SVM UK
EMERGING FUND PLC
(the
“Fund”)
HALF
YEARLY REPORT
(FOR THE
SIX MONTHS TO 30 SEPTEMBER
2023)
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 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.
HIGHLIGHTS
• Over the
6 months to 30 September 2023, net
asset value per share fell 4.1% to 89.21p, while the share price
gained 3.1% compared to a return of 0.1% in the chosen comparator,
the IA UK Companies Sector Average Index.
• Over the
five years to 30 September 2023, net
asset value per share has fallen 30.6% and the share price 46.0%,
against the comparator index return of +10.0%.
• Medium
sized companies lagged the FTSE 100 and smaller companies over the
period.
• Three
portfolio companies attracted takeovers, indicating share prices
have fallen below underlying business value.
“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 2023
|
6
months
|
3
years
|
5
Years
|
10
Years
|
|
Net Asset
Value
|
-4.1%
|
-15.0%
|
-30.6%
|
39.7%
|
|
Share
Price
|
3.1%
|
-4.9%
|
-46.0%
|
22.2%
|
|
Comparator
Index*
|
0.1%
|
26.5%
|
10.0%
|
59.5%
|
* 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.
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
CHAIRMAN’S STATEMENT
During the
six months to 30 September 2023, net
asset value per share fell 4.1% to 89.21p, while the share price
gained 3.1% compared to a return of 0.1% in the chosen comparator,
the IA UK Companies Sector Average Index. In the five years to
30 September 2023, net asset value
per share has fallen 30.6% and the share price 46.0%, against the
comparator index return of +10.0%.
During the
period under review the UK economy continued to grow despite the
rise in interest rates. There was, however, market concern that the
delay in bringing UK inflation under control would involve a longer
period of tight monetary policy, constraining demand. This led to
falls in property shares and those in consumer sectors. The sectors
that performed best reflected mainly those with global exposure;
information technology, energy, financials and
industrials.
The
strongest contributions to performance over the period were Dechra
Pharmaceuticals, 4Imprint Group, Instem, Kooth and Computacenter.
Three portfolio holdings were taken over; Dechra, Instem and Kape
Technologies. Merger and acquisition activity may point to
recognition that share prices of a number of successful British
businesses have become attractive to corporate or private equity
buyers. Negative performers included Watches of Switzerland, Impax Asset Management. FDM
Group, Jet2 and JD Sports fashion . Sales were made of Activeops,
Revolution Beauty, Frontier Developments, Avon Protection, Molten
Ventures, Maxcyte, Genus, Libertine and Impax. The holding in
Watches of Switzerland was reduced
after its prospects were adversely impacted by a change in strategy
of its main supplier. These sales funded new investments in Melrose
Industries, JTC, CRH, Intercontinental Hotels, Greggs, Informa and
Compass Group. Portfolio changes emphasised improved liquidity,
growth prospects and earnings visibility.
The UK
economy has held up better in 2023 than feared. Consumer spending
has proved resilient, driven by significant excess savings. Amongst
international investors, the UK continues to be out of favour, with
historically low valuations of smaller and medium-sized companies.
Many UK mid-cap and smaller companies now look inexpensive. There
is a risk both in the UK and US of excessive tightening by central
banks, possibly misunderstanding the supply-side nature of current
inflation.
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.
During the
period under review, the Manager agreed to waive its management
fee, with effect from 1st
September 2023, reflecting its assessment of the
implications of Consumer Duty regulation. This will be reviewed if
circumstances change. The lead
portfolio manager of the Fund, Margaret
Lawson, retired on 1st October
2023 and is succeeded by Colin
McLean, previously deputy investment manager. The Board
thanks Margaret for her enthusiasm and valuable advice.
