Baronsmead Second Venture
Trust plc
Annual Report and Audited
Financial Statements
for the year ended 30
September 2024
The Directors of Baronsmead Second Venture Trust plc are pleased to announce the Annual Financial Report for the
year ended 30 September 2024. The Annual Report and Financial
Statements can be obtained from the following website:
www.baronsmeadvcts.co.uk
Financial Highlights
· Net Asset
Value ("NAV") per share increased 6.3 per cent to 59.2p, before the
deduction of dividends, for the financial year ended 30 September
2024.
· NAV
total return of 337.7p to shareholders for every 100.0p invested at
launch (January 2001).
· Annual tax free
dividend yield of 7.2 per cent based on 4.0p dividends paid
(including proposed final dividend of 2.25p) and opening NAV of
55.6p.
· £13.4million of investments made into seven new and twelve
follow-on opportunities during the year.
Investment policy
Baronsmead Second Venture Trust plc's ("the Company")
investment policy is to invest primarily in a diverse portfolio of
UK growth businesses, whether unquoted or traded on AIM, which are
substantially based in the UK, although many of these investees may
have some trade overseas.
Investments are made selectively
across a range of sectors in companies that have the potential to
grow and enhance their value and which will diversify the
portfolio.
The Company will make investments in
accordance with the prevailing VCT legislation which places
restrictions on the type and age of investee companies as well as
the maximum amount of investment that such investee companies may
receive.
Investment securities
The Company invests in a range of
securities including, but not limited to, ordinary and preference
shares, loan stocks, convertible securities, and permitted
non-qualifying investments as well as cash. Unquoted investments
are usually structured as a combination of ordinary shares and loan
stocks or preference shares, while AIM-traded investments are
primarily held in ordinary shares. No single investment may
represent more than 15 per cent (by VCT value) of the Company's
total investments.
Liquidity
Pending investment in VCT qualifying
investments, the Company's cash and liquid funds are held in
permitted non-qualifying investments.
Investment style
Investments are selected in the
expectation that the application of private equity disciplines,
including active management of the investments, will enhance value
and enable profits to be realised on the sale of
investments.
Co‑investment
The Company typically invests
alongside Baronsmead Venture Trust plc in unquoted and quoted
companies sourced by the Manager. Following the Manager's
acquisition of the Mobeus VCTs in September 2022, the Company now
also co-invests alongside the Mobeus VCTs in new unquoted VCT
qualifying investments. All new qualifying AIM dealflow will
continue to be exclusively allocated between the Company and
Baronsmead Venture Trust plc.
As detailed in the Management
retention section of the Strategic Report in the full Annual Report
and Accounts the Manager's staff and portfolio consultants
are entitled to invest in unquoted investments alongside the
Company. This arrangement is in line with current practice of
private equity houses and its objective is to attract, recruit,
retain and incentivise the Manager's team and is made on terms
which align the interests of shareholders and the
Manager.
Borrowing powers
Should it be required, the Company's
policy is to use borrowing for short term liquidity purposes only
up to a maximum of 25 per cent of the Company's gross assets, as
permitted by the Company's Articles of Association.
Investment objective
The Company is a tax efficient
listed company which aims to achieve long-term positive investment
returns for private investors, including tax-free
dividends.
Dividend policy
The Board will decide the annual
dividends each year and the level of the dividends will depend on
investment performance, the level of realised returns and available
liquidity. The dividend policy guidelines below are not binding and
the Board retains the ability to pay higher or lower dividends
relevant to prevailing circumstances and actual realisations.
However, the Board confirms the following two guidelines that shape
its dividend policy:
· The Board will, wherever possible, seek to pay two dividends
to shareholders in each calendar year, typically an interim in
September and a final dividend following the AGM in February/March;
and
· The Board will use,
as a guide, when setting the dividends for a financial year, a sum
representing 7 per cent of the opening NAV of that financial
year.
Key
elements of the business model
Access to an attractive, diverse portfolio
The Company gives shareholders
access to a diverse portfolio of growth businesses.
The Company will make investments in
growth businesses, whether unquoted or traded on AIM, which are
substantially based in the UK in accordance with the prevailing VCT
legislation. Investments are made selectively across a range of
sectors.
