HERALD INVESTMENT TRUST
plc
(the
"Company")
LEI NUMBER:
213800U7G1ROCTJYRR70
HALF-YEARLY FINANCIAL REPORT
ANNOUNCEMENT
For the
six months ended 30 June 2024
INVESTMENT OBJECTIVE AND
POLICY
Herald Investment Trust plc's
(Herald or the Company) objective is to achieve capital
appreciation through investments in smaller quoted companies in the
areas of technology and communications. Investments may be made
across the world. The business activities of investee companies
will include information technology, broadcasting, printing and
publishing and the supply of equipment and services to these
companies. The Company's investment policy is set out in full on
page 34 of the Company's annual report and financial statements for
the year ended 31 December 2023 and remains unchanged.
INTERIM MANAGEMENT REPORT
The directors are required to
provide an Interim Management Report in accordance with the
Financial Conduct Authority (FCA) Disclosure Guidance and
Transparency Rules (DTR). The directors consider that the
Chairman's Statement provides details of the important events which
have occurred during the six months ended 30 June 2024 and
their impact on the financial statements. The statement on Related
Party Transactions, the Statement of Directors' Responsibilities
and the Chairman's Statement together constitute the Interim
Management Report of the Company for the six months period ended 30
June 2024. The outlook for the Company for the remaining six months
of the year ending 31 December 2024 is discussed in the Chairman's
Statement.
PRINCIPAL RISKS AND
UNCERTAINTIES
The principal risks facing the
Company, including the board's assessment thereof and mitigation
factors, are detailed in the annual report and financial statements
for the year ended 31 December 2023 on pages 35 to 37 of the
Strategic Report. Market risk, liquidity risk and credit risk are
discussed in detail in note 17 of the Company's annual report and
financial statements for the year ended 31 December 2023. Principal
risks facing the Company include the following: strategic risk
(risk as an investor in smaller companies); market, economic and
geopolitical risks (with these three risks covering currency risk,
interest rate risk and other price risk including, but not limited
to liquidity, price, valuation, technology and communications,
small cap, and political developments); investment management risks
(including liquidity of the portfolio and key person risks); third
party service provider operational risks (failure of service
providers and cyber risk); emerging/external risk (failure to have
in place procedures that assist in identifying new or familiar
risks that become apparent in new or unfamiliar conditions). Other
risks are also considered: gearing risk (the use of borrowings can
magnify the impact of falling markets); discount volatility;
operational risk; emerging/external risks (climate change and
global pandemic risk); and regulatory risk (the loss of investment
trust status or a breach of applicable legal and regulatory
requirements).
In the view of the board, the
principal risks and uncertainties facing the business are broadly
the same as those in the published annual report and financial
statements for the year ended 31 December 2023, and these risks and
uncertainties remain applicable to the remaining six months of the
year.
The annual report can be obtained
free of charge from the Manager, Herald Investment Management
Limited ("HIML") and is available on its website:
www.heralduk.com.
RELATED PARTY
TRANSACTIONS
Details of the related party
transactions were provided in the annual report and financial
statements for the year ended 31 December 2023. There have
been no changes to the related party transactions described in the
annual report that could have a material effect on the financial
position or performance of the Company.
GOING CONCERN
The directors have undertaken a
review of the Company's financial position and ability to continue
as a going concern. This review took account of continuing global
tensions (for example between China and the US over Taiwan, the war
in Ukraine) and climate change. These uncertainties have created
supply chain disruption and exacerbated inflationary pressures
worldwide. The Company's principal risks are market-related and the
current market conditions have demonstrated the resilience of the
Company and its investment objective and policy. The board
considers that there are no material uncertainties that call into
question the Company's ability to continue as a going concern for
at least twelve months from the date of approval of these financial
statements and the board is confident that the Company will be able
to continue in operation and meet its liabilities as they fall due.
Consequently, the financial statements continue to be prepared on a
going concern basis.
STATEMENT OF DIRECTORS'
RESPONSIBILITIES
We confirm that to the best of our
knowledge:
a) the condensed set of
financial statements has been prepared in accordance with FRS 104
'Interim Financial Reporting' and gives a true and fair view of the
assets, liabilities, financial position and profit of the
Company;
b) the half-yearly
financial report and interim management report includes a fair
review of the information required by Disclosure Guidance and
Transparency Rule 4.2.7R; and
c) the half-yearly
financial report includes a fair review of the information required
by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of
related party transactions and changes therein). There have been no
such transactions that have materially affected the financial
position of the Company.
