Half-yearly Financial Report

RNS Number : 2227K

Artemis Alpha Trust PLC

20 December 2022

 

ARTEMIS ALPHA TRUST PLC (the "Company")

LEI: 549300MQXY2QXEIL3756

Half-Yearly Financial Report for the six months ended 31 October 2022

This announcement contains regulated information

Chairman's Statement

Performance

In the six months to 31 October 2022 your Company's net asset value per share and share price (on a total return basis) fell by 13.4% and 12.2% respectively, ending the period at 315.06p (NAV per share) and 285.50p (share price). The FTSE All-Share Index fell by 5.8% over the same period. The FTSE 250, a UK domestic index of smaller companies which more closely resembles our portfolio, declined by 12.2%.

Conditions have been challenging, with the effects of the war in Ukraine, higher interest rates and inflation compounded by peculiarly domestic difficulties. The UK market and currency have been subject to considerable pressure and volatility as the appetite for risk has reduced.

More detailed information on the performance of our portfolio is set out in the Investment Manager's Review which follows.

Earnings and dividends

Revenue earnings per share for the half-year were 3.51p, an increase of 9% on the comparable period last year, reflecting the continuing recovery from the low levels of investment income received at the height of the pandemic. The Board has today declared a first interim dividend of 2.33p per ordinary share (2021: 2.14p) which will be paid on 26 January 2023 to shareholders on the register as at 30 December 2022. This increase of 9.0% over the equivalent interim dividend paid in January 2022 is consistent with our policy of growing dividends in line with, or at a rate greater than, the UK CPI inflation rate of the preceding financial year (9.0% as at 30 April 2022).

Share buy backs

Over the six-month period, the discount to NAV narrowed slightly from 10.5% to 9.3% at 31 October 2022. The Company bought back 0.8 million shares at a total cost of £2.6 million and an average discount of 10.6%. The buyback policy, as approved by shareholders in November 2021, continues to assist in managing the discount and liquidity of the Company's shares.

At the date of this report, the share price stood at 313.00p, representing a discount of 5.1%.

Gearing

During the half year, the Company increased its gearing, which stood at 13.9% of NAV at the period end (9.4% 30 April 2022). This is achieved by "contracts for difference" which continue to offer a more cost-efficient alternative to a conventional bank loan as well as providing a revenue stream in the current period of 9% of investment income (8% in the six months to 31 October 2021). 

Board succession

As noted in the Annual Report, Blathnaid Bergin stepped down from the Board in October, having made a substantial contribution over the last seven years. We are in the process of recruiting a successor and hope to be in a position to introduce the new Director to shareholders shortly. The Board recognises the importance of succession planning and achieving an appropriate balance of skills, experience and diversity.

Outlook

Despite the challenging macro-economic conditions, our investment policy remains one of picking individual stocks without the constraints of any formal benchmark. Our Investment Manager believes strongly in the prospects for, and value currently offered by, the companies selected for the Company's portfolio.

Duncan Budge

Chairman

19 December 2022

Investment Manager's Review

Review

Over the last six months, the Company's NAV fell by 13.4%, compared to a 5.8% decline in the FTSE All-Share, in a period characterised by a broad decline in asset prices and heightened volatility .

Equities are attractive owing to highly depressed valuations and to their inflation-linking

Despite the challenging macro-economic conditions, our investment policy remains one of picking individual stocks without the constraints of any formal benchmark. Our Investment Manager believes strongly in the prospects for, and value currently offered by, the companies selected for the Trust's portfolio.

High inflation, interest rates and recession have undermined investor sentiment and equity prices. These forces have depressed most notably UK equities, which have most recently suffered relative to other markets from severe instability in bond markets as a result of government policies. In the period, the FTSE 250, a UK domestic index that more closely resembles our current portfolio, fell by 12.2%.

Appetite for risk capital has fallen sharply. This is most telling from IPO and bond issuance volumes, which have almost entirely dried up. It is also clear from the fall in valuations in early-stage companies and investor sentiment indicators that are close to 2009 lows.

Adjusted for inflation, declines have been even greater than they first appear. Cash in the bank is worth 11% less than what it was a year ago, whereas money in the FTSE 250 is worth 31% less.

The recent series of confusing and negative macro events has diminished the stature of equities, although they have always been and are likely to remain, the best long-term hedge against inflation.

This is because equities are priced in nominal terms and provide owners with a claim on cash flow of productive assets in perpetuity. Over the long-term, this means that the prospective return on equities should be a function of earnings yields (cash generated by the security relative to the price you pay), inflation, and corporate earnings growth, which is a function of real GDP growth.

