TIDMSVM
SVM UK EMERGING FUND PLC
(the "Fund")
HALF YEARLY REPORT
(FOR THE SIX MONTHS TO 30 SEPTEMBER 2020)
A copy of the Half Yearly Report will be available to download from the
Manager's website at www.svmonline.co.uk and a copy will shortly be available
for inspection at the National Storage Mechanism at www.morningstar.co.uk/uk/
nsm. Copies are also available at 7 Castle Street, Edinburgh EH2 3AH, the
registered office of the Fund.
HIGHLIGHTS
* Net asset value return of 28.4% compared to a 12.8% return in the IA UK All
Companies Sector Average Index and 7% return in the FTSE All-Share
Index.The share price rose 1.4%.
* Over the five years to 30 September 2020, net asset value gained 31.4% and
the share price 17.4%, against a benchmark return of 17.0%.
* At 31 October 2020, net asset value per share was 104.71p
* Positive contributions from Ocado, 4Imprint Group, Games Workshop and Gamma
Communications
* Portfolio emphasises exposure to scalable businesses with a competitive
edge that can protect margins and deliver growth.
"Long term capital growth from investments in smaller UK companies. Its aim is
to outperform the IA UK All Companies Sector Average Index on a total return
basis"
Financial Highlights
Total Return 10 Years
Performance to 6 months 3 years 5 Years
30 September
2020
Net Asset Value +28.4% -2.5% +31.4% +51.7%
Share Price
+1.4% -11.8% +17.4% +44.9%
Benchmark Index
* +12.8% -8.2% +17.0% +31.0%
* The benchmark index for the Fund was changed to the IA UK All Companies
Sector Average Index
from 1 October 2013 prior to which the FTSE AIM Index was used.
CHAIRMAN'S STATEMENT
Over the six months to 30 September 2020, the Company's net asset value gained
28.4% to 105.0p per share, compared to a return of 12.8% in the benchmark, the
IA UK All Companies Sector Average Index. Over the six months, the share
price rose 1.4%. Over the five years to 30 September 2020, net asset value has
gained 31.4% and the share price 17.4%, against a benchmark return of 17.0%.
The Company's net asset value was 104.71p] at 31 October 2020 (total return,
Lipper data).
The period under review began after a sharp stockmarket fall, resulting from
the disruption caused by COVID-19, but over the six months many shares
rebounded. Most portfolio investments rose following government and Bank of
England support for the worst hit sectors. Higher unemployment remains a risk
for the UK economy; lower inflation and interest rates are now likely. More
recently, market concerns with regard to a successful Brexit have resurfaced.
The strongest contributions to performance over the period were from Ocado,
4Imprint Group, Rentokil Initial, Games Workshop and Gamma Communications.
Laggards included Workspace Group, Beazley and Creo Medical Group. During the
six months, travel and property sector exposure was reduced; EasyJet,
Trainline, Workspace, IWG and WH Smith were sold. New investments were made in
manufacturing and industrial services; Avon Rubber, Aveva, and DiscoverIE
Group. We expect many businesses to increase focus on resilience and
sustainability; shortening supply chains and strengthening their online
capability.
The investment strategy of the Company involves focusing on growing businesses
benefiting from structural change in the economy. Typically, these have pricing
power within their chosen niche. Companies that were already well invested in
technology and able to make good use of customer data have seen an acceleration
of change this year. Businesses are demanding more enterprise support services,
assisting cloud data, mobile services and virtual operations. Suppliers of
these technologies were typically already disrupters in their sectors and have
proven their agility in offering differentiated services in scalable ways.
The crisis has heightened the contrast between legacy businesses and
well-adapted agile disruptors. Changes in tastes are often slow to evolve, but
persistent once set. At the centre of this trend is a shift in sentiment to the
home environment and wellbeing. This investment theme could shape the economy
for some time and the portfolio includes a number of businesses expected to
benefit from these trends.