On behalf of the board
ANDREW JOY
CHAIRMAN
23 July 2024
SUMMARY OF PERFORMANCE
|
At
|
|
|
Performance
|
|
|
inception
|
At
|
At
|
since
|
Performance
|
|
16
February
|
30
June
|
31
December
|
31
December
|
since
|
Capital return
|
1994
|
2024
|
2023
|
2023
|
inception
|
Net asset value per ordinary share
(including current year revenue)A
|
98.7p
|
2,472.8p
|
2,219.2p
|
11.4%
|
2,405.4%
|
Net asset value per ordinary share
(excluding current year revenue)A
|
98.7p
|
2,470.6p
|
2,212.1p
|
11.3%
|
2,403.1%
|
Share price
|
90.9p
|
2,185.0p
|
1,922.0p
|
13.7%
|
2,303.7%
|
Deutsche Numis Smaller Companies
plus AIM (ex. investment companies) Index
|
1,750.0
|
5,534.2
|
5,404.7
|
2.4%
|
216.2%
|
Russell 2000® Technology Index
(small cap) (in sterling terms)†
|
688.7*
|
5,099.1
|
4,605.3
|
10.7%
|
640.4%
|
A Alternative Performance Measure (APM).
* At 9 April 1996 being
the date funds were first available for international
investment.
† The Russell 2000® Technology Index (small
cap) was rebased during 2009 following some minor adjustments to
its constituents. The rebased index is used from 31 December 2008
onwards.
Past performance is not a reliable
indicator of future returns.
CHAIRMAN'S STATEMENT
I am pleased to report that in the
first half of 2024 the Company's net asset value per share rose
11.4%. As in 2023 the companies that supply enabling technology for
artificial intelligence accounted for the positive return. In
particular, Super Micro Computer alone has contributed a gain of
£74.0m and although the position has been materially reduced it has
remained the largest holding in the Company. For context, the
weighted average return of stocks within the US-focused Russell
2000 Technology Index excluding Super Micro has been only
marginally positive, with the simple average just negative and the
median -6.3%, so the Company's return from its North American
portfolio of +30.9% is particularly pleasing. The return excluding
Super Micro is still +7.6%.
The European (EMEA) portfolio
returned +3.8%. France and Germany have been challenging with the
French holdings derating following Macron's snap election call, but
this has been more than offset by good returns in the Nordics,
particularly Norway. Small growth technology companies can still
perform, and BE Semiconductor Industries has again contributed
positively. The Asian return was -0.3%. We include Australia in
this region and a strong performance there (+28.3%) was offset by a
disappointing Japanese return of -9.1% reflecting the exceptional
weakness of the Yen.
Regional Market Values and IRR*
|
Market
Value (£m)
|
|
H1
- 30 June 2024
|
31/12/2023
|
30/06/2024
|
IRR*
|
Asia
|
144.0
|
151.1
|
-0.3%
|
EMEA
|
150.3
|
151.6
|
3.8%
|
North America
|
341.6
|
415.4
|
30.9%
|
UK
|
504.0
|
516.5
|
7.0%
|
Total
|
1,139.9
|
1,234.6
|
11.0%
|
Net liquid assets and government
bonds
|
105.9
|
102.1
|
|
Total net assets
|
1,245.8
|
1,336.7
|
|
* IRR-Internal Rate of
Return
NAV
movements
|
30/06/2023
|
31/12/2023
|
30/06/2024
|
Total net assets (£m)
|
1,253.0
|
1,245.8
|
1,336.7
|
NAV per share (p)
|
2,094.4
|
2,219.2(1)
|
2,472.8(2)
|
Shares in issue (number)
|
59,825,770
|
56,134,670
|
54,054,247
|
(1)
Including
share buybacks of £63.9m during H2 2023
(2)
Including
share buybacks of £43.3m during H1 2024
The UK proportion of the Company's
net assets has fallen to 38.7%, which is the lowest reported level
since inception. The return of +7.0% compares favourably to the
Deutsche Numis Smaller Companies plus AIM (ex Investment companies)
Index total return of +4.2%. YouGov in which the Company has
a sizeable position, notwithstanding previously realised gains
of £12.4m has performed poorly following disappointing
announcements. However, in general trading in investee companies
has been satisfactory and it is pleasing to see some early-stage
companies bearing fruit. It is of note that the Company's UK return
(and the general UK small cap indices returns) is significantly
ahead of the median return in North America. The success of the
Magnificent Seven US technology leaders, and Super Micro, masks the
indifferent performance among US smaller technology companies more
generally as I mention above.