Peter Dicks
Chairman
3 November 2023
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
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)
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 gain 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 (an
indication of important events that have occurred during the first
six months of the financial year, and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the
financial year); and DTR 4.2.8R (disclosure of related party
transactions and changes 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 2023 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
3 November 2023
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
UNAUDITED ACCOUNTS
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
Six months to 30 September
2023
|
Six months to 30 September 2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
|
|
|
|
|
|
|
|
Net loss
on investments at fair value
|
-
|
(214)
|
(214)
|
-
|
(1,787)
|
(1,787)
|
|
Income
|
95
|
-
|
95
|
61
|
-
|
61
|
|
Investment management fees
|
-
|
(17)
|
(17)
|
-
|
(22)
|
(22)
|
|
Other expenses
|
(76)
|
-
|
(76)
|
(72)
|
-
|
(72)
|
|
Gain/(loss) before finance costs and
taxation
|
19
|
(231)
|
(212)
|
(11)
|
(1,809)
|
(1,820)
|
|
Finance costs
|
(17)
|
-
|
(17)
|
(9)
|
-
|
(9)
|
|
Gain/(loss) on ordinary activities before
taxation
|
2
|
(231)
|
(229)
|
(20)
|
(1,809)
|
(1,829)
|
|
Taxation
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Gain/(loss) attributable to ordinary
shareholders
|
2
|
(231)
|
(229)
|
(20)
|
(1,809)
|
(1,829)
|
|
Gain/(loss) per Ordinary Share
|
0.03p
|
(3.85)p
|
(3.82)p
|
(0.33)p
|
(30.18)p
|
(30.51)p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2023
(audited)
|
|
|
|
Revenue
|
Capital
|
Total
|
|
|
|
£’000
|
£’000
|
£’000
|
|
|
|
|
|
|
|
|
Net loss
on investments at fair value
|
-
|
(1,065)
|
(1,065)
|
|
|
Income
|
104
|
-
|
104
|
|
|
Investment management fees
|
-
|
(42)
|
(42)
|
|
|
Other expenses
|
(143)
|
-
|
(143)
|
|
|
Loss before finance costs and taxation
|
(39)
|
(1,107)
|
(1,146)
|
|
|
Finance costs
|
(22)
|
-
|
(22)
|
|
|
Loss on ordinary activities before
taxation
|
(61)
|
(1,107)
|
(1,168)
|
|
|
Taxation
|
-
|
-
|
-
|
|
|
Loss attributable to ordinary
shareholders
|
(61)
|
(1,107)
|
(1,168)
|
|
|
Loss per Ordinary Share
|
(1.02)p
|
(18.46)p
|
(19.48)p
|
|
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
UNAUDITED ACCOUNTS
|
Balance Sheet
|
|
|
|
|
|
As at
30 September
2023
(unaudited)
|
As at
31 March
2023
(audited)
|
As at
30 September
2022
(unaudited)
|
|
|
£’000
|
£’000
|
£’000
|
|
Fixed Assets
|
|
|
|
|
Investments at fair value through profit or loss
|
4,836
|
4,882
|
4,318
|
|
|
|
|
|
|
Total current assets
|
979
|
1,272
|
1,264
|
|
Creditors:
amounts falling due within one year
|
(467)
|
(577)
|
(666)
|
|
Net current assets
|
512
|
695
|
598
|
|
|
|
|
|
|
Total assets less current liabilities
|
5,348
|
5,577
|
4,916
|
|
|
|
|
|
|
Capital and Reserves
|
5,348
|
5,577
|
4,916
|
|
Equity shareholders’ funds
|
5,348
|
5,577
|
4,916
|
|
|
|
|
|
|
Net asset value per Ordinary Share
|
89.21p
|
93.03p
|
82.00p
|
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
UNAUDITED ACCOUNTS
|
Statement of Changes in Equity
|
|
|
For the period to 30 September 2023
|
|
|
|