The portfolio focuses on resilient growing businesses, with low exposure to
commodities, oil and banks. These are typically scalable businesses with a
competitive edge. The Fund remains fully invested with some additional gearing.
Peter Dicks
Chairman
6 November 2020
INVESTMENT OBJECTIVE and POLICY
The investment objective of SVM UK Emerging Fund plc (the "Fund" or the
"Company") is long term capital growth from investments in smaller UK
companies. Its aim is to outperform the IA UK All Companies Sector Average
Index on a total return basis
The Fund aims to achieve its objective and to diversify risk by investing in
shares and related instruments, controlled by a number of limits on exposures.
Appropriate guidelines for the management of the investments, gearing and
financial instruments have been established by the Board. This is an abridged
version of the Fund's investment policy. The full investment policy can be
found in the Strategic Report within the Fund's latest Annual Report &
Accounts.
DIRECTORS' RESPONSIBILITY STATEMENT
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:
(i) the condensed set of financial statements have been prepared in
accordance with the Financial Reporting Council Statement 104 "Interim
Financial Reporting" on a going concern basis, taking in to account guidance on
Covid-19, and give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Fund;
(ii) the Half Yearly Report includes a fair review of the information
required by the Disclosure and Transparency Rules DTR 4.2.7R (indication of
important events during the first six months and description of principal risks
and uncertainties for the remaining six months of the year); and DTR 4.2.8R
(disclosure of related party transactions and changes therein).
(iii) No related party transactions have taken place during the first
six months of the year that have materially affected the financial position of
the Fund during the period and there have been no changes in the related party
transactions described in the Annual Report & Accounts for the year end 31
March 2020 that could do so.
The Directors consider that the Half Yearly Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Fund's performance and strategy,
The Half Yearly Report has not been audited or reviewed by the Fund's auditors.
By Order of the Board
Peter Dicks
Chairman
6 November 2020
UNAUDITED ACCOUNTS
Income Statement
Six months to 30 September Six months to 30 September
2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net gain on investments at - 1,464 1,464 - 73 73
fair value
Income 20 - 20 94 - 94
Investment management fees - (22) (22) - (26) (26)
Other expenses (73) - (73) (45) - (45)
(Loss)/gain before finance (53) 1,442 1,389
costs and taxation 49 47 96
Finance costs (5) - (5) (11) - (11)
(Loss)/gain on ordinary (58) 1,442 1,384
activities before taxation 38 47 85
Taxation - - - - - -
(Loss)/Gain attributable to (58) 1,442 1,384
ordinary shareholders 38 47 85
(Loss)/Gain per Ordinary Share (0.96)p 23.09p 0.63p 0.78p 1.41p
24.05p
Year ended 31 March 2020
(audited)
Revenue Capital Total
GBP'000 GBP'000 GBP'000
The Total column of
Net loss on investments at - (1,633) (1,633) this statement is the
fair value profit and loss
account of the Fund.
Income 137 - 137 All revenue and
capital items are
Investment management fees - (52) (52) derived from
continuing
Other expenses (120) - (120) operations. No
operations were
Gain/(loss) before finance 17 (1,685) (1,668) acquired or
costs and taxation discontinued in the
year. A Statement of
Finance costs (24) - (24) Comprehensive Income
is not required as all
Loss on ordinary activities (7) (1,685) (1,692) gains and losses of
before taxation the Fund have been
reflected in the above
Taxation - - - statement.