The equity risk premium is the enhanced return that an investor expects to make in compensation for the uncertainty taken on when investing in equities, compared to a risk-free alternative, such as an inflation-linked government bond. For the UK, taking the earnings yield on the FTSE All-Share (11%) less than 10-year inflation linked government bond (-0.6%) suggests the risk premium (longer-term anticipated return) from UK equities is 11.6%.

Similarly, the equity risk premium for US equities on the same basis is 5% and modestly below historic averages. The differential between the UK and US shows the compensation UK investors should receive for current high uncertainty.

All crises and recessions are different, but the reaction of asset prices tends to be similar because it is driven by human behaviour which fundamentally does not change. It is at times like these, that it is particularly important to recognise that natural tendencies, such as loss aversion, can be harmful in the field of equity investing. Loss aversion creates a propensity for investors to become more pessimistic in falling markets, even though falling prices mean investing in the future is more attractive.

For all these reasons, we are of the view that prospective returns from equities are very compelling, not only in absolute terms, but especially relative to bonds.

Compounding returns with share repurchases

Depressed share prices can be of benefit to the long-term investor, even if inactive, when companies are repurchasing shares. This is a key feature of the Company's portfolio as over 40% of the portfolio's NAV, across a broad range of sectors, is exposed to companies conducting share buybacks. Warren Buffet once said, "the math of repurchases grinds away slowly but can be powerful over time". When valuations are low, the mathematical impact of share repurchases is amplified.

This is most evident in the case of Frasers Group where excellent capital allocation has significantly increased per share business value. The company has allocated nearly 40% of free cash flow since 2015 to share repurchases (£540m) at attractive prices (400p) leading to a 20% reduction in its share count. This has been achieved whilst making significant investments in property, automation and acquisitions which have underpinned strong growth in cash generation. Frasers has an opportunity to lead industry consolidation and grow its business in UK general retail and European sportswear owing to ongoing capacity rationalisation.

Plus500 has a cash generative franchise that has often traded on a low valuation owing to earnings volatility. The business has taken advantage of this situation by allocating a growing proportion of its free cash flow to share repurchases, reducing its share count by 6% in 2022 and 17% since 2018, despite growing its net cash balances to over $1bn. The company has invested to expand its core OTC product into new markets and launch a futures product in the USA. Its recent capital markets day outlined an aspiration to grow revenue by $500m over the next 5 years through these initiatives. We feel that the company's valuation of 6x earnings is attractive given its capital return and growth prospects.

Prosus is a European technology conglomerate whose primary asset is Tencent, a leading Chinese internet company. In June, the business announced an open-ended share repurchase programme to exploit a widening of its discount to net assets (49%). The company has repurchased $5.8bn of stock since June, which would result in a 7% increase in per share NAV per annum at the current pace and would mean that over 3 years, NAV per share would increase by close to 25% assuming no change to the underlying asset value. Our judgement is that Tencent's competitive position has not been adversely impacted by regulatory change in China. The company continues to have a dominant position in social media and video games with monetisation levels that are far below peers.

Cyclicals offer compelling value

Despite a strong rebound in travel demand, a combination of recession, high oil prices and labour shortages have led to sharp price declines in our investments in the airline sector. The medium- term outlook for easyJet and Ryanair remains strong owing to industry consolidation and valuations are compelling.

easyJet's returns are underpinned by its strategic positions in slot-constrained airports where it competes predominantly against cost disadvantaged legacy carriers. The company has improved its position through the pandemic. Market share at Gatwick has increased from 40% to 50% through the reallocation of 16 planes (63 to 79) from less profitable bases. The impact of this could be seen over the summer quarter where revenue yield increased by 26% compared to 2019, well ahead of peers.

Our view is that easyJet's brand, fleet and slot network command growing value. Wizz Air made an all-share approach for the company at £8 per share before easyJet issued £1.4bn new stock at £4 a share, and the stock now trades at £3.52. The company's £2.6bn value today is not far above its net assets of £2.5bn and less than capital employed of £3.2bn. The business has guided for a "mid-teens" return on capital employed, which we feel has the scope to be conservative given capacity rationalisation in the industry.

Ryanair is leading sector consolidation as its capacity is 16% above pre-pandemic levels. In Italy, following the bankruptcy of Alitalia, Ryanair's market share has increased from 30% to 40%. The combination of increased scale benefitting unit costs and a supportive yield environment meant that profits over the summer quarter rose by 40% to EUR1.4bn compared to 2019. We feel that the company's valuation (9x earnings) is attractive given strong cash generation and forecast passenger growth of 8% per annum over the next 4 years.