The
Manager's approach to investing
The Manager endeavours to select the
best opportunities and applies a distinctive selection criteria
based on
· Primarily investing in parts of the economy which are
experiencing long term structural growth
· Businesses that demonstrate, or have the potential for, market
leadership in their niche
· Management teams that can develop and deliver profitable and
sustainable growth
· Companies with the
potential to become an attractive asset appealing to a range of
buyers at the appropriate time to sell
In order to ensure a strong pipeline
of opportunities, the Manager invests in building deep sector
knowledge and networks and undertakes significant proactive
marketing to interesting target companies in preferred sectors.
This approach generates a network of potentially suitable
businesses with which the Manager maintains a relationship ahead of
possible investment opportunities.
The
Manager as an influential shareholder
The Manager is an engaged and
supportive shareholder (on behalf of the Company) in both unquoted
and significant quoted investments.
For unquoted investments,
representatives of the Manager often join the investee
board.
The role of the Manager with
investees is to ensure that strategy is clear, the business plan
can be implemented and that the management resources are in place
to deliver profitable growth. The intention is to build on the
business model and grow the company into an attractive target able
to be either sold or potentially floated in the medium
term.
STRATEGIC REPORT
CHAIR'S STATEMENT
The economic environment over the 12
months to 30 September 2024 was mixed. The persistently high
inflation and rising interest rates that preceded the start of the
period subsided, with inflation falling to the lowest level in
three years and there was an initial cut in interest rates, with
expectations of more to come. Against this backdrop, the Company's
NAV per share increased 3.53p per share (6.3 per cent) before
dividend payments for the year ended 30 September 2024.
UK consumer confidence is also at
its highest level in three years. However this has not yet
translated into consumption, which remains subdued, as evidenced by
the recent household saving data. The Company aims to achieve
long-term positive investment returns for its shareholders from a
diverse portfolio of investments in UK growth companies. Despite
the difficult conditions leading to a drop in the value of the
unquoted portfolio over the period, the Board continues to believe
that, in aggregate, the fundamentals of the large majority of
portfolio companies remain robust. The Company continues to be in a
position to support those investee companies where the Manager
believes there is a strong prospect of providing good investment
returns for shareholders over the medium to longer term.
Results
|
Pence per ordinary
share
|
NAV
as at 1 October 2023 (after final dividend)
|
55.63
|
Valuation increase (6.3 per
cent)
|
3.53
|
NAV
as at 30 September 2024 before dividends
|
59.16
|
Less:
Interim dividend paid on 9 September
2024
|
(1.75)
|
Proposed final dividend of 2.25p
payable, after shareholder approval, on 17 March 2025
|
(2.25)
|
Illustrative NAV as at 30 September 2024 after proposed
dividend
|
55.16
|
Portfolio Review
At 30 September 2024, the Company's
investment portfolio was valued at £140.2 million and comprised 83
direct investments, of which 41 are in unquoted companies and 42
are in quoted companies. The Company's investments in three WS
Gresham House Equity Funds were valued at £62.5 million at 30
September. These investments provide investment exposure to an
additional 77 AIM-traded and fully listed companies, spreading
investment risk across a highly diversified portfolio of 160
companies.
The performance of the Company's
portfolio of AIM-listed and other listed investments was 16.2%
during the year. This compared favourably to the FTSE AIM All Share
Index which was 2.0 per cent over the same period. Significant
contributors to this performance were Cerillion, up 47.7 per cent
during the year; and Property Franchise Group, up 54.5 per cent
during the year.
The Company's unquoted investments
however were down 9.0 per cent during the year. This is clearly
very disappointing and stems from continued difficult trading
conditions and lower valuations where the valuations are based on
the valuation of comparable listed companies and affected by higher
discount rates. The largest detractors from performance were
eConsult in the healthcare sector and RevLifter in the technology
sector. These are covered in more detail in the Manager's Review in
the full Annual Report and Accounts.
Investments and Divestments
The Board is once again pleased to
report that the Company continues to see attractive opportunities
and make new investments. The Company invested a total of £13.4
million in 19 companies over the year. Further details of the new
investments made are included in the Manager's review
in the full Annual Report and
Accounts. As we have said to shareholders
previously, the requirement since 2015 to make investments in
earlier stage companies is likely to result in greater volatility
of returns over time. However, the more mature, established
portfolio of existing investments should assist in sustaining
returns and dividends for shareholders, as the newer holdings
develop and grow.
