Menhaden Resource Efficiency PLC - Half Year Report and Company Update
Half Year Report and Company Update
LEI: 2138004NTCUZTHFWXS17
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Company Update
The Company publishes below its Half Year Report to
For further information, please contact:
Tel: 0203 170 8733
Deutsche Numis
Tel: 0207 260 1000
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Half Year Report
for the six months ended
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Financial Highlights
Menhaden
Resource
Efficiency
PLC
(the
“Company”)
is
an
investment
trust.
Its
shares
are
listed
on
the
premium segment
of
the
Official
List
and
traded
on
the
main
market
of
the
The Company’s investment objective is to generate long-term shareholder returns, predominantly in the form of capital growth, by investing in businesses and opportunities that are demonstrably delivering or benefiting significantly from the efficient use of energy and resources irrespective of their size, location or stage of development.
We are a high conviction long term patient capital investment.
Performance As at As at
30 June 2024 31 December 2023
Total net assets £135,156,000 £126,679,000
Net asset value (“NAV”) per share 171.0p 160.3p
Share price 102.5p 100.8p
Share price discount to the NAV per share^ 40.1% 37.2%
Six months to Year to
Total returns 31 December 2023
30 June 2024
NAV per share^ 7.2% 23.8%
Share price^ 2.6% 13.6%
RPI + 3% 3.7% 8.4%
Six months to Year to
31 December 2023 30 June 2024
Annualised ongoing charges ratio^ 1.7% 1.7%
^ Alternative Performance Measure. Please refer to the Glossary on page 21 for definitions of these terms and the basis of their calculation.
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Chairman’s Statement
Strategic Context
Menhaden resource efficiency was founded in 2015 on the belief that, with insatiable demand for higher living standards on a finite planet, some companies enabling the cleaner and more efficient delivery of basic societal needs and key infrastructure, such as energy, water, digital services, mass transportation, or mitigating environmental risks like pollution and climate change, will grow earnings faster than the global economy over the long term.
The global demand for energy and other resources continues to rise in the developed and developing world. The
Consequently, our investment thesis to invest in high quality businesses that both enjoy strong market positions and are demonstrably delivering or significantly benefitting from the efficient use of energy and resources is now even more relevant.
Our aim is to provide shareholders with exposure to this investment opportunity. The Company invests in a well-researched concentrated portfolio of companies providing solutions to today’s societal needs. The Board believes this approach can deliver superior risk-adjusted returns over the long-term.
Financial Performance
The performance of our investment portfolio has been encouraging over the first half of 2024. Between 31
Safran, which develops and manufactures more fuel efficient engines for aircraft, and the portfolio’s digital technology stocks, led by Alphabet, made the greatest positive contributions to performance in the period. VINCI and Airbus were the largest detractors.
The most significant changes to the portfolio in the period were completion of the new
Environmental Performance
Our Portfolio Manager actively monitors the energy and resource efficiency of our investments in line with the carbon disclosure project and the Science Based Targets initiative. The focus of our Portfolio Manager’s engagement with our quoted investee companies has been on their alignment with the Paris Agreement to reduce global warming, deforestation and biodiversity loss. The aim is to encourage them to adopt and use best practice environmental solutions and define pathways to reduce their GHG emissions and preserve tropical rain forests, together with associated biodiversity. Some positive progress is being made, which is welcomed. Further corporate engagement is planned where little or no progress is being made. At the end of 2023, the
Share Price Discount
For a number of reasons significant share price discounts are currently reflected across the majority of the
We have not previously favoured share buy backs for mitigation of the share price discount and remain of the view that share buybacks are not usually in the best interest of shareholders as they reduce the size of the Company and increase the ongoing charges ratio. However, the Board does recognize that buybacks are accretive to NAV per share, may help to temper share price volatility and send a signal to the market about our confidence in the underlying value of the assets in the investment portfolio.