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 2023
|
300
|
314
|
5,136
|
27
|
394
|
(594)
|
5,577
|
|
Loss
attributable to shareholders
|
-
|
-
|
-
|
-
|
(231)
|
2
|
(229)
|
|
As at 30 September 2023
|
300
|
314
|
5,136
|
27
|
163
|
(592)
|
5,348
|
|
For the year to 31 March 2023
|
|
|
|
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 2022
|
300
|
314
|
5,136
|
27
|
1,501
|
(533)
|
6,745
|
|
Loss
attributable to shareholders
|
-
|
-
|
-
|
-
|
(1,107)
|
(61)
|
(1,168)
|
|
As at 31 March 2023
|
300
|
314
|
5,136
|
27
|
394
|
(594)
|
5,577
|
|
For the period to 30 September 2022
|
|
|
|
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 2022
|
300
|
314
|
5,136
|
27
|
1,501
|
(533)
|
6,745
|
|
Gain/(loss)
attributable to shareholders
|
-
|
-
|
-
|
-
|
(1,809)
|
(20)
|
(1,829)
|
|
As at 30 September 2022
|
300
|
314
|
5,136
|
27
|
(308)
|
(553)
|
4,916
|
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
UNAUDITED ACCOUNTS
|
Investment Portfolio as at 30 September
2023
|
|
|
|
|
|
|
|
Stock
|
Market Exposure 2022
£000
|
%
of Net Assets
|
|
Sector
analysis as at 30 September 2023
Sector
|
%
of Gross Exposure
|
|
|
|
1
|
4Imprint
Group
|
364
|
6.8
|
|
Industrials
|
27.1
|
|
|
|
2
|
Alpha FX
Group
|
214
|
4.0
|
|
Consumer
Discretionary
|
24.7
|
|
|
|
3
|
Unite
Group
|
181
|
3.4
|
|
Financials
|
12.3
|
|
|
|
4
|
Beazley
Group
|
173
|
3.2
|
|
Information
Technology
|
11.9
|
|
|
|
5
|
Rentokil
Initial
|
170
|
3.2
|
|
Communication
Services
|
10.5
|
|
|
|
6
|
Howden
Joinery Group
|
162
|
3.0
|
|
Real
Estate
|
5.4
|
|
|
|
7
|
Whitbread*
|
157
|
2.9
|
|
Consumer
Staples
|
3.3
|
|
|
|
8
|
Ashtead
Group
|
156
|
2.9
|
|
Materials
|
3.0
|
|
|
|
9
|
Games
Workshop Group
|
153
|
2.9
|
|
Healthcare
|
1.8
|
|
|
|
10
|
JD Sports
Fashion*
|
141
|
2.6
|
|
Total
|
100.0
|
|
|
|
Ten
largest investments
|
1,871
|
34.9
|
|
|
|
|
|
|
11
|
Experian
|
135
|
2.6
|
|
|
|
|
|
|
12
|
Flutter
Entertainment*
|
133
|
2.5
|
|
|
|
|
|
|
13
|
Jet2
|
123
|
2.3
|
|
|
|
|
|
|
14
|
Keystone
Law Group
|
123
|
2.3
|
|
|
|
|
|
|
15
|
JTC
|
119
|
2.2
|
|
|
|
|
|
|
16
|
CRH
|
112
|
2.1
|
|
|
|
|
|
|
17
|
Intercontinental
Hotels Group
|
112
|
2.1
|
|
|
|
|
|
|
18
|
Oxford
Instruments
|
109
|
2.0
|
|
|
|
|
|
|
19
|
Compass
Group
|
108
|
2.0
|
|
|
|
|
|
|
20
|
Serco
Group
|
107
|
2.0
|
|
|
|
|
|
|
Twenty
largest investments
|
3,052
|
57.0
|
|
|
|
|
|
|
21
|
Computacenter
|
105
|
2.0
|
|
|
|
|
|
|
22
|
Hilton
Food Group
|
105
|
2.0
|
|
|
|
|
|
|
23
|
Watches of
Switzerland Group*
|
99
|
1.9
|
|
|
|
|
|
|
24
|
Kainos
Group
|
99
|
1.9
|
|
|
|
|
|
|
25
|
Kooth
|
98
|
1.8
|
|
|
|
|
|
|
26
|
XP
Power
|
94
|
1.8
|
|
|
|
|
|
27
|
Renew
|
91
|
1.7
|
|
|
|
|
|
|
28
|
FDM Group
Holdings
|
86
|
1.6
|
|
*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
|
Informa
|
82
|
1.5
|
|
|
|
|
30
|
Auto
Trader Group
|
81
|
1.5
|
|
|
|
|
Thirty
largest investments
|
3,992
|
74.7
|
|
|
|
|
Other
investments (30 holdings)
|
1,542
|
28.8
|
|
|
|
|
Total
investments
|
5,534
|
103.5
|
|
|
|
|
CFD
positions
|
(721)
|
(13.5)
|
|
|
|
|
CFD
unrealised gains
|
23
|
0.4
|
|
|
|
|
Net
current assets
|
512
|
9.6
|
|
|
|
|
Net
assets
|
5,348
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
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 2023 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 2023 Annual Report.