The priority for portfolio companies
is to operate in a difficult macroeconomic environment with
proactivity and resilience. The Company has the resources to
support new and existing portfolio companies and the Manager is
focusing on the key challenges and opportunities of each
holding.
There was only one full realisation
in the unquoted portfolio during the year with proceeds of £0.1
million received from the realisation of FundingXchange, for a
gross multiple of 0.1x cost. However, in addition to this, deferred
earn-out consideration of £0.1 million from the sale of Evotix for
a gross money multiple of 0.8x cost. In the listed portfolio, the
Manager has also continued its approach of profitable partial
realisations of Cerillion during the year, resulting in the receipt
of proceeds of £8.2 million at an aggregate of 21.1x original
invested cost in this AIM-listed company. Following the takeovers
of Gresham House and Gama Aviation, the Company received £0.5
million for a gross money multiple of 3.9x cost and £0.6 million
for a gross money multiple of 0.6x cost
respectively.
Dividends
The Board is pleased to declare a
final dividend of 2.25p per share for the year to 30 September
2024, payable on 17 March 2025. This is in addition to the 1.75p
interim dividend paid in September and means that the total
dividends for the year are 4.00p. This is a 7.2 per cent yield
based on the opening NAV of 55.6p and meets the target policy of 7
per cent of the NAV at the start of the year.
VCT
Regulations - Retirement Date of the UK Government's Venture
Capital Schemes
During the summer we were pleased to
see the European Commission approve the extension of the VCT scheme
until 5 April 2035. This was formalised by UK legislation on 3
September 2024. The regulations bring into effect the extension of
the Enterprise Investment Scheme (EIS) and the Venture Capital
Trust (VCT) Scheme sunset clause to 2035.
Autumn Budget 2024
AIM stocks suffered a material sell
off in the run up to the October 2024 UK budget on fears that IHT
tax relief on AIM shares might be removed. In the event the relief
was reduced but not removed entirely resulting in a relief rally in
certain popular AIM stocks. Overall the preservation of the relief
albeit at reduced rates signals a recognition by the new government
that support for the AIM market is
important as a component of its
overall growth strategy. We look forward to more indications of
government support for the UK equity market going
forward.
Consumer Duty
The FCA's Consumer Duty came into
force on 31 July 2023 and requires in-scope firms to act to deliver
good outcomes for retail customers across the distribution chain in
respect of four main areas: (i) products and services, (ii) price
and value, (iii) consumer understanding, and (iv) consumer support.
The Consumer Duty applies to the regulated and ancillary activities
of all FCA authorised firms under the Financial Services and
Markets Act 2000, the Payment Services Regulations 2017 and the
Electronic Money Regulations 2011. VCTs are not FCA authorised
firms and, accordingly, the Company does not fall within scope of
the Consumer Duty. However, the Consumer Duty does apply to the
Manager, being an FCA authorised firm, and the Board is cognisant
of the Manager's obligations to comply with the Consumer Duty.
Notwithstanding that the Baronsmead VCTs are outside of direct
scope of the Consumer Duty, the Investment Manager continue to
apply the principles of the Consumer Duty to the VCTs given the
retail nature of the target market. The Board receives regular
updates from the Manager on the delivery of its obligations under
the Consumer Duty.
Succession planning
During the year, the Board began the
process of implementing its succession plan, with Adriana Stirling
joining the Board on 1 December 2024. Adriana qualified as a
chartered accountant with PricewaterhouseCooper LLP ("PwC") and
developed extensive organisational and financial crime technical
expertise over her 17 years at PwC, leading client engagements
across financial and non- financial service industries, spanning
the public and private sectors. In 2014, she became the Managing
Director of a private family office. She has overall responsibility
for the investment and operational aspects of the office, including
managing significant shareholder positions in several unquoted
companies. We are very much looking forward to working with
her.
Our current Audit & Risk
Committee Chair, Malcolm Groat, will be retiring with effect from
31 December 2024. Malcolm has served as a director of Baronsmead
Second Venture Trust plc since 2016. I would like to thank Malcolm
for his dedication and hard work during this time and wish him all
the best in his future endeavours. Malcolm was also the Senior
Independent Director and, following Malcolm's retirement, Graham
McDonald will assume this role.