Thus during 2023 we undertook a modest programme of share buybacks. While this exercise resulted in no discernible effect on the discount at the time, with the discount continuing to widen the Board took the decision in
Continuation
The Company was established with an unlimited life, however, the Company’s Articles of Association provide that a continuation resolution be put to shareholders as an ordinary resolution at the annual general meeting of the Company every five years, with the next continuation vote due to be put to shareholders at the AGM to be held in
The Board is conscious of the challenges facing the listed investment company sector, many of which are also faced by the Company at this time. Notwithstanding its good net asset value performance, at its current size the Company’s secondary market liquidity is relatively low and it has been unable to attract attention and demand from investors, which has led to the Company’s shares trading at a material discount to the Company’s net asset value per share.
In this context the Board is proposing to undertake, together with its advisers, a formal review of the options available to it in order to address the issues facing the Company. The Board will update shareholders once it has an outcome from its review ahead of the forthcoming AGM.
Dividend
In line with previous practice the Board has not declared an interim dividend in respect of this half year. As shareholders will be aware a dividend of 0.9p per share was recommended in respect of the year to
The Company’s dividend policy is that the Company will pay a dividend as a minimum to maintain investment trust status. While income generation is not part of the Company’s investment objective the Board recognizes that dividends are an important shareholder benefit. The Board currently expects to recommend the payment of a final dividend in respect of the full year to
The Board
As announced to the market in June, Sir
Outlook
Financial markets have generally been resilient so far in 2024, and while the Board hopes for an upturn for both quoted equities and private investment opportunities; numerous global macro factors continue to influence financial markets and investor sentiment. These include the impact of continuing wars in
The Board considers the Company’s portfolio to be well placed for further capital growth because of its quality and the defensive and inflation resistant properties of many of the holdings. Moreover, the Board continues to remain convinced of the validity of the premise that the world and all businesses need to be more energy and resource efficient and the Company’s investment thesis should accordingly provide long-term benefits for our investors.
Further Information
Our Portfolio Manager’s report, starting on page 8 provides further details about our investments and their contribution to the Company’s performance during the period. The Company’s most recent 2023 annual environmental impact report and monthly factsheets can be found on our website www.menhaden.com. Our 2024 annual report and environmental impact report will be published in mid-2025.
Howard
Pearce
Chairman
16
September
2024
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Investment Themes
Theme Description
Companies involved in the production and
Clean energy transmission of power from clean sources such
as solar or wind.
Companies focused on improving energy
Industrial emissions reduction efficiency (e.g. in buildings or
manufacturing processes) or creating
emissions reduction products or services.
Sustainable infrastructure and Companies in the infrastructure and transport
transportation sectors helping to reduce harmful emissions.
Companies with products or services that
Water and waste management enable reductions in usage/volumes and/or
smarter ways to manage water and waste.
Digitalisation Companies that facilitate reduced resource
consumption through digital technology.
Reporting Companies providing the means for
environmental reporting and evaluation.
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Portfolio as at 30 June 2024
Investment Country Fair Value % of net assets
£’000
Alphabet United States 17,715 13.1
Safran France 14,222 10.5
Avantus* United States 13,844 10.2
Microsoft United States 13,430 10.0
Airbus France 12,397 9.2
VINCI France 9,842 7.3
TCI Real Estate Partners Fund IV* United States 9,110 6.7
Canadian Pacific Kanas City Canada 8,653 6.4
Canadian National Railway Canada 7,569 5.6
Amazon United States 6,577 4.9
Tenlargestinvestments 113,359 83.9
Ocean Wilsons Bermuda 4,644 3.4
John Laing* UK 4,589 3.4
TCI Real Estate Partners Fund III* United States 1,237 0.9
Waste Management United States 1,063 0.8
ASML Netherlands 736 0.5
Union Pacific United States 716 0.5
KLA United States 652 0.5
LAM Research United States 421 0.3
Totalinvestments 127,417 94.3
Other net assets (including cash) 7,739 5.7
Totalnetassets 135,156 100.0
* Unquoted
Investment Business Description Theme
Delivers a range of
internet-based products and
services for users and
Alphabet advertisers, which are Digitalisation
powered by renewable energy
with the group being the
largest corporate buyer of
renewable power worldwide
Designs, manufactures and
services next generation Industrial emissions
Safran aircraft engines which reduction
offer significant fuel
efficiency savings
Premier solar and storage
developer in the US, with
Avantus* one of the largest Clean energy
development pipelines
across California and the
Southwest.
