2023. No valuation has been placed on the earn-out at 30 June 2022.
Unrealised valuation increases totalling £7.7m were offset by value decreases of £6.1m. The valuation uplift was primarily generated from RED and Incremental.
The principal valuation reduction was at GPS (£5.9m). A partial sale of GPS, a market leader in payment processing technology, was achieved in December 2021 generating a gross return of 2.2x original cost. In the half year GPS's revenue has continued to increase by 13%. However, since December 2021 the valuation multiples applied to fintech companies have suffered a significant downturn. This has resulted in a full provision being made against the remaining investment.
Further details are provided in the Manager's Review.
Cash, Commitments & Liquidity
At 30 June 2022 the Company held cash and near cash equivalents totalling £30.0m out of total net assets of £74.6m. Following completion of the RED realisation cash reserves are expected to increase to £53.7m. There are outstanding commitments to limited partnership funds of £9.7m at 30 June 2022, consisting of £9.0m to Dunedin-managed funds and £0.7m to Realza.
Tender Offer
The Board is committed to returning proceeds of asset sales to shareholders and doing so efficiently. While the portfolio realisation process continues, the Board will look at opportunities to combine the proceeds of more than one sale before conducting a tender to achieve economies in the process. Once funding and regulatory approvals are received on the realisation of RED the Board intends to announce a distribution to shareholders.
Dividends
A second interim dividend of 12.6p per share relating to the year ended 31 December 2021 was paid to shareholders in March 2022, amounting to £1.7m. A final dividend of 1.9p per share also relating to that year was paid to shareholders in May 2022, amounting to £0.3m.
Outlook
Following the invasion of Ukraine our portfolio companies have had to contend with a level of uncertainty seldom seen. Inflationary pressures and economic disruption have provided a headwind which looks likely to continue for some time.
Duncan Budge
16 September 2022
Manager's Review
Results for the six months to 30 June 2022
In the six months to 30 June 2022, the net asset value per share total return was 4.0%, after taking account of dividends paid for 2021 of 14.5p per share (paid in March/May 2022). This compares with a decrease in the FTSE Small Cap Index (ex Inv. Cos) over the same period of 15.8%.
In the six months to 30 June 2022 the Company realised £8.6m from investments.
Net asset and cash movements in the half year to 30 June 2022
The movement in net asset value is summarised in the table below:-
| £'m | |
| Net asset value at 31 December 2021 | 73.4 |
| Unrealised value increases | 7.7 |
| Unrealised value decreases | (6.1) |
| Realised gain over opening valuation | 0.9 |
| Dividends paid to shareholders | (1.9) |
| Other movements | 0.6 |
| Net asset value at 30 June 2022 | 74.6 |
Cash movements in the half year to 30 June 2022 can be summarised as follows:-
| £'m | |
| Cash & near cash balances at 31 December 2021 | 24.4 |
| Investments made | (0.3) |
| Investments realised | 8.6 |
| Dividends paid to shareholders | (1.9) |
| Operating activities | (0.8) |
| Cash & near cash balances at 30 June 2022 | 30.0 |
Portfolio composition and movements
Dunedin Enterprise holds investments in unquoted companies through:-
• Dunedin managed funds, and
• Third party managed funds.
The portfolio movements can be analysed as shown in the table below:-
| Valuation | Additions | Disposals | Realised | Unrealised | Valuation | |
| at 31-12-21 | in half year | in half year | movement | movement | at 30-6-22 | |
| £'m | £'m | £'m | £'m | £'m | £'m | |
| Dunedin managed | 43.6 | 0.2 | (8.6) | 0.9 | 1.5 | 37.6 |
| Third party managed | 5.2 | 0.1 | - | - | 0.1 | 5.4 |
| Investment portfolio | 48.8 | 0.3 | (8.6) | 0.9 | 1.6 | 43.0 |
| AAA rated money market funds (excluding cash on deposit) | 11.8 | 12.3 | (9.1) | - | - | 15.0 |
| Total | 60.6 | 12.6 | (17.7) | 0.9 | 1.6 | 58.0 |
Realisations
In the half year a total of £8.6m was realised from the portfolio of investments.
