Half-year report
13 June 2023
HARGREAVE HALE AIM VCT PLC
(the “Company”)
Unaudited Interim Results
The Company announces its half-year results for the six months ended 31 March 2023.
These half-year results will be available on the Company's website at https://www.hargreaveaimvcts.co.uk/document-library/.
In accordance with Listing Rule 9.6.1, a copy of this document will also be submitted to the UK Listing Authority via the National Storage Mechanism and will be available for viewing shortly at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
For further information, please contact:
| JTC (UK) Limited Susan Fadil Uloma Adighibe | HHV.CoSec@jtcgroup.com +44 20 3893 1005 +44 20 7409 0181 |
LEI: 213800LRYA19A69SIT31
Financial highlights for the six month period ending 31 March 2023
| Net asset value (NAV) per share | NAV total return | Tax free dividends paid in the period | Share price total return | Ongoing charges ratio |
| 52.84p(1) | -5.57%(1) | 4.00p | -13.94%(1) | 2.17%(1) |
• £9.2 million invested in Qualifying Companies in the period.
• 95.79% invested by VCT tax value in Qualifying Investments at 31 March 2023.
• Offer for subscription closed to further applications by the Company on 10 February 2023, having raised £40 million.
• Special dividend of 2.00 pence and final dividend of 2.00 pence per share paid 10 February 2023.
• Interim dividend of 1 penny approved by the Board.
| Summary financial data | Six months ending 31-Mar-23 | Six months ending 31-Mar-22 | Year ending 30 Sept-22 |
| NAV (£m) | 174.72 | 206.37 | 160.51 |
| NAV per share (p)(1) | 52.84 | 77.13 | 60.19 |
| NAV total return (%)(1) | -5.57 | -17.54 | -33.42 |
| Market capitalisation (£m) | 165.35 | 200.00 | 167.32 |
| Share price (p) | 50.00 | 74.75 | 62.75 |
| Share price premium/discount to NAV per share (%)(1) (2) | -5.37 | -3.09 | +4.25 |
| Share price 5 year average discount to NAV per share (%)(1) (2) | -5.56 | -6.02 | -5.65 |
| Share price total return (%)(1) | -13.94 | -16.24 | -28.06 |
| Loss/gain per share for the period (p) | -3.72 | -18.74 | -33.42 |
| Dividends paid per share (p) | 4.00 | 5.65 | 6.65 |
| Ongoing charges ratio (%)(1) | 2.17 | 2.10 | 2.06 |
(1) Alternative performance measure illustrations and definitions can be found in this interim report.
(2) The discount/premium is a function of the closing mid-price and the Net Asset Value per share on the balance sheet date which is typically published 5 business days after the period end.
| Financial Calendar | |
| Record date for interim dividend | 30 June 2023 |
| Payment of interim dividend | 28 July 2023 |
| Announcement of annual results for the year ending 30 September 2023 | December 2023 |
| Annual General Meeting | February 2024 |
| Payment of annual dividend (subject to approval by shareholders at the AGM) | February 2024 |
Chair’s statement
Introduction
May I start by welcoming the many new shareholders who have joined us by way of the recent successful fundraise and of course by thanking all shareholders for their continuing support, which is greatly appreciated.
I do not think it is too much of an exaggeration to say that we started the financial year with some significant headwinds, including a forecast by the Bank of England that the United Kingdom would endure the longest recession of the last 100 years. Whilst we would not wish to downplay the hardship that many had to endure over the winter as the cost of living crisis bit hard, nor the impact on many companies as they sought to navigate falling demand and higher input costs, it is also true to say that the outlook is much improved with the United Kingdom now expected to avoid falling into recession this year.
Uncertainty is a theme that we have all learned to live with these past few years; that is not likely to change in the short-term. Whilst we are more encouraged by the improving outlook, we remain mindful of the macro-economic backdrop and alert to the potential for further upset as the impact of significantly tighter credit conditions continues to work its way through financial markets and the wider economy.
When launching the 2022 offer for subscription, we spoke about the opportunity for value creation over the medium term, which we take to mean 5 years. We were cautious about the short-term outlook over the course of the current financial year; our experience over the period under review is consistent with that view. Generating short-term performance is difficult with the market applying asymmetrical responses to news flow – positive updates are not getting full recognition whilst those that disappoint are often treated harshly. Stock market liquidity is a factor in performance. With many active managers now deep into their second year of outflows, there are few institutional buyers of shares in small UK companies. Taken together, this has left the sector in deep value territory. Private equity has taken note and M&A has picked up. This is not something we particularly welcome; we would prefer to see exciting companies with bright futures remain in public ownership for the long term.
Primary issuance has declined. Over the 6 months to 31 March 2023, the number of VCT qualifying deals on AIM has fallen by 33% to 12. The value invested by AIM VCTs over the same period has declined by 58% to £23.1m. IPO activity on AIM is also down very significantly. This is broadly in line with our assumptions at the start of the year. Despite this, we are pleased to report that we have deployed capital ahead of budget. We continue to expect deal flow to pick up later this year. Although only a hypothesis at this stage, it is possible that the failure of Silicon Valley Bank will drive increased demand for equity funding as young companies find banks and shadow banks less willing to lend on terms that are acceptable to them. To be clear, we are not seeing evidence of this yet but it will be interesting to see how this plays out.
Finally, there is a flipside to these difficult markets. As a consequence of the deep value now in evidence, we are being presented with opportunities to invest on favourable terms that we hope will set us up for improved performance in future years.
Performance
At 31 March 2023, the NAV per share was 52.84 pence which, after adjusting for the dividends paid in the half year of 4.00 pence, gives a NAV total return for the period of -5.57%. The NAV total return (dividends reinvested) for the half year was -5.98% compared with +1.09% for the FTSE AIM All-Share Index Total Return (also calculated on a dividends reinvested basis). The Directors consider this to be the most appropriate benchmark from a shareholder’s perspective, however, due to the investment restrictions placed on a VCT it is not wholly comparable.
| Rolling Returns to end March 2023 | Six months | 1Y | 3Y | 5Y | 10Y |
| NAV total return | -5.57% | -25.01% | 21.50% | -2.39% | 56.51% |
| Share price total return | -13.94% | -26.42% | 29.51% | -1.35% | 55.12% |
| NAV total return (dividends reinvested)(1) (2) | -5.98% | -25.56% | 14.47% | -8.19% | 53.94% |
| Share price total return (dividends reinvested)(1) (2) | -14.42% | -27.06% | 21.89% | -7.15% | 52.28% |
| FTSE AIM All-Share Index Total Return | 1.09% | -21.16% | 22.53% | -15.30% | 25.20% |
Source: Canaccord Genuity Asset Management/Bloomberg
(1) Alternative performance measure illustrations and definitions can be found in this interim report.
(2) The NAV total return (dividends reinvested) and Share price total return (dividends reinvested) measures have been included to improve comparability with the FTSE AIM All-Share index Total Return which is also calculated on that basis.
The earnings per share total return for the year was a loss of 3.72 pence (comprising a revenue gain of 0.04 pence and a capital loss of 3.76 pence). Revenue income in the period increased by 173% to £1.0m following increases in the bank interest rate, additional investment into high yielding equities and material new investment into investment grade corporate bonds.
The share price decreased from 62.75 pence to 50.00 pence over the reporting period which, after adjusting for dividends paid, gives a share price total return of -13.94%.
Investments
The Investment Manager invested £9.2 million into 6 Qualifying Companies during the period. The fair value of Qualifying Investments at 31 March 2023 was £101.6 million (58.2% of NAV), invested across 62 AIM companies and 41 unquoted companies. At the half-year end, the fair value of non-qualifying equities and the Marlborough Special Situations Fund were £20.1 million (11.5% of NAV) and £14.3 million (8.2% of NAV) respectively, with most of the non-qualifying equities listed within the FTSE 350 index and offering good levels of liquidity should the need arise. £17.7 million (10.1% of NAV) was held in short-dated investment grade corporate bonds, £2.0 million (1.1% of NAV) was invested in a UK Government bond exchange traded fund and £19.1 million (10.9% of NAV) held in cash at the period end.
1 Excluding companies in administration or at risk of administration with zero value
Dividend
The Directors continue to maintain their policy of targeting a tax free dividend yield equivalent to 5% of the year end NAV per share.
A special dividend of 2.00 pence and a final dividend for the year ending 30 September 2022 of 2.00 pence was paid on 10 February 2023.
An interim dividend of 1 penny (2022: 1 penny) will be paid on 28 July 2023, with an ex-dividend date of 29 June 2023 and a record date of 30 June 2023. The final dividend will be determined at the year end.
Dividend reinvestment scheme
Shareholders may elect to reinvest their dividends by subscribing for new shares in the Company. Further information can be found in the shareholder information section.
On 10 February 2023, 1,836,516 ordinary shares were allotted at a price of 54.95 pence per share, which was calculated in accordance with the terms and conditions of the dividend reinvestment scheme (DRIS), on the basis of the last reported NAV per share as at 20 January 2023, to shareholders who elected to receive shares as an alternative to the final dividend for the year ended 30 September 2022 and special dividend announced on 19 December 2022.
Buybacks
In total, 2,660,431 shares (nominal value: £26,604) were repurchased during the six month period ending 31 March 2023 at a cost of £1,454,426 (average price: 54.67 pence per share). As at 9 June 2023, a further 1,481,360 shares have been repurchased at a cost of £750,823 (average price of 50.68 pence per share).
Share price discount
The Company aims to improve liquidity and to maintain a discount of approximately 5 per cent. to the last published NAV per share (as measured against the mid-price) by making secondary market purchases of its shares in accordance with parameters set by the Board.
We continued to operate the discount control and management of share liquidity policy effectively during the period. The Company has 1 and 5 year average share price discounts of -4.19% and -5.56% respectively.
The share price discount as at 31 March 2023 was -5.37% compared to a premium of +4.25% at 30 September 2022. The share price premium as reported for the period ending 30 September 2022 was a consequence of decreases in the valuation of several private companies incorporated into the 30 September 2022 Net Asset Value per share as published on 10 October 2022.
As at 9 June 2023 the discount to NAV is 5.26% of the last published NAV per share.
Offer for subscription
The Directors of the Company announced on 5 September 2022 the launch of an offer for subscription for shares to raise up to £20 million, together with an over-allotment facility of up to a further £30 million. On 10 February 2023, the Company announced it had received valid applications of approximately £40 million. The Board decided not to utilise any further sums under the over-allotment facility and therefore the offer for subscription was closed to further applications.
The offer resulted in gross funds being received of £40 million and the issue of 66 million shares.
Cancellation of share premium
At the general meeting of the Company held on 7 October 2022, a special resolution was passed approving the cancellation of the Company’s share premium account in order to create a pool of distributable reserves.
We are pleased to confirm the cancellation of the share premium account of the Company has been approved by the High Court of Justice in England and Wales and accordingly, the amount standing to the credit of the share premium account (£133.2m) of the Company as at 9 May 2023 has been cancelled.
Cost efficiency
Your Board reviews costs incurred by the Company on a regular basis and is focused on maintaining a competitive ongoing charges ratio. The period end ongoing charges ratio was 2.17% (30 Sept 2022: 2.06%) when calculated in accordance with the AIC’s “Ongoing Charges” methodology, the increase primarily being a result of the fall in average net assets in the period under review.