Provides cloud
infrastructure and software
Microsoft services which deliver Digitalisation
energy efficiency savings
for customers versus legacy
solutions
Designs, manufactures and
services next generation Sustainable infrastructure
Airbus aircraft engines which and transportation
offer significant fuel
efficiency savings
Owns and operates
VINCI fuel-efficient freight Sustainable infrastructure
railways in Canada and the and transportation
USA
TCI Real Estate Partners Invests in energy-efficient Sustainable infrastructure
Fund IV* real estate projects and transportation
Owns and operates
Canadian Pacific Kanas fuel-efficient freight Sustainable infrastructure
City railways in Canada and the and transportation
USA
Operates rail freight
services across North
Canadian National Railway America, which represent Sustainable infrastructure
the most environmentally and transportation
friendly way to transport
freight over land
An energy efficient
ecommerce and cloud
Amazon computing business aiming Digitalisation
to use only renewable
energy by 2030
Operates ports and provides Sustainable infrastructure
Ocean Wilsons (lower climate impact) and transportation
maritime services in Brazil
Portfolio of mostly Sustainable infrastructure
John Laing renewable rail and social and transportation
infrastructure assets
TCI Real Estate Partners Invests in energy-efficient Sustainable infrastructure
Fund III real estate projects and transportation
Provides waste management
Waste Management and environmental services Water and waste management
in North America
Develops, manufactures and
services advanced
ASML lithography systems used to Digitalisation
produce more energy
efficient semiconductor
chips
Provides fuel-efficient Sustainable infrastructure
Union Pacific rail freight services and transportation
across the USA
Develops, manufactures and
services inspection and
KLA metrology equipment used to Digitalisation
increase the efficiency of
semiconductor manufacturing
Develops, manufactures and
services etching and
LAM Research deposition equipment used Digitalisation
to produce more energy
efficient semiconductor
chips
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Portfolio Manager’s Review
Performance
During the first half of 2024, the Company’s NAV per share increased from 160.3p to 171.0p. This represents a total return of 7.2% and compares to the benchmark return of 3.7%. The Company’s shares traded at a 40.1% discount to NAV as at
30June Return
AssetCategory 2024 Contribution
NAV% %
Quoted Equities 73.0 8.2
Private Investments 21.3 1.5
FX Hedges - (0.2)
Cash and cash equivalents 6.5 -
Expenses (including accruals) (0.8) (2.3)
Dividend Paid (0.6)
Net Assets 100.0
Net Return 6.6
Impact of dividend reinvestment 0.6
Total Return 7.2
Resource efficiency remains a critical focus for businesses and governments worldwide. Disclosures on environmental impacts are surging, with nearly 25,000 organisations disclosing data through CDP in 2023. Companies included in this data disclosure account for two-thirds of global equity market value. We believe that investing in businesses benefitting from the efficient use of energy and resources remains more relevant than ever.
