Interim / Quarterly Report • Nov 26, 2024
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
Half Year Report to 30 September 2024
SVM UK EMERGING FUND plc Half Yearly Report 2024
SVM UK EMERGING FUND PLC (the "Fund") HALF YEARLY REPORT (FOR THE SIX MONTHS TO 30 SEPTEMBER 2024)
A copy of the Half Yearly Report will be available to download from the Manager's website at www.river.global and a copy will shortly be available for inspection at the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism in due course. Copies are also available at 7 Castle Street, Edinburgh EH2 3AH, the registered office of the Fund.
• Over the six months to 30 September 2024, net asset value per share increased by 2.8% to 99.45p and the share price gained 6.5% compared to a return of 6.2% in the chosen comparator, the IA UK All Companies Sector Average.
• Over the five years to 30 September 2024, net asset value per share has fallen 10.7% and the share price 24.7%, against the comparator return of 25.5%.
• Consumer discretionary and financial services were the best performing sectors in the portfolio over the six month review period.
• Consumer confidence is improving and the portfolio is positioned to benefit from lower inflation and interest rates.
| 6 months | 3 years | 5 Years | 10 Years | |
|---|---|---|---|---|
| Net Asset Value | 2.8% | -31.8% | -10.7% | 52.7% |
| Share Price | 6.5% | -43.3% | -24.7% | 28.4% |
| Comparator * | 6.2% | 9.0% | 25.5% | 72.0% |
*The comparator for the Fund is the IA UK All Companies Sector Average.
Half Yearly Report 2024
During the six months to 30 September 2024, net asset value per share increased by 2.8% to 99.45 and the share price gained 6.5% compared to a return of 6.2% in the chosen comparator, the IA UK Companies Sector Average. Over the five years to 30 September 2024, net asset value per share has fallen 10.7% and the share price 24.7%, against the comparator return of 25.5%.
This year, investors have favoured businesses seen as 'quality', with strong balance sheets and less debt risk. Before this rally began, smaller and medium sized London-listed companies had fallen to long term low valuations relative to the largest global businesses. The period under review has seen a broadening of stock market performance, with investors looking for growing businesses in out-of-favour areas. Despite the challenges for the global economy there appears potential for more catch up from small and mediumsized businesses.
The strongest contributions to performance over the period were Marks & Spencer (M&S), JTC, Cranston's, Tesco and Alpha Group International. M&S was the largest positive contributor to returns. Consumer discretionary stocks typically perform well at this point in the cycle, but M&S also benefited from indications that it was continuing to take share in both food and clothing. Insurers, Beasley and Conduit also gained. Negative performers included 4Imprint Group, Melrose Industries, Man Group, Boku and DiscoverIE Group. The holding in Unite Group was reduced against a background of concern on the growth outlook for student accommodation.
Positive real wage growth has supported a recovery in consumer confidence, with the potential for further improvement from release of excess savings. UK smaller companies are more exposed to the domestic economy and typically more cyclical. They are also more geared to central bank base rates and should benefit from easing of inflation and interest rates. UK inflation has reduced and forecasts for growth of the UK economy for 2025 exceed both the US and the Eurozone.
The portfolio focuses on resilient growing businesses, with low exposure to commodities, oils and banks. Portfolio investments are typically scalable businesses with a competitive edge. The Fund remains fully invested with minimal gearing.
At the Annual General Meeting in September, all resolutions were passed. I reiterated that your Board is focused on the scheduled continuation vote in 2025 and is continuing to look at a range of options. This strategic review will include assessing the discount and consulting with shareholders before reverting to shareholders with a formal recommendation. In order to reduce costs, the Manager has continued to waive its management fee.
Peter Dicks Chairman 8 November 2024
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 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:
therein that could have a material effect on the financial position or performance of the Fund during the first six months of the current financial year).