Fundraising
On 1 October 2024 the Company
announced its intention to fundraise new funds in the 2024/25 tax
year. It is the Board's current intention to launch its offer for
subscription to raise £15 million (before costs) with an additional
£10 million over allotment facility during January 2025 in a joint
offer for subscription alongside our sister VCT, Baronsmead Venture
Trust plc. The full terms and conditions as they pertain to these
offers will be published in the prospectus and we will ensure
shareholders are notified accordingly.
Annual General Meeting ("AGM")
The Company intends to hold the next
AGM on 12 March 2025. Shareholders are invited to attend a
presentation by the Manager at 11am followed by a Q&A session.
This will be followed by some light refreshments at 12.30pm. The
formal business of the AGM will start at 1.30pm.
The event will give shareholders
more opportunity to engage with the Board and the Manager and I
look forward to meeting as many shareholders as possible. Please
see the inside cover for more details and how to register to
attend. Registration details will also be included in the Notice of
AGM and on the Baronsmead Second Venture Trust website. The event
will be held in person, with a recording made available shortly
afterwards for those unable to attend in person.
Outlook
With UK CPI now tracking the target
inflation level and UK investors having priced in their
expectations of two further interest rate cuts, we hope that the
green shoots of economic improvement in the second half of the year
will continue.
The portfolio remains highly
diversified and the Board continues to believe it is a good time to
be investing in earlier stage, innovative and high growth potential
businesses. The Manager is actively seeking to complete new
investments, believing that this is a propitious time in the
economic cycle ahead of the typical upswing that follows the
uncertain times of the past few years. We remain confident that the
Manager is suitably resourced and positioned to provide the
necessary levels of support to the portfolio companies and remains
focussed on retaining, recovering and helping to grow value in
existing and future investee companies.
Sarah Fromson
Chair
23 December 2024
MANAGER'S REVIEW
2024 has been a very unusual year
with significant macroeconomic and geopolitical factors having a
significant influence over markets. The UK equity market delivered
modest growth during the year with larger cap companies
outperforming smaller cap companies, particularly those on AIM due
to ongoing negative fund flow dynamics and depressed risk appetite
amongst domestic investors. An increasing weight of money chasing
large cap US stocks, particularly in the technology sector,
supported by index funds and passive flows has further exacerbated
the relative underperformance of the UK. Such levels of global
equity market concentration into one geography (the US) and certain
sectors or companies (large cap technology) have only been seen
infrequently throughout history and have typically reversed
aggressively in due course. A period of uncertainty following the
snap UK general election and the new Labour government's first
budget, the longest such period for almost 100 years, contributed
to volatile sentiment and produced a further headwind for UK
smaller companies reduced, both listed share prices and funding
availability for unquoted growth companies. In particular the
shares of many AIM-listed companies were depressed by the
uncertainty running up to the budget due to concerns over the
future of tax reliefs although the outcome was ultimately less bad
than feared by many commentators. There remains an ongoing
disparity between the valuations of many UK smaller companies and
equivalent valuations for similar companies in private markets.
This has supported the ongoing elevated level of takeover activity
across the UK market as private equity investors and strategic
corporates seek to exploit this discount to buy businesses. We
expect this discount to close as more investors return seeking to
capture some of this increasingly extreme value
opportunity.
During the year our AIM portfolio
and our WS Gresham House Equity Fund investments significantly
outperformed our unquoted portfolio. This largely reflects the
relative maturity of the underlying portfolio companies with our
quoted holdings typically being larger, profitable, cash generative
businesses that have already established themselves and delivering
growth at a sensible moderate pace. In contrast the nature of the
relatively earlier stage unquoted portfolio is such that more of
these businesses are immature and more exposed to elongating sales
cycles that are typical during periods of greater economic
uncertainty. Also typically a certain number of earlier stage
venture investments will fail and those that do tend to fail
earlier than the time it takes for the successful businesses to
demonstrate meaningful and sustained traction. As a result we
expect to see value uplifts come through from the unquote portfolio
in future years as some of the businesses mature.
