SCHRODER BRITISH OPPORTUNITIES TRUST PLC

Quarterly Report • Dec 4, 2023

National Storage Mechanism | Additional information

RNS Number : 4844V

Schroder British Opportunities Tst.

04 December 2023

Half Year Report

Schroder British Opportunities Trust plc hereby submits its Half Year Report for the six months ended 30 September 2023 as required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.2. 

The Half Year Report is also available to download from the Company's webpage. Please click on the following link to view the document:

http://www.rns-pdf.londonstockexchange.com/rns/4844V_1-2023-12-3.pdf

The Company has submitted a copy of its Half Year Report to the National Storage Mechanism and it will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism 

Enquiries:

Schroder Investment Management Limited

Augustine Chipungu (Press)        020 7658 6000

John Spedding                            0207 658 3206

Highlights for the year ended 30 September 2023

Financial Highlights

·      Over the six months to 30 September 2023, the net asset value ("NAV") per share decreased by 2.5% from 107.32 pence per share to 104.66 pence per share, with weakness in UK equity markets impacting the public allocation of the portfolio, while the private allocation continues to show robust growth in aggregate.

·      The share price increased 6.9% over the period (30 September 2023: 73.25p vs. 31 March 2023: 68.50p). The Board believes the current share price still undervalues the Company and does not reflect the strong underlying fundamentals of the portfolio.

Portfolio Highlights

·      At period end, the portfolio consisted of 9 private companies (65% of NAV) and 23 public companies (27% of NAV).

·      The public equity portfolio detracted from NAV performance over the period. These investments focus on small and medium-sized UK businesses, with a high weighting towards the consumer discretionary sector - both areas of the market that have struggled as rising interest rates have encouraged investors to seek safer havens, such as cash, bonds, and more defensive sectors.

·      The private segment of the portfolio has continued to perform well in aggregate, having increased in value every quarter since the Company's inception. The focus on 'growth capital' and 'buyout' areas continues to deliver.

·      Main contributors to performance over the six months included EasyPark (private), Pirum (private) and Bytes Technology (public):

o  EasyPark's recent announcement of its intention to acquire Flowbird Group has led to a positive re-rating of the Company's holding, adding c.£1.8 million to the NAV.

o  Pirum's strong sales and EBITDA growth has triggered a c.£1.1 million increase to its valuation.

o  Shares in Bytes Technology increased following strong financial results.

·      Main detractors to performance over the six months included Watches of Switzerland (public), Rapyd (private) and Learning Technologies (public):

o  Watches of Switzerland's ("WoS") shares unexpectedly fell over the market's concerns that Rolex's acquisition of luxury watch retailer Bucherer would hurt WoS' growth.

o  While Rapyd continues to grow, the investment landscape in the payments sector remains challenging, leading to a reduction in valuation over the period.

o  Learning Technologies announced an earnings downgrade, citing tough markets primarily in its contracts business.

Schroder British Opportunities Trust plc

Half Year Report and Accounts for the six months ended 30 September 2023

Chairman's Statement

Introduction

This report covers your Company's progress in the six months to 30 September 2023 and its financial position at that date.

Investment Strategy

Your Company invests in a diversified mix of public and private companies, either UK based or generating a significant proportion of their revenues from the UK. The investment team look for companies with the potential for high growth along with strong ESG credentials, a combination that we believe will create shareholder value over time. Our objective is to provide long term, sustainable capital growth.

Performance

During the six-month period to 30 September 2023, the net asset value ("NAV") per share decreased by 2.5% from 107.32 pence per share to 104.66 pence per share. This reflects markedly different performance from the public and private investments.

Net asset value attribution1

	6 months to	1 year to	Since IPO to
	30.09.23	30.09.23	30.09.23
Public	-4.9%	-2.0%	-17.7%
Private	2.9%	6.8%	27.2%
Other	-0.5%	-1.2%	-4.4%
Total	-2.5%	3.6%	5.2%

The public segment of the portfolio has suffered from lower sales and profit multiples as UK equity market sentiment, particularly toward the mid and small cap stocks, continues to be weak. Capital outflows from equities have increasingly been allocated to safe haven investments such as cash, gilts and gold. During the period, the Bank of England raised interest rates from 4% to 5.25% which had further negative impacts on the valuation of UK growth shares. The public investments' valuation reduction is frustrating, but the Portfolio Manager's investment thesis is based on the potential for growth and value accretion over the medium to long term. They believe that their strategy remains valid despite current market negatives.

By contrast, the private segment of the portfolio has seen a valuation increase as the companies we have invested in have generally shown robust revenue growth and continue to increase market share. The net increase in the value of the private equity portfolio in the most recent quarter represents the 11th consecutive quarter of increases since the Company's IPO. This increase is despite public market comparators negatively impacting our private company valuations. The attribution table above explains how the two segments of the portfolio have developed in the period and since IPO. Shareholders approved the removal of the 60% limit of NAV held in private companies (at the AGM in September 2022) as the Portfolio Manager believed that this would offer the best opportunities over the past year. The results we are now reporting validate this view.