(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 as described in the Annual Report & Accounts for the year end 31 March 2024 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 8 November 2024
| Six months to 30 September 2024 |
Six months to 30 September 2023 |
||||||
|---|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
||
| Net gain/(loss) on investments at fair value |
- | 153 | 153 | - | (214) | (214) | |
| Income | 98 | 98 | 95 | - | 95 | ||
| Investment management fees | - | - | - | - | (17) | (17) | |
| Other expenses | (80) | - | (80) | (76) | - | (76) | |
| Gain/(loss) before finance costs and taxation |
18 | 153 | 171 | 19 | (231) | (212) | |
| Finance costs | (8) | - | (8) | (17) | - | (17) | |
| Gain/(loss) on ordinary activities before taxation |
10 | 153 | 163 | 2 | (231) | (229) | |
| Taxation | - | - | - | - | - | - | |
| Gain/(loss) attributable to ordinary shareholders |
10 | 153 | 163 | 2 | (231) | (229) | |
| Gain/(loss) per Ordinary Share | 0.17p | 2.55p | 2.72p | 0.03p | (3.85)p | (3.82)p |
| Year ended 31 March 2024 (audited) |
||||
|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
||
| Net gain on investments at fair value | - | 272 | 272 | |
| Income | 140 | - | 140 | |
| Investment management fees | - | (17) | (17) | |
| Other expenses | (143) | - | (143) | |
| (Loss)/Gain before finance costs and taxation |
(3) | 255 | 252 | |
| Finance costs | (30) | - | (30) | |
| (Loss)/Gain on ordinary activities before taxation Taxation |
(33) - |
255 - |
222 - |
|
| (Loss)/Gain attributable to ordinary shareholders |
(33) | 255 | 222 | |
| (Loss)/Gain per Ordinary Share | (0.55)p | 4.25p | 3.70p |
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 | As at | As at | |
|---|---|---|---|
| 30 September | 31 March | 30 September | |
| 2024 | 2024 | 2023 | |
| (unaudited) | (audited) | (unaudited) | |
| £'000 | £'000 | £'000 | |
| Fixed Assets | |||
| Investments at fair value through profit or loss | 5,606 | 5,485 | 4,836 |
| Total current assets | 479 | 522 | 979 |
| Creditors: amounts falling due within one year | (123) | (208) | (467) |
| Net current assets | 356 | 314 | 512 |
| Total assets less current liabilities | 5,962 | 5,799 | 5,348 |
| Capital and Reserves | 5,962 | 5,799 | 5,348 |
| Equity shareholders' funds | 5,962 | 5,799 | 5,348 |
| Net asset value per Ordinary Share | 99.45p | 96.73p | 89.21p |
| 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 2024 | 300 | 314 | 5,136 | 27 | 649 | (627) | 5,799 |
| Gain attributable to shareholders |
- | - | - | - | 153 | 10 | 163 |
| As at 30 September 2024 |
300 | 314 | 5,136 | 27 | 802 | (617) | 5,962 |
| 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 2023 | 300 | 314 | 5,136 | 27 | 394 | (594) | 5,577 |
| Loss attributable to shareholders |
- | - | - | - | 255 | (33) | 222 |
| As at 31 March 2024 | 300 | 314 | 5,136 | 27 | 649 | (627) | 5,799 |
| 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 2023 | 300 | 314 | 5,136 | 27 | 394 | (594) | 5,577 |
| Gain/(loss) attributable to shareholders |
- | - | - | - | (231) | 2 | (229) |
| As at 30 September 2023 |
300 | 314 | 5,136 | 27 | 163 | (592) | 5,348 |
*Distributable reserves comprise of the Special Reserve and the Revenue Reserve and were £4,519,000 at 30 September 2024 (31 March 2024: £4,509,000).