Loss attributable to ordinary (7) (1,685) (1,692)
shareholders
Loss per Ordinary Share (0.12)p (28.08)p (28.20)p
Balance Sheet
As at As at As at
30 September 31 March 30 September
2020 2020 2019
(unaudited) (audited) (unaudited)
GBP'000 GBP'000 GBP'000
Fixed Assets
Investments at fair value through profit 6,278 4,463 6,668
or loss
Total Current Assets 227 745 138
Creditors: amounts falling due within (212) (299) (121)
one year
Net current assets 15 (446) 17
Total assets less current liabilities 6,293 4,909 6,685
Capital and Reserves 6,293 4,909 6,685
Equity shareholders' funds 6,293 4,909 6,685
Net asset value per Ordinary Share 104.97p 81.88p 111.51p
Statement of Changes in Equity
For the period to 30 September 2020
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2020 300 314 5,136 27 (492) (4,909)
(376)
Gain/(Loss) - - - - 1,442 (58) 1,384
attributable to
shareholders
As at 30 September 300 314 5,136 27 950 (434) 6,293
2020
For the year to 31 March 2020
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2019 300 314 5,144 27 1,193 (369) 6,609
Ordinary shares
repurchased - - (8) - - - (8)
Loss attributable - - - -
to shareholders (1,685) (7) (1,692)
As at 31 March 2020 300 314 5,136 27 (492) (376) 4,909
For the period to 30 September 2019
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2019 300 314 5,144 27 1,193 (369) 6,609
Ordinary shares - - (9) - - -
repurchased (9)
Gain attributable - - - - 47 38 85
to shareholders
As at 30 September 300 314 5,135 27 1,240 (331) 6,685
2019
Investment Portfolio as at 30 September 2020
Market % of Net Sector analysis as at % of Gross
Exposure 2020 Assets 30 September 2020 Exposure
Stock GBP000
Sector
1 Ocado Group 343 5.5 Industrials 20.4
2 Hilton Food Group 261 4.1 Consumer Discretionary 19.1
3 Rentokil Initial 241 3.8 Technology 15.3
4 Unite Group 231 3.6 Consumer Staples 11.8
5 Alpha Financial Markets 211 3.4 Financials 9.6
6 Knights Group 208 3.3 Real Estate 6.5
7 Dechra Pharmaceuticals 192 3.1 Healthcare 5.8
8 Gamma Communications 179 2.8 Consumer Services 4.7
9 4Imprint Group 177 2.8 Telecommunications 3.6
10 FDM Group Holdings 168 2.7 Energy 2.4
Ten largest investments 2,211 35.1 Consumer Goods
0.8
11 JD Sports Fashion * 152 2.4 Total 100.0
12 Games Workshop Group 148 2.4
13 Experian 146 2.3
14 Renishaw * 128 2.0
15 Codemasters 127 2.0
16 Learning Technologies 126 2.0
Group
17 Just Eat Takeaway * 123 2.0
18 Keystone Law Group 120 1.9
19 Ceres Power Holdings 117 1.9
20 Draper Espirit 116 1.8
Twenty largest investments 3,514 55.8
21 Flutter Entertainment * 116 1.8
22 XP Power 111 1.8
23 Globaldata 107 1.7
24 Johnson Service Group 103 1.6
25 Computacenter 98 1.6
26 Manolete Partners 98 1.6
27 Dunelm Group 98 1.6
28 Asos * 1.5 *Includes Contract for Difference
97 ("CFD")
29 Beazley Group 96 1.5
Market exposure for equity
30 Team17 Group 92 1.5 investments held is the same as
fair value and for CFDs held is
Thirty largest investments 4,530 72.0 the market value of the
underlying shares to which the
Other investments (38 2,351 37.4 portfolio is exposed via the
holdings) contract. The investment
portfolio is grossed up to
Total investments 6,881 109.4 include CFDs and the net CFD
position is then deducted in
CFD positions exposure (750) (11.9) arriving at the net asset total.
CFD unrealised gains 147 2.3
Net current assets 15 0.2
Net assets 6,293 100.0
Risks and Uncertainties
The principal risks facing the Fund relate to the investment in financial
instruments and include market, liquidity, credit and interest rate risk.