In March 2022 Incremental, the market-leading IT services platform which designs, implements and supports clients with ERP/CRM systems and cloud infrastructure, was realised by a trade sale to Telefonica. Proceeds from the realisation amounted to £7.9m, consisting of capital of £7.1m and income of £0.8m. At 30 June 2022 the investment has been valued at the additional deferred proceeds of £1.4m which are expected to be received by the year end. The investment in Incremental was valued at £5.6m at 31 December 2021 and has generated a return of £9.9m, representing a gross return of 2.5x return original cost.
In January 2022 the remaining investment in CitySprint, the same day courier, was realised delivering proceeds of £1.5m. Total proceeds from the original investment totalled £21.3m and generated a 2.1x return on cost of £9.8m.
Following the half year it was announced that Dunedin Buyout Fund II LP has entered into a legally binding agreement to realise the investment in RED, the provider of SAP contract and permanent staff. The transaction is subject to funding and regulatory approvals and is expected to complete in the second half of 2022. The investment in RED was valued at £23.7m in the Preliminary Unaudited Net Asset Value at 30 June 2022 published on 1 August 2022. Proceeds from the sale are expected to amount to £23.7m, consisting of capital of £19.7m and income of £4.0m. Additionally, there are future potential proceeds from an earn-out arrangement which are dependent upon RED achieving profit targets in the year to 31 March 2023.
Investment activity
A further £0.2m was drawn down by Dunedin and third-party managed funds to meet management fees and ongoing expenses.
Unrealised movements in valuations
Unrealised valuation increases in the half year amounted to £7.7m. There were valuation uplifts at RED (£3.0m), Incremental (£1.4m) and Premier (£0.6m).
RED, the provider of SAP contract and permanent staff, has been valued at the expected proceeds from the sale announced in August 2022.
As noted above, Incremental was realised in March 2022. There are future potential proceeds from an earn-out arrangement which are dependent upon Incremental achieving profit targets in 2022 and 2023. It is expected that this earn-out will generate £1.4m of further proceeds in 2022 which is included in the current valuation.
Premier Hytemp, the provider of highly engineered components to the oil and gas industry, has experienced a recovery in profitability following an increase in margins both in the UK and Singapore. As the market outlook improves the company is tendering for some significant contracts. The investment continues to be valued on a discounted net assets basis.
The principal valuation reduction was at GPS (£5.9m). A partial sale of GPS, a market leader in payment processing technology, was achieved in December 2021 generating a gross return of 2.2x original cost. In the half year GPS's revenue has continued to increase by 13%. However, since December 2021 the valuation multiples applied to fintech companies have suffered a significant downturn. This has resulted in a full provision being made against the remaining investment.
The average earnings multiple applied to the valuation of the Dunedin managed portfolio was 8.8x EBITDA (31 December 2021: 9.7x). These multiples are applied to the maintainable earnings of portfolio companies. Within the Dunedin managed portfolio, the weighted average gearing of the companies was 3.1x EBITDA (31 December 2021: 3.3x).
The portfolio continues to be valued in accordance with the International Private Equity Venture Capital valuation guidelines (www.privateequityvaluation.com).
Dunedin LLP
16 September 2022
Current Investments
by value at 30 June 2022
| Approx. | Percentage | |||
| percentage | Cost of | Directors | of net | |
| of equity | investment | valuation | assets | |
| Company name | % | £'000 | £'000 | % |
| RED | 20.1 | 9,665 | 23,726 | 31.8 |
| Weldex | 15.1 | 9,505 | 6,612 | 8.9 |
| Realza | 8.9 | 4,321 | 5,428 | 7.3 |
| FRA | 5.2 | 1,413 | 3,848 | 5.2 |
| Premier Hytemp | 23.0 | 10,136 | 2,328 | 3.1 |
| EV | 10.6 | 8,321 | 1,921 | 2.6 |
| Incremental | - | - | 1,422 | 1.9 |
| GPS | 1.5 | 1,994 | - | - |
| Hawksford | 3.7 | - | - | - |
| 45,355 | 45,285 | 60.8 |
Total return of current investments
at 30 June 2022
| Cost of | Gross realised |
Directors | Total | |
| investment | to date* | valuation | return | |
| Company name | £'000 | £'000 | £'000 | £'000 |
| RED | 11,438 | 1,432 | 23,726 | 25,158 |
| Weldex | 9,505 | 119 | 6,612 | 6,731 |
| Realza | 11,545 | 11,651 | 5,428 | 17,079 |
| FRA | 6,035 | 5,504 | 3,848 | 9,352 |
| Premier Hytemp | 10,136 | 178 | 2,328 | 2,506 |
| EV | 8,321 | - | 1,921 | 1,921 |
| Incremental | 3,875 | 9,852 | 1,422 | 11,274 |
| GPS | 8,220 | 18,203 | - | 18,203 |
| Hawksford | 6,910 | 7,087 | - | 7,087 |
| 75,985 | 54,026 | 45,285 | 99,311 |
* - dividends and capital.
