SVM UK EMERGING
FUND PLC
(the “Fund”)
HALF YEARLY
REPORT
(FOR THE SIX
MONTHS TO 30 SEPTEMBER 2021)
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
- Over the six months to 30 September
2021, the Company’s net asset value gained 16.6% to 145.7p
per share, compared to a return of 8.4% in the IA UK All Companies
Sector Average Index.
- Over the five years to 30 September
2021, net asset value gained 70.5% and the share price
79.1%, against the IA UK All Companies Sector Average Index return
of 38.4%.
- Positive contributions from Watches of Switzerland, Alpha FX Group, Dianomi, Reach
and Dechra Pharmaceuticals.
- 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
Performance to 30 September 2021 |
6 months |
3 years |
5 Years |
10
Years |
Net Asset Value |
16.6% |
13.5% |
70.5% |
98.5% |
Share Price |
16.1% |
-7.6% |
79.1% |
122.1% |
Comparator Index* |
8.4% |
15.1% |
38.4% |
92.3% |
* The comparator 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
2021, the Company’s net asset value gained 16.6% to 145.7p
per share, compared to a return of 8.4% in the IA UK All Companies
Sector Average Index. Over the six months, the share price
gained 16.1%. In the five years to 30
September 2021, net asset value has gained 70.5% and the
share price 79.1%, against the IA UK All Companies Sector Average
return of 38.4%. The Company’s net asset value declined
slightly since the period under review to 145.45p at 29 October 2021 (total return, SVM and FE
fundinfo data).
During the period investor focus was on recovery and concerns
over inflation, with the best performances in the stockmarket
typically from businesses that were expected to benefit from the
easing the lockdown. However, the summer saw some interest
return to growth businesses, as many traditional sectors were hit
by economic pressures, supply disruption and higher energy
costs. This seems likely to lead in the short term to higher
UK interest rates, but higher energy costs and shortages are likely
in time to cool the economy. Nevertheless, the UK economy
looks set for strong growth in 2022, with capital expenditure for
investment at particularly high levels.
The strongest contributions to performance over the period were
from Watches of Switzerland, Alpha
FX Group, Dianomi, Reach, Kin and Carta and Dechra
Pharmaceuticals. Laggards included Ceres Power, ASOS,
Renishaw and AO World.
Additional investment was made in Entain, Kooth, Marlowe and
Redde Northgate. The Fund also participated in the new
listings of Brickability Group, Dianomi, Revolution Beauty and
Microlise Group. These flotations brought into the portfolio
innovative strategies of a number of smaller and medium sized
businesses. To fund these purchases, Ocado, AO World, The Hut
Group, Just Eat Takeaway, Premier Foods and Moonpig were
sold.
The sharp recovery in the UK economy is creating value in some
disruptive businesses. Many of these enter the stockmarket as small
or mid-cap, but have potential to be much bigger, growing
organically and by acquisition. Some, such as Dianomi,
emphasise innovative digital strategies and online services, but
others are providing new services in traditional sectors. For
example, Microlise is a long-established business that provides
logistics management services to optimise operations for truck
fleets. The portfolio is diversified across a wide range of
sectors, but a common characteristic of many portfolio holdings is
dominance within a niche.
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
5 November 2021
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
medium-sized and 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)UNAUDITED ACCOUNTS
Income
Statement |
|
|
Six months to 30 September
2021 |
Six months to 30 September 2020 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
|
Net gain on
investments at fair value |
- |
1,283 |
1,283 |
- |
1,464 |
1,464 |
Income |
56 |
- |
56 |
20 |
- |
20 |
Investment management fees |
- |
(32) |
(32) |
- |
(22) |
(22) |
Other expenses |
(61) |
- |
(61) |
(73) |
- |
(73) |
(Loss)/gain before
finance costs and taxation |
(5) |
1,251 |
1,246 |
(53) |
1,442 |
1,389 |
Finance costs |