Importantly, the underlying operational and financial performance of the vast majority of our portfolio companies has been strong. Our private equity portfolio companies continue to show resilience in challenging times. By way of example, six of the nine private equity companies were EBITDA2 positive, and their weighted average EBITDA margin was 44%. Over the period, the key drivers of performance from the portfolio were EasyPark and Pirum both of which are progressing ahead of their original investment cases.

Notwithstanding the fall in net asset value per share, the Company's share price increased by 6.9% to 73.25 at the period end. The improvement in share price was driven by a reduction in the discount to NAV to 30.0% at 30 September 2023. This was against a backdrop of widening discounts across the whole investment trust sector, and private equity trusts remaining on material discounts relative to the wider investment trust space.

At period end, our portfolio consisted of nine private companies (65% of NAV), 23 public companies (27% of NAV), and cash and cash equivalents of £8.2m (10% of NAV). Our Top 10 holdings represented 73% of total investments.

The Portfolio Manager's report, beginning on page 7, includes a detailed review of the portfolio, individual company performance, and investment transactions in the period.

1     "Total" represents the percentage change in NAV over a given period. The percentages shown for public, private and other represent the contribution to the total change in NAV over a given period. For public and private, this is based on fair value gains and losses.

2     EBITDA = Earnings Before Interest, Tax, Depreciation, and Amortisation. EBITDA is a measure of core corporate profitability. EBITDA is a valuation metric used to compare relative value of different businesses. EBITDA margin is a profitability ratio that compares the EBITDA of a company to its net revenue.

Valuations

As I have reported previously, public investments are obviously valued at the listed share price and the private portfolio has valuations developed by a specialist valuations team within Schroders. This team is independent from the Portfolio Manager. In general, we use public market comparable companies to avoid insulating the private valuations from the broader market. Valuations are calculated using established methodologies and public market comparators in accordance with International Private Equity and Venture Capital guidelines. The output from the Schroders independent specialist valuations team is reviewed by the Valuations Committee, the Board and, in respect of the annual results, by the Company's external auditors. Shareholders can be assured that your Board is cognisant of scepticism toward private equity valuations due to a reduced level of transparency and leads a discursive and challenging process.

Discount Control

The Company's shares continued to trade at a discount to NAV during the period under review and up to the date of this report. There continue to be many examples of a disconnect between an investment company's share price and the value of its portfolio holdings. We believe this to be the case with your Company. We suffer from two forms of discount. First, the unwarranted discount of the UK market relative to peers and second, the discount applied to your Company, which we believe to be a result of exogenous factors. It does not reflect the aggregate operational performance of the Company's unquoted holdings since inception.

Buybacks are one of several mechanisms your Board actively considers to reduce this discount. The use of our cash reserves is a matter of regular review. We aim to balance the benefits of highly accretive buybacks when discounts are high against ensuring that we hold appropriate reserves to fund potential follow-on investments in the private portfolio and capture the best of the new investment opportunities that we continue to see. Given the current pipeline, particularly from companies that want to stay private for longer, and taking into consideration the current size of the trust, we have chosen not to buy back in the period.

Board

In September, we created a separate Valuations Committee to be chaired by Professor Tim Jenkinson, a leading authority on private equity and the mechanisms of valuation. This decision recognises the importance of the Board's oversight role on valuations and the need for shareholders to have confidence in the outcomes.

Diana Dyer Bartlett was appointed as Senior Independent Director in September 2023, in addition to her role as chair of the Audit & Risk Committee.

The Board intends to recruit a new non-executive director in the new year in order to bring the Board strength back to four. We aim to improve Board diversity when doing so.

Dividend

No dividend has been declared or recommended for the year. Your Company is focused on providing capital growth and has a policy to only pay dividends to the extent that it is necessary to maintain the Company's investment trust status.

Outlook

The world is an uncertain place as I write, and equity markets may well remain out of favour for the next few months. High interest rates and uncertainty over future rates have continued to be a major negative factor affecting investment companies that focus on growth. The assumption is that these companies will need cash to fund that growth and that will be expensive and/or difficult to get. Unfortunately, the market is not differentiating between those companies with genuine issues in this regard and those that have no such needs, as is the case with the vast bulk of our investments.

One result of this is that the price at which our shares are trading continues to significantly undervalue the Company as it does not reflect the strong fundamentals of our portfolio.