We continue to pair this with a strict focus on quality and valuation. This preference for businesses which benefit from barriers to entry, and which trade at reasonable valuations, has led us to invest primarily within the sustainable infrastructure and transportation and digitalisation themes, and has mainly been expressed in quoted equities where we believe the return relative to risk has been more favourable. More recently, we are starting to see more value in some of the private positions, such that the Company’s unlisted exposure at
Investment performance was led by the portfolio’s digitalisation holdings (Microsoft, Alphabet and Amazon). Safran also performed strongly, buoyed by the sustained strong demand for travel. Airbus and VINCI were the main detractors, with the former struggling with supply chain issues and the latter negatively affected by perceived risks stemming from the recent French elections. The private portfolio performed in line with expectations, with the fourth fund of the
We started the year with a high cash balance, following the completion of the sale of X-ELIO in
Quoted Equities
Quoted equities represented 73.0% of total NAV at 30
Investment Increase/ Contribution
(Decrease)% toNAV%
Alphabet 30.4 3.5
Safran 23.8 2.3
Microsoft 18.9 2.0
Amazon 27.2 1.5
Ocean Wilsons 7.5 0.3
ASML 41.4 0.2
KLA 41.8 0.2
Waste Management 19.1 0.1
LAM Research 36.0 0.1
Canadian Pacific Kansas City (0.4) 0.0
Union Pacific (7.9) (0.0)
Canadian National Railway (6.0) (0.3)
Airbus 2.1 (0.6)
VINCI (13.5) (1.2)
Note: Percentage increase/(decrease) for individual holdings is calculated on their local currency and based over the holding period if bought or sold during the year.
Alphabet
delivers everyday digital services to billions of people on a sustainable basis, with targets for net-zero emissions and 24/7 carbon-free energy by 2030.
French aircraft engine manufacturer Safran continues to lead the way towards the decarbonisation of the commercial passenger aviation sector. Renewal of the existing fleet with the latest generation of aircraft powered by Safran’s LEAP engine should reduce the carbon emissions per passenger mile by 1-2% per year over the next 15 years. The Science Based Targets Initiative (SBTi) also independently validated the company’s targets to reduce scope 1 and 2 emissions by 50% by 2030 and scope 3 emissions by 42.5% per available seat kilometre by 2035. Passenger traffic remains strong this year, whilst the delivery of new aircraft to airlines remains constrained by supply chain and regulatory issues. These dynamics benefit Safran by translating into robust demand for spare parts due to high utilisation rates on the existing CFM engine fleet and low retirements.
Microsoft is the key technology partner for enterprise and its software products are ubiquitous. More than 95% of Fortune 500 companies are customers of the Azure cloud business and four out of every five use Office 365. The company strives to ensure its technology infrastructure is fully sustainable, aiming to operate on carbon-free energy everywhere, at all times, by 2030. Microsoft continues to invest heavily to support the increasing use of artificial intelligence. The company faces the same concerns as Alphabet over the level of future returns on this spending. That said, Azure continues to grow rapidly, with an increasing contribution from artificial intelligence services. We expect management to manage the pace of investment as needed. The rollout of Microsoft 365 Copilot continues and should help to sustain healthy revenue growth for Office 365 even as growth in users slows down.
Amazon
aims to make both ecommerce and cloud computing sustainable, with goals to only use renewable energy by 2030 and then operate on a net zero carbon basis by 2040. The company’s carbon intensity declined 13% from 2022 to 2023, with total emissions decreasing by 3% on an absolute basis and 100% of electricity consumed attributable to renewable energy sources. Profitability and free cash flow generation have further improved this year. The retail business continues to benefit from growing services revenues and the switch to a regional fulfilment model in
Holding company,
Ocean Wilsons
, comprises a controlling interest in publicly listed Brazilian port operator, Wilson Sons, and a diversified investment portfolio. Wilson Sons’ port infrastructure and maritime services facilitate moving freight by sea, which is more than 40% less carbon intensive than rail and more than 80% less than trucking across
The semiconductor industry appears on the cusp of an upswing driven by artificial intelligence. We expect wafer fabrication equipment spending to post strong growth on a year-over-year basis in 2025. This should benefit the semiconductor capital equipment companies in the portfolio, ASML , Lam Research and KLA . Each company dominates its respective niche in the value chain and plays a critical role in helping the wider industry both maximise semiconductor production from finite resources and develop and produce more advanced and energy efficient chips. We believe the fundamental drivers of semiconductor demand remain as clear as ever: cloud computing, artificial intelligence, 5G, the Internet of Things (IoT) and the digitalisation of the automotive industry. Semiconductor manufacturers’ capital intensity also continues to increase. We expect all these companies to have very bright futures.