The UK market has faced heavy cash
outflows from UK collective vehicles, which are predominantly used
by domestic investors. However, perhaps because of these outflows,
there has been a high level of takeovers which has relieved the
selling pressure. For the Company, IQGeo, Spirent Communications
and Gresham Technologies are the material takeovers in progress at
the period end date. All the takeovers of companies in which the
Company has been invested have been made by overseas entities. In
my last statement I mentioned the effect of rising interest rates,
but more recently it seems that in some cases domestic investors
are realising capital gains for fear of an increase in the tax
rate, and the inflows are from overseas corporates, private equity,
and more recently direct investing from US investors in some of the
larger names held by the Company. We hope that the pessimism from
UK investors is misplaced. Now that overseas investors own the
majority of the value in the UK market, a change of sentiment
would be damaging. This explains the Manager's progressive
reduction in weighting in spite of the relatively attractive
valuations in the UK, where the headwinds to earnings growth from
the rise in corporation tax and the costs of implementing ESG
policies, are now partially reflected in results.
In the UK the Company's historic
co-investors have either disappeared from the market or are
similarly cash constrained by redemptions. The primary markets are
not going to function without a functioning secondary market, which
requires many players. Successful active fund management is not
scalable, and this is particularly the case for investing in
smaller companies. Meanwhile the costs of active fund management
have risen materially. Markets will wither and die if new capital
is not provided to fund the next generation of growth companies,
and some of these companies will not attract funding elsewhere.
Passive funds do not provide primary capital, nor efficient stock
market valuations. Should attractive investment opportunities in
the UK market continue to decline, the Manager has demonstrated its
ability to generate strong returns in overseas markets and is
confident that many existing UK holdings can be realised with
patience at materially higher prices through takeovers, in part
because so many of them have a global presence.
During the period buy-backs
continued at a relatively high rate. In aggregate 3.7% of the
outstanding capital was bought back for £43.3m. This follows share
repurchases of £107.4m last year. The aggregate value of over £150m
bought back in 18 months far exceeds the outside capital ever
raised by the Company (£95m). In fact, net outside capital
cumulatively is now an outflow of £292m. Nevertheless, due to a
strong performance over a long period, the Company remains a
substantial FTSE 250 investment company.
It is pleasing that overall net
assets per share have increased 18.1% over the last twelve months
as well as 11.4% in the period, and the average p/e in each region
is trading at a similar level to the start of the year.
Regional Price to Earnings
|
YE
31/12/2022
|
YE
31/12/2023
|
PE
30/06/2024
|
Asia
|
16.9
|
21.5
|
21.2
|
EMEA
|
24.1
|
30.4
|
29.7
|
North America
|
17.9
|
22.3
|
23.9
|
UK
|
16.7
|
16.0
|
16.4
|
All investors everywhere must be
concerned that fiscal deficits are unsustainably high in so many
major economies and that geopolitical tensions are at dangerous
levels, which provides a challenging investment environment. The
Company is fortunate in having a mandate to invest in a sector that
demonstrates growth, and innovation continues at an extraordinary
pace. This is opening up new markets, providing cost benefits to
traditional businesses and small players can disrupt large ones.
Artificial intelligence, the drive to Net Zero, security (both
cyber and defence) and the need for efficiencies are all powerful
drivers. The Board remains excited to be investing in the sector,
and with a Manager who has provided proven long-term
performance.
As announced on 24 April 2024, the
Board is pleased to welcome Christopher Metcalfe to the Board as an
independent non-executive director of the Company. He brings
extensive and relevant experience both in Investment Trusts and as
an institutional investor.