The Company's positions in UKhousebuilders have suffered as housing demand has been impacted by rising interest rates. Our view is that the resulting decline in values fails to recognise the stability of industry cash generation, as land values adjust to house price changes, meaning that the economics of their business model is maintained through the cycle. Accounting earnings obscure this as land is accounted for on a historic cost basis. This means that in an environment of declining house prices, accounting earnings will fall but cash generation will rise.

The industry entered this downturn in an entirely different position to the last, with no gearing and record contracted order books. The sector now trades on a 35% discount to its land value, which is close to the low of 2008/9. As housebuilders typically buy land to achieve a 20%+ gross margin, this means house prices could decline substantially in nominal terms, and cash generated from landbanks alone would be far in excess of current value.

Shelter is a basic necessity and the UK faces an accumulated housing deficit of c.1.5m homes. The demand for housing is deferred, not lost when it is not fulfilled. Affordability and pricing metrics may change, but the UK's requirement for more housing does not.

Beneficiaries of higher interest rates

Our holdings in UK retail bank franchises Lloyds and NatWest are amongst the clearest beneficiaries of higher interest rates. Zero interest rates robbed banks of pricing power as it was not viable to charge customers for their deposits. The return of positive nominal interest rates has allowed banks to earn margins on the liability side of their balance sheet as retail deposits are inert and insensitive to interest rate changes. NatWest and Lloyds both have approximately £480bn of deposits. An increase in deposit margins to 1% would increase interest income by £4.8bn, which is significant as the aggregate valuation of the two banks is £51bn.

Companies with long-term liabilities will see a positive impact as discount rates cause values to fall. Currys has a pension deficit of £250m, accounting for nearly a third of its market value and to which it makes annual contributions of £78m. A 1% increase in discount rates in isolation, would reduce its pension deficit by £278m highlighting that equity value should stand to benefit from higher interest rates.

Dignity's prepaid funeral business remains an underappreciated asset in the business. As of June, the company had £1,050m in trust, with an average duration of 10 years, and liabilities estimated to be £950m, which should fall as discount rates rise. The potential impact of an increase in the current surplus (£150m) to a company valued at £230m is significant.

Dignity has made progress in its strategy to de-lever, announcing a transaction with bondholders. We believe this will reduce constraints placed on the business by the securitisation structure and serve to highlight the value of the company's crematoria division. Crematoria are desirable infrastructure assets with pricing power, high cash generation and barriers to entry. The company's enterprise value of £700m represents a multiple of 14x operating profit of the crematoria division alone, a notable discount to European infrastructure assets.

Retaining conviction in out-of-favour digital winners

The unique appeal of Nintendo's intellectual property (IP) has meant that software sales have remained robust despite the Switch console being over 5 years old. Digital penetration has increased from 34% to 50% over the last 3 years, leading to a structural improvement in margins. The business is making progress in monetising its IP in new avenues such as theme parks, films and merchandise. We continue to find Nintendo to be attractively valued at 15x 2023 EPS (10x ex-cash) for the growth opportunities and duration it provides.

Hobby product provider Hornby is starting to see the benefits of its investments to enable a digital-first direct-to-consumer strategy. In the first two quarters of 2022/23, direct website sales increased by 54%. On a per unit basis, direct sales lead to a more than doubling of gross profit as Hornby captures the retail margin. Ongoing successful execution should lead to a substantial improvement in profitability and form deeper engagement with customers.

Loss-making businesses have seen a ruthless reappraisal of their values as broader technology valuations have declined, impacting our investments in Just Eat Takeaway and Delivery Hero. The slowdown in industry volumes is distorted by pandemic base effects and obscures impressive structural growth. Demand for their services has expanded as the number of merchants on platforms has increased permanently. In recent quarters, platforms have demonstrated their profitability with focus shifting to improving efficiency and monetisation.

Activity

Haelon is the largest personal care business globally owning brands in dental care (Sensodyne/Polident), vitamins (Centrum), and painkillers (Voltaren/ Panadol/Advil). It expects to grow revenues by 4-6% and earnings by c.8%. We believe guidance is achievable due to clear industry growth drivers in the form of demographics, self-medication, and premiumisation, which are observable in peers (Colgate/P&G/Reckitts).