Waste Management provides essential services and supports customers in reducing their carbon footprints through effective handling and recycling of waste. The company benefits from a high proportion of annuity-like revenue streams, with the cost of its services representing a very small portion (circa 0.5%) of customers’ total expenses. The recently announced acquisition of Stericycle sees Waste Management enter the medical waste services space. We believe the combination of cost synergies and secular revenue growth should translate into good returns. The takeover is expected to close by the end of this year. Internal growth investments in new automated recycling facilities and renewable natural gas plants at landfill sites continue, with five of the latter set to start up later this year.
The subdued North American freight environment has provided a challenging backdrop for the company’s freight railroad holdings:
Canadian National Railway
,
Canadian Pacific
European aircraft manufacturer, Airbus , is poised to be a major beneficiary of airlines’ fleet renewal requirements and the need for the global aviation sector to decarbonise. By upgrading to Airbus’ latest generation aircraft, customers can reduce carbon emissions by 20-30%. Airbus’ aircraft are also certified to operate on 50% sustainable aviation fuel (SAF), with a target to reach 100% by the end of the decade. Airbus plans to reduce scope 1 and 2 emissions by 63% by 2030 and reduce scope 3 emissions by 46% by 2035. The company is focused on ramping A320 production. This program is sold out until 2029. The supply chain has remained challenging, with engine deliveries remaining a key bottleneck. The management team downgraded the published outlook in June, with expectations for deliveries this year reduced by 4% to 770 and the A320 ramp up to 75 per month pushed back by one year into 2027. We believe these are temporary setbacks. Deliveries of aircraft should increase from 735 in 2023 to more than 1,000 annually in the coming years and underpin significant earnings growth. This profile is well supported by the current backlog of nearly 8,600 aircraft.
French infrastructure group,
VINCI
, builds and operates critical infrastructure ready for the transition to a net-zero world. The company plans to reduce scope 1 and 2 emissions by 40% and scope 3 emissions by 20% by 2030, including using low carbon concrete for 90% of its needs. The shares were negatively affected by the announcement of France’s snap national elections in June and are still recovering. This was due to concerns that a change in government could lead to the nationalisation of French motorways. Following the election results, we view this scenario as very unlikely. The company is also appealing against the imposition of the new French motorway tax, with the
Private Investments
Our portfolio of private investments represented 21.3% of the total NAV as at
Investment Increase/ Contribution
(Decrease)% toNAV%
TCI REP Fund IV 5.5 1.3
John Laing 3.4 0.1
TCI REP Fund III 4.1 0.1
Avantus - (0.1)
Note: Percentage increase/(decrease) for individual holdings is calculated on their local currency and based over the holding period if bought or sold during the year. Contribution to NAV includes income received.”
The
TCI Real Estate Partners Fund IV
has continued to deploy capital and made five further capital calls during the period, totalling
Following the successful repayment of one of its outstanding loans in the first quarter, the
TCI Real Estate Partners Fund III
has only two remaining loans to separate real estate developments in
We were pleased to agree a new
Outlook
We believe our strategy of investing in businesses or opportunities delivering or benefiting from the efficient use of energy and resources, and doing so with a focus on the criteria of quality and value, results in a portfolio well placed to generate superior returns for the risk taken We believe our quoted equity portfolio will continue to demonstrate this performance. We aim to complement the portfolio with private investments that offer a more attractive balance between risk and reward and enhance the portfolio.
We ended the period with an elevated cash balance, representing 7.0% of NAV. We plan to use this to fund expected capital calls from TCI Real Estate Partners Fund IV over the remainder of the year. We also continue to look for additional unlisted opportunities that will deliver the returns that this component of our portfolio has done historically.