ANDREW JOY
CHAIRMAN
23 July 2024
TOP TWENTY EQUITY
HOLDINGS
At 30 June 2024
Ordinary or common shares unless
otherwise stated.
|
|
Value
|
% of total
|
Company (region)
|
Business
|
£'000
|
assets
|
Super Micro Computer (NA)
|
Leading server and storage
vendor
|
51,656
|
3.9
|
BE Semiconductor Industries
(EMEA)
|
Supplier of semiconductor assembly
equipment
|
34,308
|
2.6
|
Fabrinet (NA)
|
Advanced optical,
electro-mechanical, and electronic manufacturing
services
|
30,466
|
2.3
|
Diploma (UK)
|
Distributor of components and
systems
|
24,864
|
1.9
|
Silicon Motion Technology ADR*
(NA)
|
Develops controllers used with flash
memory
|
22,858
|
1.7
|
Trustpilot (UK)
|
Digital platform to independently
record customer experiences and rating
|
22,381
|
1.7
|
Next 15 (UK)
|
Digital media communications
provider
|
21,922
|
1.6
|
Celestica (NA)
|
Leader in design, manufacturing,
hardware platform and supply chain solutions
|
20,391
|
1.5
|
Volex (UK)
|
Leading global supplier of power and
connectivity-related solutions
|
18,743
|
1.4
|
Descartes Systems (NA)
|
Cloud-based logistics and supply
chain management solutions
|
17,596
|
1.3
|
GB Group (UK)
|
Global specialists in digital
identity and fraud prevention
|
16,168
|
1.2
|
Varonis Systems (NA)
|
Data security and data protection
software provider
|
15,934
|
1.2
|
Esker (EMEA)
|
Developer of process automation
software
|
14,877
|
1.1
|
Nordic Semiconductor
(EMEA)
|
Wireless semiconductor
technology
|
14,807
|
1.1
|
Idox (UK)
|
Developer of information management
software
|
14,747
|
1.1
|
Pegasystems (NA)
|
Develops applications for sales,
marketing and operations
|
14,392
|
1.1
|
Telecom Plus (UK)
|
Provider of telecommunications and
other utilities
|
14,385
|
1.1
|
Craneware (UK)
|
Developer of revenue integrity, cost
management and decision enablement software
|
12,458
|
0.9
|
IQGeo (UK)
|
Network design, planning and
deployment software provider
|
12,384
|
0.9
|
Wilmington (UK)
|
Offers intelligence, training and
education covering governance, risk and compliance
|
12,116
|
0.9
|
|
|
407,453
|
30.5
|
* American Depositary
Receipt.
GEOGRAPHICAL SPREAD OF INVESTMENTS
(Distribution of total
assets)
|
At
|
At
|
|
30 June
|
31
December
|
|
2024
|
2023
|
Net Liquid Assets* & Government
Bonds
|
7.6%
|
8.5%
|
UK
|
38.7%
|
40.5%
|
EMEA**
|
11.3%
|
12.1%
|
North America
|
31.1%
|
27.4%
|
Asia Pacific
|
11.3%
|
11.5%
|
*Cash, current assets and
liabilities.
** EMEA stands for Europe, Middle
East and Africa.
TOP
FIVE WINNERS AND LOSERS
For the six months ended 30 June
2024 in sterling terms (millions)
TOP
5 WINNERS
|
|
Super Micro Computer
|
74.0
|
Celestica
|
10.1
|
Trustpilot
|
7.1
|
Fabrinet
|
7.1
|
Silicon Motion Technology
|
6.0
|
TOP
5 LOSERS
|
|
YouGov
|
-15.1
|
Bango
|
-4.5
|
Qualys
|
-3.0
|
Cogent Communications
|
-2.2
|
Ekinops
|
-1.9
|
CONDENSED STATEMENT OF COMPREHENSIVE
INCOME
(Unaudited)
|
For the
six months ended
30 June
2024
|
For the
six months ended
30 June
2023
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Realised gains on
investments
|
-
|
80,211
|
80,211
|
-
|
14,003
|
14,003
|
Movements in unrealised gains on
investments
|
-
|
53,254
|
53,254
|
-
|
(22,325)
|
(22,325)
|
Losses on foreign
exchange
|
-
|
(507)
|
(507)
|
-
|
(1,815)
|
(1,815)
|
Income
|
8,560
|
-
|
8,560
|
8,715
|
-
|
8,715
|
Investment management fee - note
3
|
(6,532)
|
-
|
(6,532)
|
(6,390)
|
-
|
(6,390)
|
Other administrative
expenses
|
(591)
|
(4)
|
(595)
|
(482)
|
(5)
|
(487)
|
Profit/(loss) before
taxation
|
1,437
|
132,954
|
134,391
|
1,843
|
(10,142)
|
(8,299)
|
Taxation
|
(225)
|
-
|
(225)
|
(293)
|
-
|
(293)
|
Profit/(loss) after
taxation
|
1,212
|
132,954
|
134,166
|
1,550
|
(10,142)
|
(8,592)
|
Profit/(loss) per ordinary share -
note 4
|
2.21p
|
241.89p
|
244.10p
|
2.54p
|
(16.63)p
|
(14.09)p
|
Weighted average number of ordinary
shares in issue during the period
|
|
|
54,964,006
|
|
|
60,963,329
|
The total column of this statement
is the profit and loss account of the Company, prepared in
accordance with UK Accounting Standards.