Top investments
RED
Percentage of equity held 20.1%
Cost of Investment £9.7m
Directors' valuation £23.7m
Percentage of net assets 31.8%
RED is a global supplier of SAP contract and permanent staff to international corporations and consultancies. SAP is the market leader in ERP software (Enterprise Resource Planning), which enables companies of all sizes and industries to operate more efficiently, including many of the world's largest organisations.
RED, which was founded in 2000, now has a global footprint with access to over 200,000 candidates in 80 countries, and has offices in the UK, Germany, Switzerland and the USA.
RED has a highly scalable business model. Growth is expected to come from deeper penetration of the existing client base, development of new clients, continued focus on service differentiation and increasing market share in existing geographical markets. Additional growth opportunities include expansion to support high growth technologies complementary to SAP.
In August 2022 it was announced that a legally binding agreement to realise the investment in RED had been entered into by Dunedin Buyout Fund II LP. Proceeds from the sale are expected to amount to £23.7m.
Weldex
Percentage of equity held 15.1%
Cost of Investment £9.5m
Directors' valuation £6.6m
Percentage of net assets 8.9%
Weldex is a market-leading crawler crane hire business in the UK, with the tenth largest lifting capacity globally. It serves the offshore wind, oil & gas, commercial construction and infrastructure markets. Its cranes, including some of the largest in the UK, have been used in a number of significant construction projects including Heathrow Terminal 5, the iconic arch at the Wembley Stadium, the 2012 Olympic site and Crossrail. Recent projects include the HS2 railway, the Thames Tideway Tunnel in London, and the Peterborough Railway Tunnel where a curved concrete box weighing more than the Eiffel Tower will be pushed underground to form a new railway tunnel.
Weldex was established in 1979 and has grown into the UK's largest crawler crane hire company. The company employs over 100 staff and operates nationwide and overseas from its headquarters in Inverness and its depot at Alfreton. The company provides its customers with an established team of fully accredited operators, site managers and service engineers and also supplies associated lifting equipment including wheeled cranes, forklifts, lorry loaders and trailers.
Realza
Percentage of equity held 8.9%
Cost of Investment £4.3m
Directors' valuation £5.4m
Percentage of net assets 7.3%
Realza Capital FCR is a Spanish private equity fund making investments in Spain and Portugal. The fund is limited to investing 15% of commitments in Portugal. Dunedin Enterprise's investment is held via Dunedin Fund of Funds LP.
The fund invests in companies with leading market positions and attractive growth prospects either through organic growth or through merger & acquisition activity. Realza seeks to invest in companies with an enterprise value normally ranging from €20m to €100m. The fund's typical equity investment ranges from €10m to €25m.
Realza has three investments remaining: -
• a manufacturer of water pumps for the automotive industry;
• a producer of premium tomatoes; and
• a producer of cannabis for medicinal and pharmaceutical use.
FRA
Percentage of equity held 5.2%
Cost of Investment £1.4m
Directors' valuation £3.8m
Percentage of net assets 5.2%
FRA is an international consultancy that provides forensic accounting, data analytics and e-discovery expertise, helping businesses respond to regulatory investigations in an increasingly regulated global environment.
FRA works on some of the largest and most complex regulatory investigations globally. Its clients are typically blue-chip multinational corporates seeking advice to help navigate regulatory scrutiny, effect compliant cross-border data transfer, and manage risk. The company has offices in London, Dallas, New York, Washington DC, Philadelphia, Paris, Helsinki and Stockholm. It also runs data centres near each office location as well as in Montreal and Zurich.