Following the positive year to date returns, the Company’s net asset value per share has now compounded at 11%, after fees, for the five years ending
Performance CAGR% to 30 June 2024 1 year 3 year 5 year 7 year Inception NAV per share 13.5% 5.0% 11.1% 10.2% 7.1% Share Price 7.1% (1.5)% 4.5% 6.9% 0.2% RPI+3% 5.9% 10.9% 8.3% 7.2% 6.6%
Menhaden
Capital
Management
LLP
Portfolio
Manager
16
September
2024
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Regulatory Disclosures
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the
Company are explained in detail in the Company’s Annual
Report for the year ended
Related Parties Transactions
During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.
Going Concern
The Directors believe, having considered the Company’s investment objective, risk management policies, capital management policies and procedures, the nature of the portfolio and the expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. O n the basis that shareholders pass the continuation vote due to be put to them in 2025, there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least twelve months from the date of the approval of this half year report. For these reasons, the Directors consider it is appropriate to continue to adopt the going concern basis in preparing the financial statements.
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Directors’ Responsibilities Statement
The Board confirms that, to the best of the Directors’ knowledge:
(i) the condensed set of financial statements contained within the half year report has been prepared in accordance with FRS 104 ‘Interim Financial Reporting’ and gives a true and fair view of the assets, liabilities, financial position and return of the Company; and
(ii)
the interim management report includes a fair review
of
the
information
required
by
sections
4.2.7R
and 4.2.8R of the
In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
•
state
whether
applicable
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;
and the Directors confirm that they have done so.
This half year report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
Howard
Pearce
Chairman
16
September
2024
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Condensed Income Statement
Six months to 30 June Six months to 30 June
2024 2023
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
Note £’000 £’000 £’000 £’000 £’000 £’000
Gains on investments at
fair value through profit - 9,684 9,684 - 17,492 17,492
or loss
Income from investments 5 1,684 – 1,684 1,129 – 1,129
Management and performance 6,9 (189) (1,589) (1,778) (161) (1,079) (1,240)
fees
Other expenses (233) – (233) (193) – (193)
Net returns before taxation 1,262 8,095 9,357 775 16,413 17,188
Taxation (169) – (169) (99) – (99)
Net returns after taxation 1,093 8,095 9,188 676 16,413 17,089
Basic and diluted returns 7
per share 1.4p 10.2p 11.6p 0.8p 20.7p 21.5p
The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital columns are prepared under guidance issued by the Association of Investment Companies’ Statement of Recommended Practice.
All revenue and capital items in the above statement derive from continuing operations.
There are no recognised gains or losses other than those shown above and therefore no Statement of Total Comprehensive Income has been presented.
The notes on pages 18 and 20 form an integral part of these financial statements.
.
Condensed Statement of Changes in Equity
Called up Capital
share Special redemption Capital Revenue
capital reserve Reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000 £’000
Six months to 30 June 2024
(unaudited)
Balance at 31 December 2023 790 76,442 10 48,169 1,268 126,679
Net returns after taxation – – – 8,095 1,093 9,188
Dividends paid – – – – (711) (711)
Balance at 30 June 2024 790 76,442 10 56,264 1,650 135,156
Six months to 30 June 2023
(unaudited)
Balance at 31 December 2022 800 77,371 – 24,970 690 103,831
Net returns after taxation – – – 16,413 676 17,089
Repurchase of ordinary (10) (929) 10 – – (929)
shares for cancellation
Dividends paid – – – – (316) (316)
Balance at 30 June 2023 790 76,442 10 41,383 1,050 119,675
The notes on pages 18 and 20 form an integral part of these financial statements.
.
Condensed Statement of Financial Position
As at As at
30 June 2024 31 December 2023
(audited)
Note (unaudited) £’000
£’000
Fixed assets
Investments at fair value through profit or 8 127,417 110,027
loss
Current assets
Debtors 77 928
Derivative financial instruments 8 - 1,917
Cash and cash equivalents 9,442 14,898
9,519 17,743
Current liabilities
Creditors: amounts falling due within one (950) (262)
year
Performance fee provisions 9 - (829)
Net current assets 8,569 16,652
Non-current liabilities
Performance fee provisions 9 (830) -
Net assets 135,156 126,679
Capital and reserves
Called up share capital 790 790
Special reserve 76,442 77,442
Capital redemption reserve 10 10
Capital reserve 56,264 48,169
Revenue reserve 1,650 1,268
Total shareholders’ funds 135,156 126,679
Net asset value per share 171.0p 160.3p
The notes on pages 18 and 20 form an integral part of these financial statements.