PORTFOLIO REVIEW
Overview
The net assets of £227 million were
invested as follows:
Asset class
|
NAV (£mn)
|
%
of NAV*
|
Number of investees
|
%
return in the year**
|
Unquoted
|
53
|
23
|
41
|
(9)
|
AIM‑traded companies
|
87
|
38
|
42
|
16
|
WS Gresham House Equity
Funds***
|
62
|
28
|
77
|
18
|
Liquid assets#
|
25
|
11
|
N/A
|
3
|
Totals
|
227
|
100
|
160
|
6
|
*
By value as at 30 September 2024.
**
Return includes interest received on unquoted realisations during
the year.
*** Excludes investee companies with holdings by more than one
fund.
#
Represents cash, OEICs and net current assets. % return in the
period relates only to the cash liquidity funds.
The timeline and table in the Annual
Report and Accounts show the breakdown of new investments and
realisations over the course of the year and below is a commentary
on some of the key highlights in both the unquoted and quoted
portfolios.
Investment activity - unquoted and quoted
The Company's investment strategy is
primarily focused on companies operating in parts of the economy
that we believe are benefiting from long-term structural growth
trends and in sectors where we have deep expertise and network. The
amount of capital invested in each business is matched to the
scale, maturity and underlying risk profile of the company seeking
investment.
During the year, £13.4 million was
invested into 19 companies including 7 new additions to the
portfolio and 12 follow-on investments.
Five new unquoted investments were
completed during the year.
Below are descriptions of the new
investments made;
· Ozone
API is a software developer providing banks
and financial institutions with low-cost, compliant APIs
· CitySwift is a software business that
works with bus operators to analyse data from their
networks
· Azarc.io specialises in business
process automation, notably automating custom declaration
forms
· SciLeads is a
data-intelligence platform that enables companies operating within
Life Science verticals to identify, track and convert potential
customers
· OnSecurity
Technology is a B2B cybersecurity services
business which has built a technology platform to automate the
scoping, scheduling, and reporting of human-based penetration
tests
Two new AIM quoted investments were
made during the year:
· IntelliAM is a provider of a machine learning platform
enabling manufacturing organisations to leverage their data and
maximise the value and efficiency of their assets
·
Earnz is a consolidator in the
blue collar energy services sector created by an experienced
Executive Chairman which the Manager has successfully backed in
previous ventures
The Company made additional
investments totalling £5.1 million into twelve existing portfolio
companies, 3 quoted and 9 unquoted, across the year. This is
consistent with the investment strategy of continuing to back our
high potential assets with further capital to support future
growth. We anticipate the level of follow-on investment will
continue to grow as the earlier stage portfolio continues to
mature.
Investment diversification at 30 September 2024 by
value
Sector*
Technology
|
64%
|
Healthcare &
education
|
20%
|
Business services
|
9%
|
Consumer markets
|
7%
|
Total assets
AIM
|
38%
|
WS Gresham House Equity
Funds
|
28%
|
Unquoted
|
23%
|
Cash liquidity funds
|
11%
|
Length of time investments held*
Pre-VCT rule change**
|
49%
|
Between 5 years and VCT rule
change
|
12%
|
Between 3 and 5 years
|
22%
|
Between 1 and 3 years
|
11%
|
Less than 1 year
|
6%
|
*
Direct investments only, not held by the WS Gresham House UK Equity
Funds.
**
Investments made prior to the VCT rule change that took effect from
18 November 2015.
Quoted Portfolio (AIM-traded investments)
Performance
The quoted portfolio delivered
positive absolute performance of 16.2 per cent during the year,
despite the ongoing elevated levels of geopolitical and
macroeconomic uncertainty in the markets. For reference the AIM
market in the UK increased 2.0 percent over the same period. The
AIM portfolio remains in good financial health and is exposed to
structural growth areas providing some insulation from the
deteriorating economic conditions.
The software sector provided the
largest positive contributor to performance with Cerillion, a
provider of billing and charging software to the telecoms industry
continuing to deliver strong revenue and profit growth. Property
Franchise Group, a franchised estate agency business focussed
primarily on lettings, also performed positively during the year
following its takeover of Belvoir Lettings.