Two re-financings of the business have been undertaken with Dunedin Enterprise receiving proceeds of £5.5m.
Premier Hytemp
Percentage of equity held 23.0%
Cost of Investment £10.1m
Directors' valuation £2.3m
Percentage of net assets 3.1%
Premier Hytemp is a global market leader in the manufacture and supply of engineered metal solutions. It is a specialist in the provision of low alloy and nickel alloy steel components for the upstream oil and gas industry. Its components are used in complex engineered assemblies required to extract and control the flow of oil and gas from new reserves, often sub-sea.
Premier Hytemp is headquartered in Edinburgh with manufacturing facilities in Singapore and Malaysia.
EV
Percentage of equity held 10.6%
Cost of Investment £8.3m
Directors' valuation £1.9m
Percentage of net assets 2.6%
EV is a UK headquartered, global market leader in the provision of high performance, harsh environment, video cameras and quantitative visual analytics to the global energy industry.
It offers a highly specialist service, providing skilled engineers to operate its market leading cameras in the most difficult down-hole conditions. The high-resolution video images produced by EV's cameras allow oil and gas well operators to identify, quantify and solve problems rapidly. EV is based in Dubai, Perth, Kuala Lumpur, Calgary, Aberdeen, Houston and Norwich. It has a further presence in seventeen worldwide locations across Europe, Canada, USA, South America, West Africa, the Middle East, Asia and Australasia. The business employs more than 100 staff.
EV's high value Visual Analytics services and products hold a significant technological competitive advantage operating in a growing marketplace as global leader in this field of optical data analytics. The business has a key technological competitive advantage delivering full 360 degree top to toe wellbore images in HD colour employing the EV proprietary Optis Infinity Multi-Side-View-Camera technology. EV are focussed on increasing customer well performance and providing detailed well integrity information helping customers extend well life and thereby decrease the global carbon footprint.
GPS
Percentage of equity held 1.5%
Cost of Investment £2.0m
Directors' valuation £-m
Percentage of net assets -%
GPS is a UK headquartered payments processing business providing customers with leading edge payment processing and ancillary services. Customers include new emerging fintech or challenger banks, offering a significantly differentiated proposition for their clients; as well as specialist payment firms serving the travel, insurance and foreign exchange markets. It offers a best in class, scalable payment processing platform with flexibility, innovative features and an accelerated speed to market for new market entrants. It has over 100 clients, including many UK fintech and challenger banks, and is seeing significant growth opportunities from emerging overseas challenger banks as they seek to disrupt their own domestic banking markets.
GPS has a large and growing addressable market. Challenger banks and fintech companies needing leading edge payment processing services are being created in all major geographical markets. Many are seeking help from GPS as they start to disrupt their own domestic markets. As the winners emerge, the volume of payments that they generate also increases, thereby adding further volume of processing to the GPS platform. In general, the payments market is growing globally through a reduction in the use of cash and an increase in the use of mobile methods of payment (e.g. phones and 'tap to pay' debit cards).
GPS has an increasingly international target market, with recent client wins in Europe and Australia. GPS has signed a strategic partnership with Visa to provide fintech clients with payments technology in the Asia Pacific region. It has also been selected by Mastercard as its chosen processing partner in its Fintech Express Programme. In 2020 GPS was selected by the Department for International Trade (DIT) to become a London Export Champion.
In December 2021 a refinancing of GPS was completed with new investors providing additional capital to finance future growth. Gross proceeds from the refinancing of 2.2x original cost were received by Dunedin Enterprise, which retains a 1.5% interest in GPS Newco.
Hawksford
Percentage of equity held 3.7%
Cost of Investment £-m
Directors' valuation £-m
Percentage of net assets -%
Hawksford is a leading international provider of corporate, private client and funds services. The business offers a comprehensive range of services to, and solutions for, trusts, companies, foundations, partnerships, family offices and investment funds.
During 2018 Hawksford completed the acquisitions of P&P, a Hong Kong based trust business; and the corporate services division of audit and accountancy practice SH Landes. The P&P acquisition increased Hawksford's Asian presence, giving the company new representation in China and Japan, building on its existing presence in Singapore and Hong Kong. Hawksford's international clients will now have access to a greater depth of services across Asia, while P&P clients will be able to utilise Hawksford's wider services in other locations. As a result of the SH Landes acquisition, Hawksford is able to provide specialist corporate services from its central London offices.