Shareholder events
Both your Board and the Investment Manager are keen to improve interaction with our shareholders. On 23 November 2022, the Company held a well-attended shareholder event at Everyman Cinema, Broadgate, City of London. The event included presentations from several portfolio companies, a panel discussion and a presentation from the Investment Manager’s VCT team before concluding with the screening of a feature film. A summary recording of the Investment Manager’s presentation is available to view on the Company’s website https://www.hargreaveaimvcts.co.uk.
The 2023 shareholder event will be held at 2pm, Wednesday 29 November at Everyman Broadgate.
Following feedback from shareholders, we plan to trial a series of shorter and more regular in person events, which will be more focussed on performance. These are likely to be held over breakfast or at the end of the day to assist those who cannot attend the lengthier annual review held in November or who would like more frequent access to the Investment Manager and members of the Board. The first event will be at 8am on Wednesday 21 June 2023 at 88 Wood Street, London, EC2V 7QR. Further information on this event and future events will be published on the Company’s website and via email.
Shareholders are asked to register their attendance at events via email at aimvct@canaccord.com.
Electronic communications
As ever, we are respectfully asking shareholders to opt into electronic communications and update their dividend payment preference from cheque to bank transfer. Switching to the digital delivery of shareholder communications and dividend distributions is more cost efficient and more secure whilst also helping to reduce our environmental footprint.
To assist with this transition, and as highlighted in the September 2022 annual report and accounts, the Company will no longer print and distribute the interim report to shareholders, unless specifically requested by shareholders.
To support the digital experience, the Company is investing in an upgraded website that will improve the experience and include more regular updates to the content, including recorded updates from the manager and portfolio companies.
The interim results will continue to be available for download on our website https://www.hargreaveaimvcts.co.uk and a summary of the results is also published via a Regulatory Information Service on the London Stock Exchange.
Regulatory update
There were no major changes to VCT legislation during the period under review.
On 23 September 2022, the Government announced that it intended to extend the sunset clause that, if not otherwise repealed or extended, would result in the withdrawal of the upfront 30% income tax relief for new investment into VCTs from 6 April 2025.
The sunset clause, introduced as part of the 2015 EU State aid review, does not affect the Capital Gains Tax relief or tax free dividend payments, nor does it affect investors’ income tax relief on VCT investments made before 6 April 2025.
The extension of the sunset clause will require legislation to be laid before Parliament.
Consumer Duty
The Financial Conduct Authority (FCA) is introducing a new Consumer Duty from 31 July 2023 to improve the standard of care provided by firms that are involved in the manufacture or supply of products and services to retail clients. Consumer Duty will compromise a new principle and suite of other rules and guidance to be followed by firms involved in the manufacture and distribution of a product to put consumers in a better position to take responsibility for meeting their financial needs and objectives. For consumers, this should:
• give confidence that firms are acting in good faith, in line with their interests;
• allow them to make informed choices about products and services that are fit for purpose and designed to meet a designated target market;
• improve the information available to assist with the review of the products and services most likely to meet their needs;
• support the correct delivery of benefits that consumers should reasonably expect from the product and services they subscribe to;
• improve the standard of customer service; and
• help them obtain fair value from financial products and services.
Canaccord Genuity Asset Management (CGAM) is the designated manufacturer of the Company. Canaccord Genuity Wealth Limited (CGWL) is the distributor for the Company. In its capacity as manufacturer, CGAM has conducted a fair value assessment and a target market assessment. Having reviewed both pieces of work, the Board is satisfied that CGAM and CGWL have complied with their obligations.
Two of the four pillars that underpin Consumer Duty relate to consumer understanding and consumer support. Although the Board is satisfied that these obligations are met in full, we intend to upgrade the Company’s website to enhance the services and benefits derived from an investment in the Company.
VCT status
I am pleased to report that we continue to perform well against the requirements of the legislation and at the period end, the investment test was 95.79% (2022: 85.63%) against an 80% requirement when measured using HMRC’s methodology. The Company met all other tests relevant to its status as a Venture Capital Trust.
Key information document
In accordance with the Packaged Retail Investment and Insurance Products (PRIIPs) regulations, the Company’s Key Information Document (KID) is published on the Company’s website at https://www.hargreaveaimvcts.co.uk.
Risk review
Your Board has reviewed the risks facing the Company. Further detail can be found in the principal risks and uncertainties section.
Outlook
Trading continues to vary quite widely by sector.
The fallout from SVB has been most acutely felt by the life sciences sector. Those companies serving the media industry have noted disruption as content creators review budgets. Technology companies are reporting mixed trading, varying by application and the industry served. The UK consumer continues to spend, albeit selectively, drawing down on accumulated savings. Spending on retail and dining out has stabilised, whilst demand for overseas travel is high. Industrials are reporting stronger end markets as supply chain restrictions continue to ease, whilst the defence sector is trading well and reporting strong growth in order books. We expect these trends to persist through to the year end.
Deal flow remains very quiet. There is a growing pipeline of deal flow that is being held back until the market environment improves. We do not expect a material pick up in activity before the summer recess, perhaps a quarter later than we have previously guided to.
Although the larger benchmark indices are trading well, AIM continues to grind lower. It is difficult to see this dynamic changing until we have more clarity on when and where interest rates will peak and further evidence emerges of improving business and consumer confidence. Given the clear evidence of the value on offer and the gradually improving outlook, we remain optimistic about the opportunity in 2024 and beyond.
David Brock
Chair
Date: 13 June 2023
Investment Manager’s report
Introduction
This report covers the first half of the Company’s 2022/23 financial year, 1 October 2022 to 31 March 2023. The Investment Manager’s report contains references to movements in the NAV per share and NAV total return per share for the period. Movements in the NAV per share do not necessarily mirror the earnings per share total return reported in the accounts and elsewhere, which convey the profit after tax of the Company within the reported period as a function of the weighted average number of shares in issue for the period.
Investment performance measures contained in this report are calculated on a pence per share basis and include realised and unrealised gains and losses.
Investment report
Investor sentiment improved through the first half of the 2023 financial year, as investors became more confident that inflation was close to peaking and, with it, the interest rate tightening cycle that had done so much damage to risk assets in 2022.
A change of Prime Minister and Chancellor helped to restore confidence in UK fiscal policy, allowing the currency to recover and credit markets to stabilise. The economy has withstood the pressure better than many had predicted. All the same, companies and households have had to navigate an immensely difficult period of high inflation and stagnating economic activity. For UK households, real wage growth was strongly negative and budgets came under pressure from higher energy bills and sharp increases in the cost of food. Companies came under pressure too, with weak business and consumer sentiment and higher input costs reflected in company updates. The number of companies reducing guidance was sharply higher year on year.
UK consumers, very short of confidence, drew down on household savings to support spending over the key Christmas trading period. In-store retail bounced back and pubs, bars and restaurants traded marginally ahead of 2019, the most recent non-COVID comparator, in part helped by the 2022 World Cup. Those industries and channels most impacted by COVID (travel, leisure, high street retail) continued to recover whilst COVID beneficiaries (housing, home improvements, consumer tech, durable goods, online retail) reported more difficult trading.
Much of the deep pessimism that dominated the early part of the financial year has moderated. The UK economy continues to outperform against low expectations. The Office of Budget Responsibility and the Bank of England (BoE) raised their real GDP forecasts for 2023 in the quarter and again post period end. In its May 2023 Monetary Policy Report, the BoE significantly upgraded its guidance with the UK economy now expected to grow by 0.9% over the 12 months to June 2024.
UK inflation remains stubbornly high at 10.1% in March 2023, defying predictions that it would fall below 10% in March. In response, the BoE has continued to raise the base rate with market participants predicting a terminal rate of 4.8% in Q4’23 with inflation expected to fall back to around 5% by the end of 2023.
Sentiment was further buoyed by the reopening of the Chinese economy in early 2023, the last of the major economies to relax COVID restrictions. Towards the end of the period under review, concerns started to surface that some mid and large sized US regional banks (subject to a lighter touch regulatory regime than the larger globally systemically important banks) might struggle to operate profitably in the high interest rate environment that emerged in 2022, leading to depositor flight. Silicon Valley Bank (SVB) was the first of several significant bank failures. There were problems in Europe, too, with a hastily arranged distressed sale of Credit Suisse to UBS. For now, the fallout appears well-contained with deposits and taxpayers protected by the actions of the regulators and other market participants.
Terminal interest expectations and the bond market have been unusually volatile as investors responded to fresh economic data, adjusted for the tighter credit conditions and assessed the implications for monetary policy. By some estimates, the failure of SVB might tighten financial conditions by the equivalent of a 1.5% increase in US base rates.
Amidst such uncertainty, monetary policy committees and market participants are scrutinising each employment report, inflation and economic survey for evidence of falling inflation and leading indicators of economic activity. Future monetary policy is now very data dependent, placing enormous weight on each announcement, setting us up for further periods of heightened volatility. Meanwhile, the bond markets continue to forecast a US recession later this year or early next year.
UK stock markets were positive for most of the period under review. Sentiment turned in early March 2023 as investors took increasing note of signs of distress within the US banking industry. AIM (+1.09%) continued to underperform the FTSE 100 (+12.55%) and FTSE 250 (+11.63%) indices as investors continued to favour larger more established companies over smaller, higher risk and less liquid companies.
Performance
In the six months to 31 March 2023, the unaudited NAV per share decreased from 60.19 pence to 52.84 pence. A special dividend of 2.0 pence per share and a final dividend of 2.0 pence per share was paid on 10 February 2023, giving a NAV total return to investors of -3.35 pence per share, which translates to a loss of -5.57%. The NAV total return (dividends reinvested) for the period was -5.98% compared with +1.09% in the FTSE AIM All-Share Index Total Return and +12.25% in the FTSE All-Share Index Total Return (also calculated on a dividends reinvested basis).
The Qualifying Investments made a net contribution of -2.98 pence per share whilst the Non-Qualifying Investments returned -0.13 pence per share. The adjusting balance was the net of running costs and investment income. The contribution to NAV performance is split out in further detail below.
Zoo Digital (+50%, +0.99 pence per share) announced a second strategically significant platform contract with a major Hollywood studio to support the localisation and preparation of content for distribution through its streaming platform. Post period end, the company raised funds and acquired a minority stake in a Japanese localisation company. At the same time, Zoo reported that a temporary disruption at its largest client would leave revenues for the 12 months to March 2023 behind previously upgraded forecasts. Profit guidance was unchanged.
In a January trading update, Learning Technologies Group (+22.9%, +0.36 pence per share) announced FY22 revenues of £595m and adjusted EBIT of at least £100m, in line with market expectations. Margin outperformance was driven by a combination of efficiency gains and organic growth in GP Strategies. Net debt of £119.8m was in line with consensus. The company confirmed that it remained confident of delivering its 2025 targets of £850m run-rate revenue and £175m EBIT. The post period end release of its results for 12 months to December 2022 included a cautious outlook and revealed a higher than expected interest charge from floating rate debt. The shares sold off aggressively.
Equipmake (+16%, +0.29 pence per share) raised £6.2m at 5 pence per share in January. Whilst news has been limited, interim results confirmed trading remained in line with expectations. The company has a strong pipeline which it expects to convert into contracts over the remainder of 2023.
XP Factory (+54.2%, +0.29 pence per share) provided a trading update for FY22 with revenue guidance of £21.9m and pre IFRS15 adjusted EBITDA of £2.6m, in line with market expectations. Including recent site openings, annualised run-rate revenues have reached £33m. The company closed the year with £3.2m cash.