(7) |
- |
(7) |
(5) |
- |
(5) |
(Loss)/gain on ordinary
activities before taxation |
(12) |
1,251 |
1,239 |
(58) |
1,442 |
1,384 |
Taxation |
- |
- |
- |
- |
- |
- |
(Loss)/gain
attributable to ordinary shareholders |
(12) |
1,251 |
1,239 |
(58) |
1,442 |
1,384 |
(Loss)/gain per
Ordinary Share |
(0.20)p |
20.87p |
20.67p |
(0.96)p |
24.05p |
23.09p |
|
|
|
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. |
|
Year
ended 31 March 2021
(audited) |
|
|
Revenue |
Capital |
Total |
|
|
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
Net gain on investments at fair
value |
- |
2,743 |
2,743 |
|
Income |
51 |
- |
51 |
|
Investment management fees |
- |
(48) |
(48) |
|
Other expenses |
(144) |
- |
(144) |
|
(Loss)/gain before finance costs
and taxation |
(93) |
2,695 |
2,602 |
|
Finance costs |
(17) |
- |
(17) |
|
(Loss)/gain on ordinary
activities before taxation |
(110) |
2,695 |
2,585 |
|
Taxation |
- |
- |
- |
|
(Loss)/gain attributable to
ordinary shareholders |
(110) |
2,695 |
2,585 |
|
(Loss)/gain
per Ordinary Share |
(1.83)p |
44.95p |
43.12p |
|
UNAUDITED ACCOUNTS
Balance
Sheet |
|
|
|
|
As at
30 September
2021
(unaudited) |
As at
31 March
2021
(audited) |
As at
30 September
2020
(unaudited) |
|
£’000 |
£’000 |
£’000 |
Fixed Assets |
|
|
|
Investments at fair value through
profit or loss |
8,416 |
7,598 |
6,278 |
|
|
|
|
Total current
assets |
433 |
107 |
227 |
Creditors:
amounts falling due within one year |
(116) |
(211) |
(212) |
Net current
assets/(liabilities) |
317 |
(104) |
15 |
|
|
|
|
Total assets less
current liabilities |
8,733 |
7,494 |
6,293 |
|
|
|
|
Capital and
Reserves |
8,733 |
7,494 |
6,293 |
Equity
shareholders’ funds |
8,733 |
7,494 |
6,293 |
|
|
|
|
Net asset value per
Ordinary Share |
145.67p |
125.00p |
104.97p |
UNAUDITED ACCOUNTS
Statement of Changes
in Equity |
|
For the period to 30 September 2021 |
|
|
Share
capital |
Share
premium |
Special
reserve |
Capital
redemption
reserve |
Capital
reserve |
Revenue
reserve |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
As at 1 April 2021 |
300 |
314 |
5,136 |
27 |
2,203 |
(486) |
7,494 |
Gain/(loss) attributable to
shareholders |
- |
- |
- |
- |
1,251 |
(12) |
1,239 |
As at 30 September
2021 |
300 |
314 |
5,136 |
27 |
3,454 |
(498) |
8,733 |
For the year to 31 March 2021 |
|
|
Share
capital |
Share
premium |
Special
reserve |
Capital
redemption
reserve |
Capital
reserve |
Revenue
reserve |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
|
|
As at 1 April 2020 |
300 |
314 |
5,136 |
27 |
(492) |
(376) |
4,909 |
Gain/(loss) attributable to
shareholders |
- |
- |
- |
- |
2,695 |
(110) |
2,585 |
As at 31 March
2021 |
300 |
314 |
5,136 |
27 |
2,203 |
(486) |
7,494 |
For the period to 30 September 2020 |
|
|
Share
capital |
Share
premium |
Special
reserve |
Capital
redemption
reserve |
Capital
reserve |
Revenue
reserve |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
|
|
As at 1 April 2020 |
300 |
314 |
5,136 |
27 |
(492) |
(376) |
4,909 |
Gain/(loss)
attributable to shareholders |
- |
- |
- |
- |
1,442 |
(58) |
1,384 |
As at 30 September
2020 |
300 |
314 |
5,136 |
27 |
950 |
(434) |
6,293 |
UNAUDITED ACCOUNTS
Investment Portfolio as at 30 September 2021 |
|
Stock |
Market
Exposure 2021
£000 |
% of Net Assets |
|
Sector
analysis as at 30 September 2021
Sector |
% of
Gross Exposure |
|
1 |
Alpha Financial Markets |
399 |
4.6 |
|
Consumer Discretionary |
28.7 |
|
2 |
Dechra Pharmaceuticals |
290 |
3.3 |
|
Industrials |
25.1 |
|
3 |
4Imprint Group |
285 |
3.3 |
|
Technology |
20.7 |
|
4 |
Ceres Power Holdings |
281 |
3.2 |
|
Financials |
9.1 |
|
5 |
Watches Of Switzerland Group* |
265 |
3.0 |
|
Healthcare |
4.1 |
|
6 |
Unite Group |
219 |
2.5 |
|
Energy |
4.0 |
|
7 |
Draper Esprit |
214 |
2.4 |
|
Consumer
Staples |
3.2 |
|
8 |
FDM Group Holdings |
209 |
2.4 |
|
Real Estate |
3.1 |
|
9 |
Keystone Law Group |
205 |
2.3 |
|
Telecommunications |
2.0 |
|
10 |
XP Power |
204 |
2.3 |
|
Total |
100.0 |
|
Ten largest
investments |
2,571 |
29.3 |
|
|
|
|
11 |
Gamma Communications |
198 |
2.3 |
|
|
|
|
12 |
JD Sports Fashion* |
197 |
2.3 |
|
|
|
|
13 |
Reach |
193 |
2.2 |
|
|
|
|
14 |
Kin And Carta* |
176 |