Going
Concern
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 COVID-19 pandemic, 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.
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 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 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 2023.
2. During
the period
no shares were bought back (2022: no shares were bought back during
the period).
The
number of shares in issue at 30 September
2023 was 6,005,000 (2022:
6,005,000).
Returns
per share are based on a weighted average of 5,995,000
(2022:
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 loss for the period of
£229,000 (2022:
loss of £1,829,000). Capital return per share is based on the
capital loss for the period of £231,000 (2022:
loss of £1,809,000).
Revenue
return per share is based on the revenue gain after taxation for
the period of £2,000 (2022:
loss of £20,000).
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
UNAUDITED ACCOUNTS
3. All
investments are held at fair value.
At 30 September 2023 no unlisted
investments were held with value attributed (31 March 2023: same; 30
September 2022: same).
Investments
have been classified using the fair value hierarchy:
|
|
September 2023
£000
£000
|
March 2023
£000
£000
|
|
Classification of financial instruments
|
Assets
|
Liabilities
|
Assets
|
Liabilities
|
|
Level 1
|
4,813
|
-
|
4,860
|
-
|
|
Level 2
|
23
|
418
|
22
|
507
|
|
Level 3 – 2 investments (March 2022:
3)
|
-
|
-
|
-
|
-
|
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 2023 and 31
March 2023.
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 2023:
8 (31
March 2023: 9)
|
CFD
positions
|
September 2023
|
March
2023
|
|
|
£000
|
£000
|
|
Gross
exposure
|
721
|
892
|
|
Net
exposure
|
721
|
892
|
|
Unrealised
gains
|
23
|
22
|
|
Unrealised
losses
|
418
|
507
|
The
gearing ratio is 9.0% at 30 September
2023 (31 March 2023:
9.3%).
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.
The Manager has elected to waive the investment management fee from
1 September 2023 until further
notice.
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
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 2023 is unaudited. The accounts for
the year to 31 March 2023, 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
Sally Moore
Four
Communications
SVM
UK EMERGING FUND plc
Half Yearly
Report 2023
CORPORATE INFORMATION
Directors
Peter Dicks (Chairman)
Ian Gray
Jeremy Harris
Investment Manager, Secretary and
Registered Office
SVM Asset
Management Limited
6th
Floor
7 Castle
Street
Edinburgh EH2 3AH
Telephone:
+44 (0)
0131 226 6699
Facsimile:
+44 (0)
131 226 7799
Email:
info@svmonline.co.uk
Web:
www.svmonline.co.uk
Registrars
Computershare
Investor Services plc
Edinburgh
House
4 North St
Andrew Street
Edinburgh EH2 1HU
Telephone:
+44 (0)
370 702 0003
Authorised
and regulated by the Financial Conduct Authority
Auditor
Johnston
Carmichael LLP
7-11
Melville Street
Edinburgh
EH3
7PE
Custodians
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 and a member of
the Investment Association
Registered Number
SC211841
Company Website
www.svmonline.co.uk
© SVM Asset
Management Limited 2023