**Non-distributable reserves comprise the Capital Redemption Reserve and Capital Reserve and were £829,000 at 30 September 2024 (31 March 2024 : £676,000).
| Market Exposure |
% of Net |
Sector analysis as at 30 September 2024 |
% of Gross |
||
|---|---|---|---|---|---|
| Stock | 2024 | Assets | Exposure | ||
| £000 | Sector | ||||
| 1 | Beazley Group | 238 | 4.0 | Industrials | 27.6 |
| 2 | 4Imprint Group | 236 | 4.0 | Financials | 18.7 |
| 3 | Howden Joinery Group | 218 | 3.7 | Consumer Discretionary | 17.5 |
| 4 | Marks and Spencer Group | 217 | 3.6 | Consumer Staples | 12.3 |
| 5 | Experian | 196 | 3.3 | Communication Services | 7.4 |
| 6 | Cranswick | 196 | 3.3 | Real Estate | 6.9 |
| 7 | Alpha Group International | 189 | 3.2 | Information Technology | 5.1 |
| 8 | Games Workshop Group | 188 | 3.1 | Materials | 2.8 |
| 9 | Tesco | 183 | 3.1 | Healthcare | 1.7 |
| 10 | Ashtead Group | 181 | 3.0 | Total | 100.0 |
| Ten largest investments | 2,042 | 34.3 | |||
| 11 | JTC | 173 | 2.9 | ||
| 12 | CRH | 168 | 2.8 | ||
| 13 | Compass Group | 168 | 2.8 | ||
| 14 | Serco Group | 168 | 2.8 | ||
| 15 | Conduit Holdings | 165 | 2.8 | ||
| 16 | Boku | 160 | 2.7 | ||
| 17 | Jet2 | 160 | 2.7 | ||
| 18 | IMI | 158 | 2.7 | ||
| 19 | InterContinental Hotels Group | 150 | 2.5 | * Investment held as Contract for Difference | |
| 20 | London Metric Property | 145 | 2.4 | ("CFD"). | |
| Twenty largest investments | 3,657 | 61.4 | |||
| 21 | Computacenter | 143 | 2.4 | ** Net current assets per this table do not | |
| 22 | Keystone Law Group | 143 | 2.4 | include CFD unrealised losses as these are | |
| 23 | Unite Group | 142 | 2.4 | disclosed separately for clarity. These losses are included in creditors in the balance sheet |
|
| 24 | Whitbread | 142 | 2.4 | and are therefore included within net current | |
| 25 | Renew | 134 | 2.2 | assets in the balance sheet. | |
| 26 | Hilton Food Group | 132 | 2.2 | ||
| 27 | Greggs | 131 | 2.2 | *** Includes CFDs. | |
| 28 | Flutter Entertainment | 126 | 2.1 | ||
| 29 | Segro | 120 | 2.0 | Market exposure for equity investments held | |
| 30 | Auto Trader Group | 114 | 1.9 | is the same as fair value and for CFDs held is | |
| Thirty largest investments | 4,984 | 83.6 | the market value of the underlying shares to | ||
| Other investments (15 holdings)*** | 950 | 15.9 | which the portfolio is exposed via the | ||
| CFD positions | (378) | (6.3) | contract. The investment portfolio is grossed | ||
| CFD unrealised gains | 50 | 0.8 | up to include CFDs and the net CFD position | ||
| Total investments | 5,606 | 94.0 | is then deducted in arriving at the net asset total. Further information is given in note 6 to |
||
| CFD unrealised losses | (21) | (0.3) | the annual Financial Statements. A full | ||
| Net current assets** | 377 | 6.3 | portfolio listing as at 31 March 2024 is | ||
| Net assets | 5,962 | 100.0 | detailed on the website. |
| Sector analysis as at 30 September 2024 Sector |
% of Gross Exposure |
|
|---|---|---|
The major risks inherent within the Fund are market risk, liquidity risk, credit risk and interest rate risk. The Fund has an established environment for the management of these risks which are continually monitored by the Manager. Appropriate guidelines for the management of its financial instruments and gearing have been established by the Board of Directors. The Fund has no significant exposure to foreign currency assets and therefore does not use currency hedging. It does not use derivatives within the portfolio with the exception of CFDs. An explanation of these risks and how they are mitigated is explained in the 2024 Annual Report, which is available on the Manager's website: www.river.global. These principal risks and uncertainties have not changed from those disclosed in the 2024 Annual Report.