2.0 |
|
|
|
|
15 |
Hilton Food Group |
172 |
2.0 |
|
|
|
|
16 |
Essensys |
169 |
1.9 |
|
|
|
|
17 |
Kape Technologies |
166 |
1.9 |
|
|
|
|
18 |
Impax Asset Management Group |
162 |
1.9 |
|
|
|
|
19 |
Rentokil Initial |
162 |
1.9 |
|
|
|
|
20 |
Kainos Group |
161 |
1.8 |
|
|
|
|
Twenty largest
investments |
4.327 |
49.5 |
|
|
|
|
|
21 |
Experian |
155 |
1.8 |
|
|
|
|
22 |
Games Workshop Group |
149 |
1.7 |
|
|
|
|
23 |
Jet2 |
146 |
1.7 |
|
|
|
|
24 |
Flutter Entertainment* |
146 |
1.7 |
|
|
|
|
25 |
Dianomi |
136 |
1.5 |
|
|
|
|
26 |
Entain* |
134 |
1.5 |
|
|
|
27 |
Kooth |
128 |
1.5 |
|
|
|
|
28 |
Instem |
123 |
1.4 |
|
*Includes Contract for Difference (“CFDs”)
Market exposure for equity investments held is the same as fair
value and for CFDs held is the market value of the underlying
shares to which the portfolio is exposed via the contract.
The investment portfolio is grossed up to include CFDs and the net
CFD position is then deducted in arriving at the net asset
total. |
|
29 |
Volex |
120 |
1.4 |
|
|
30 |
Beazley Group |
119 |
1.4 |
|
|
Thirty largest
investments |
5,683 |
65.1 |
|
|
|
Other investments (49
holdings) |
4,143 |
47.5 |
|
|
|
Total
investments |
9,826 |
112.6 |
|
|
|
CFD
positions |
(1,437) |
(16.5) |
|
|
CFD unrealised
gains |
27 |
0.3 |
|
|
Net current
assets |
317 |
3.6 |
|
|
Net assets |
8,733 |
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED ACCOUNTS
Risks and Uncertainties
The major risks inherent within the Fund are market risk,
liquidity risk, credit risk and interest rate risk. It 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. It has no 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 2021 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 2021 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. This conclusion
takes in to account the Directors’ assessment of the continuing
risks from the COVID-19 pandemic. 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 April 2021 (the interim financial statements for
the period to 30 September 2020 were
prepared under the SORP issued in October 2019). The Company
is exempt from presenting a Cash Flow Statement as a Statement of
Changes in Equity is presented and substantially all of the
Company’s investments are highly liquid and are carried at market
value. These financial statements have been prepared in accordance
with the accounting policies used for the financial year ended
31 March 2021.
2. During the
period no shares were bought back (2020: no shares were
bought back during the period).
The number of shares in issue at 30
September 2021 was 6,005,000 (2020: 6,005,000).
Returns per share are based on a weighted average of 5,995,000
(2020: 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 £1,239,000 (2020: gain of £1,384,000). Capital return per
share is based on the capital gain for the period of £1,251,000
(2020: gain of £1,442,000,000). Revenue return per share is
based on the revenue loss after taxation for the period of £12,000
(2020: loss of £58,000).
UNAUDITED ACCOUNTS
3. All
investments are held at fair value. At 30 September 2021 no unlisted investments were
held with value attributed (31 March
2021: same; 30 September 2020:
same).
Investments have been classified using the fair value
hierarchy:
|
September
2021
£000 |
March 2021
£000 |
Classification of financial
instruments |
|
|
Level 1 |
8,389 |
7,304 |
Level 2 |
27 |
294 |
Level 3 – 2 investments (March
2021: 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 2021 and 31 March 2021.
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 2021: 12 (31 March 2021: 11)CFD positions |
September
2021 |
March 2021 |
|
£000 |
£000 |
Gross exposure |
1,437 |
1,172 |
Net exposure |
1,437 |
1,172 |
Unrealised gains |
27 |
294 |
Unrealised losses |
68 |
61 |
The gearing ratio is 15.6% at 30
September 2021 (31 March 2021:
16.7%). 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.
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.
UNAUDITED ACCOUNTS
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
2021 is unaudited. The accounts for the year to 31 March 2021, 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