The largest detractors from
performance were Crossword Cybersecurity, a cyber consultancy and
software provider, which was subscale and exhibited a challenging
cash runway; and Inspired, an energy procurement and optimisation
consultancy, which announced the potential for certain large
customer projects to be delayed impacting current year revenue and
profits.
We continue to closely monitor our
AIM portfolio with a rolling programme of independent reviews of
top AIM holdings and broadly continue to be positive on the
long-term investment prospects of these companies. Many of the
larger quoted investments have been long- term holdings. These
companies are typically profitable, cash generative businesses with
low levels of financial gearing and continue to have attractive
long-term growth prospects.
Divestments
There were two full realisations
during the year, both corporate actions, in Gresham House and Gama
Aviation whose proceeds of £0.1 million and £0.1 million
represented gross multiples of 3.9x and 0.6x cost respectively. Our
investment in DeepVerge, an environmental and life sciences group,
was written off during the year although the NAV impact of this was
limited during the year as the value of this investment had
decreased in previous years.
The opportunity to crystallise
further profits was taken for Cerillion; over the course of the
year proceeds of £8.2 million were realised at 21.1x
cost.
In addition to this, liquidation
proceeds of £0.1 million were received for InterQuest, which was
written off in September 2023.
Unquoted portfolio
Performance
The unquoted portfolio decreased in
value by 9.0 per cent during the year. The macroeconomic
environment remained challenging for our portfolio companies with
many experiencing difficult trading conditions and lengthening of
product and services sales cycles, most notably consumer related
businesses.
This was a disappointing performance
which reflects the immaturity of the unquoted portfolio. Earlier
stage investment delivered lower levels of growth than had been
forecast resulting in shortened cash runways. With this increased
risk profile it is appropriate to have reduced the holding value of
a number of the companies within our portfolio. Gresham House's
experienced Non-Executive Directors and consultants continue to
support the portfolio companies during these turbulent times with
the expectation that a number of these companies will recover value
as they trade out of difficult conditions and / or raise further
capital.
Panthera Biopartners and Ozone API
were the two investments that made the biggest positive
contribution in the year. Panthera, a provider of recruitment
services for clinical trials, delivered impressive sales growth and
profitability during the year as a result of new contract wins.
Ozone API, a software developer providing banks and financial
institutions with low-cost, compliant APIs, was a new investment in
the year. The company grew in line with expectations and the
valuation benefitted from the preference structure of the
investment.
The largest detractors from
performance were in the healthcare and technology sectors.
eConsult, an online consultation provider used by GP practices and
hospitals, experienced increased competition during the year and an
ongoing challenge of funding for its hospital product, leading to a
much reduced cash runway. This led to the decision to seek a new
owner for the business and eConsult was acquired by Huma
Therapeutics Ltd in a share for share transaction in September
2024. Huma is a well funded digital healthcare business which
specialises in continuous patient monitoring. RevLifter, an AI
platform using advanced behavioural analytics to deliver tailored
promotions to users, suffered from its largest customer, a large US
retailer, more than halving its spending.
As Manager we remain highly engaged
with the management teams within the portfolio, sharing insight and
best practice to help them both manage risk and spot opportunities
in a quickly changing environment. We have continued to invest in
our portfolio and in-house talent teams, which alongside our
extensive network of earlier stage, high growth company experts,
ensure we are well positioned to help the companies we invest in to
navigate the challenges they face whilst also continuing to develop
and scale.
Divestments
There was one full realisation in
the unquoted portfolio during the year with proceeds of £0.1
million received from the realisation of FundingXchange, for a
gross multiple of 0.1x cost. In addition to this, earn out proceeds
were received on Evotix of £0.1 million with a gross money multiple
of 0.8x cost. Our investment in Armstrong Craven, a provider of
executive search and business intelligence services, was written
off during the year although the value of this investment had
largely decreased in previous years.
Collective investment vehicles
The Company's investments in the WS
Gresham House UK Micro Cap Fund ("Micro Cap"), WS Gresham House UK
Multi Cap Income Fund ("Multi Cap") and WS Gresham House UK Smaller
Companies Fund ("Small Cap") remain a core component of the
Company's portfolio construction. These investments provide
shareholders with additional diversification through exposure to an
additional 77 underlying companies, as well as access to the
potential returns available from a larger and more established
group of companies that fall within the Manager's core area of
expertise.