To date Hawksford has completed seven major acquisitions in Jersey, the UK, the Middle East and the Far East. These acquisitions have further enhanced Hawksford's position through additional high-quality people and clients. The focus of the business remains on providing excellent service and increasing client choice by growing the international footprint.
In February 2021 Hawksford completed a refinancing where proceeds of 1.0x cost were received. Dunedin Enterprise retains a 3.7% interest in Hawksford.
Overview of Portfolio
Fund Analysis
Dunedin Buyout Fund II 76%
Dunedin Buyout Fund III 11%
Realza 13%
Geographic Location
UK 87%
Rest of Europe 13%
Valuation Method
Earnings - provision 4%
Earnings - uplift 20%
Assets basis 20%
Exit value 56%
Sector Analysis
Automotive 7%
Consumer products & services 5%
Industrials 9%
Support services 79%
Year of Investment
3-5 years 3%
>5 years 97%
Statement of Comprehensive Income
for the six months ended 30 June 2022
| Six months ended 30 June 2022 | Six months ended 30 June 2021 | Year ended 31 December 2021 | ||||||||
| (unaudited) | (unaudited) | (audited) | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Investment income | 3 | 791 | - | 791 | 590 | - | 590 | 4,800 | - | 4,800 |
| Gain on investments | - | 2,551 | 2,551 | - | 15,003 | 15,003 | - | 23,408 | 23,408 | |
| Total Income | 791 | 2,551 | 3,342 | 590 | 15,003 | 15,593 | 4,800 | 23,408 | 28,208 | |
| Expenses | ||||||||||
| Investment management fees | (17) | (50) | (67) | (10) | (31) | (41) | (29) | (88) | (117) | |
| Other expenses | (180) | (52) | (232) | (193) | (2) | (195) | (384) | (23) | (407) | |
| Profit before finance costs and tax | 594 | 2,449 | 3,043 | 387 | 14,970 | 15,357 | 4,387 | 23,297 | 27,684 | |
| Finance costs | - | - | - | (12) | (37) | (49) | (10) | (32) | (42) | |
| Profit before tax | 594 | 2,449 | 3,043 | 375 | 14,933 | 15,308 | 4,377 | 23,265 | 27,642 | |
| Taxation | - | - | - | - | - | - | 272 | 70 | 342 | |
| Profit for the period | 594 | 2,449 | 3,043 | 375 | 14,933 | 15,308 | 4,649 | 23,335 | 27,984 | |
| Earnings per ordinary share (basic & diluted) | 6 | 4.52p | 19.04p | 23.56p | 2.07p | 82.50p | 84.57p | 26.56p | 133.33p | 159.89p |
The Total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.
All income is attributable to the equity shareholders of Dunedin Enterprise Investment Trust PLC.