Gousto (-79.7%, -0.70 pence per share) raised new equity in February 2023 to fund capital expenditure and working capital. Operational and financial performance has improved following a difficult period in mid-2022. Gross margins remain healthy despite the demanding supply environment. Adjustments made to overheads and operational footprint (current and future) are starting to feed through to improving operating profit margins and cash performance. The company continues to focus on quality and choice whilst elevating its value proposition, helping to drive higher levels of customer satisfaction. Although we increased the company’s enterprise value, the addition of a new class of share resulted in a reduction to the value of the investment.
Initially, the outlook looked promising for Polarean (-50%, -0.43 pence per share) with the company receiving FDA clearance for Xenoview, its drug-device combination product that allows MRI scanners to provide detailed evaluation of lung function. In subsequent updates, the company revised its growth and cost assumptions, resulting in a substantial cut to guidance. The FY22 closing cash balance of $16m provides runway until May 2024.
Maxcyte (-32.1%, -0.43 pence per share) reported that FY22 revenues grew +31% to $44.3m with gross profit margins stable at 88%. Although the company reported a net loss of $23.6m, it remains very well-funded with cash of $227.3m as it continues to invest for growth. FY23 guidance was set at 20-25% revenue growth, with potential upside should the first product developed on its platform (Exa-cel, a partnership between Vertex Pharma & CRISPR) receive FDA approval in H2 2023. The longer-term pipeline is positive, with 16 partnered programs currently in the clinic and a pipeline of pre-clinical milestones of over $1.55bn. Post period end, the company reported a 26% decline in revenues for the 3 months to 31 March 2023 and revised its guidance to revenue growth of 8-12%.
In a January update, Angle (-70.5%, -0.34 pence per share) warned that a weaker economic environment and changes to Canadian R&D tax credits would require the closure of its Canadian operation. The company also announced that it would not continue to develop its molecular diagnostics platform and instead prioritise third party platforms such as those from Thermo Fisher and Illumina. The company is funded into H2 2024 following a £20m fundraise in July 2022 and an ongoing cost reduction programme.
Surface Transform (-25.6%, -0.30 pence per share) revised guidance for a second time following teething problems that emerged with the commissioning of new equipment installed to support the significant increase in revenues forecast this year and next. 2023 revenue forecasts were cut from £23m to £16m. Although disappointing, the company reports the matter is now resolved and continues to expect to transition into profit this year. The company has a £290m order book that includes very large contracts with three leading automotive OEMs.
Within the qualifying portfolio, we exited Diurnal through a takeover, and sold our investment in In The Style following a period of very difficult trading. We reduced our investment in Zoo Digital and Faron Pharma following a period of strong share price performance. We also reduced our investment in Smoove through a tender offer.
Within the non-qualifying portfolio, we sold investments in JD Sports, Natwest, NCC, Shaftesbury, Safestore, Seraphine and Workspace.
Portfolio structure
The VCT is comfortably through the HMRC defined investment test and ended the period at 95.79% invested as measured by the HMRC investment test. By market value, the VCT had a 58.1% weighting to Qualifying Investments.
Qualifying investment activity was strong in the half year with £9.2m invested into 6 Qualifying Companies, including 2 new AIM investments and 3 follow-on investments. There was also one follow on investment into a private company.
In line with the investment policy, we made investments in the Marlborough Special Situations Fund as a temporary home for proceeds from fundraising, increasing the weighting from 2.1% to 8.2%. The non-qualifying equity portfolio increased from 7.7% to 11.1%. For the first time since 2016, we have invested into short-dated investment grade UK corporate credit, building a 10.1% weighting across six issuers. Cash decreased from 26.1% to 10.9% of net assets despite inflows from the offer for subscription.
The HMRC investment tests are set out in Chapter 3 of Part 6 Income Tax Act 2007, which should be read in conjunction with this Investment Manager’s report. Funds raised by VCTs are first included in the investment tests from the start of the accounting period containing the third anniversary of the date on which the funds were raised. Therefore, the allocation of qualifying investments as defined by the legislation can be different to the portfolio weighting as measured by market value relative to the net assets of the VCT.
Post period end update
Since the period end, the FTSE AIM All-Share Total Return Index has declined by 1.59%, whilst the FTSE All-Share Total Return Index has increased by 0.78%. The Company’s NAV has fallen by 2.1% to 51.72 pence (31 May 2023).
As of 9 June 2023, the share price of 49.00 pence represented a discount of 5.26% to the last published NAV per share.
For further information please contact:
Oliver Bedford
Lead Manager
Date: 13 June 2023
Hargreave Hale AIM VCT plc,
Talisman House
Boardmans Way
Blackpool
FY4 5FY
0207 523 4837
aimvct@canaccord.com
Investment portfolio summary
As at 31 March 2023
| Net Assets % | Cost £000 | Cumulative movement in value £000 | Valuation £000 | Market | COI(1) | |
| Equity Qualifying Investments | ||||||
| Zoo Digital Group plc | 4.91 | 2,159 | 6,421 | 8,580 | AIM | YES |
| Equipmake Holdings plc | 3.59 | 3,740 | 2,538 | 6,278 | AIM | NO |
| Learning Technologies Group plc | 3.32 | 2,238 | 3,562 | 5,800 | AIM | YES |
| Eagle Eye Solutions Group plc | 2.77 | 1,642 | 3,206 | 4,848 | AIM | YES |
| PCI-PAL plc | 1.90 | 2,280 | 1,042 | 3,322 | AIM | YES |
| Tortilla Mexican Grill plc | 1.65 | 1,125 | 1,750 | 2,875 | AIM | YES |
| Surface Transforms plc | 1.64 | 1,744 | 1,128 | 2,872 | AIM | YES |
| Maxcyte Inc | 1.63 | 1,270 | 1,580 | 2,850 | AIM | YES |
| Engage XR Holdings plc | 1.58 | 3,453 | (690) | 2,763 | AIM | YES |
| Infinity Reliance Ltd (My 1st Years)(2) | 1.57 | 2,500 | 243 | 2,743 | Unlisted | YES |
| Itaconix plc | 1.49 | 3,025 | (415) | 2,610 | AIM | NO |
| Bidstack Group plc | 1.40 | 2,733 | (286) | 2,447 | AIM | NO |
| XP Factory plc | 1.37 | 4,068 | (1,681) | 2,387 | AIM | YES |
| Beeks Financial Cloud Group plc | 1.36 | 1,038 | 1,341 | 2,379 | AIM | YES |
| Cohort plc | 1.25 | 619 | 1,566 | 2,185 | AIM | YES |
| Eneraqua Technologies plc | 1.17 | 1,955 | 92 | 2,047 | AIM | NO |
| Diaceutics plc | 1.17 | 1,550 | 489 | 2,039 | AIM | YES |
| Aquis Exchange plc | 1.05 | 765 | 1,074 | 1,839 | AIM | YES |
| Abcam plc | 1.03 | 55 | 1,746 | 1,801 | AIM | NO |
| CentralNic Group plc | 0.92 | 588 | 1,024 | 1,612 | AIM | YES |
| Arecor Therapeutics plc | 0.92 | 1,687 | (87) | 1,600 | AIM | NO |
| C4X Discovery Holdings plc | 0.89 | 2,300 | (742) | 1,558 | AIM | NO |
| Polarean Imaging plc | 0.85 | 2,081 | (588) | 1,493 | AIM | NO |
| Ilika plc | 0.85 | 1,636 | (157) | 1,479 | AIM | NO |
| Zappar Ltd | 0.82 | 1,600 | (170) | 1,430 | Unlisted | NO |
| Belvoir Group plc | 0.73 | 762 | 509 | 1,271 | AIM | YES |
| Velocys plc | 0.71 | 2,220 | (978) | 1,242 | AIM | NO |
| Craneware plc | 0.65 | 125 | 1,002 | 1,127 | AIM | YES |
| Idox plc | 0.64 | 135 | 989 | 1,124 | AIM | YES |
| Kidly Ltd | 0.64 | 1,660 | (542) | 1,118 | Unlisted | NO |
| Quixant plc | 0.61 | 1,209 | (150) | 1,059 | AIM | NO |
| Instem plc | 0.60 | 297 | 748 | 1,045 | AIM | YES |
| Crimson Tide plc | 0.58 | 1,260 | (252) | 1,008 | AIM | YES |
| Blackbird plc | 0.56 | 615 | 369 | 984 | AIM | NO |
| Intelligent Ultrasound Group plc | 0.55 | 1,550 | (586) | 964 | AIM | NO |
| EKF Diagnostics Holdings plc | 0.53 | 565 | 362 | 927 | AIM | NO |
| Verici DX plc | 0.53 | 1,939 | (1,012) | 927 | AIM | YES |
| Equals Group plc | 0.52 | 750 | 152 | 902 | AIM | YES |
| AnimalCare Group plc | 0.52 | 720 | 182 | 902 | AIM | YES |
| The Property Franchise Group plc | 0.50 | 377 | 501 | 878 | AIM | YES |
| Skillcast Group plc | 0.49 | 1,570 | (721) | 849 | AIM | NO |
| OneMedia iP Group plc | 0.47 | 1,141 | (326) | 815 | AIM | YES |
| Crossword Cybersecurity plc | 0.45 | 2,039 | (1,254) | 785 | AIM | YES |
| Bivictrix Therapeutics plc | 0.45 | 1,200 | (420) | 780 | AIM | NO |
| Eden Research plc | 0.42 | 1,355 | (621) | 734 | AIM | NO |
| Globaldata plc | 0.39 | 173 | 501 | 674 | AIM | YES |
| Hardide plc | 0.37 | 3,566 | (2,928) | 638 | AIM | YES |
| Tristel plc | 0.36 | 543 | 77 | 620 | AIM | NO |
| Intercede Group plc | 0.35 | 305 | 311 | 616 | AIM | YES |
| Creo Medical Group plc | 0.35 | 2,329 | (1,720) | 609 | AIM | YES |
| SCA Investments Ltd (Gousto) | 0.32 | 2,484 | (1,919) | 565 | Unlisted | YES |
| Faron Pharmaceuticals Oy | 0.28 | 1,133 | (638) | 495 | AIM | NO |
| Angle plc | 0.26 | 1,158 | (711) | 447 | AIM | NO |
| K3 Business Technology Group plc | 0.19 | 270 | 60 | 330 | AIM | YES |
| Everyman Media Group plc | 0.15 | 600 | (332) | 268 | AIM | YES |
| Science in Sport plc | 0.15 | 1,479 | (1,214) | 265 | AIM | NO |
| Smoove plc | 0.13 | 621 | (392) | 229 | AIM | NO |
| Strip Tinning Holdings plc | 0.13 | 1,054 | (826) | 228 | AIM | NO |
| Fusion Antibodies plc | 0.13 | 624 | (400) | 224 | AIM | NO |
| Trakm8 Holdings plc | 0.08 | 486 | (352) | 134 | AIM | NO |
| Rosslyn Data Technologies plc | 0.04 | 500 | (430) | 70 | AIM | YES |
| MYCELX Technologies Corporation | 0.04 | 361 | (297) | 64 | AIM | YES |
| Renalytix AI plc | 0.03 | 82 | (25) | 57 | AIM | YES |
| Gfinity plc | 0.02 | 2,026 | (1,992) | 34 | AIM | YES |
| Yourgene Health plc | 0.01 | 472 | (459) | 13 | AIM | NO |
| Osirium Technologies plc | — | 858 | (849) | 9 | AIM | NO |