Additional risks faced by the Fund are investment strategy, share price
discount, accounting, legal and regulatory, operational, corporate governance
and shareholder relations, and financial. The Board seeks to mitigate and
manage these risks through continuous review, policy setting and enforcement of
contractual obligations. The Board receives both formal and informal reports
from the Managers and third party service providers addressing these risks. An
explanation of these risks and how they are mitigated is explained in the 2020
Annual Report, which is available on the Manager's website:
www.svmonline.co.uk. These principal risks and uncertainties have not changed
from those disclosed in the 2020 Annual Report.
Going Concern
The Board, having made appropriate enquiries, has a reasonable expectation that
the Fund has adequate resources to continue in operational existence for the
foreseeable future, a period of not less than 12 months from the date of this
report. Accordingly, it continues to adopt the going concern basis in preparing
the financial statements.
Notes
1. The Financial Statements have been prepared on a going concern basis
in accordance with FRS 102 "Financial Reporting Standard applicable in the UK
and Republic of Ireland", FRS 104 "Interim Financial Reporting" and under the
Association of Investment Companies Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
("SORP") issued in 2019 (the interim financial statements for the period to 30
September 2019 were prepared under the SORP issued in 2014). The requirements
have been met to qualify for the exemption to prepare a Cash Flow Statement.
These financial statements have been prepared in accordance with the accounting
policies used for the financial year ended 31 March 2020.
2. During the period no shares were bought back (2019 - 10,000 Ordinary
Shares with a nominal value of GBP500 and representing 0.17% of the issued share
capital were bought back and placed in treasury for an aggregate consideration
of GBP8,650).
The number of shares in issue at 30 September 2020 was 5,995,000
(2019 - 5,995,000).
Return per share is based on a weighted average of 5,995,000 (2019
- 6,004,672) ordinary shares in issue during the period.
Total return per share is based on the total gain for the period of GBP1,384,000
(2019 - gain of GBP85,000). Capital return per share is based on the capital gain
for the period of GBP1,442,000 (2019 - gain of GBP47,000). Revenue return per share
is based on the revenue loss after taxation for the period of GBP58,000 (2019 -
gain of GBP38,000).
3. All investments are held at fair value. At 30 September 2020 no
unlisted investments were held with value attributed (31 March 2020: same; 30
September 2019: same).
Investments have been classified using the fair value hierarchy:
September March
2020 2020
GBP000 GBP000
Classification of financial instruments
Level 1 6,131 4,455
Level 2 147 8
Level 3 - 2 investments (March 2020 - 2) - -
Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments whose fair value is
evidenced by comparison with other observable current market transactions in
the same instrument or based on a valuation technique whose variables include
only data from observable markets. The CFD positions are the sole Level 2
investments at 30 September 2020 and 31 March 2020.
Level 3 reflects financial instruments whose fair value is
determined in whole or in part using a valuation technique based on assumptions
that are not supported by prices from observable market transactions in the
same instrument and not based on available observable market data.
4. The Board has granted the Manager a limited authority to invest
in CFDs to achieve some degree of gearing and/or hedging without incurring the
gross cost of the investment. The Board requires the Manager to operate within
certain risk limits, as detailed in the Annual Report. The following table
details the CFD positions:
Number of CFD holdings at 30 September 2020: 9 (31 March 2020: 9)
CFD positions September March
2020 2020
GBP000 GBP000
Gross exposure 750 514
Net exposure 750 514
Unrealised gains 147 8
Unrealised losses 92 224
The gearing ratio is 11.4% at 30 September 2020 (31 March 2020: 16.5%). The
gearing figure indicates the extra amount by which the shareholders' funds
would change if total assets (including CFD position exposure and netting off
cash and cash equivalents) were to rise or fall. A figure of zero per cent
means that the Company has a nil geared position.
5. SVM Asset Management Limited 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.
6. 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 2020 is
unaudited. The accounts for the year to 31 March 2020, on which the
auditors issued an unqualified report, have been lodged with the Registrar of
Companies and did not contain a statement required under Section 498 of the
Companies Act 2006.
For further information, please contact:
Colin McLean SVM Asset Management 0131 226 6699
Sally Moore Four Communications 020 3697 4200
END
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