Statement of Changes in Equity
for the six months ended 30 June 2022
Six months ended 30 June 2022 (unaudited)
| Share capital £'000 |
Capital redemption reserve £'000 |
Capital reserve realised £'000 |
Capital reserve - unrealised £'000 |
Special Distributable Reserve £'000 |
Revenue account £'000 |
Total retained earnings £'000 |
Total equity £'000 |
|
| At 31 December 2021 | 3,284 | 1,241 | 19,721 | (8,378) | 51,001 | 6,544 | 68,888 | 73,413 |
| Profit/(loss) for the period | - | - | (3,544) | 5,993 | - | 594 | 3,043 | 3,043 |
| Dividends paid | - | - | - | - | - | (1,905) | (1,905) | (1,905) |
| At 30 June 2022 | 3,284 | 1,241 | 16,177 | (2,385) | 51,001 | 5,233 | 70,026 | 74,551 |
Six months ended 30 June 2021 (unaudited)
| Share capital £'000 |
Capital redemption reserve £'000 |
Capital reserve realised £'000 |
Capital reserve - unrealised £'000 |
Special Distributable Reserve £'000 |
Revenue account £'000 |
Total retained earnings £'000 |
Total equity £'000 |
|
| At 31 December 2020 | 4,525 | 49,850 | 30,600 | (16,357) | 1,151 | 5,153 | 20,547 | 74,922 |
| Profit/(loss) for the period | - | - | (4,163) | 19,096 | - | 375 | 15,308 | 15,308 |
| Dividends paid | - | - | - | - | - | (362) | (362) | (362) |
| At 30 June 2021 | 4,525 | 49,850 | 26,437 | 2,739 | 1,151 | 5,166 | 35,493 | 89,868 |
Year ended 31 December 2021 (audited)
| Share capital £'000 |
Capital redemption reserve £'000 |
Capital reserve realised £'000 |
Capital reserve - unrealised £'000 |
Special Distributable Reserve £'000 |
Revenue account £'000 |
Total retained earnings £'000 |
Total equity £'000 |
|
| At 31 December 2020 | 4,525 | 49,850 | 30,600 | (16,357) | 1,151 | 5,153 | 20,547 | 74,922 |
| Profit/(loss) for the year | - | - | 15,356 | 7,979 | - | 4,649 | 27,984 | 27,984 |
| Cancellation of Capital Redemption Reserve | - | (49,850) | - | - | 49,850 | - | 49,850 | - |
| Purchase and cancellation of shares | (1,241) | 1,241 | (26,235) | - | - | - | (26,235) | (9,975) |
| Dividends paid | - | - | - | - | - | (3,258) | (3,258) | (3,258) |
| At 31 December 2021 | 3,284 | 1,241 | 19,721 | (8,378) | 51,001 | 6,544 | 68,888 | 73,413 |
Balance Sheet
As at 30 June 2022
| 30 June 2022 (unaudited) £'000 |
30 June 2021 (unaudited) £'000 |
31 December 2021 (audited) £'000 |
|
| Non-current assets | |||
| Investments held at fair value | 57,993 | 90,821 | 60,588 |
| Current assets | |||
| Other receivables | 1,650 | 401 | 297 |
| Cash and cash equivalents | 14,936 | 171 | 12,616 |
| 16,586 | 572 | 12,913 | |
| Total assets | 74,579 | 91,393 | 73,501 |
| Current liabilities | |||
| Other liabilities | (28) | (1,525) | (88) |
| Net assets | 74,551 | 89,868 | 73,413 |
| Capital and reserves | |||
| Share capital | 3,284 | 4,525 | 3,284 |
| Capital redemption reserve | 1,241 | 49,850 | 1,241 |
| Capital reserve - realised | 16,177 | 26,437 | 19,721 |
| Capital reserve - unrealised | (2,385) | 2,739 | (8,378) |
| Special distributable reserve | 51,001 | 1,151 | 51,001 |
| Revenue reserve | 5,233 | 5,166 | 6,544 |
| Total equity | 74,551 | 89,868 | 73,413 |
| Net asset value per ordinary share (basic and diluted) | 567,5p | 496.5p | 558.8p |
Cash Flow Statement
for the six months ended 30 June 2022
| 30 June 2022 (unaudited) £'000 |
30 June 2021 (unaudited) £'000 |
31 December 2021 (audited) £'000 |
|
| Operating activities | |||
| Profit before tax | 3,043 | 15,308 | 27,642 |
| Adjustments for: | |||
| (Gains) on investments | (2,551) | (15,003) | (23,408) |
| Interest paid | - | 49 | 42 |
| (Increase)/decrease in debtors | (1,352) | 656 | 760 |
| (Decrease) in creditors | (60) | (746) | (2,183) |
| Net cash from operating activities | (920) | 264 | 2,853 |
| Cash flows from investing activities | |||
| Purchase of investments | (231) | (1,342) | (1,550) |
| Drawn from subsidiary | (53) | (35) | (79) |
| Purchase of 'AAA' rated money market funds | (12,327) | (6,208) | (6,213) |
| Sale of investments | 8,641 | 6,753 | 38,547 |
| Distribution from subsidiary | - | - | - |
| Sale of 'AAA' rated money market funds | 9,115 | 1,000 | 8,100 |
| Net cash used in investing activities | 5,145 | 168 | 38,805 |
| Tax | |||
| Tax recovered | - | 342 | - |
| Cash flows from financing activities | |||
| Tender offer | - | (1) | (26,235) |
| Dividends paid | (1,905) | (362) | (3,258) |
| Interest paid | - | (49) | (42) |
| Net cash used in financing activities | (1,905) | (412) | (29,535) |
| Net increase in cash and cash equivalents | 2,320 | 20 | 12,465 |
| Cash and cash equivalents at the start of the period | 12,616 | 151 | 151 |
| Cash and cash equivalents at the end of the period | 14,936 | 171 | 12,616 |
Statement of Principal Risks and Uncertainties
The Directors have an ongoing process for identifying, evaluating and managing principal risks, emerging risks and uncertainties of the Company. The principal risks faced by the Company related to the Company's investment activities and these are set out below: -
· COVID
· war in Ukraine
· investment and liquidity risk
· portfolio concentration risk
· financial risk
· economic risk
· credit risk
· currency risk
· internal control risk
Information on each of these risks, and an explanation of how they are managed, is on page 23 of the Company's Annual Report for the year ended 31 December 2021.