The Board, having made appropriate enquiries, has a reasonable expectation that the Fund has adequate resources and sufficient liquidity to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of this report. This conclusion takes in to account the Directors' assessment of the continuing risks and impacts from the geopolitical risks relating to the conflict between Russia and Ukraine, the conflict in the Middle East, and economic factors that are influencing the current market volatility, such as inflation, interest rates and supply chains. Accordingly, it continues to adopt the going concern basis in preparing the financial statements.
The number of shares in issue at 30 September 2024 was 6,005,000 (2023: 6,005,000).
Returns per share are based on a weighted average of 5,995,000 (2023: 5,995,000) ordinary shares, being the number of shares in issue during the period excluding the 10,000 shares held in Treasury.
Total return per share is based on the total gain for the period of £163,000 (2023: loss of £229,000). Capital return per share is based on the capital gain for the period of £153,000 (2023: loss of £231,000). Revenue return per share is based on the revenue gain after taxation for the period of £10,000 (2023: gain of £2,000).
Investments have been classified using the fair value hierarchy:
| September 2024 | March 2024 | |||
|---|---|---|---|---|
| £000 | £000 | £000 | £000 | |
| Classification of financial instruments | Assets | Liabilities | Assets | Liabilities |
| Level 1 | 5,556 | - | 5,436 | - |
| Level 2 | 50 | 21 | 49 | 9 |
| Level 3 – 2 investments (March 2024: 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 2024 and 31 March 2024.
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. The Board has instructed the Manager not to make any new investments in unlisted shares.
There are two (March 2023 - two) investments in the Fund which have values of £nil where the respective share prices have been suspended, or are stale. The Fair Value and Pricing Committee oversees and has ratified the positions.
Number of CFD holdings at 30 September 2024: four (31 March 2024: four)
| CFD positions | September | March |
|---|---|---|
| 2024 | 2024 | |
| £000 | £000 | |
| Gross exposure | 378 | 389 |
| Net exposure | 378 | 389 |
| Unrealised gains | 50 | 49 |
| Unrealised losses | 21 | 9 |
The gearing ratio is 1.1% at 30 September 2024 (31 March 2024: 0.7%). The gearing ratio indicates the extra amount by which the shareholders' funds would change if total assets (including CFDs' 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.
River Global Investors LLP provides investment management and secretarial services to the Fund. The Manager is entitled to a fee for these services, payable quarterly in arrears, equivalent to 0.75% per annum of the total assets of the Fund, less current liabilities. The Manager has elected to waive the investment management fee from 1 September 2023 until further notice.
The above figures do not constitute full or statutory accounts in terms of Sections 434 and 435 of the Companies Act 2006. All information shown for the six months to 30 September 2024 is unaudited. The accounts for the year to 31 March 2024, 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.
For further information, please contact:
River Global on +44 (0) 20 3327 5100.
Alternatively, information is available on the website: www.river.global. The Manager is not permitted to give you financial or tax advice. If you are in any doubt, please consult your financial adviser.
Peter Dicks (Chairman) Ian Gray Jeremy Harris
River Global Investors LLP 30 Coleman Street London EC2R 5AL Telephone: +44 (0) 20 3327 5100 Email: [email protected] Web: www.river.global
Authorised and regulated by the Financial Conduct Authority and a member of the Investment Association
SVM UK Emerging Fund plc 7 Castle Street Edinburgh EH2 3AH
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
State Street Bank & Trust Company
Registered Office: 20 Churchill Place Canary Wharf London EH14 5HJ
Correspondence Address: Quartermile 3 10 Nightingale Way Edinburgh EH3 9EG
Authorised and regulated by the Financial Conduct Authority
Manager's Website www.river.global
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.