History suggests that within listed UK equities, small and medium sized growth companies are often the first to suffer in a bear market but also first to rerate on signs of recovery and a change in market sentiment. A reduction in interest rates may well be the trigger for this. UK inflation appears to have peaked, and some commentators are predicting a base rate reduction as early as Q2 2024. At the time of writing, we are experiencing some improvement in the share prices of our public investments. This has generated a post period end NAV increase of 4.7%.

Your Board expects that the patient shareholder will benefit when market sentiment changes and the value and quality of the underlying portfolio becomes appreciated.

Neil England

Chairman

1 December 2023

Portfolio Manager's Review

Introduction

Summary

Market

Over the six-month period to 30 September 2023, UK small and mid-cap stocks (SMIDs) underperformed against a backdrop of spiked interest rate expectations in early summer. Markets got ahead of themselves when they briefly anticipated that base rates would head north of 6% on the back of stronger-than-expected jobs, wage growth and core inflation data. This was reflected in higher long-term UK government bond yields. However, towards the end of the period, market interest rate expectations stabilised and the sell-off in long-term UK government bonds moderated. The expectation now is that near-term inflation will fall, and UK base interest rates may have peaked.

In private equity markets, global deal activity has fallen back to the normal pre-pandemic levels in terms of deal value and volume, following the exuberance of 2021. Exit activity remains muted compared to 2021. This lower level of deal activity, paired with relatively reduced fundraising levels, has kept valuations lower, with bigger valuation corrections noticed in small/mid-sized deals (<$1 billion enterprise value). Buyout performance has remained robust, despite the macroeconomic backdrop, with lower entry valuation and healthy EBITDA growth possibly explaining relatively strong performance despite cost pressures. While these observations come from global trend analysis, we believe these dynamics are also being reflected in the UK private equity market. Furthermore, we have observed the bid-ask spread between buyers and sellers closing during the second half of 2023, which should start to deliver a pipeline of attractive UK growth and buyout opportunities.

Portfolio Performance

Since the Company's IPO in December 2020, the net asset value has proved resilient despite a volatile market. However, the Company's NAV has fallen over the six-month period under review, predominantly due to weakness in listed UK equity markets. The private portfolio has continued to show positive momentum and strong underlying operational performance in aggregate.

Attribution analysis (£m) for six months to 30 September 2023

	Quoted	Unquoted	Net cash	Other	NAV
Value as at 31 March 2023	26.2	47.9	7.8	(2.6)	79.3
+ Investments	0.6	0.2	(0.8)	-	-
- Realisations at value	(1.9)	-	1.9	-	-
+/- Fair value gains/(losses)	(3.9)	2.3	-	-	(1.6)
+/- Costs and other movements	-	-	(0.8)	0.4	(0.4)
Value as at 30 September 2023	21.0	50.4	8.1	(2.2)	77.3

Component rows have been rounded

Main positive and negative performers over the six months to 30 September 2023

Top 5 contributors	Contribution %
EasyPark	2.2
Pirum	1.4
Cera	0.4
Bytes	0.4
Mintec	0.3
Bottom 5 contributors	Contribution %
Watches of Switzerland	-0.9
Rapyd	-0.9
Learning Technologies	-0.7
Learning Curve	-0.7
OSB	-0.6

The NAV as of 30 September 2023 was £77.3 million, a decrease of 2.5% compared with the NAV (£79.3 million) as of 31 March 2023. The 2.5% decrease in the net asset value was comprised of:

•   Quoted holdings: -4.9%

•   Unquoted holdings: 2.9%

•   Costs and other movements: -0.5%

The public equity portfolio detracted from NAV performance over the period. These investments focus on small and medium-sized UK businesses, with a high weighting towards the consumer discretionary sector - both areas of the market that have struggled as rising interest rates have encouraged investors to seek safer havens, such as cash, bonds, and more defensive sectors.

Watches of Switzerland's ("WoS") shares unexpectedly fell over the market's concerns that Rolex's acquisition of luxury watch retailer Bucherer would hurt WoS' growth. However, we remain a shareholder given our view that the share price reaction was excessive, whilst we are optimistic of the equity story from the subsequent release of the new Long Range Plan. Elsewhere, workplace digital learning and talent management company, Learning Technologies, was a negative contributor, as the company announced an earnings downgrade citing tough markets primarily in its contracts business. Meanwhile, our position in specialist mortgage lender OSB Group also held performance back, after warning that its profits would be hampered by mortgage customers rushing to mitigate against rising interest rates. On the positive side, shares of software reseller Bytes Technology and premium British pub operator City Pub Group did well, following strong financial results. Performance was also helped by Dalata Hotel Group, which continued to grow its revenue per available room ahead of the industry.