The company was spun out from GSK in July at a price of 340p with the board having rejected an approach from Unilever in January at a see-through price of c.430p. We more than doubled our position in the stock at 250p after it fell sharply in response to concerns over potential Zantac-related litigation in August, at an attractive valuation of 14x earnings.

Berkeley Group is an unique business, a combination of property developer and house builder with a specific focus on Greater London. London is a structurally undersupplied market in the <£1m range. Since 2016, Berkeley has been focused on long-term regeneration sites. Sites can require up to 7-9 years and over £100m in capital before generating any revenues. In turn, the sites are very long-duration with the company noting in a recent meeting that they have acquired sites from National Grid that will still be producing homes in 2070.

The company has an exceptional and long-duration land bank of 16 years with a stated undiscounted embedded development profit of over £8bn. We acquired a position in August when the stock's debt-free value was £4bn. Our view is that the company has scarcity and strategic value. Ongoing share repurchases at attractive values will further increase value on a per share basis.

Vinci Group is a French industrial conglomerate which has existed for over 100 years. The company has consistently used cash flow from its contracting business to build and acquire infrastructure assets. Today, 70% of its value is accounted for by infrastructure assets (50% French toll roads and 20% airports) whilst 30% is from energy/construction contracting services.

The company's infrastructure assets are high quality, scarce, and enjoy inflation-linked pricing. Toll roads are a regulated monopoly in France where pricing is set at 70% of CPI. Vinci has lower leverage than its peers (2.5x net debt/EBITDA) and has a weighted average debt maturity of 7 years with a fixed cost of 2.5%. We took advantage of its price declines to build a position at an attractive valuation of 11x free cash flow and with a prospective dividend yield of 4.5%.

Although the Company did not take part in the funding round, Reaction Engines successfully raised £40m in September at our existing carrying value. The raise was led by a new investor and leaves the company in a strong liquidity position.

John Dodd, Kartik Kumar

Fund Managers

Artemis Fund Managers Limited

19 December 2022

Key Sector Exposures
Sector	October 2022	Companies
General Retail	15.4%	Frasers Group, Currys
Housebuilding & Construction	13.1%	Redrow, Bellway, Barratt, Springfield
Video Games & Hobbies	11.4%	Nintendo, Hornby
Funeral Services	11.2%	Dignity
Airlines	11.7%	easyJet, Ryanair
Food delivery	8.3%	Delivery Hero, Just Eat Takeaway
Banking	6.3%	Lloyds, NatWest
Defence & Aerospace	6.2%	Reaction Engines
Trading platform	6.1%	Plus500
China technology	4.3%	Prosus, Alibaba
Consumer staples	4.7%	Haleon, Essilor Luxottica
Financials	3.7%	Singer Capital Markets
Pharmaceuticals	3.3%	Glaxosmithkline
Infrastructure	2.0%	Vinci
Gaming	1.8%	Flutter Entertainment
Commodities	1.5%	Anglo American, Glencore