The Company's principal risks, emerging risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the remaining six months of the Company's financial year.
On behalf of the Board
Duncan Budge
Chairman
Statement of the Directors' Responsibilities in respect of the half-yearly financial report
In accordance with Chapter 4 of the Disclosure Guidance and Transparency Rules, the Directors confirm that to the best of their knowledge:
• the condensed set of financial statements has been prepared in accordance with applicable International Financial Reporting Standards, and gives a true and fair view of the assets, liabilities, financial position and net return of the Company;
• the half-yearly report includes a fair review of the development and performance of the Company and important events that have occurred during the first six months of the financial year and their impact on the financial statements;
• the Directors' Statement of Principal Risks and Uncertainties shown on this page is a fair review of the principal risks and uncertainties for the remainder of the financial year; and
• the half-yearly report includes a fair review of the related party transactions that have taken place in the first six months of the financial year.
On behalf of the Board
Duncan Budge
Chairman
Notes to the Accounts
1. Unaudited Interim Report
The comparative financial information contained in this report for the year ended 31 December 2021 does not constitute the Company's statutory accounts but is derived from those accounts. Statutory accounts for the year ended 31 December 2021 have been delivered to the Registrar of Companies. The auditor has reported on those accounts; their report 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.
The financial statements for the six months ended 30 June 2021 and 30 June 2022 have not been audited.
2. Basis of Preparation
These condensed set of financial statements for the six months ended 30 June 2022 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA) and IAS 34 'Interim Financial Reporting'. They do not include all the information required by International Financial Reporting Standards (IFRS) in full annual financial statements and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2021.
In May 2016 shareholders approved a change in the investment policy of the Company. The Company's new investment objective is to conduct an orderly realisation of its relatively illiquid assets, to be effected in a manner that seeks to achieve a balance between maximising the value of its assets and progressively returning cash to shareholders. As it is likely this processwill ultimately lead to the liquidation of the Company, these financial statements have not been prepared on a going concern basis. No adjustments were necessary to the investment valuations or other assets and liabilities included in the financial statement as a consequence of the change in the basis of preparation.
.
3. Income
| Six months to 30 June 2022 £'000 |
Six months to 30 June 2021 £'000 |
Year to 31 December 2021 £'000 |
|
| Limited partnership income - UK | 747 | 582 | 4,788 |
| AAA rated money market funds | 27 | 1 | 1 |
| Deposit interest | 17 | 7 | 11 |
| 791 | 590 | 4,800 |
4. Dividends
| Six months to 30 June 2022 £'000 |
Six months to 30 June 2021 £'000 |
Year to 31 December 2021 £'000 |
|
| Dividends paid in the period | 1,905 | 362 | 3,258 |
5. Investments
All investments are designated fair value through profit or loss at initial recognition, therefore all gains and losses that arise on investments are designated at fair value through profit or loss. Given the nature of the Company's investments the fair value gains recognised in these financial statements are not considered to be readily convertible to cash in full at the balance sheet date and therefore the movement in these fair values are treated as unrealised.