| Honest Brew Ltd(2) | – | 2,800 | (2,800) | – | Unlisted | NO |
| Laundrapp Ltd(2) | — | 2,450 | (2,450) | — | Unlisted | NO |
| Airportr Technologies Ltd(2) | – | 1,888 | (1,888) | – | Unlisted | NO |
| Mporium Group plc | — | 33 | (33) | — | Unlisted | NO |
| Flowgroup plc | – | 26 | (26) | – | Unlisted | NO |
| Infoserve Group plc(3) | — | — | — | — | Unlisted | NO |
| Total – equity Qualifying Investments | 56.03 | 97,661 | 206 | 97,867 | ||
| Qualifying fixed income investments | ||||||
| Kidly Ltd (convertible loan notes) | 1.37 | 2,400 | – | 2,400 | Unlisted | NO |
| Osirium Technologies plc (convertible loan notes) | 0.75 | 800 | 511 | 1,311 | Unlisted | NO |
| Honest Brew Ltd (loan notes) | – | 300 | (300) | – | Unlisted | NO |
| Total qualifying fixed income investments | 2.12 | 3,500 | 211 | 3,711 | ||
| Total Qualifying Investments | 58.15 | 101,161 | 417 | 101,578 | ||
| Non-Qualifying Investments | ||||||
| Funds | ||||||
| Marlborough Special Situations Fund | 8.19 | 16,130 | (1,817) | 14,313 | Unlisted | NO |
| iShares plc ISHRS UK Gilts 0–5Yr ETF GBP (Dist) | 1.14 | 2,001 | (5) | 1,996 | Main | NO |
| Total Funds | 9.33 | 18,131 | (1,822) | 16,309 | ||
| Equity Non-Qualifying Investments | ||||||
| Bodycote plc | 0.84 | 1,534 | (66) | 1,468 | Main | NO |
| Hollywood Bowl Group plc | 0.80 | 1,566 | (171) | 1,395 | Main | YES |
| SThree plc | 0.80 | 1,687 | (293) | 1,394 | Main | YES |
| Bytes Technology Group plc | 0.78 | 1,137 | 222 | 1,359 | Main | YES |
| WH Smith plc | 0.68 | 1,220 | (24) | 1,196 | Main | YES |
| National Grid plc | 0.63 | 1,041 | 55 | 1,096 | Main | YES |
| The Watches of Switzerland Group plc | 0.58 | 1,216 | (197) | 1,019 | Main | YES |
| TP ICAP Group plc | 0.58 | 1,023 | (14) | 1,009 | Main | YES |
| BAE Systems plc | 0.56 | 782 | 191 | 973 | Main | NO |
| Energean plc | 0.52 | 926 | (15) | 911 | Main | YES |
| Diversified Energy Company plc | 0.49 | 1,050 | (199) | 851 | Main | YES |
| Chemring Group plc | 0.48 | 920 | (86) | 834 | Main | YES |
| Hilton Food Group plc | 0.47 | 1,262 | (433) | 829 | Main | YES |
| Trifast Group plc | 0.44 | 1,318 | (542) | 776 | Main | YES |
| JD Sports Fashion plc | 0.42 | 771 | (34) | 737 | Main | YES |
| Harbour Energy plc | 0.39 | 922 | (236) | 686 | Main | YES |
| Rotork plc | 0.38 | 737 | (76) | 661 | Main | NO |
| Ashtead Group plc | 0.37 | 771 | (127) | 644 | Main | YES |
| XP Power plc | 0.35 | 743 | (135) | 608 | Main | YES |
| Future plc | 0.33 | 599 | (20) | 579 | Main | YES |
| Wickes Group plc | 0.20 | 585 | (240) | 345 | Main | NO |
| On the Beach Group plc | 0.18 | 868 | (545) | 323 | Main | YES |
| Tortilla Mexican Grill plc | 0.18 | 161 | 152 | 313 | Main | YES |
| MYCELX Technologies Corporation | 0.04 | 298 | (223) | 75 | Main | YES |
| Genagro Services Ltd(4) | – | – | – | – | Unlisted | YES |
| Total – equity Non-Qualifying Investments | 11.49 | 23,137 | (3,056) | 20,081 | ||
| Fixed Income – bonds | ||||||
| British Telecommunications plc 5.75% BDS 17/12/28 | 1.76 | 3,171 | (95) | 3,076 | Main | NO |
| NatWest Markets plc 6.375% NTS 08/11/27 | 1.73 | 3,067 | (51) | 3,016 | Main | NO |
| Royal Bank of Canada 5.000% SNR NTS 24/01/28 | 1.70 | 3,049 | (77) | 2,972 | Main | NO |
| Marks & Spencer plc 3.000% NTS 08/12/23 | 1.69 | 2,988 | (33) | 2,955 | Main | NO |
| Next Group plc 4.375% BDS 02/10/26 | 1.67 | 2,976 | (61) | 2,915 | Main | NO |
| Barclays plc 3.25% NTS 12/02/27 | 1.56 | 2,859 | (131) | 2,728 | Main | NO |
| Total Fixed Income – bonds | 10.11 | 18,110 | (448) | 17,662 | ||
| Total – Non-Qualifying Investments | 30.93 | 59,378 | (5,326) | 54,052 | ||
| Total investments | 89.08 | 160,539 | (4,909) | 155,630 | ||
| Cash at bank | 10.94 | 19,130 | ||||
| Prepayments, accruals | (0.02) | (35) | ||||
| Net assets | 100.00 | 174,725 |
(1) COI – Co-investments with other funds managed by the Investment Manager at 31 March 2023.
(2) Different classes of shares held in unlisted companies within the portfolio have been aggregated.
(3) Impaired fully through the profit and loss account and therefore shows a zero cost.
(4) Company awaiting liquidation.
The investments listed below are either listed, headquartered or registered outside the UK:
| Listed | Headquartered | Registered | |
| Listed Investments: | |||
| Abcam plc | UK/USA | UK | UK |
| Bytes Technology Group plc | UK/South Africa | UK | UK |
| Crimson Tide plc | UK/Republic of Ireland | UK | UK |
| Craneware plc | UK | UK/USA | UK |
| Diversified Energy Company plc | UK | USA | UK |
| Engage XR Holdings plc | UK | ROI | UK |
| Energean plc | UK/Israel | UK | UK |
| Faron Pharmaceuticals Oy | UK/Finland | Finland | Finland |
| Itaconix plc | UK/USA | USA | UK |
| Maxcyte Inc | UK/USA | USA | USA |
| Mycelx Technologies Corporation plc | UK/USA | USA | USA |
| National Grid plc | UK/USA | UK | UK |
| Polarean Imaging plc | UK | USA | UK |
| Renalytix AI plc | UK/USA | USA | UK |
| Verici DX plc | UK | UK/USA | UK |
| Unlisted private companies: | |||
| Genagro Ltd(1) | — | UK | Jersey |
(1) Company awaiting liquidation.
Top ten investments
As at 31 March 2023 (by market value)
The top ten investments are shown below. Each investment is valued by reference to the bid price, or, in the case of unquoted companies, the IPEV guidelines using one or more valuation techniques according to the nature, facts and circumstances of the investment. Forecasts, where given, are drawn from a combination of broker research and/or Bloomberg consensus forecasts. Forecasts are in relation to a period end for which the company results are yet to be released. Published accounts are used for private companies or public companies with no published broker forecasts. The net asset figures and net cash values are from published accounts in most cases.
| Zoo Digital Group plc | Share price: 195.0p | ||
| Investment date | April 2017 | Forecasts for the year to | March 2023 |
| Equity held | 4.98% | Turnover ($’000) | 90,400 |
| Av. Purchase Price | 49.1p | Profit before tax ($’000) | 6,800 |
| Cost (£’000) | 2,159 | Net cash September 2022 ($’000) | 1,498 |
| Valuation (£’000) | 8,580 | Net assets September 2022 ($’000) | 30,690 |
Company description
Zoo Digital is a provider of cloud-based dubbing, subtitling, localisation and distribution services for the global entertainment industry. Zoo’s clients include major Hollywood studios, global broadcasters and independent distributors. Zoo’s point of difference in the marketplace is its development and use of innovative cloud technology that ensures that content is localised in any language and delivered to all the major online platforms with reduced time to market, higher quality and lower costs.
| Equipmake Holdings plc | Share price: 7.3p | ||
| Investment date | July 2022 | Forecasts for the year to | May 2023 |
| Equity held | 10.51% | Turnover (£’000) | 4,800 |
| Av. Purchase Price | 4.3p | Loss before tax (£’000) | (4,400) |
| Cost (£’000) | 3,740 | Net cash November 2022 (£’000) | 7,443 |
| Valuation (£’000) | 6,278 | Net assets November 2022 (£’000) | 9,491 |
Company description
Equipmake has developed a range of electrification products for the provision of electric vehicle (EV) drivetrains to meet the needs of the automotive, aerospace, space and transport sectors in support of the transition to zero emission powertrains. Equipmake products can be applied in a variety of other vehicle electrification contexts, including hybrid, fully electric and fuel cell vehicles. Equipmake provides individual components to full turnkey systems.
| Learning Technologies Group plc | Share price: 128.9p | ||
| Investment date | July 2015 | Forecasts for the year to | December 2023 |
| Equity held | 0.57% | Turnover (£’000) | 608,900 |
| Av. Purchase Price | 49.7p | Profit before tax (£’000) | 94,000 |
| Cost (£’000) | 2,238 | Net debt December 2022 (£’000) | (119,811) |
| Valuation (£’000) | 5,800 | Net assets December 2022 (£’000) | 426,300 |
Company description
Learning Technologies Group provides workplace digital learning and talent management software and services to corporate and government clients. The group offers end-to-end learning and talent solutions ranging from strategic consultancy, through a range of content and platform solutions to analytical insights that enable corporate and government clients to meet their performance objectives.
| Eagle Eye Solutions Group plc | Share price: 560.0p | ||
| Investment date | April 2014 | Forecasts for the year to | June 2023 |
| Equity held | 2.96% | Turnover (£’000) | 38,900 |
| Av. Purchase Price | 189.7p | Profit before tax (£’000) | 3,800 |
| Cost (£’000) | 1,642 | Net cash December 2022 (£’000) | 14,409 |
| Valuation (£’000) | 4,848 | Net assets December 2022 (£’000) | 17,012 |
Company description
Eagle Eye is a Software-as-a-Service (SaaS) technology company that creates digital connections enabling personalised, real-time marketing solutions for large retailers. Through Eagle Eye AIR, the company’s loyalty and promotions omnichannel SaaS platform, companies connect all aspects of the customer journey in real time, unlocking the capability to deliver personalisation, streamline marketing execution and open up new revenue streams through promotions, loyalty apps, gamification, subscriptions and gift services.
| Kidly Ltd(1) | Unquoted | ||
| Investment date | March 2020 | Results for the year to | March 2022 |
| Voting rights held | 9.90% | Turnover (£’000)(2) | — |
| Av. Purchase Price | 165.6p | Profit/(loss) before tax (£’000)(2) | — |
| Cost (£’000) | 4,060 | Net cash March 2022 (£’000) | 358 |
| Valuation (£’000) | 3,518 | Net assets March 2022 (£’000) | (1,490) |
| Income recognised in period (£) | 103,233 | ||
Company description
Kidly is an online children’s retail platform that curates a range of attractive third-party brands that sit alongside its own Kidly Label brand, catering to children between the ages of 0-5 years.
(1) Includes equity investment of £1.1 million and convertible loan note investments of £2.4 million.