.
Condensed Cash Flow Statement
Six months to Six months to
30 June 2024 30 June 2023
(unaudited) (unaudited)
£’000 £’000
Net cash (outflow)/inflow from operating activities (534) 6
Investing activities
Purchases of investments (25,879) (18,982)
Sales of investments 19,343 15,172
Settlement of derivatives 1,614 5,237
Net cash (outflow)/inflow from investing activities (4,922) 1,427
Financing activities
Dividends paid - (316)
Repurchase of ordinary shares for cancellation - (929)
Net cash outflow from financing activities - (1,245)
(Decrease)/increase in cash and cash equivalents (5,456) 188
Cash and cash equivalents at beginning of period 14,898 6,061
Cash and cash equivalents at end of period 9,442 6,249
The notes on pages 18 and 20 form an integral part of these financial statements.
.
Notes to the Financial Statements
1 FINANCIAL STATEMENTS
The condensed financial statements contained in this interim financial report do not constitute statutory accounts as defined in s434 of the Companies Act 2006. The financial information for the six months to 30 June 2024 and 30 June 2023 has not been audited or reviewed by the Company’s external auditor.
The information for the year ended 31 December 2023 has been extracted from the latest published audited financial statements. Those statutory financial statements have been filed with the Registrar of Companies and included the report of the auditor, which was unqualified and did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006.
No statutory accounts in respect of any period after
Earnings for the first six months should not be taken as a guide to the results for the full year.
2 ACCOUNTING POLICIES
These
condensed
financial
statements
have
been
prepared
on
a
going
concern
basis
in
accordance
with
the
Disclosure
Guidance
and
Transparency
Rules
of
the
Financial
Conduct
Authority,
FRS
104
‘Interim
Financial
Reporting’, the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies
and
Venture
Capital
Trusts’
and
using
the
same
accounting
policies
as
set
out
in
the
Company’s Annual Report for the year ended
3 GOING CONCERN
After making enquiries, and having reviewed the investments, Statement of Financial Position and projected income and expenditure for the next 12 months, the Directors have a reasonable expectation that the Company has adequate resources to continue in operation for the foreseeable future. The Directors have therefore adopted the going concern basis in preparing these financial statements.
4 PRINCIPAL RISKS AND UNCERTAINTIES
The
principal
risks
facing
the
Company
together
with
an
explanation
of
these
risks
and
how
they
are
managed
is
contained
in
the
Strategic
Report
and
note
17
of
the
Company’s
Annual
Report
for
the
year
ended
5 INCOME
Six months to Six months to
30 June 2024 30 June 2023
(unaudited) (unaudited)
£’000 £’000
Income from investments
Overseas dividends 1,389 1,103
Total income from investments 1,389 1,103
Other income
Interest income* 295 26
Total income 1,684 1,129
*Includes £280,000 income from the Company's investment in money market fund instruments, which are classified as cash equivalent in the Condensed Statement of Financial Position.
6 AIFM AND PORTFOLIO MANAGEMENT FEES
Six months to 30 June Six months to 30 June
2024 (unaudited) 2023 (unaudited)
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
AIFM fee 29 119 148 25 99 124
Portfolio management fee 160 640 800 136 546 682
Provision for performance fee – 830 830 – 434 434
189 1,589 1,778 161 1,079 1,240
7 RETURNS PER SHARE
The
revenue
and
capital
returns/(losses)
per
share
are
based
on
the
weighted
average
number
of
Ordinary shares in issue during the six months to
There are no dilutive instruments in the Company and so basic and diluted returns are the same.
8 FAIR VALUE HIERARCHY
The methods of fair value measurement are classified into a hierarchy based on reliability of the information used to determine the valuation.