The profit/(loss) after taxation is
the total comprehensive income and therefore no additional
statement of comprehensive income is presented. The supplementary
revenue and capital columns are presented for information purposes
in accordance with the Statement of Recommended Practice issued by
the Association of Investment Companies. All items in the above
statement derive from continuing operations of the Company. No
operations were acquired or discontinued in the period.
CONDENSED STATEMENT OF FINANCIAL
POSITION
(Unaudited)
|
As
at
|
As
at
|
|
30
June
|
31
December
|
|
2024
|
2023
|
|
(unaudited)
|
(audited)
|
|
£'000
|
£'000
|
Fixed assets
|
|
|
Investments held at fair value
through profit or loss
|
1,295,956
|
1,200,639
|
Current assets
|
|
|
Cash and cash equivalents
|
39,844
|
42,285
|
Other receivables
|
2,667
|
4,022
|
|
42,511
|
46,307
|
Current liabilities
|
|
|
Other payables
|
(1,804)
|
(1,189)
|
|
(1,804)
|
(1,189)
|
Net current assets
|
40,707
|
45,118
|
TOTAL NET ASSETS
|
1,336,663
|
1,245,757
|
Capital and reserves
|
|
|
Called up share capital
|
13,514
|
14,034
|
Share premium
|
73,738
|
73,738
|
Capital redemption
reserve
|
8,438
|
7,918
|
Capital reserve
|
1,243,756
|
1,154,062
|
Revenue reserve
|
(2,783)
|
(3,995)
|
TOTAL SHAREHOLDERS' FUNDS
|
1,336,663
|
1,245,757
|
NET ASSET VALUE PER ORDINARY SHARE
(including current year revenue)
|
2,472.8p
|
2,219.2p
|
NET ASSET VALUE PER ORDINARY SHARE
(excluding current year revenue)
|
2,470.6p
|
2,212.1p
|
Ordinary shares in issue
(number)
|
54,054,247
|
56,134,670
|
CONDENSED STATEMENT OF CHANGES IN
EQUITY
(Unaudited)
For the six months ended 30
June 2024
|
|
|
Capital
|
|
|
Total
|
|
Called
up
|
Share
|
redemption
|
Capital
|
Revenue
|
Shareholders'
|
|
share
capital
|
premium
|
reserve
|
reserve
|
reserve
|
funds
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Shareholders' funds at 1 January
2024
|
14,034
|
73,738
|
7,918
|
1,154,062
|
(3,995)
|
1,245,757
|
Profit after taxation
|
-
|
-
|
-
|
132,954
|
1,212
|
134,166
|
Shares purchased for cancellation -
note 7
|
(520)
|
-
|
520
|
(43,260)
|
-
|
(43,260)
|
Shareholders' funds at
30 June 2024
|
13,514
|
73,738
|
8,438
|
1,243,756
|
(2,783)
|
1,336,663
|
For the six months ended 30
June 2023
|
|
|
Capital
|
|
|
Total
|
|
Called
up
|
Share
|
redemption
|
Capital
|
Revenue
|
Shareholders'
|
|
share
capital
|
premium
|
reserve
|
reserve
|
reserve
|
funds
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Shareholders' funds at 1 January
2023
|
15,543
|
73,738
|
6,409
|
1,217,387
|
(8,029)
|
1,305,048
|
(Loss)/profit after
taxation
|
-
|
-
|
-
|
(10,142)
|
1,550
|
(8,592)
|
Shares purchased for cancellation -
note 7
|
(587)
|
-
|
587
|
(43,492)
|
-
|
(43,492)
|
Shareholders' funds at 30 June
2023
|
14,956
|
73,738
|
6,996
|
1,163,753
|
(6,479)
|
1,252,964
|
CONDENSED STATEMENT OF CASH
FLOWS
(Unaudited)
|
For the
six
|
For the
six
|
|
months
ended
|
months
ended
|
|
30
June
|
30
June
|
|
2024
|
2023
|
|
£'000
|
£'000
|
Cash flow from operating
activities
|
|
|
Profit/(loss) before finance costs
and taxation
|
134,391
|
(8,299)
|
Adjustments for (gains)/losses on
investments
|
(133,465)
|
8,322
|
Purchase of investments
|
(127,771)
|
(95,624)
|
Sale of investments
|
168,074
|
113,878
|
Return of capital
|
223
|
-
|
Increase in receivables
|
(34)
|
(523)
|
Increase in payables
|
64
|
2
|
Amortisation of fixed income book
cost
|
(874)
|
(736)
|
Effect of foreign exchange rate
changes
|
507
|
1,815
|
Overseas tax on overseas
income
|
(234)
|
(301)
|
Net cash inflow from operating
activities
|
40,881
|
18,534
|
Cash flow from financing
activities
|
|