(2) Not available, data taken from abbreviated accounts.
| PCI PAL plc | Share Price: 48.0p | ||
| Investment date | January 2018 | Forecasts for the year to | June 2023 |
| Equity held | 10.55% | Turnover (£’000) | 14,900 |
| Av. Purchase Price | 32.9p | Loss before tax (£’000) | (2,200) |
| Cost (£’000) | 2,280 | Net cash December 2022 (£’000) | 1,876 |
| Valuation (£’000) | 3,322 | Net assets December 2022 (£’000) | (1,477) |
Company description
PCI PAL is a provider of SaaS solutions that allows companies to take payments from their customers securely. Its products secure payments and data in any business communications environment including voice, chat, social, email, and contact centre and is integrated to, and resold by, business communications vendors and payment service providers.
| Tortilla Mexican Grill plc | Share Price: 115.0p | ||
| Investment date | October 2009 | Forecasts for the year to | December 2023 |
| Equity held | 7.17% | Turnover (£’000) | 69,800 |
| Av. Purchase Price | 46.4p | Profit before tax (£’000) | 1,000 |
| Cost (£’000) | 1,286 | Net debt December 2022 (£’000) | (555) |
| Valuation (£’000) | 3,188 | Net assets December 2022 (£’000) | 3,591 |
Company description
Tortilla is the UK’s largest fast-casual Mexican restaurant brand, offering a California-style Mexican menu. Founded in October 2007, Tortilla operates a multichannel order strategy across dine in, take away, click and collect and delivery options. The current estate includes more than 59 Tortilla restaurants across the UK, 9 UK and 3 overseas franchise stores, 3 UK delivery kitchens and delivery partnerships with Deliveroo, Just Eat and Uber. Following the acquisition of Chilango Ltd in May 2022, the company operates 3 sites across the UK under the Chilango brand.
| Surface Transforms plc | Share Price: 29.0p | ||
| Investment date | March 2016 | Forecasts for the year to | December 2023 |
| Equity held | 5.07% | Turnover (£’000) | 16,000 |
| Av. Purchase Price | 17.6p | Loss before tax (£’000) | (844) |
| Cost (£’000) | 1,744 | Net cash December 2022 (£’000) | 13,826 |
| Valuation (£’000) | 2,872 | Net assets December 2022 (£’000) | 33,551 |
Company description
Surface Transforms develops and produces carbon-ceramic brake discs serving customers that include major OEMs in the global automotive markets. Surface Transforms interweaves continuous carbon fibre to form a 3D multi-directional matrix, producing a stronger, lighter and more durable product with superior heat conductivity compared to standard production components.
| Maxcyte Inc | Share Price: 380.0p | ||
| Investment date | March 2016 | Forecasts for the year to | December 2023 |
| Equity held | 0.73% | Turnover ($’000) | 49,300 |
| Av. Purchase Price | 169.3p | (Loss) before tax ($’000) | (33,500) |
| Cost (£’000) | 1,270 | Net cash March 2023 ($’000) | 224,700 |
| Valuation (£’000) | 2,850 | Net assets March 2023 ($’000) | 247,819 |
Company description
Maxcyte is a cell-engineering focused company providing enabling platform technologies to advance the discovery, development and commercialization of next-generation cell therapeutics.
| Engage XR Holdings Plc | Share Price: 3.20p | ||
| Investment date | March 2023 | Forecasts for the year to | December 2023 |
| Equity held | 16.45% | Turnover (€’000) | 5,400 |
| Av. Purchase Price | 4.0p | (Loss) before tax (€’000) | (4,500) |
| Cost (£’000) | 3,453 | Net cash December 2022 (€’000) | 2,209 |
| Valuation (£’000) | 2,763 | Net assets December 2022 (€’000) | 2,480 |
Company description
Engage XR is a virtual reality (‘VR’) technology company with a proprietary cloud-based professional metaverse platform used to deliver immersive corporate communications, remote collaborations and events, training and education. The company has a strong reputation for data security and reliability, with a diverse customer base of more than 200 clients including several blue-chip companies such as Meta, HP, HTC, KIA and BMW.
For further information please contact:
Oliver Bedford
Lead Manager
Hargreave Hale AIM VCT plc
Talisman House
Boardmans Way
Blackpool
FY4 5FY
0207 523 4837
aimvct@canaccord.com
Principal risks and uncertainties
The principal risks facing the Company relate to the Company’s investment activities and include venture capital trust approval, investment, compliance, operational risk and outsourcing, key personnel and exogenous risks such as economic, political, financial, climate change and health risk. Other risks faced by the Company include market risk, currency risk, interest rate risk, liquidity risk and credit risk. These risks and the way in which they are managed are described in more detail in the Company’s annual report and accounts for the year ended 30 September 2022. The Company’s principal risks and uncertainties have not changed materially since the date of that report.
Going concern
The Company’s business activities and the factors affecting its future development are set out in the Chair’s statement and the Investment Manager’s report. The Company’s principal risks are set out above.
The Board receives regular reports from the Investment Manager and Administrator and reviews the financial position, performance and liquidity of the Company’s investment portfolio. Revenue forecasts and expense budgets are prepared at the start of each financial year and performance against plan is reviewed by the Board. Cash forecasts are prepared and reviewed by the Board as part of the HMRC investment test compliance monitoring.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for a period of at least twelve months. No material uncertainties related to events or conditions that may cast significant doubt about the ability of the Company to continue as a going concern have been identified by the Directors. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
On behalf of the Board of Directors.
David Brock
Chair
Date: 13 June 2023
Other matters
Dividend policy
The Company’s dividend policy is to target a tax-free dividend yield equivalent to 5% of the year end NAV per share. The ability to pay dividends is dependent on the Company’s available distributable reserves and cash resources, the Act, the Listing Rules and the VCT Rules. The policy is non-binding and at the discretion of the Board. Dividend payments may vary from year to year in both quantum and timing. The level of dividend paid each year will depend on the performance of the Company’s portfolio. In years where there is strong investment performance, the Directors may consider a higher dividend payment, including the payment of special dividends. In years where investment performance is not as strong, the Directors may reduce or even pay no dividend.
Discount control and management of share liquidity policy
The Company aims to improve liquidity and to maintain a discount of approximately 5% to the last published NAV per share (as measured against the mid-price) by making secondary market purchases of its shares in accordance with parameters set by the Board.
This policy is non-binding and at the discretion of the Board. Its operation depends on a range of factors including the Company’s liquidity, shareholder permissions, market conditions and compliance with all laws and regulations. These factors may restrict the effective operation of the policy and prevent the Company from achieving its objectives.
Diversity and inclusion
The Board comprises three male non-executive directors and three female non-executive directors with a diverse range of experience, skills, length of service and backgrounds. The Board considers diversity and inclusion when reviewing Board composition and has made a commitment to consider diversity and inclusion when making future appointments. The Board will always appoint the best person for the job. It will not discriminate on the grounds of gender, race, ethnicity, religion, sexual orientation, age or physical ability.
Environmental Social and Governance (ESG) Considerations
The Board seeks to maintain high standards of conduct with respect to environmental, social and governance issues and to conduct the Company’s affairs responsibly.
The Company does not have any employees or offices and so the Board does not maintain any specific policies regarding employees, human rights, social and community issues but does expect the Investment Manager to consider them when fulfilling its role. The Company is exempt from the Streamlined Energy and Carbon Reporting requirements.
The management of the Company’s investment portfolio has been delegated to its Investment Manager, Canaccord Genuity Asset Management Limited. The Company has not instructed the Investment Manager to include or exclude any specific types of investment on ESG grounds. However, it expects the Investment Manager to take account of ESG considerations in its investment process for the selection and ongoing monitoring of underlying investments. The Board has also given the Investment Manager discretion to exercise voting rights on resolutions proposed by investee companies.
The Investment Manager continues to strengthen its approach to ESG issues.
To minimise the direct impact of its activities, the Company offers electronic communications where acceptable to reduce the volume of paper it uses and uses Carbon Balanced paper manufactured at a FSC accredited mill to print its annual financial reports. Vegetable based inks are used in the printing process where appropriate.
David Brock
Chair
Date: 13 June 2023
Statement of directors’ reponsibilities
in respect of the half-yearly financial report
In accordance with Disclosure Transparency Rule (DTR) 4.2.10, David Brock (Chair), Oliver Bedford, Angela Henderson, Justin Ward, Megan McCracken and Busola Sodeinde, the Directors, confirm that to the best of their knowledge that:
• The half-yearly financial results have been prepared in accordance with UK GAAP and give a true and fair view of the assets, liabilities, financial position and profit of the Company as at 31 March 2023 as required by DTR 4.2.4;
• The interim management report consisting of the Chair’s statement, Investment Manager’s report, investment portfolio summary, principal risks and uncertainties disclosure and notes to the half-yearly report includes a fair review of the information required by the Financial Conduct Authority Disclosure and Transparency Rules, being;
• an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;
• a description of the principal risks and uncertainties for the remaining six months of the year; and
• a description of related party transactions that have taken place in the first six months of the current financial year, that may have materially affected the financial position or performance of the Company during that period and any changes in the related party transactions described in the last annual report that could do so.
On behalf of the Board of Directors.
David Brock
Chair
Date: 13 June 2023
Condensed income statement
for the six month period to 31 March 2023 (unaudited)
| For the six month period to 31 March 2023 (unaudited) | For the six month period to 31 March 2022 (unaudited) | ||||||
| Note | Revenue £000 | Capital £000 | Total £000 | Revenue £000 | Capital £000 | Total £000 | |
| Net (loss) on investments held at fair value through profit or loss | 5 | — | (10,472) | (10,472) | — | (43,893) | (43,893) |
| Income | 2 | 1,008 | — | 1,008 | 370 | — | 370 |
| 1,008 | (10,472) | (9,464) | 370 | (43,893) | (43,523) | ||
| Management fee | (363) | (1,089) | (1,452) | (475) | (1,425) | (1900) | |
| Other expenses | (515) | (26) | (541) | (587) | (5) | (592) | |
| (878) | (1,115) | (1,993) | (1,062) | (1,430) | (2,492) | ||
| Profit/(loss) on ordinary activities before taxation | 130 | (11,587) | (11,457) | (692) | (45,323) | (46,015) | |
| Taxation | — | — | — | — | — | — | |
| Profit/(loss) after taxation | 130 | (11,587) | (11,457) | (692) | (45,323) | (46,015) | |
| Basic and diluted earnings/(loss) per share | 3 | 0.04p | (3.76)p | (3.72)p | (0.28)p | (18.46)p | (18.74)p |
The total columns of these statements are the income statements of the Company. All revenue and capital items in the above statements derive from continuing operations. There was no other comprehensive income other than the profits/losses for the six-month periods as set out above. The accompanying notes are an integral part of these financial statements.
Condensed income statement
for the year ended 30 September 2022 (audited)
| For the year to 30 September 2022 (audited) | ||||
| Note | Revenue £000 | Capital £000 | Total £000 | |
| Net (loss) on investments held at fair value through profit or loss | 5 | — | (85,203) | (85,203) |
| Income | 2 | 975 | 13 | 988 |
| 975 | (85,190) | (84,215) | ||
| Management fee | (835) | (2,505) | (3,340) | |
| Other expenses | (1,093) | (22) | (1,115) | |
| (1,928) | (2,527) | (4,455) | ||
| (Loss) on ordinary activities before taxation | (953) | (87,717) | (88,670) | |
| Taxation | — | — | — | |
| (Loss) after taxation | (953) | (87,717) | (88,670) | |
| Basic and diluted (loss) per share | 3 | (0.36)p | (33.06)p | (33.42)p |
The total column of this statement is the income statement of the Company. All revenue and capital items in the above statement derive from continuing operations. There was no other comprehensive income other than the loss for the year as set out above. The accompanying notes are an integral part of these financial statements.