Level 1 – Quoted prices in active markets.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data), either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is unavailable).
The table below sets out the Company’s fair value hierarchy investments as at 30 June 2024.
Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
As at 30 June 2024 (unaudited)
Investments 98,637 – 28,780 127,417
As at 31 December 2023 (audited)
Investments 97,767 – 12,260 110,027
Derivatives – 1,917 – 1,917
9 PROVISIONS
Provisions are recognised when a present obligation arises from past events, it is probable that the obligation will materialise and it is possible for a reliable estimate to be made, but the timing of settlement or the exact amount is uncertain.
The Company has provided for the performance fee obligation to its Portfolio Manager that has arisen in the reporting period, being the first year of the three-year performance period that commenced on
Full details of the performance fee arrangement can be found in the Company’s Annual Report for the year ended 31
.
Glossary of Terms
Alternative Performance Measures (“APMs”)
Measures not specifically defined under the International Financial Reporting Standards but which are viewed as particularly relevant for investment trusts and which the Board of Directors uses to assess the Company’s performance. Definitions of the terms used and the basis of calculation are set out in this Glossary.
Discount/Premium (APM)
A description of the difference between the share price and the net asset value per share. The size of the discount or premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share the result is a premium. If the share price is lower than the net asset value per share the shares are trading at a discount.
Net Asset Value (“NAV”) Per Share (APM)
The value of the Company’s assets, principally investments made in other companies and cash held, minus any liabilities. The NAV is also described as “shareholders’ funds”. The NAV is often expressed in pence per share after being divided by the number of shares that have been issued. The NAV per share is unlikely to be the same as the share price, which is the price at which the Company’s shares can be bought or sold by an investor. The share price is determined by the relationship between the demand for and supply of the shares.
NAV Total Return (APM)
The theoretical total return on shareholders’ funds per share, reflecting the change in NAV assuming that dividends paid to shareholders were reinvested at NAV at the time the shares were quoted ex-dividend. A way of measuring investment management performance of investment trusts which is not affected by movements in the share price.
To 30 June 2024 1 year 3 years 5 years 7 years Inception Opening NAV per share (p) a 151.4 148.7 101.7 87.6 94.1 Closing NAV per share (p) b 171.0 171.0 171.0 171.0 171.0 Dividends per share paid (p) c 0.9 1.1 1.5 2.2 2.2 Dividend adjusted closing NAV d=b+c 171.9 172.1 172.5 173.2 173.2 per share (p) NAV per share Total Return (d-a)/a 13.5% 5.0% 11.1% 10.2% 7.1%
Share Price Total Return (APM)
Share price total return to a shareholder, on a last traded price to a last traded price basis, assuming that all dividends received were reinvested, without transaction costs, into the shares of the Company at the time the shares were quoted ex-dividend.
To 30 June 2024 1 year 3 years 5 years 7 years Inception Opening share price (p) a 96.5 108.0 83.0 65.5 102.5 Closing share price (p) b 102.5 102.5 102.5 102.5 102.5 Dividends per share paid (p) c 0.9 1.1 1.5 2.2 2.2 Dividend adjusted closing share d=b+c 103.4 103.6 104.0 104.7 104.7 price (p) Share Price Total Return (d-a)/a 7.1% (1.5)% 4.5% 6.9% 0.2%
Ongoing Charges (APM)
The ongoing charges percentage reflects the costs incurred directly by the Company which are associated with the management of a static investment portfolio.
As recommended by the AIC, ongoing charges are defined as the Company’s annualised revenue and capitalised expenses (excluding finance costs, performance fees and certain non-recurring items) expressed as a percentage of the average monthly net assets of the Company during the year.
30 June 31 December
2024
(unaudited) 2023
£’000 (audited)
£’000
Total operating expenses 1,181 2,040
Total operating expenses (annualised) 2,362 2,040
Average NAV during the period/year 135,901 117,147
Ongoing Charges 1.7% 1.7%