|
Shares purchased for
cancellation
|
(42,815)
|
(42,683)
|
Net cash outflow from financing
activities
|
(42,815)
|
(42,683)
|
Net
decrease in cash and cash equivalents
|
(1,934)
|
(24,149)
|
Cash and cash equivalents at start
of the period
|
42,285
|
80,442
|
Effect of foreign exchange rate
changes
|
(507)
|
(1,815)
|
Cash and cash equivalents at the end
of the period
|
39,844
|
54,478
|
Comprised of:
|
|
|
Cash and cash equivalents
|
39,844
|
54,478
|
Cash flow from operating activities
includes interest received of £2,065,000 (2023 - £1,232,000) and
dividends received of £5,463,000 (2023 - £5,851,000).
As the Company did not have any
long-term debt at both the current and prior six month period end,
no reconciliation of the net debt position is presented.
NOTES TO THE CONDENSED FINANCIAL
STATEMENTS
(Unaudited)
1
FINANCIAL STATEMENTS
The condensed financial statements
for the six months to 30 June 2024 within the Half Yearly Financial
Report comprise the previous statements set out on pages 7 to 10
together with the subsequent related notes. The condensed financial
statements do not constitute statutory accounts as defined in
sections 434 to 436 of the Companies Act 2006 and have been neither
audited nor reviewed by the Company's auditor. Financial
information in relation to the year ended 31 December 2023 has
been extracted from the statutory accounts which have been filed
with the Registrar of Companies. The auditor's report on those
accounts was unqualified and did not contain a statement under
Section 498 (2) or (3) of the Companies Act 2006.
The Company's assets, which largely
consist of investments in quoted securities, exceed its liabilities
significantly. All borrowings require the prior approval of the
board. Gearing levels are reviewed by the board on a regular basis.
In accordance with the Company's articles of association,
shareholders have the right to vote on the continuation of the
Company every three years with the next vote being in April
2025. The Board continues to monitor the impact of the Covid
pandemic and the war in Ukraine on the Company as it evolves. No
material events have been identified that may cast significant
doubt about the Company's ability to continue as a going
concern for at least the next twelve months from the date this
half-yearly financial report is published. The condensed financial
statements have been prepared on a going concern basis and it is
the directors' opinion that the Company has adequate resources to
continue in operational existence for the foreseeable
future.
2
ACCOUNTING POLICIES
The condensed financial statements
have been prepared in accordance with applicable United Kingdom
Accounting Standards and applicable law (UK Generally Accepted
Accounting Practice), including FRS 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland, FRS 104
Interim Financial Reporting and the Statement of Recommended
Practice Financial Statements of Investment Trust Companies and
Venture Capital Trusts, issued by the Association of Investment
Companies in July 2022.
The accounting policies applied for
the condensed financial statements are as set out in the Company's
annual report for the year ended 31 December 2023.
3
INVESTMENT MANAGEMENT FEE
Herald Investment Management Limited
is appointed investment manager under a management agreement which
is terminable on twelve months' notice. The management fee is 1.0%
per annum of the Company's net asset value (excluding current year
net revenue) based on middle market prices up to £1.25bn and 0.8%
per annum on amounts beyond this level. The management fee is
levied on all assets.