Portfolio of Investments

Investment	Business activity	Country of incorporation			Global exposure* £'000	% of total net assets		Market value £'000
Consumer Discretionary
Alibaba Group Holding 5	Chinese e-commerce company	Cayman Islands			1,658	1.6		(3)
Barratt Developments	UK residential property development	UK			1,505	1.4		1,505
Bellway 5	UK housebuilder	UK			4,359	4.2		(42)
Berkeley Group Holdings	Housebuilding in London, Birmingham and the South of England	UK			1,822	1.8		1,822
Claremont Alpha 1	Taiwan land	Isle of Man			905	0.9		905
Currys	European electricals retailer	UK			3,064	3.0		3,064
Delivery Hero	Online food delivery company	Germany			4,621	4.5		4,621
Dignity	UK funeral services	UK			11,613	11.2		11,613
easyJet	European low-cost airline	UK			6,968	6.7		6,968
Frasers Group	Sports and general apparel retailer	UK			12,950	12.5		12,950
Flutter Entertainment 5	Global sports betting and gambling operator	Ireland			1,853	1.8		54
Hardly Ever 1	Apparel e-commerce platform	UK			570	0.5		570
Hornby 2	Hobby and toy brands	UK			4,602	4.4		4,602
J D Wetherspoon	UK pub operator	UK			92	0.1		92
Nintendo, ADR	Video games	Japan			7,251	7.0		7,251
Redrow	UK housebuilder	UK			4,605	4.4		4,605
Rok Entertainment Group 3	Global mobile entertainment	USA			-	-		-
ROK Global 3	Global mobile entertainment	UK			-	-		-
Ryanair Holdings	European low-cost airline	Ireland			5,155	5.0		5,155
Springfield Properties 2	UK housebuilder	UK			1,334	1.3		1,334
Total Consumer Discretionary					74,294	72.3		67,066
Financials
Lloyds Banking Group	UK retail bank	UK			4,727	4.5		4,727
NatWest Group	Financial services company	UK			1,761	1.7		1,761
Plus500	Global online financial trading platform	Israel			6,318	6.1		6,318
Singer Capital Markets 1	UK investment bank	UK			3,811	3.7		3,811
Total Financials					16,617	16.0		16,617
Industrials
MBA Polymers 3	Plastics recycling	USA			-	-		-
Rated People 1	UK home maintenance services platform	UK			456	0.5		456
Reaction Engines 1	Rocket propulsion systems	UK			6,433	6.2		6,433
Vinci 5	French concessions and construction company	France			2,089	2.0		(3)
Total Industrials					8,978	8.7		6,886
Health Care
EssilorLuxottica 5	Global eyeware manufacturer	France			2,477	2.4		(18)
GSK	Global healthcare company	UK			3,429	3.3		3,429
Haleon	Multinational consumer healthcare company	UK			2,412	2.3		2,412
Total Health Care					8,318	8.0		5,823
Technology
Just Eat Takeaway.com	Online food delivery company	Netherlands			4,026	3.9		4,026
Prosus 5	China-focussed technology investment company	Netherlands			2,833	2.7		173
Total Technology					6,859	6.6		4,199
Basic Materials
Anglo American	Global mining company	UK			782	0.8		782
Glencore	Multinational commodity trading and mining company	Jersey			874	0.8		874
Total Basic Materials					1,656	1.6		1,656
Energy
Energy Equity Resources (Norway) 3	African oil and gas exploration	UK			-	-		-
Leed Resources 3	Oil and gas exploration and production company	UK			-	-		-
PetroHunter Energy 3	Oil and gas exploration and production company	USA			-	-		-
Total Energy					-	-		-
Total investments (including CFDs) 4					117,355	113.2		102,247
Forward Currency Contracts
Buy £6,057,514 29/11/2022 Sell €7,000,000 29/11/2022							42
Buy £5,215,652 29/11/2022 Sell $6,000,000 29/11/2022							8
Total Forward Currency Contracts							50
Portfolio fair value							102,297
Net other assets							1,370
Net assets							103,667

1 Unquoted investment

2   AIM quoted investment

3 Delisted, suspended or investments in administration or liquidation

4 CFDs are disclosed in Derivative assets/liabilities at market value in the Condensed Statement of Financial Position

5 Long CFDs

* Global exposure has been calculated in line with the guidelines issued by the European Securities and Markets Authority ('ESMA') and represents the market value of an equivalent position in the underlying investment of each derivative contract. For all other asset types the percentage of net assets has been calculated based on the valuation of each holding

Interim Management Report and Responsibility Statement

Principal Risks and Uncertainties

Pursuant to DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, the principal risks and uncertainties faced by the Company include strategic risk, investment risk, legal and regulatory risk, operational and cybercrime risks. External factors such as UK political, Brexit, geopolitical and climate risks also bring risk and uncertainty to the Company.

The Directors have assessed these risks and are of the opinion the nature of the risks and the way in which they are managed has not materially changed as described in the previous Annual Financial Report. These risks remain applicable to the six months under review and the remaining six months in the financial year. Details of the risks and their management is described in more detail in the Annual Financial Report 30 April 2022 which is available at artemisalphatrust.co.uk.

Related Party Transactions

During the six months ending 31 October 2022, no transactions with related parties have taken place which have materially impacted the Company.

Going Concern

The Directors have considered the Company's principal risks and uncertainties together with its current financial position, assets and liabilities, projected revenue and expenses and the Company's dividend policy. The Directors also considered the impact on the Company of recent market volatility due to the war in Ukraine and the inflationary pressures currently being felt. It is the Directors' opinion that the Company has adequate resources to continue in operational existence for the foreseeable future; a period of at least 12 months from the approval of this Half-Yearly Report. For this reason, the going concern basis of accounting continues to be used in the preparation of this financial statement.

Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report

The Directors confirm that to the best of their knowledge, in respect of the Half-Yearly Financial Report for the six months ended 31 October 2022:

· the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' issued by the International Accounting Standards Board as adopted by the EU;

· the Interim Management Report, together with the Chairman's Statement and the Investment Manager's Report, include a fair review of the information required by:

(a) Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months; and a description of the principal risks and uncertainties for the remaining six months of the year); and

(b) Disclosure Guidance and Transparency Rule 4.2.8R (related party transactions).