Condensed balance sheet
as at 31 March 2023 (unaudited)
| Note | 31 March 2023 (unaudited) £000 | 31 March 2022 (unaudited) £000 | 30 September 2022 (audited) £000 | |
| Fixed assets | ||||
| Investments at fair value through profit or loss | 5 | 155,631 | 168,933 | 119,188 |
| Current assets | ||||
| Debtors | 7 | 925 | 496 | 408 |
| Cash at bank | 19,130 | 38,082 | 41,911 | |
| 20,055 | 38,578 | 42,319 | ||
| Creditors: amounts falling due within one year | 8 | (961) | (1,139) | (1,000) |
| Net current assets | 19,094 | 37,439 | 41,319 | |
| Total assets less current liabilities | 174,725 | 206,372 | 160,507 | |
| Capital and Reserves | ||||
| Called up share capital | 3,307 | 2,675 | 2,666 | |
| Share premium | 132,541 | 92,707 | 93,660 | |
| Capital redemption reserve | 227 | 179 | 201 | |
| Capital reserve – unrealised | 22,030 | 63,852 | 23,935 | |
| Special reserve | 50,058 | 68,107 | 63,931 | |
| Capital reserve – realised | (30,456) | (18,297) | (20,774) | |
| Revenue reserve | (2,982) | (2,851) | (3,112) | |
| Total shareholders’ funds | 174,725 | 206,372 | 160,507 | |
| Net asset value per share (basic and diluted) | 4 | 52.84p | 77.13p | 60.19p |
The accompanying notes are an integral part of these financial statements.
Condensed statement of changes in equity
for the six month period to 31 March 2023 (unaudited)
| Non–distributable reserves | Distributable reserves (1) | ||||||||
| Note | Share capital £000 | Share premium £000 | Capital redemption reserve £000 | Capital reserve unrealised £000 | Special reserve £000 | Capital reserve realised £000 | Revenue reserve £000 | Total £000 | |
| At 1 October 2022 | 2,666 | 93,660 | 201 | 23,935 | 63,931 | (20,774) | (3,112) | 160,507 | |
| Loss and total comprehensive income for the period | |||||||||
| Realised loss on investments | 5 | — | — | — | — | — | (5,075) | — | (5,075) |
| Unrealised loss on investments | 5 | — | — | — | (5,397) | — | — | — | (5,397) |
| Management fee charged to capital | — | — | — | — | — | (1,089) | — | (1,089) | |
| Income allocated to capital | 2 | — | — | — | — | — | — | — | — |
| Due diligence investment costs | — | — | — | — | — | (26) | — | (26) | |
| Revenue profit after taxation for the period | — | — | — | — | — | — | 130 | 130 | |
| Total loss after taxation for the period | — | — | — | (5,397) | — | (6,190) | 130 | (11,457) | |
| Contributions by and distributions to owners | |||||||||
| Subscription share issues | 9 | 649 | 38,720 | — | — | — | — | — | 39,369 |
| Issue costs | 14 | — | (830) | — | — | — | — | — | (830) |
| Share buybacks | 9 | (26) | — | 26 | — | (1,454) | — | — | (1,454) |
| DRIS share issues | 9 | 18 | 991 | — | — | — | — | — | 1,009 |
| Equity dividends paid | 6 | — | — | — | — | (12,419) | — | — | (12,419) |
| Total contributions by and distributions to owners | 641 | 38,881 | 26 | — | (13,873) | — | — | 25,675 | |
| Other movements | |||||||||
| Diminution in value | 5 | — | — | — | 3,492 | — | (3,492) | — | — |
| Total other movements | — | — | — | 3,492 | — | (3,492) | — | — | |
| At 31 March 2023 | 3,307 | 132,541 | 227 | 22,030 | 50,058 | (30,456) | (2,982) | 174,725 | |
Reserves available for distribution are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 31 March 2023 were £16.6 million. The accompanying notes are an integral part of these financial statements.
(1) The Income Taxes Act 2007 restricts distribution of capital from reserves created by the conversion of the share premium account into a special (distributable) reserve until the third anniversary of the share allotment that led to the creation of that part of the share premium account. As at 31 March 2023, none of the special reserve was subject to this restriction.
Condensed statement of changes in equity
for the six month period to 31 March 2022 (unaudited)
| Non–distributable reserves | Distributable reserves (1) | ||||||||
| Note | Share capital £000 | Share premium £000 | Capital redemption reserve £000 | Capital reserve unrealised £000 | Special reserve £000 | Capital reserve realised £000 | Revenue reserve £000 | Total £000 | |
| At 1 October 2021 | 2,280 | 53,802 | 158 | 102,311 | 84,004 | (11,433) | (2,159) | 228,963 | |
| Loss and total comprehensive income for the period | |||||||||
| Realised loss on investments | 5 | — | — | — | — | — | (2,161) | — | (2,161) |
| Unrealised loss on investments | 5 | — | — | — | (41,732) | — | — | — | (41,732) |
| Management fee charged to capital | — | — | — | — | — | (1,425) | — | (1,425) | |
| Income allocated to capital | 2 | — | — | — | — | — | — | — | — |
| Due diligence investment costs | — | — | — | — | — | (5) | — | (5) | |
| Revenue (loss) after taxation for the period | — | — | — | — | — | — | (692) | (692) | |
| Total (loss) after taxation for the period | — | — | — | (41,732) | — | (3,591) | (692) | (46,015) | |
| Contributions by and distributions to owners | |||||||||
| Subscription share issues | 406 | 38,794 | — | — | — | — | — | 39,200 | |
| Issue costs | (729) | — | — | — | — | — | (729) | ||
| Share buybacks | (21) | — | 21 | — | (1,739) | — | — | (1,739) | |
| DRIS share issues | 10 | 840 | — | — | — | — | — | 850 | |
| Equity dividends paid | — | — | — | — | (14,158) | — | — | (14,158) | |
| Total contributions by and distributions to owners | 395 | 38,905 | 21 | — | (15,897) | — | — | 23,424 | |
| Other movements | |||||||||
| Diminution in value | — | — | — | 3,273 | — | (3,273) | — | — | |
| Total other movements | — | — | — | 3,273 | — | (3,273) | — | — | |
| At 31 March 2022 | 2,675 | 92,707 | 179 | 63,852 | 68,107 | (18,297) | (2,851) | 206,372 | |
Reserves available for distribution are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 31 March 2022 were £47.0 million. The accompanying notes are an integral part of these financial statements.
(1) The Income Taxes Act 2007 restricts distribution of capital from reserves created by the conversion of the share premium account into a special (distributable) reserve until the third anniversary of the share allotment that led to the creation of that part of the share premium account. As at 31 March 2022, none of the special reserve was subject to this restriction.
Condensed statement of changes in equity
for the year ended 30 September 2022 (audited)
| Non–distributable reserves | Distributable reserves (1) | ||||||||
| Note | Share Capital £000 | Share Premium £000 | Capital Redemption Reserve £000 | Capital Reserve Unrealised £000 | Special Reserve £000 | Capital Reserve Realised £000 | Revenue Reserve £000 | Total £000 | |
| At 1 October 2021 | 2,280 | 53,802 | 158 | 102,311 | 84,004 | (11,433) | (2,159) | 228,963 | |
| Loss and total comprehensive income for the year | |||||||||
| Realised gains on investments | 5 | — | — | — | — | — | 2,056 | — | 2,056 |
| Unrealised (losses) on investments | 5 | — | — | — | (87,259) | — | — | — | (87,259) |
| Management fee charged to capital | — | — | — | — | — | (2,505) | — | (2,505) | |
| Income allocated to capital | 2 | — | — | — | — | — | 13 | = | 13 |
| Due diligence investments costs | — | — | — | — | — | (22) | — | (22) | |
| Revenue (loss) after taxation for the year | — | — | — | — | — | — | (953) | (953) | |
| Total (loss) after taxation for the year | — | — | — | (87,259) | — | (458) | (953) | (88,670) | |
| Contributions by and distributions to owners | |||||||||
| Subscription share issues | 416 | 39,579 | — | — | — | — | — | 39,995 | |
| Issue costs | — | (746) | — | — | — | — | — | (746) | |
| Share buybacks | (43) | — | 43 | — | (3,243) | — | — | (3,243) | |
| DRIS share issues | 13 | 1,025 | — | — | — | — | — | 1,038 | |
| Equity dividends paid | 6 | — | — | — | — | (16,830) | — | — | (16,830) |
| Total contributions by and distributions to owners | 386 | 39,858 | 43 | — | (20,073) | — | — | 20,214 | |
| Other movements | |||||||||
| Diminution in value | — | — | — | 8,883 | — | (8,883) | — | — | |
| Total other movements | — | — | — | 8,883 | — | (8,883) | — | — | |
| At 30 September 2022 | 2,666 | 93,660 | 201 | 23,935 | 63,931 | (20,774) | (3,112) | 160,507 | |
Reserves available for distribution are capital reserve realised, special reserve and revenue reserve. Total distributable reserves at 30 September 2022 were £40 million. The accompanying notes are an integral part of these financial statements.
(1) The Income Taxes Act 2007 restricts distribution of capital from reserves created by the conversion of the share premium account into a special (distributable) reserve until the third anniversary of the share allotment that led to the creation of that part of the share premium account. As at 30 September 2022, none of the special reserve was subject to this restriction.
Condensed statement of cash flows
for the six month period to 31 March 2023 (unaudited)
| Note | 31 March 2023 (unaudited) £000 | 31 March 2022 (unaudited) £000 | 30 September 2022 (1) (audited) £000 | |
| Total (loss) on ordinary activities before taxation | (11,457) | (46,015) | (88,670) | |
| Realised losses/(gains) on investments | 5 | 5,075 | 2,161 | (2,056) |
| Unrealised losses on investments | 5 | 5,397 | 41,732 | 87,259 |
| (Increase) in debtors | 7 | (517) | (166) | (78) |
| (Decrease)/increase in creditors | 8 | (39) | (44) | (183) |
| Non–cash distributions | 2 | — | (54) | (126) |
| Amortisation | (26) | — | — | |
| Net cash (outflow) from operating activities | (1,567) | (2,386) | (3,854) | |
| Purchase of investments | 5 | (51,920) | (22,737) | (29,460) |
| Sale of investments | 5 | 5,031 | 12,765 | 27,995 |
| Net cash (used in) investing activities | (46,889) | (9,972) | (1,465) | |
| Share buybacks | 9 | (1,454) | (1,739) | (3,243) |
| Issue of share capital | 9 | 39,369 | 39,200 | 39,995 |
| Issue costs | 14 | (830) | (729) | (746) |
| Dividends paid | 6 | (11,410) | (13,308) | (15,792) |
| Net cash provided by financing activities | 25,675 | 23,424 | 20,214 | |
| Net (decrease)/increase in cash | (22,781) | 11,066 | 14,895 | |
| Opening cash | 41,911 | 27,016 | 27,016 | |
| Closing cash | 19,130 | 38,082 | 41,911 |
The accompanying notes are an integral part of these financial statements.
(1) 30 September 2022 cash flow represents annual results
Explanatory notes
for the six month period to 31 March 2023 (unaudited)
Basis of preparation
The Company has prepared its half-yearly financial results for the six month period ending 31 March 2023. The condensed financial statements have been prepared in accordance with UK Generally Accepted Accounting Practice (“UK GAAP”), including Financial Reporting Standard 104 (“FRS 104”) and with the Companies Act 2006 and the Statement of Recommended Practice for “Financial Statements of Investment Trust Companies and Venture Capital Trusts” July 2022 (“SORP”).