The portfolio's private equity holdings have continued to perform well in aggregate, having increased in value every quarter since the Company's inception. The Company's focus on the 'growth capital' and 'buyout' areas of the private equity landscape, in contrast to venture capital and pre-IPO areas (which have been negatively impacted by rising inflation and interest rates) has been successful. Eight out of the nine companies in the Company's private equity portfolio are either profitable or, in our assessment, have cash runways to fund them through to profitability. The increase in the aggregate valuation of these holdings has been driven by transactional activity and trading gains, offset somewhat by valuation multiple compression, as illustrated below. Additionally, the private equity portfolio companies have continued to demonstrate robust organic and inorganic growth in aggregate, also illustrated on the next page.

Focusing on the EBITDA-positive companies in the private equity portfolio, the profitability of these companies significantly exceeds those of selected and relevant public market comparables. This strong positive differential against listed comparators is also prevalent when assessing the combination of sales growth and profitability (referred to as the "rule of 40" and typically used in the software space). This rule acts as a proxy to help assess how effectively a company is utilising capital to achieve a balance between growth and profitability. Our applicable portfolio companies display metrics almost 1.8x higher than listed comparators on average. Despite these favourable metrics, these companies are being valued more prudently on aggregate than public comparators, as illustrated below.

EasyPark and Pirum were the key positives in the period. EasyPark Group, one of the global leaders in mobile paid parking, recently announced its intention to acquire Flowbird Group. While the deal is subject to customary approvals by relevant authorities and the parties have agreed not to disclose the terms agreed, this has led to a positive re-rating of the Company's holding, adding c.£1.8 million to the NAV. This deal will be highly complementary to EasyPark's existing business and extend their global reach. Pirum, a leading provider of post-trade automation and collateral management technology for the global securities industry, has displayed strong sales and EBITDA growth, which has been reflected in a c.£1.1 million increase to its valuation in the period.

On the more challenging side, the valuations for both holdings in Rapyd and Learning Curve have come down over the past six months. Rapyd continues to grow, principally fuelled by its small and medium-sized customers. In August, the company announced the $610 million acquisition of a substantial part of PayU Global Payment Organisation, a leading provider of best-in-class payment solutions to emerging markets, operating in over 30 countries worldwide. This deal, which is subject to regulatory approval, will continue Rapyd's global expansion across Central and Eastern Europe and Latin America. Rapyd would then be present in over 100 countries, including 41 that are licensed or regulated, servicing 250,000+ customers. While the company continues to perform, the investment landscape in the payments sector remains challenging, with comparable businesses amending their long-term growth outlooks. As a result, the valuation multiple applied has been reduced, offsetting the company's positive financial performance, leading to a reduction in valuation over the period. The valuation for leading private UK training and education specialist, Learning Curve Group, has also been reduced due to some short-term demand weakness. We believe the longer-term outlook remains positive.

Portfolio Diversification

While having notable exposure to software, the portfolio is well-diversified across a number of growing industry sectors.

Portfolio breakdown by industry as % of total investments (30 September 2023)

Portfolio Changes

Early in the reporting period, we exited our holding in video games outsourcer Keywords Studios, as we believed the potential downside risk on parts of its business from artificial intelligence was not fully priced into its shares.

Finally, we modestly trimmed our position in City Pub Group following a period of robust share price performance, however we retained our holding given the significant discount to net asset value that the shares were trading at. The firm was subsequently bid for by competitor Young & Co's Brewery Plc on 16 November 2023 (after the period under review), at a price that was a 46% premium to the prior day's closing share price, thus making it the sixth company that has been bid for since the Company's inception. We have since exited our position at a profit.

Outlook

The public equity portion of the portfolio is weighted towards the consumer discretionary sector, which is sensitive to consumer confidence and interest rate sentiment. When clearer signs of a sustained economic recovery materialise and market sentiment substantially improves, we believe that both small and mid-caps and the consumer sector should be the first to re-rate. Our analysis shows that such market underperformance in the past by UK small and mid-caps has usually been followed by outperformance over three- to five-year periods relative to large cap companies in the FTSE 100. Aside from the relative valuation opportunity with UK equities remaining unloved relative to world markets in an historical context, in aggregate, they are also attractive as a result of their strong balance sheets. The valuation opportunity can also be looked at through the lens of free cash flow yields, with the UK having a higher yield than many other developed markets, making investing in the UK a compelling opportunity in our view.

While our public equity allocation suffered over the reporting period of six months to end September 2023, we have been encouraged with returns since, helped by positive sentiment around interest rate expectations, the announced bid for our largest holding City Pub Group, the first steps towards a realised break up of Ascential, and a buoyant move in MaxCyte's shares.