The Half-Yearly Financial Report for the six months ended 31 October 2022 was approved by the Board and the above responsibility statement was signed on its behalf by:

Duncan Budge

Chairman

19 December 2022

Condensed income statement  

	Six months ended 31 October 2022 (unaudited)			Six months ended 31 October 2021 (unaudited)			Year ended 30 April 2022 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment income	1,582	-	1,582	1,616	-	1,616	3,099	-	3,099
Total revenue	1,582	-	1,582	1,616	-	1,616	3,099	-	3,099
Net losses on investments	-	(15,588)	(15,588)	-	(10,387)	(10,387)	-	(30,511)	(30,511)
Net losses on derivatives	-	(1,846)	(1,846)	-	(454)	(454)	-	(7,770)	(7,770)
Currency gains/(losses)	-	22	22	-	(110)	(110)	-	(16)	(16)
Total income/(loss)	1,582	(17,412)	(15,830)	1,616	(10,951)	(9,335)	3,099	(38,297)	(35,198)
Expenses
Investment management fee	(76)	(301)	(377)	(123)	(491)	(614)	(219)	(875)	(1,094)
Other expenses	(257)	(1)	(258)	(235)	(5)	(240)	(492)	(74)	(566)
Profit/(loss) before finance costs and tax	1,249	(17,714)	(16,465)	1,258	(11,447)	(10,189)	2,388	(39,246)	(36,858)
Finance costs	(22)	(91)	(113)	(3)	(15)	(18)	(9)	(36)	(45)
Profit/(loss) before tax	1,227	(17,805)	(16,578)	1,255	(11,462)	(10,207)	2,379	(39,282)	(36,903)
Tax	(60)	-	(60)	(45)	-	(45)	(118)	-	(118)
Profit/(loss) and total comprehensive income/(expense) for the period	1,167	(17,805)	(16,638)	1,210	(11,462)	(10,462)	2,261	(39,282)	(37,021)
Earnings/(loss) for the period	3.51p	(53.61)p	(50.10)p	3.22p	(30.55)p	(27.33)p	6.29p	(109.28)p	(102.99)p

The total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with International Financial Reporting Standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations.

All income is attributable to the equity shareholders of Artemis Alpha Trust plc. There are no minority interests.

 

Condensed statement of financial position

		31 October 2022 (unaudited) £'000	31 October 2021 (unaudited) £'000	30 April 2022 (audited) £'000
Non-current assets
Investments		102,086	150,887	119,612
Investment in subsidiary undertaking		4,083	3,610	4,231
		106,169	154,497	123,843
Current assets
Derivative assets		277	355	492
Other receivables		1,688	2,512	781
Cash and cash equivalents		978	7,149	2,389
Collateral held		-    -    1,970	-	1,970
		2,943	10,016	5,632
Total assets		109,112	164,513	129,475
Current liabilities
Derivative liabilities		(66)	(303)	(308)
Collateral pledged		(2,030)	(50)	(830)
Other payables		(5,219)	(3,016)	(5,066)
Total Liabilities		(5,445)	(5,349)	(5,374)
Net assets		103,667	159,164	124,101
Equity attributable to equity holders
Share capital		373	373	373
Share premium		676	676	676
Special reserve		19,308	29,515	21,964
Capital redemption reserve		217	217	217
Retained earnings - revenue		3,144	2,809	3,117
Retained earnings - capital		79,949	125,574	97,754
Total equity		103,667	159,164	124,101
Net asset value per ordinary share		315.08p	447.15p	367.65p

      Condensed statement of changes in equity

	Six months ended 31 October 2022 (unaudited)
	Share capital £'000	Share premium £'000	Special reserve £'000	Capital redemption reserve £'000	Retained earnings		Total £'000
					Revenue £'000	Capital £'000
At 1 May 2022	373	676	21,964	217	3,117	97,754	124,101
Total comprehensive income:
Profit/(loss) for the period	-	-	-	-	1,167	(17,805)	(16,638)
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury	-	-	(2,656)	-	-	-	(2,656)
Dividends paid	-	-	-	-	(1,140)	-	(1,140)
At 31 October 2022	373	676	19,308	217	3,144	79,949	103,667