They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2022 annual report.
1. Significant accounting policies
Hargreave Hale AIM VCT plc has applied the same accounting policies and methods of computation in its interim condensed financial statements as in its 2022 annual financial statements.
Segmental reporting
There is considered to be one operating segment being investment in equity and debt securities.
Key judgements and estimates
The preparation of the financial statements requires the Board to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The nature of estimation means that the actual outcomes could differ from those estimates. Key judgements and estimates mainly relate to the determination of the fair valuation of unquoted investments.
The assessment of fair value will reflect the market conditions at the measurement date irrespective of which valuation technique is used. The IPEV guidelines describe a range of valuation techniques, as described in the “financial instruments” section.
Further areas requiring judgement and estimation are recognising and classifying unusual or special dividends as either capital or revenue in nature. The estimates and underlying assumptions are under continuous review with particular attention paid to the carrying value of the investments.
2. Income
| Six months to 31 March 2023 (unaudited) £000 | Six months to 31 March 2022 (unaudited) £000 | Year ended 30 September 2022 (audited) £000 | |
| Income from investments | |||
| Revenue: | |||
| Dividend income | 467 | 251 | 744 |
| Interest from bonds | 146 | – | — |
| Interest from loan notes | 151(1) | 116(2) | 184(3) |
| Bank interest | 244 | 3 | 47 |
| 1,008 | 370 | 975 | |
| Capital: | |||
| Return of capital | — | — | — |
| In-specie dividend | — | — | 13(4) |
| — | — | 13 | |
| Total income | 1,008 | 370 | 988 |
(1) Loan stock interest of £18k in respect of the previous financial year has been recognised in the period following reversal of the impairment being carried at 30 September 2022.
(2) The Company’s accrued fixed interest from a convertible loan note in XP Factory plc (£54.0k) was converted into shares on 2 February 2022.
(3) As noted above, the Company’s accrued fixed income from a convertible loan note in XP Factory (£54k) was converted into shares on 2 February 2022. The Company also converted tranche 1 of the Kidly 2025 convertible loan note at the principal plus accrued fixed income of £59k into equity in line with the terms of the agreement to meet HMRC investment requirements ahead of a follow-on investment into the Company in August 2022. Total loan stock interest due but not recognised in the year was £50.7k. This was due to Honest Brew Ltd being placed into administration in June 2022 and impairment of the Osirium plc loan note.
(4) EKF Diagnostics plc distribution in specie of Verici shares (£13k).
3. Basic and diluted (loss) per share
| Six months to 31 March 2023 (unaudited) | Six months to 31 March 2022 (unaudited) | Year ended 30 September 2022 (audited) | |
| (Loss) per share | (3.72p) | (18.74p) | (33.42)p |
| Net (loss) for the period | (£11,457,253) | (£46,014,820) | (£88,670,119) |
| Weighted average number of shares | 308,143,674 | 245,572,062 | 265,292,558 |
4. Net asset value per share
| Six months to 31 March 2023 (unaudited) | Six months to 31 March 2022 (unaudited) | Year ended 30 September 2022 (audited) | |
| Net asset value per share | 52.84p | 77.13p | 60.19p |
| Net assets | £174,724,979 | £206,371,986 | £160,507,390 |
| Number of shares in issue at period end | 330,697,542 | 267,559,694 | 266,652,209 |
5. Investments
| Listed Investments 31-Mar-23 £000 | Unlisted Investments(1) 31-Mar-23 £000 | Total Investments 31-Mar-23 £000 | Total Investments 31-Mar-22 £000 | Total Investments 30-Sep-22 £000 | |
| Opening valuation | 105,321 | 13,867 | 119,188 | 202,800 | 202,800 |
| Re-classification adjustment | — | — | — | — | — |
| Purchases at cost | 39,201 | 12,719 | 51,920 | 22,737 | 29,460 |
| Effective yield adjustment | 26 | — | 26 | — | — |
| Non-cash distribution | — | — | — | 54(2) | 126(3) |
| Sale proceeds | (5,031) | — | (5,031) | (12,765) | (27,995) |
| Realised (losses)/gains | (5,075) | — | (5,075) | (2,161)(4) | 2,056(4) |
| Unrealised (losses) | (2,691) | (2,706) | (5,397) | (41,732)(4) | (87,259)(4) |
| Closing valuation | 131,751 | 23,880 | 155,631 | 168,933 | 119,188 |
| Cost at period end | 125,468 | 35,071 | 160,539 | 122,917 | 118,699 |
| Unrealised gains/(losses) at period end | 26,024 | (3,994) | 22,030 | 63,852 | 23,935 |
| Diminution in value at period end(5) | (19,741) | (7,197) | (26,938) | (17,836) | (23,446) |
| Valuation at period end | 131,751 | 23,880 | 155,631 | 168,933 | 119,188 |
(1) Includes £14.3 million invested in the Marlborough Special Situations Fund.
(2) The Company elected to convert accrued fixed interest from a convertible loan note in XP Factory into shares (£54k).
(3) As noted above accrued fixed interest of £54k from a loan note in XP Factory converted into shares, EKF Diagnostics plc distribution in specie of Verici shares (£13k) and the Company elected to convert accrued fixed interest from a convertible loan note in Kindly into shares (£59k).
(4) The net (loss) on investments held at fair value through profit or loss in the income statement is the sum of the realised (losses)/gains and unrealised (losses) for the period as detailed in the table above.
(5) Diminishments of £7,110,352 were made in the six month period ending 31 March 2023. Once adjusted for disposals of £3,617,829 diminishments at the period end are £26,938,099.
Financial Instruments – fair value measurement hierarchy
The table below sets out fair value measurements using FRS102 (appendix to section 2 fair value measurement) fair value hierarchy. The Company has one class of assets, being at fair value through profit or loss.
• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: Valued by reference to valuation techniques using inputs that are not based on observable market data.
| Level 1 Investments £’000 | Level 2 Investments £’000 | Level 3 Investments £’000 | Total Investments £’000 | |
| Six months ended 31 March 2023 (unaudited) | 143,615 | 2,449 | 9,567 | 155,631 |
| Year ended 30 September 2022 (audited) | 104,999 | 3,561 | 10,558 | 119,188 |
| Six months ended 31 March 2022 (unaudited) | 144,368 | — | 24,570 | 168,933 |
The following table sets out the basis of valuation for the material Level 3 investments and those where the value has materially changed during the period, held within the portfolio at 31 March 2023.
| Level 3 Unquoted Investments | |
| SCA Investments Ltd (Gousto) | The company raised new equity in February 2023 to fund capital expenditure and working capital. Revenue and EBITDA continues to improve following a difficult period in mid-2022. Although the assessment of value has resulted in an increased enterprise value, the addition of a new class of share has resulted in a reduction to the value of the investment. EV/Sales and EV/EBITDA peer group ratios and discounted cash flow analysis were used to support the valuation. |
| Kidly Ltd | Trading remained difficult over the winter period with the company closing FY23 with revenues lower year on year. Losses were marginally lower than in the prior year. The company has made changes to its operating model to increase efficiency and reduce losses in FY24. The company successfully raised new financing from debt and equity investors (including the Company) during the period under review and post period end, potentially sufficient to take the company through to break even. The fair value of the equity investment, which was reviewed against EV/Sales multiples across a peer group of listed companies, was unchanged. The fair value of the convertible loan note investment was also unchanged. The conversion option is valued using the Black-Scholes option pricing model. |
| Infinity Reliance Ltd (My 1st Years) | Despite the difficult environment, trading remained resilient and in line with expectations in FY22 with the company continuing to generate positive EBITDA. The company expects to generate modest growth in revenues in FY23. The fair value of the investment, which was unchanged, was reviewed against EV/Sales multiples across a peer group of listed companies. |
| Portr Ltd | The company continues to generate modest revenues from operations in the United Kingdom and Switzerland. Much of its recent focus has been on securing a new funding to support a growth plan that includes launches into several new territories. The assessment of fair value was set with reference to FY23 projections and EV/Sales multiples across a peer group of listed peers and led to a reduction in value following a review of several funding scenarios. |
| Zappar Ltd | The company modestly reduced revenue guidance for FY23 to reflect lengthening sales cycles. Profit forecasts were unchanged. Despite a considerably more cautious outlook, the company expects to deliver further growth in FY24. The valuation, which was unchanged, was reviewed against the revised financial projections for FY23 and EV/Sales multiples across a peer group of listed companies, many of which had increased in value over the period. |
| Osirium Technologies plc – convertible loan note | The company raised new equity in November 2022 and, as a result, set a new lower strike price for the value of the option to convert the loan note into the company’s ordinary shares, which increased the value of the option to convert and, as a result, the value of the convertible loan note. The value of the conversion option was calculated using the Black-Scholes option pricing model. |
Level 3 Unquoted Investment disposals
There were no disposals of unquoted investments in the period.
6. Dividends paid
Summary of dividends paid in the six months to 31 March 2023 and the financial year ending 30 September 2022 are detailed below:
| Six months ended 31 March 2023 (unaudited) £’000 | Year ended 30 September 2022 (audited) £’000 | |
| Special capital dividend of 2.50 pence per share paid on 29 October 2021 | — | 5,704 |
| Final capital dividend of 3.15 pence for the year ended 30 September 2021 paid on 10 February 2022 | — | 8,455 |
| Interim capital dividend of 1.00 pence per share for the year ended 30 September 2022 paid on 29 July 2022 | — | 2,671 |
| Special capital dividend of 2.00 pence per share paid on 10 February 2023 | 6,216 | — |
| Final capital dividend of 2.00 pence per share for the year ended 30 September 2022 paid on 10 February 2023 | 6,216 | — |
| Unclaimed dividends(1) | (13) | |
| Total | 12,419(2) | 16,830(3) |
(1) Unclaimed dividends for a period of 12 years reverted to the Company.
(2) The difference between total dividends paid for the period ending 31 March 2023, and the cash flow statement is £1,009,000 which is the amount of dividends reinvested under the DRIS for the period.
(3) The difference between total dividends paid for the period ending 30 September 2022 and the cash flow statement is £1,038,000 which is the amount of dividends reinvested under the DRIS for the period.
7. Debtors
| Six months to 31 March 2023 (unaudited) £000 | Six months to 31 March 2022 (unaudited) £000 | Year ended 30 September 2022 (audited) £000 | |
| Prepayments and accrued income | 925 | 496 | 408 |
8. Creditors: amounts falling due within one year
| Six months to 31 March 2023 (unaudited) £000 | Six months to 31 March 2022 (unaudited) £000 | Year ended 30 September 2022 (audited) £000 | |
| Trade Creditors | — | 20 | 8 |
| Accruals and deferred income | 961 | 1,119 | 992 |
| 961 | 1,139 | 1,000 |
9. Transactions in shares
Buybacks
In total, the Company repurchased 2,660,431 shares during the six month period ending 31 March 2023 at a total cost of £1,454,426. The repurchased shares represent 1% of ordinary shares in issue on 1 October 2022. The acquired shares have been cancelled.
Share issues
In total, the Company issued 64,869,248 new shares (nominal value £648,692) through an offer for subscription during the six month period ending 31 March 2023, raising gross proceeds of £39,369,083. Once adjusted for issue costs this resulted in net proceeds of £38,538,938.
The Company also issued 1,836,516 shares under the dividend reinvestment scheme.
10. Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments of the Company at 31 March 2023.