In private equity markets, with financial engineering unlikely to propel returns in the near term due to increased interest rates, inflation and macroeconomic uncertainty, we continue to believe that strategies focused on identifying companies that exhibit strong underlying financial performance are poised to do well. This may be achieved by the expansion of product lines, geographic footprint, and professionalising companies to improve profit margins, for example. This is all easier to do in small and medium-sized companies, and typically harder to achieve at larger companies, which have often been through several rounds of private equity or institutional ownership. Furthermore, despite the economic backdrop, we are seeing significant deal flow across a breadth of opportunities. We have established a formidable network in the UK (as well as globally) with hard-to-access investment partners, and strongly believe we are well positioned to seek out the best opportunities for the Company going forward.

The Company's differentiated public-private equity strategy enables us to continue to invest without boundaries, providing access to a broader investable universe which differentiates us from other investment trusts.

Schroder Investment Management Limited

1 December 2023

The Company's top ten holdings as of 30 September 2023 are set out below.

		Fair value as of	Total	Fair value as of	Total
	Quoted/	31 March 2023	investments	30 September 2023	investments
Top 10 holdings	unquoted	(£'000)	%	(£'000)	%
Mintec1	Unquoted	8,614	11.6	8,865	12.4
Rapyd Financial Network1	Unquoted	8,399	11.3	7,721	10.8
Cera EHP S à r l	Unquoted	6,986	9.5	7,316	10.2
Pirum Systems1	Unquoted	6,087	8.2	7,166	10.0
EasyPark1	Unquoted	4,492	6.1	6,245	8.7
Culligan1 (formerly Waterlogic)	Unquoted	5,053	6.9	4,909	6.9
CFC Underwriting1	Unquoted	4,098	5.5	4,416	6.2
Learning Curve1	Unquoted	2,455	3.3	1,918	2.7
Graphcore	Unquoted	1,778	2.4	1,801	2.5
Volution	Quoted	2,012	2.7	1,691	2.3

1    The fair value disclosed for the following investments represents the Company's investment in an intermediary vehicle:

-   Mintec (held via Synova Merlin LP)

-   Rapyd Financial Network (held via Target Global Fund)

-   Pirum Systems (held via Bowmark Investment Partnership LP)

-   Culligan (formerly Waterlogic) (held via Epic-1b Fund)

-   EasyPark (held via Purple Garden Invest (D) AB)

-   CFC Underwriting (held via Vitruvian Investment Partnership LLP)

-   Learning Curve (held via Agilitas Boyd 2020 Co-invest Fund)

Investment Portfolio

As at 30 September 2023

			Country of incorporation (of underlying holding where applicable)
					Fair value £'000
Holding	Quoted/unquoted		Industry Sector		Total Investments %
Mintec1	Unquoted		United Kingdom		Software		8,865		12.4
Rapyd Financial Network1	Unquoted		United Kingdom		IT Services		7,721		10.8
Cera EHP S à r l	Unquoted		United Kingdom		Health Care Technology		7,316		10.2
Pirum Systems1	Unquoted		United Kingdom		Software		7,166		10.0
EasyPark1	Unquoted		Sweden		Software		6,245		8.7
Culligan1 (formerly Waterlogic)	Unquoted		United Kingdom		Diversified Consumer Services		4,909		6.9
CFC Underwriting1	Unquoted		United Kingdom		Insurance		4,416		6.2
Learning Curve1	Unquoted		United Kingdom		Diversified Consumer Services		1,918		2.7
Graphcore	Unquoted		United Kingdom		Semiconductors & Equipment		1,801		2.5
Volution	Quoted		United Kingdom		Building products		1,691		2.3
City Pub	Quoted		United Kingdom		Hotels, Restaurants & Leisure		1,650		2.3
Trainline	Quoted		United Kingdom		Hotels, Restaurants & Leisure		1,580		2.2
Dalata Hotel	Quoted		Ireland		Hotels, Restaurants & Leisure		1,502		2.1
Watches of Switzerland	Quoted		United Kingdom		Specialty Retail		1,400		2.0
Ascential	Quoted		United Kingdom		Media		1,340		1.9
SSP	Quoted		United Kingdom		Hotels, Restaurants & Leisure		1,334		1.9
Bytes Technology	Quoted		United Kingdom		Software		1,067		1.5
Discoverie	Quoted		United Kingdom		Electrical Equipment		1,059		1.5
Sosandar	Quoted		United Kingdom		Textiles, Apparel & Luxury Goods		1,046		1.5
OSB	Quoted		United Kingdom		Financial Services		1,036		1.5
Trustpilot	Quoted		United Kingdom		Interactive Media & Services		962		1.3
Judges Scientific	Quoted		United Kingdom		Machinery		861		1.2
GB	Quoted		United Kingdom		Software		837		1.2
Mobico	Quoted		United Kingdom		Ground Transportation		658		0.9
MaxCyte	Quoted		United Kingdom		Life Sciences Tools & Services		597		0.8
On the Beach	Quoted		United Kingdom		Hotels, Restaurants & Leisure		589		0.8
Learning Technologies	Quoted		United Kingdom		Software		493		0.7
Luceco	Quoted		United Kingdom		Electrical Equipment		429		0.6
Victorian Plumbing	Quoted		United Kingdom		Specialty Retail		403		0.6
Invinity Energy Systems	Quoted		Jersey		Electrical Equipment		274		0.4
Lendinvest	Quoted		United Kingdom		Financial Services		199		0.3
Velocys	Quoted		United Kingdom		Energy Equipment & Services		42		0.1
Total investments2								71,406		100.0