	Six months ended 31 October 2021 (unaudited)
	Share capital £'000	Share premium £'000	Special reserve £'000	Capital redemption reserve £'000	Retained earnings		Total £'000
					Revenue £'000	Capital £'000
At 1 May 2021	382	676	40,738	208	2,788	137,036	181,828
Total comprehensive income:
Profit/(loss) for the period	-	-	-	-	1,210	(11,462)	(10,252)
Transactions with owners recorded directly to equity:
Repurchase of shares into treasury	-	-	(7,132)	-	-	-	(7,132)
Repurchase and cancellation of ordinary shares	(9)	-	(4,091)	9	-	-	(4,091)
(Dividends paid	-	-	-	-	(1,189)	-	(1,189)
At 31 October 2021	373	676	29,515	217	2,809	125,574	159,164

	Year ended 30 April 2022 (audited)
	Share capital £'000	Share premium £'000	Special reserve £'000	Capital redemption reserve £'000			Retained earnings			Total £'000
							Revenue £'000		Capital £'000
At 1 May 2021	382	676	40,738	208			2,788		137,036	181,828
Total comprehensive income:
Profit/(loss) for the period	-	-	-	-			2,261		(39,282)	(37,021)
Transactions with owners recorded directly to equity:
Repurchase of ordinary shares into treasury	-	-	(14,683)		-		-		-	(14,683)
Repurchase and cancellation of ordinary shares	(9)	-	(4,091)		9		-		-	(4,091)
Dividends paid	-	-	-		-		(1,932)		-	(1,932)
At 30 April 2022	373	676	21,964			217		3,117	97,754	124,101

Condensed statement of cash flows

	Six months ended 31 October 2022 (unaudited) £'000		Six months ended 31 October 2021 (unaudited) £'000	Year ended 30 April 2022 (audited) £'000
Operating activities
Loss before tax	(16,578)		(10,207)	(36,903)
Interest payable	113		18	45
Net losses on investments	15,588		10,387	30,511
Net losses on derivatives	1,846		454	7,770
Currency (gains)/losses	(22)		110	16
Decrease/(increase) in other receivables	35		(79)	(56)
(Decrease)/increase in other payables	(219)		5	(96)
Net cash inflow from operating activities before interest and tax		763	688	1,287
Interest paid		(113)	(18)	(45)
Irrecoverable overseas tax suffered		(60)	(45)	(118)
Net cash inflow from operating activities		590	625	1,124
Investing activities
Purchase of investments		(13,322)	(13,101)	(25,087)
Sales of investments		15,437	27,097	49,583
Purchase of derivatives		(3,257)	(2,672)	(6,656)
Collateral pledged/(held)		2,130	1,200	(2,800)
Net cash inflow from investing activities		988	12,524	15,040
Financing activities
Repurchase of ordinary shares into treasury		(2,722)	(6,940)	(14,617)
Repurchase and cancellation of ordinary shares		-	(4,091)	(4,091)
Dividends paid		(1,140)	(1,189)	(1,932)
Increase/(decrease) in intercompany loan		851	(147)	404
Net cash outflow from financing activities		(3,011)	(12,367)	(20,236)
Net (increase)/decrease in net debt		(1,433)	782	(4,072)
Net funds at the start of the period		2,389	6,477	6,477
Effect of foreign exchange rate changes		22	(110)	(16)
Net funds at the end of the period		978	7,149	2,389
Cash and cash equivalents		978	7,149	2,389

Notes to the half-yearly financial report

1.       Accounting policies

The Half-Yearly Financial Report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', the provisions of the Companies Act 2006 and with the guidance set out in the Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts ("SORP") issued by the Association of Investment Companies in July 2022.

All other accounting policies remain the same as disclosed in the Annual Financial Statements for the year ended 30 April 2022.

2.       Earnings/(loss) per ordinary share

	Six months ended 31 October 2022	Six months ended 31 October 2021	Year ended 30 April 2022
Earnings/(loss) per ordinary share is based on:
Revenue earnings (£'000)	1,167	1,210	2,261
Capital loss (£'000)	(17,805)	(11,462)	(39,282)
Total loss (£'000)	(16,638)	(10,252)	(37,021)
Weighted average number of ordinary shares in issue during the period	33,209,552	37,522,202	35,944,478

3.       Net asset value per ordinary share

	As at 31 October 2022	As at 31 October 2021	As at 30 April 2022
Net asset value per ordinary share is based on:
Net assets (£'000)	103,667	159,164	124,101
Number of shares in issue at the end of the period	32,902,188	35,594,974	33,754,674

During the period, the Company repurchased 852,486 shares into treasury (six months ended 31 October 2021: repurchased and cancelled 925,000 shares and repurchased 1,665,500 shares into treasury; 30 April 2022: repurchased and cancelled 925,000 shares and repurchased 3,505,800 shares into treasury).