11. Legal form and principal activities
The Company was incorporated and registered in England and Wales on 16 August 2004 under the Companies Act 1985, registered number 5206425.
The Company has been approved as a Venture Capital Trust by HMRC under section 259 of the Income Taxes Act 2007. The shares of the Company were first admitted to the Official List of the UK Listing Authority and trading on the London Stock Exchange on 29 October 2004 and can be found under the TIDM code “HHV”. The Company is premium listed.
In common with many other VCTs, the Company revoked its status as an investment company as defined in Section 256 of the Companies Act 1985 on 23 May 2006 to facilitate the payment of dividends out of capital profits.
The Company’s principal activity is to invest in a diversified portfolio of qualifying small UK based companies, primarily trading on AIM, with a view to generating capital returns and income from its portfolio and to make distributions from capital and income to shareholders whilst maintaining its status as a VCT.
The Company is registered as a small UK Alternative Investment Fund Manager (AIFM) with a Board comprising of six non-executive directors, five of whom are independent. Oliver Bedford is not considered independent as he is an employee of Canaccord Genuity Asset Management Limited, the Company’s Investment Manager. Canaccord Genuity Wealth Limited acts as administrator and custodian and JTC (UK) Limited provide company secretarial services to the Company.
The Board has overall responsibility for the Company’s affairs including the determination of its investment policy, however, the Board may exercise these responsibilities through delegation to Canaccord Genuity Asset Management Limited, Canaccord Genuity Wealth Limited and JTC (UK) Limited as it considers appropriate.
The Directors have managed and continue to manage the Company’s affairs in such a manner as to comply with Section 259 of the Income Taxes Act 2007.
12. Cautionary statement
The results should not be taken as a guide to the results for the financial period ending 30 September 2023. This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be considered as a profit forecast.
13. Publication of non-statutory accounts
The financial information contained in the 31 March 2023 income statement, balance sheet, statement of cash flows and statement of changes in equity has not been audited and does not comprise full financial statements within the meaning of Section 434 of the Companies Act 2006. No statutory accounts in respect of any period after 30 September 2022 have been reported on by the Company’s auditor.
The comparative figures for the financial year ended 30 September 2022 have been extracted from the latest published audited Annual Report and Financial Statements. Those accounts have been reported on by the Company’s auditor and lodged with the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
14. Related party transactions and conflicts of interest
The remuneration of the Directors, who are key management personnel of the Company is disclosed in the table below.
| Director | Role | Fees for the six-month period ending 31 March 2023 (£) |
| David Brock | Chair | 19,500 |
| Oliver Bedford | Director | 14,000 |
| Angela Henderson | Director (Chair of Management and Service Provider Engagement Committee) | 16,000 |
| Justin Ward | Director (Chair of Audit Committee) | 16,750 |
| Megan McCracken | Director | 15,250 |
| Busola Sodeinde | Director | 15,250 |
Transactions with the manager
As the Company’s Investment Manager, Canaccord Genuity Asset Management is a related party to the Company for the purposes of the Listing Rules. As the Investment Manager and CGWL are part of the same CGWL group, CGWL also falls into the definition of related party.
Oliver Bedford, a non-executive director of the Company is also an employee of the Investment Manager which received fees of £14,000 for the period ended 31 March 2023 in respect of his position on the Board (2022: £12,875). Of these fees £7,000 was owed at the period end.
CGWL act as administrator and custodian to the Company.
| 31 March 2023 (£) | 31 March 2022 (£) | 30 September 2022 (£) | |
| Custody | 15,000 | 15,000 | 30,000 |
| Administration | 97,500 | 97,500 | 195,000 |
| Total | 112,500 | 112,500 | 225,000 |
| Still owed at the period end | 55,975 | 55,980 | 55,240 |
Under an offer agreement dated 5 September 2022, CGWL were appointed by the Company to administer the offer for subscription and acted as receiving agent in relation to the offer. Under the terms of the agreement CGWL received a fee of 3.5% of the gross proceeds of the offer for providing these services. The Administrator agreed to discharge commissions payable to financial advisers in respect of accepted applications for Offer Shares submitted by them, including any trail commission.
The Administrator also agreed to discharge and/or reimburse all costs and expenses of and incidental to the offer and the preparation of the prospectus, including without limitation to the generality of the foregoing, FCA vetting fees in relation to the prospectus, sponsor and legal fees, expenses of the Company and CGWL, the Company’s tax adviser’s fees and expenses, registrar’s fees, costs of printing, postage, advertising, publishing and circulating the prospectus and marketing the offer, including any introductory commission and discounts to investors. However, the Administrator was not responsible for the payment of listing fees associated with the admission of the ordinary shares to the premium segment of the Official List and to trading on the main market of the London Stock Exchange.
During the half year, the Company issued 64,869,248 ordinary shares of 1 penny (nominal value £648,692) in an offer for subscription which resulted in gross funds being received of £39,369,083. As marketing adviser and receiving agent to the Company, CGWL was entitled to 3.5% of the gross proceeds (£1,377,918), often referred to as the ‘premium’. From this, CGWL paid for the allotment of additional shares to investors with a value of £547,773. A further reduction of £755 introductory commission was made resulting in net fees payable to CGWL of £829,390 which were then used to pay other costs associated with the prospectus and marketing.
Following the final allotment under the offer, CGWL rebated £100,000 to the Company, being the maximum rebate available under the offer agreement for a £40 million raise.
Canaccord Genuity Asset Management Limited is appointed as Investment Manager to the Company and receives an investment management fee of 1.7% per annum.
Investment management fees for the half-year are £1,451,972 (2022: £1,900,193). Of these fees £701,058 was still owed at the period end. As the Investment Manager to the Company and the investment advisor to the Marlborough Special Situations Fund (in which the Company may invest), the Investment Manager makes an adjustment as necessary to its investment management fee to ensure the Company is not charged twice for their services.
Upon completion of an investment, the Investment Manager is permitted under the investment management agreement to charge private investee companies a fee equal to 1.5% of the investment amount. This fee is subject to a cap of £40,000 per investment and is payable directly from the investee company to the Investment Manager. The Investment Manager may recover external due diligence and transactional services costs directly from private investee companies. No fees were charged to investee companies in the period to 31 March 2023 under this agreement.
Total commission of £48,447 was paid to CGWL in the half year for broker services.
The Investment Manager has agreed to indemnify the Company and keep indemnified the Company in respect of the amount by which the annual running costs of the Company exceed 3.5% of the net assets of the Company, such costs shall exclude any VAT payable thereon and any payments to financial intermediaries, the payment of which is the responsibility of the Company. No fees were waived by the Investment Manager in the first half of the financial year under the indemnity.
As at 31 March 2023, the Company had cash deposits of £19,130,255. Of this, £8,856,608 was held in the client account at CGWL.
15. Post balance sheet events
Buybacks
Since the period end, a further 1,481,360 ordinary shares have been purchased at an average price of 50.68 pence and a total cost of £750,823.
Share issues
Since the period end, a further 1,047,986 new shares have been issued (nominal value £10,480) raising net proceeds of £554,210. The offer is now fully subscribed and closed.
Cancellation of share premium
In accordance with a special resolution passed at a general meeting of the Company on 7 October 2022, the amount standing to the credit of the share premium account on 9 May 2023 (£133.2m) has been cancelled.
New investments
The Company has made the following investments since the period end:
| Amount Invested £000 | Investment into existing company | |
| Qualifying Companies | ||
| Fadel Partners Inc | 2,300 | No |
| Non-Qualifying Companies | ||
| Ashtead Group plc | 344 | Yes |
| On the Beach Group plc | 320 | Yes |
Alternative performance measures
An alternative performance measure (“APM”) is a financial measure of the Company’s historic or future financial performance, financial position or cash flows which is not defined or specified in the applicable financial reporting framework.
The Directors assess the Company’s performance against a range of criteria which are viewed as particularly relevant for a VCT.
APM definitions are available in the interim report. Where the calculation of the APM is not detailed within the financial statements, an explanation of the methodology employed is below:
NAV total return
| 31 March 2023 | 31 March 2022 | ||
| Opening NAV per share | A | 60.19p | 100.39p |
| Special dividend paid | B | 2.00p | 2.50p |
| Final dividend paid | C | 2.00p | 3.15p |
| Closing NAV per share | D | 52.84p | 77.13p |
| NAV total return | [(B+C+D-A)/A]*100 | -5.57% | -17.54% |
NAV total return (dividends reinvested)
| 31 March 2023 | % Return | |||
| Opening NAV per share (30 September 2022) | A | 60.19p | ||
| Closing NAV per share (31 March 2023) | 52.84p | |||
| Special dividend paid February 2023 | 2.00p | |||
| Final dividend for year paid February 2023 | 2.00p | |||
| Total dividend payments | 4.00p | |||
| Closing NAV per share plus dividends paid | 56.84p | -5.57% (-17.54% 31 March 2022) | ||
| In year performance of reinvested dividends | -0.25p | |||
| NAV total return (dividends reinvested) | ((B-A)/A)*100 | B | 56.59p | -5.98% (-18.49% 31 March 2022) |
Share price total return
| 31 March 2023 | 31 March 2022 | ||
| Opening share price | A | 62.75p | 93.00p(1) |
| Special dividend paid | B | 2.00p | — |
| Final dividend paid | C | 2.00p | 3.15p |
| Closing share price | D | 50.00p | 74.75p |
| Share price total return | ((B+C+D-A)/A)*100 | -13.94% | -16.24% |
(1) Ex-dividend (special).
Share price total return (dividends reinvested)
| 31 March 2023 | % Return | |||
| Opening share price (30 September 2022) | A | 62.75p | ||
| Closing share price (31 March 2023) | 50.00p | |||
| Special dividend paid February 2023 | 2.00p | |||
| Final dividend for year paid February 2023 | 2.00p | |||
| Total dividend payments | 4.00p | |||
| Closing share price plus dividends paid | 54.00p | -13.94% (-16.24% 31 March 2022) | ||
| In year performance of reinvested dividends | -0.30p | |||
| Share price total return (dividends reinvested) | ((B-A)/A)*100 | B | 53.70p | -14.42% (-16.67% 31 March 2022) |
Ongoing charges ratio
The ongoing charges ratio has been calculated using the AIC’s “Ongoing Charges” methodology.
| 31 March 2023 £000 | 31 March 2022 £000 | ||
| Investment management fee(1) | 2,904 | 3,800 | |
| Other expenses(1)(2) | 932 | 1,086 | |
| VCT proportion of MSSF expenses(1) | 113 | 34 | |
| Ongoing charges | A | 3,949 | 4,920 |
| Average net assets | B | 182,015 | 234,128 |
| Ongoing charges ratio | (A/B)*100 | 2.17% | 2.10% |
(1) Figures for the period ending 31 March 2022/23 have been annualised to calculate the ongoing charges ratio.
(2) Other expenses exclude London Stock Exchange fees of £75k (2023) and £49k (2022) for admission of shares under the offer for subscription as the Board do not consider this cost to be an ongoing cost to the fund.
Share price discount
| 31 March 2023 | 31 March 2022 | ||
| Share price | A | 50.00p | 74.75p |
| NAV per share | B | 52.84p | 77.13p |
| (Discount) / premium | [(A/B)-1]*100 | -5.37% | -3.09% |
The 1 year average discount of -4.19% is calculated by taking the average of the share price discount at each month end between 30 April 2022 and 31 March 2023.
The 5 year average discount of – 5.56% is calculated by taking the average of the share price discount at each month end between 30 April 2018 and 31 March 2023.
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