4 NET
RETURN PER ORDINARY SHARE
|
Six
months
|
Six
months
|
|
ended
|
ended
|
|
30
June
|
30
June
|
|
2024
|
2023
|
|
£'000
|
£'000
|
Revenue profit after
taxation
|
1,212
|
1,550
|
Capital profit/(loss) after
taxation
|
132,954
|
(10,142)
|
Total net return
|
134,166
|
(8,592)
|
Weighted average number of ordinary
shares
|
54,964,006
|
60,963,329
|
Net return per ordinary share is
based on the above totals of revenue and capital and the weighted
average number of ordinary shares in issue during each
period.
There are no dilutive or potentially
dilutive shares in issue.
5
DIVIDENDS
In accordance with FRS 102 Section
32 'Events After the End of the Reporting Period', the final
dividend payable on ordinary shares is recognised as a liability
when approved by shareholders. Interim dividends are recognised
only when paid.
No dividends were paid for the year
ended 31 December 2023 (2022: same), nor declared for the interim
(2023: same).
6
FINANCIAL INSTRUMENTS
The Company's investments as
disclosed in the Company's balance sheet, are valued at fair
value.
Nearly all of the Company's
portfolio of investments are in the Level 1 category as defined in
FRS 102.
The three levels set out in FRS 102
are as follows:
Level 1: The unadjusted quoted price
in an active market for identical assets or liabilities that the
entity can access at the measurement date.
Level 2: Inputs other than quoted
prices included within Level 1 that are observable (i.e. developed
using market data) for the asset or liability, either directly or
indirectly.
Level 3: Inputs are unobservable
(i.e. for which market data is unavailable) for the asset or
liability.
The investment manager considers
observable data to be the market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The analysis of the valuation basis
for the financial instruments based on the hierarchy is as
follows:
|
As
at
|
As
at
|
|
30
June
|
31
December
|
|
2024
|
2023
|
|
£'000
|
£'000
|
Level 1
|
1,279,686
|
1,185,554
|
Level 3
|
16,270
|
15,085
|
Total fixed assets
|
1,295,956
|
1,200,639
|
The fair value of listed security
investments is bid value. Investments on the Alternative Investment
Market are included at their bid value. The fair value of unlisted
investments uses valuation techniques determined by the directors
on the basis of latest information in line with the relevant
principles of the International Private Equity and Venture Capital
Valuation Guidelines.
7
SHARE CAPITAL
At the AGM held on 23 April 2024 the
Company's authority to buy back up to 14.99% of its issued share
capital at that date was renewed. In the six months to 30 June 2024
a total of 2,080,423 (30 June 2023 - 2,347,453) ordinary
shares of 25p each were bought back and cancelled at a total cost
of £43,259,825 (30 June 2023 - £43,492,156). At 30 June 2024 the
Company had authority to buy back a further 7,679,896 ordinary
shares.
8
FIXED ASSET INVESTMENTS
During the period, cost of purchases
amounted to £127,877,000 (30 June 2023 - £96,651,000) and proceeds
of sales amounted to £166,899,000 (30 June 2023 -
£114,858,000).
|
Six
months
|
Six
months
|
|
ended
|
ended
|
|
30
June
|
30
June
|
|
2024
|
2023
|
|
£'000
|
£'000
|
Transaction costs
|
|
|
Commission costs:
|
|
|
Purchases
|
262
|
109
|
Sales
|
339
|
138
|
Total commission costs
|
601
|
247
|
Custody transaction costs
|
4
|
5
|
Other transaction costs
|
16
|
40
|
Total transaction costs
|
621
|
292
|
STATUS OF THIS REPORT
These interim financial statements
are not the Company's statutory accounts for the purposes of
section 434 of the Companies Act 2006. They are unaudited. The
half-yearly financial report will be made available to the public
at the registered office of the Company.
The report will also be available on
the Company's website www.heralduk.com
The information for the year ended
31 December 2023 has been extracted from the last published audited
financial statements, unless otherwise stated. The audited
financial statements have been delivered to the Registrar of
Companies. The auditor reported on those accounts and their report
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under sections 498(2) or
498(3) of the Companies Act 2006.
For further information
contact:
Apex Listed Companies Services (UK)
Limited
Tel: 020 3327 9720
END