Over the year, Small Cap and Micro
Cap delivered returns of 31.8 per cent and 9.8 per cent
respectively, compared to the IA UK Smaller Companies sector which
returned 16.1 per cent. Multi Cap delivered a return of 20.5 per
cent, compared to the IA UK Equity Income sector which returned
15.0 per cent.
Micro Cap and Multi Cap continue to
be both highly rated by independent ratings agencies. Micro Cap's
cumulative performance is currently second quartile within the IA
UK Smaller Companies sector over the past 10 years. Multi Cap's
cumulative performance has remained the top quartile within the IA
UK Equity Income sector since launch in June 2017 and is the best
performer over five years. Small Cap has also achieved top quartile
cumulative performance since launch in 2019 and is the third best
performing fund over the past five years within the IA UK Smaller
Companies sector.
Liquid assets (cash and near cash)
The Company had cash and liquidity
OEICs of approximately £25.8 million at the year-end. This asset
class is conservatively managed to take minimal or no capital risk.
The average 7 day yield on the liquidity OEICs was 4.9 per cent at
the end of the year.
Third party independent valuations
During the year, the Company engaged
the services of Lincoln International and Kroll to conduct
independent third party valuations as a means of managing the
Board's risk in respect of a systematic error regarding the
valuation of one or more of the material VCT portfolio assets. The
responsibility for the preparation of draft valuations lies with
the Manager, and this does not constitute outsourcing of any part
of the valuation, and the Board is responsible for the approval of
valuations. The Manager uses these independent valuations in
conjunction with their own valuations to provide independent
assurance and risk mitigation to the Board and the Board continues
to support this. Four unquoted investments were selected focussing
on the higher valued assets in the portfolio, which also covered
different characteristics such as value based on both revenue and
EBITDA multiples and those with a range of both equity and loan
instruments. In July 2024, the Board assessed the use of the third
party valuations and concluded that the process had provided
comfort on the Manager's controls and the quality of the Manager's
processes compared to the market. Furthermore, the Board agreed to
reassess the use of third party independent valuations on a regular
basis.
ESG
Highlights
Following the year end, we commenced
our latest ESG survey of our unquoted portfolio companies, to
identify how these companies think about ESG and which ESG data is
already being reported and monitored. Further details on our ESG approach and policies can be found
in the strategic report in the full Annual Report and
Accounts.
Outlook
Geo-political flux is likely to
persist throughout 2025, although the UK election result will
hopefully allow more clarity on the future economic and political
landscape. That being said, the impact of the UK Government's first
budget has caused an element of short term market turbulence,
potential inflationary pressures and pausing of interest rate
reductions.
This environment should present
attractive opportunities with the advantage of being able to take a
longer-term view of both new and portfolio follow-on investments.
The early stage cohort of investments are taking on the challenges
presented and are expected to accelerate their funding plans,
however this should also produce some compelling follow-on
investment opportunities.
Gresham House's seasoned investment
managers are a vital source of knowledge and experience available
to support the Company's portfolio of management teams. In this
respect, Gresham House is well placed by having one of the largest
and most experienced portfolio teams in the industry.
Looking into 2025, the Manager
remains cautiously optimistic that the combination of a somewhat
improving economic backdrop, greater political stability and a more
attractive valuation environment will produce attractive investment
opportunities when viewed with a long- term perspective.