4.       Dividends

	Six months ended 31 October 2022 £'000	Six months ended 31 October 2021 £'000	Year ended 30 April 2022 £'000
Final dividend for the year ended	1,140	1,189	1,189
30 April 2022 - 3.46p (2021: 3.19p)
First interim dividend for the year ended	-	-	743
30 April 2022 - 2.14p
	1,140	1,189	1,932

A first interim dividend for the year ending 30 April 2023 of 2.33p per ordinary share has been declared. This will be paid on 26 January 2023 to those shareholders on the register at close of business on 30 December 2022.

5.       Analysis of retained earnings - capital

	As at 31 October 2022 £'000	As at 31 October 2021 £'000	As at 30 April 2022 £'000
Retained earnings - capital (realised)	79,536	115,940	95,149
Retained earnings - capital (unrealised)	413	9,634	2,605
	79,949	125,574	97,754

6.       Reconciliation of liabilities arising from financial activities

	1 May 2022 £'000		Transactions in the period £'000	Cash flow payments £'000	Balance at 31 October 2022 £'000
Repurchase of shares into treasury
treasury	66	2	2,656	(2,722)	-
Dividends paid	-	(	1,140	(1,140)	-
Intercompany loan	-		(851)	851	-
	-		2,945	(3,011)	-

7.       Comparative information

The financial information for the six months ended 31 October 2022 and 31 October 2021 has not been audited and does not constitute statutory financial statements as defined in Section 234 of the Companies Act 2006.

The information for the year ended 30 April 2022 has been extracted from the Audited Financial Statements for the year ended 30 April 2022. These financial statements contained an unqualified auditor's report and have been lodged with the Registrar of Companies and did not contain a statement required under Section 498 of the Companies Act 2006.

8.       Related party transactions

The amounts paid to the Investment Manager are disclosed in the Condensed income statement. However, the existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under IAS 24: Related Party Disclosures, the Investment Manager is not considered to be a related party.

9.       Fair value hierarchy

IFRS 7 'Financial Instruments: Disclosures' requires an entity to provide an analysis of investments held at fair value through profit and loss using a fair value hierarchy that reflects the significance of the inputs used in making the measurements of fair value. The hierarchy used to analyse the fair values of financial assets is set out below.

Level 1 - investments with quoted prices in an active market;

Level 2 - investments whose fair value is based directly on observable current market prices or is indirectly derived from market prices; and

Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or are not based on observable market data.

The investments held at the balance sheet date fell into the categories, Level 1, Level 2 and Level 3. The values in these categories are summarised as part of this note. Any investments that are delisted or suspended from a listed stock exchange are transferred from Level 1 to Level 3.

	(Unaudited) As at 31 October 2022 Assets £'000	Liabilities £'000	(Unaudited) As at 31 October 2021 Assets £'000	Liabilities £'000	(Audited) As at 30 April 2022 Assets £'000	Liabilities £'000
Level 1	89,911	-	138,440	-	106,844	-
Level 2	277	(66)	355	(303)	492	(308)
Level 3	12,175	-	12,447	-	12,768	-
Total	102,363	(66)	151,242	(303)	120,104	(308)

The valuation of the Level 3 investments would not be significantly different had reasonably possible alternative valuation bases been applied.

Details of the movements in Level 3 assets during the six months ended 31 October 2022 are set out in the table below.	£'000
Level 3 investments
Opening book cost	13,969
Opening fair value adjustment	(1,201)
Opening valuation	12,768
Movements in the period:
Purchases at cost	-
Sales - proceeds	-
- realised losses on sales	-
Increase in fair value adjustment	593
Closing valuation	12,175
Closing book cost	13,969
Closing fair value adjustment	(1,794)
	12,175

Copies of the Half-Yearly Financial Report for the six months ended 31 October 2022 will be sent to shareholders shortly and will be available from the registered office at Cassini House, 57 St James's Street, London SW1A 1LD as well as on the website,  artemisalphatrust.co.uk .

A copy of the Half Yearly Financial Report will also be submitted to the National Storage Mechanism and will soon be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

Artemis Fund Managers Limited

Company Secretary

For further information, please contact:

Artemis Fund Managers Limited

Telephone: [phone]

20 December 2022

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