1   The fair value disclosed for the following investments represents the Company's investment in an intermediary vehicle:

Mintec (held via Synova Merlin LP)

Rapyd Financial Network (held via Target Global Fund)

Pirum Systems (held via Bowmark Investment Partnership LP)

Culligan (held via Epic-1b Fund)

EasyPark (held via Purple Garden Invest (D) AB)

CFC Underwriting (held via Vitruvian Investment Partnership LLP)

Learning Curve (held via Agilitas Boyd 2020 Co-invest Fund)

Total investments comprise:	£'000	%
Unquoted	50,357	70.4
Quoted on FTSE 250	11,068	15.5
Quoted on AIM	6,402	9.1
Quoted on FTSE Allshare	2,077	2.9
Listed on a recognised stock exchange overseas	1,502	2.1
Total	71,406	100.0

Interim Management Statement

Principal risks and uncertainties

The Board has determined that the principal risks and uncertainties for the Company fall into the following categories: strategic risks, market risks and operational risks. These risks are set out on pages 34 to 36 of the Annual Report and Accounts for the period ended 31 March 2023. The Company's principal risks and uncertainties, and their mitigation, have not materially changed during the six months ended 30 September 2023 or since the Annual Report was published on 6 July 2023.

Going concern

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence until 31 December 2024, which is more than 12 months from the date when these financial statements were signed and the Directors have accordingly adopted the going concern basis in preparing the financial statements.

The Board has considered the Company's principal risks and uncertainties including whether there are any emerging risks. They have additionally considered the liquidity of the Company's portfolio of listed investments, the Company's cash balances and the forecast income and expenditure flows as well as commitments to provide further funding to the Company's private equity investee companies; the Company currently has no borrowings. A substantial proportion of the Company's expenditure varies with the value of the investment portfolio. In the event that there is insufficient cash to meet the Company's liabilities, the listed investments in the portfolio may be realised and the Directors have reviewed the average days to liquidate the listed investments. On this basis, the Board considers it appropriate to adopt the going concern basis of accounting in preparing the Company's accounts.

Related party transactions

There have been no transactions with related parties that have materially affected the financial position or the performance of the Company during the six months ended 30 September 2023.

Directors' responsibility statement

The Directors confirm that, to the best of their knowledge, this set of condensed financial statements has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommended Practice, "Financial Statements of Investment Companies and Venture Capital Trusts" issued in July 2022 and that this Interim Management Statement includes a fair review of the information required by 4.2.7R and 4.2.8R of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

The half-yearly financial report has not been audited or reviewed by the Company's auditor.

Signed on behalf of the Board of Directors.

Neil England

Chairman

1 December 2023

Income Statement

for the six months ended 30 September 2023 (unaudited)

	(Unaudited)			(Unaudited)			(Audited)
	For the six months			For the six months			For the year ended
	ended 30 September 2023			ended 30 September 2022			31 March 2023
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments held at fair value through profit or loss
-	(1,735)	(1,735)	-	(2,018)	(2,018)	-	3,198	3,198
(Losses)/gains on foreign exchange	-	-	-	-	(1)	(1)	-	16	16
Income from investments	202	-	202	227	-	227	392	-	392
Other interest receivable and similar income	115	-	115	-	-	-	77	-	77
Gross (loss)/return	317	(1,735)	(1,418)	227	(2,019)	(1,792)	469	3,214	3,683
Investment management fee	(232)	-	(232)	(226)	-	(226)	(458)	-	(458)
Performance fee	-	-	-	-	(500)	(500)	-	(555)	(555)
Administrative expenses	(314)	-	(314)	(324)	-	(324)	(650)	-	(650)
Transaction costs	-	-	-	-	-	-	-	(4)	(4)
Net (loss)/return before finance costs and taxation
(229)	(1,735)	(1,964)	(323)	(2,519)	(2,842)	(639)	2,655	2,016
Finance costs	-	-	-	-	-	-	-	-	-
Net (loss)/return before taxation	(229)	(1,735)	(1,964)	(323)	(2,519)	(2,842)	(639)	2,655	2,016
Taxation (note 3)	-	-	-	-	-	-	-	-	-
Net (loss)/return after taxation	(229)	(1,735)	(1,964)	(323)	(2,519)	(2,842)	(639)	2,655	2,016
(Loss)/return per share
(note 4)	(0.31)p	(2.35)p	(2.66)p	(0.43)p	(3.37)p	(3.80)p	(0.86)p	3.57p	2.71p