Fair value hierarchy
The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
• Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
• Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
• Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised:
| At 30 June 2022 £'000 |
At 30 June 2021 £'000 |
At 31 December 2021 £'000 |
|
| Level 1 'AAA' rated money market funds OEICs |
15,024 | 18,907 | 11,812 |
| Level 2 | - | - | - |
| Level 3 | |||
| Unlisted investments | 42,969 | 71,914 | 48,776 |
| 57,993 | 90,821 | 60,588 | |
The Company recognises transfers between the levels of the fair value hierarchy as of the end of the reporting period during which the transfer occurred. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended 30 June 2022.
Level 3 fair values
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the six months ended 30 June 2022 are set out below:-
| Level 3 £'000 |
|
| Book cost at 31 December 2020 | 57,154 |
| Unrealised depreciation | (8,378) |
| Valuation at 31 December 2020 | 48,776 |
| Purchases at cost | 284 |
| Sales - proceeds | (8,641) |
| Sales - realised gain on sales | (3,443) |
| Increase in unrealised appreciation | 5,993 |
| Valuation at 30 June 2021 | 42,969 |
| Book cost at 30 June 2021 | 45,354 |
| Closing unrealised appreciation | (2,385) |
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the six months ended 30 June 2021 are set out below:-
| Level 3 £'000 |
|
| Book cost at 31 December 2020 | 78,643 |
| Unrealised depreciation | (16,357) |
| Valuation at 31 December 2020 | 62,286 |
| Purchases at cost | 1,377 |
| Sales - proceeds | (6,753) |
| Sales - realised gain on sales | (4,092) |
| Increase in unrealised appreciation | 19,096 |
| Valuation at 30 June 2021 | 71,914 |
| Book cost at 30 June 2021 | 69,175 |
| Closing unrealised appreciation | 2,739 |
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the year ended 31 December 2021 are set out below:-
| Level 3 £'000 |
|
| Book cost at 31 December 2020 | 78,643 |
| Unrealised depreciation | (16,357) |
| Valuation at 31 December 2020 | 62,286 |
| Purchases at cost | 1,629 |
| Sales - proceeds | (38,547) |
| Sales - realised gain on sales | 15,429 |
| Decrease in unrealised appreciation | 7,979 |
| Valuation at 31 December 2021 | 48,776 |
| Book cost at 31 December 2021 | 57,154 |
| Closing unrealised depreciation | (8,378) |
Valuation of investments
Unquoted investments are fair valued by the Directors in accordance with the following rules, which are consistent with the International Private Equity and Venture Capital Valuation Guidelines:
· Investments are only valued at cost for a limited period after the date of acquisition, otherwise investments are valued on one of the other basis detailed below. Generally the earnings multiple basis of valuation will be used.
· When valuing on an earnings basis, the maintainable earnings of a company are multiplied by an appropriate multiple.
· When valuing on a revenue basis, the maintainable revenue of a company is multiplied by an appropriate multiple.
· An investment may be valued by reference to the value of its net assets. This is appropriate for businesses whose value derives mainly from the underlying value of its assets rather than its earnings.
· When investments have obtained an exit (either by listing or trade sale) after the valuation date but before finalisation of the relevant accounts (interim or final), the valuation is based on the exit valuation.
· Accrued interest on loans to portfolio companies is included in valuations where there is an expectation that the interest will be received.
IFRS 13 requires disclosure, by class of financial instrument, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specific underlying circumstances and position of the investee company. On that basis the Board believe that the impact of changing one or more of the inputs to reasonably possible alternative assumptions would not change the fair value significantly.
The Directors consider the carrying value of financial instruments in the financial statements to represent their fair value.
6. Earnings per share
| Six months to 30 June 2022 £'000 |
Six months to 30 June 2021 £'000 |
Year to 31 December 2021 £'000 |
|
| Revenue return per ordinary share (p) | 4.52 | 2.07 | 26.56 |
| Capital return per ordinary share (p) | 19.04 | 82.50 | 133.33 |
| Earnings per ordinary share (p) | 23.56 | 84.57 | 159.89 |
| Weighted average number of shares | 13.136.810 | 18.100.180 | 17,501,856 |
The earnings per share figures are based on the weighted average numbers of shares set out above. Earnings per share is based on the revenue profit in the period as shown in the consolidated income statement.
7. Related party transactions
There have been no material changes to the related party transactions described in the last annual report.
ENDS
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