Gresham House Asset Management Ltd
Manager
23 December 2024
Investments in the year*
Invested a total of £13.4 million in
to:
· £5.520
million in to five new unquoted investments
· £3.814
million in to nine existing unquoted investments
· £2.820
million in to two new AIM-traded investments
· £1.253
million in to three existing AIM-traded investments
October 2023
Eden Research plc- £0.9mn (quoted,
follow on)
December 2023
Ozone Api - £1.8mn (unquoted, new
investment)
CitySwift - £0.9mn (unquoted, new
investment)
Patchworks - £0.9mn (unquoted,
follow on)
Azarc.io - £0.7mn (unquoted, new
investment)
Metrion Biosciences- £0.5mn
(unquoted, follow on)
Focal Point Positioning - £0.2mn
(unquoted, follow on)
March 2024
SciLeads - £0.9mn (unquoted, new
investment)
PCI-PAL - £0.2mn (quoted, follow
on)
Orri - £0.1mn (unquoted, follow
on)
April 2024
Yappy - £0.3mn (unquoted, follow
on)
Rockfish Group - £0.2mn (unquoted,
follow on)
May 2024
CountingUp - £0.5mn (unquoted,
follow on)
June 2024
OnSecurity Technology - £1.2mn
(unquoted, new investment)
Dayrize - £0.1mn (unquoted, follow
on)
July 2024
IntelliAM - £2.1mn (quoted, new
investment)
Orri - £0.2mn (unquoted, follow
on)
August 2024
Airfinity - £0.7mn (unquoted, follow
on)
Oberon Investments - £0.1mn (quoted,
follow on)
September 2024
Earnz - £0.7mn (quoted, new
investment)
Dayrize - £0.1mn (unquoted, follow
on)
* Investments in to unquoted and AIM
investments only.
Realisations in the year
|
|
First
investment
|
Original
book cost#
Proceeds‡
|
Overall
multiple
|
IRR
|
Company
|
|
date
|
£'000
|
£'000
|
return (x)
|
(%)
|
Unquoted realisations
|
|
|
|
|
|
|
Funding Xchange Ltd
|
Full trade sale
|
Nov
19
|
795
|
50
|
0.1
|
-
|
Armstrong Craven Ltd
|
Written off
|
Jun
13
|
664
|
-
|
1.1*
|
1.6
|
Total unquoted realisations
|
|
|
1,459
|
50
|
|
|
AIM-traded realisations
|
|
|
|
|
|
|
Cerillion plc
|
Market sale
|
Nov
15
|
388
|
8,171
|
21.1
|
43.4
|
Gama Aviation plc
|
Tender offer
|
Nov
10
|
1,004
|
573
|
0.6
|
-
|
Gresham House plc
|
Takeover
|
Nov
14
|
137
|
530
|
3.9
|
15.9
|
Deepverge plc
|
Written off
|
Jun
21
|
1,590
|
-
|
-
|
-
|
Total AIM-traded realisations
|
|
|
3,119
|
9,274
|
|
|
Total realisations in the year**
|
|
|
4,578
|
9,324
|
|
|
During the year, liquidation
proceeds of £114k were received from InterQuest Group plc, which
was written off in September 2023; and earn out proceeds of £69k
were received from Evotix Ltd, which was realised in May 2023; and
liquidation proceeds of £14k were received from Crawshaw Group plc,
was written off in October 2018.
# Residual
book cost at realisation date.
‡ Proceeds at time of realisation including interest.
* Includes interest/dividends
received, loan note redemptions and partial realisations accounted
for in prior periods.
** Includes unquoted and AIM
investments only.
Final Dividend
Subject to shareholder approval at
the AGM, a final dividend of 2.25p per share will be paid on 17
March 2025 to shareholders on the register at 14 February 2025. The
ex-dividend date will be 13 February 2025, and the last date for
registering DRIP instructions will be 24 February 2025.
Annual General Meeting
The AGM will be held on 12 March 2025
at Saddlers' Hall EC2V 6BR. Shareholders are invited to attend the
Shareholder Event starting at 10.30am. This will include
presentations from the Company Chair, members of the Manager's
team, case studies and presentations from a number of portfolio
companies as well as a Q&A session. This will be followed by
lunch. The formal business of the AGM will start at 1.30pm. The
2025 Notice of Annual General Meeting can be found on the Company's
website and will be posted to shareholders shortly.
Further Information
The Annual Report and Accounts for
the year ended 30 September 2024 and the 2025 Notice of Annual
General Meeting will both be available today on
www.baronsmeadvcts.co.uk.
The Annual Report will be submitted
shortly in full unedited text to the Financial Conduct Authority's
National Storage Mechanism and will be available for inspection
at data.fca.org.uk/#/nsm/nationalstoragemechanism
in accordance with DTR 6.3.5(1A) of the Financial
Conduct Authority's Disclosure Guidance and Transparency
Rules.
LEI: 2138008D3WUMF6TW8C28
END
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accessible from hyperlinks on this announcement (or any other
website) is incorporated into, or forms part of, this
announcement.