The "Total" column of this statement is the profit and loss account of the Company. The "Revenue" and "Capital" columns represent supplementary information prepared under guidance issued by The Association of Investment Companies. The Company has no other items of other comprehensive income, and therefore the net return after taxation is also the total comprehensive income for the period.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

Statement of Changes in Equity

for the six months ended 30 September 2023 (unaudited)

For the six months ended 30 September 2023 (unaudited)

	Called-up	Share	Special	Capital	Revenue
	share capital	premium	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 March 2023	750	-	71,957	8,253	(1,649)	79,311
Net loss after taxation	-	-	-	(1,735)	(229)	(1,964)
At 30 September 2023	750	-	71,957	6,518	(1,878)	77,347

For the six months ended 30 September 2022 (unaudited)

	Called-up	Share	Special	Capital	Revenue
	share capital	premium	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 March 2022	750	-	72,765	5,598	(1,010)	78,103
Repurchase of ordinary shares into treasury	-	-	(617)	-	-	(617)
Net loss after taxation	-	-	-	(2,519)	(323)	(2,842)
At 30 September 2022	750	-	72,148	3,079	(1,333)	74,644

For the year ended 31 March 2023 (audited)

	Called-up	Share	Special	Capital	Revenue
	share capital	premium	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31 March 2022	750	-	72,765	5,598	(1,010)	78,103
Repurchase of ordinary shares into treasury	-	-	(808)	-	-	(808)
Net return/(loss) after taxation	-	-	-	2,655	(639)	2,016
At 31 March 2023	750	-	71,957	8,253	(1,649)	79,311

Statement of Financial Position

at 30 September 2023

	(Unaudited)	(Unaudited)1	(Audited)
	30 September	30 September	31 March
	2023	2022	2023
	£'000	£'000	£'000
Fixed asset
Investments at fair value	71,406	71,832	74,128
Current assets
Debtors	75	14	151
Cash and cash equivalents	8,160	5,086	7,759
	8,235	5,100	7,910
Current liabilities
Creditors: amounts falling due within one year	(624)	(673)	(1,543)
	(624)	(673)	(1,543)
Net current assets	7,611	4,427	6,367
Total assets less current liabilities	79,017	76,259	80,495
Creditors: amounts falling due after more than one year
Performance fee	(1,670)	(1,615)	(1,184)
Net assets	77,347	74,644	79,311
Capital and reserves
Called-up share capital (note 5)	750	750	750
Capital reserve	78,475	75,227	80,210
Revenue reserve	(1,878)	(1,333)	(1,649)
Total equity shareholders' funds	77,347	74,644	79,311
Net asset value per share (note 6)	104.66p	100.62p	107.32p

1 Other creditors and accruals at 30 September 2022 were previously reported as £2,288,000. The balance has been restated to £673,000 because performance fees of £1,615,000 could not have fallen due within one year under any circumstances. Therefore, they have been reclassified as creditors: amounts falling due after more than one year.

Registered in England and Wales as a public company limited by shares

Company registration number: 12892325

Cash Flow Statement

for the six months ended 30 September 2023

	(Unaudited)	(Unaudited)	(Audited)
	For the six	For the six	For the
	months ended	months ended	year ended
	30 September	30 September	31 March
	2023	2022	2023
	£'000	£'000	£'000
Operating activities
Total (loss)/return before taxation	(1,964)	(2,842)	2,016
Less capital (return)/loss before taxation	1,735	2,519	(2,655)
Decrease/(increase) in prepayments and accrued income	93	80	(45)
(Increase)/decrease in other debtors	(17)	21	9
(Decrease)/increase in creditors and performance fee payable	(433)	125	572
Performance fee and transaction costs allocated to capital	-	(500)	(559)
Net cash outflow from operating activities	(586)	(597)	(662)
Investing activities
Purchases of investments	(872)	(16,281)	(19,840)
Sales of investments	1,859	7,121	13,601
Net cash inflow/(outflow) from investing activities	987	(9,160)	(6,239)
Net cash inflow/(outflow) before financing	401	(9,757)	(6,901)
Financing activities
Repurchase of ordinary shares into treasury	-	(609)	(808)
Net cash outflow from financing activities	-	(609)	(808)
Net cash inflow/(outflow) in the period	401	(10,366)	(7,709)
Cash and cash equivalents at the beginning of the period	7,759	15,452	15,452
Net cash inflow/(outflow) in the period	401	(10,366)	(7,709)
Exchange movements	-	-	16
Cash and cash equivalents at the end of the period	8,160	5,086	7,759

Notes to the Financial Statements

1.      Financial statements

The information contained within the accounts in this half year report has not been audited or reviewed by the Company's independent auditor.

The figures and financial information for the year ended 31 March 2023 are extracted from the latest published accounts of the Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditor which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.      Accounting policies

Basis of accounting

The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, in particular with Financial Reporting Standard 104 "Interim Financial Reporting" and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies in July 2022.

All of the Company's operations are of a continuing nature.

The accounting policies applied to these accounts are consistent with those applied in the accounts for the year ended 31 March 2023.

3.      Taxation

The Company's effective corporation tax rate is nil, as deductible expenses exceed taxable income. The Company intends to continue meeting the conditions required to maintain its status as an Investment Trust Company, and therefore no provision has been made for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

4.      (Loss)/return per share

	(Unaudited)	(Unaudited)	(Audited)
	For the six	For the six	For the
	months ended	months ended	year ended
	30 September	30 September	31 March
	2023	2022	2023
	£'000	£'000	£'000
Revenue loss	(229)	(323)	(639)
Capital (loss)/return	(1,735)	(2,519)	2,655
Total (loss)/return	(1,964)	(2,842)	2,016
Weighted average number of shares in issue during the period	73,900,000	74,823,042	74,376,633
Revenue loss per share	(0.31)p	(0.43)p	(0.86)p
Capital (loss)/return per share	(2.35)p	(3.37)p	3.57p
Total (loss)/return per share	(2.66)p	(3.80)p	2.71p

5.      Called-up share capital

Changes in called-up share capital during the period were as follows:

	(Unaudited)	(Unaudited)	(Audited)
	For the six	For the six	For the
	months ended	months ended	year ended
	30 September	30 September	31 March
	2023	2022	2023
	£'000	£'000	£'000
Opening balance of ordinary shares of 1p each	739	750	750
Repurchase of shares into treasury	-	(8)	(11)
Subtotal, ordinary shares of 1p each, excluding shares held in treasury	739	742	739
Shares held in treasury	11	8	11
Closing balance, ordinary shares of 1p each, including shares held in treasury	750	750	750

Changes in the number of shares in issue during the period were as follows:

	(Unaudited)	(Unaudited)	(Audited)
	For the six	For the six	For the
	months ended	months ended	year ended
	30 September	30 September	31 March
	2023	2022	2023
	£'000	£'000	£'000
Opening balance of shares in issue	73,900,000	75,000,000	75,000,000
Repurchase of shares into treasury	-	(818,365)	(1,100,000)
Closing balance of shares in issue, excluding shares
held in treasury	73,900,000	74,181,635	73,900,000
Closing balance of shares held in treasury	1,100,000	818,365	1,100,000
Closing balance of shares in issue, including shares held in treasury	75,000,000	75,000,000	75,000,000

6.      Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	30 September	30 September	31 March
	2023	2022	2023
Total equity shareholders' funds (£'000)	77,347	74,644	79,311
Shares in issue at the period end, excluding shares held in treasury	73,900,000	74,181,635	73,900,000
Net asset value per share	104.66p	100.62p	107.32p

7.      Financial instruments measured at fair value

The Company's financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio and any derivative financial instruments.

FRS 102 requires that financial instruments held at fair value are categorised into a hierarchy consisting of the three levels below. A fair value measurement is categorised in its entirety on the basis of the lowest level input that is significant to the fair value measurement.

Level 1 - valued using unadjusted quoted prices in active markets for identical assets.

Level 2 - valued using observable inputs other than quoted prices included within Level 1.

Level 3 - valued using inputs that are unobservable.

The following tables set out the fair value measurements using the above hierarchy:

	30 September 2023 (unaudited)
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Investments in equities           - quoted		-	-	21,049
- unquoted	-	-	50,357	50,357
Total	21,049	-	50,357	71,406

	30 September 2022 (unaudited)
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Investments in equities           - quoted	26,297	-	-	26,297
- unquoted	-	-	45,535	45,535
Total	26,297	-	45,535	71,832

		31 March 2023 (audited)
	Level 1		Level 2	Level 3	Total
	£'000		£'000	£'000	£'000
Investments in equities      - quoted	26,166		-	-	26,166
- unquoted	-		-	47,962	47,962
Total	26,166		-	47,962	74,128

There have been no transfers between Levels 1, 2 or 3 during the period (six months ended 30 September 2022 and year end 31 March 2023: nil).

8.      Uncalled capital commitments

At 30 September 2023, the Company had uncalled capital commitments amounting to £5,171,000 (30 September 2022: £7,652,000; 31 March 2023: £5,476,000) in respect of follow-on investments, which may be called at any time by investee companies, subject to their achievement of certain milestones and objectives.

9.      Events after the interim period that have not been reflected in the financial statements for the interim period

The Directors have evaluated the period since the interim date and have not noted any events which have not been reflected in the financial statements.

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