BlackRock Throgmorton Trust
plc
(Legal Entity Identifier:
5493003B7ETS1JEDPF59)
Information disclosed in
accordance with Article 5 Transparency Directive and DTR
4.2
Half
Yearly Financial Report 31 May
2024
Performance
Record
|
As at
31 May
2024 |
As at
30 November
2023 |
|
|
|
|
|
Net assets
(£’000)1 |
644,498 |
575,925 |
|
Net asset value per
ordinary share
(pence) |
703.55 |
600.72 |
|
Ordinary share price
(mid-market) (pence) |
639.00 |
579.00 |
|
Benchmark
Index2 |
17,182.78 |
14,713.60 |
|
Discount to cum income net
asset
value3 |
(9.2)% |
(3.6)% |
|
|
========= |
========= |
|
|
For the
six months
ended
31 May
2024 |
For the
year
ended
30 November
2023 |
|
Performance (with
dividends
reinvested) |
|
|
|
Net asset value per
share3 |
19.2% |
(2.3)% |
|
Ordinary share
price3 |
12.5% |
(0.8)% |
|
Benchmark
Index2 |
16.8% |
(6.0)% |
|
Average discount to cum
income net asset value for the
period/year3 |
(8.0)% |
(5.2)% |
|
|
========= |
========= |
|
|
For the period
since 1 July 2008
to 31 May
2024 |
For the period
since 1 July 2008
to 30 November
2023 |
|
Performance since 1 July
20084 (with dividends
reinvested) |
|
|
|
Net asset value per
share3 |
526.0% |
425.1% |
|
Ordinary share
price3 |
543.1% |
471.7% |
|
Benchmark
Index2 |
183.1% |
142.4% |
|
|
========= |
========= |
|
|
For the six
months ended
31 May
2024 |
For the six
months ended
31 May
2023 |
Change
% |
Revenue |
|
|
|
Net revenue profit on
ordinary activities after taxation
(£’000) |
8,885 |
8,544 |
+4.0% |
Revenue earnings per
ordinary share
(pence)5 |
9.44 |
8.46 |
+11.6% |
|
--------------- |
--------------- |
--------------- |
Dividends per ordinary
share
(pence) |
|
|
|
Interim |
3.75 |
3.30 |
+13.6% |
|
========= |
========= |
========= |
1 The
change in net assets reflects portfolio movements, share buybacks
and dividends paid during the
period.
2 The
Company’s Benchmark Index is the Deutsche Numis Smaller Companies
plus AIM (excluding Investment Companies)
Index.
3
Alternative Performance Measures, see Glossary contained within the
half yearly financial
report.
4 Since
BlackRock's appointment as Investment Manager on 1 July
2008.
5
Further details are given in the Glossary contained within the half
yearly financial report.
Chairman’s
Statement
Dear
Shareholder
Highlights
·
NAV total return of 19.2%, an outperformance of 2.4 percentage
points against the Benchmark
Index
·
Share price total return underperformed the Benchmark Index by 4.3
percentage points as our share price discount to NAV widened to
9.2% (30 November 2023: 3.6%) and
traded at an average discount of
8.0%
·
Performance remains strong over the longer term; our NAV has
outperformed the Benchmark Index by 12.2% over five years (share
price by 9.9%) and by 89.6% over 10 years (share price by
104.2%)
·
Interim dividend of 3.75p per share declared (31 May 2023:
3.30p)
Overview
The Company had a positive
first six months of the year, delivering a strong absolute return
during the six months to 31 May 2024
and outperforming our Benchmark Index by 2.4 percentage points.
Earnings per share also rose by 11.6%, enabling the Board to
declare an increased interim
dividend.
The UK economy has
displayed notable resilience and following a shallow technical
recession in the second half of 2023, UK GDP returned to growth in
2024, although to date progress remains relatively modest. Overall
market sentiment was once again heavily influenced by the path of
inflation and interest rates. UK inflation continued its steady
trajectory downward during the period, providing welcome relief to
corporates and households alike. The rate of inflation for the 12
months to 31 May 2024 came in at 2.0%
(the lowest level since July 2021),
meeting the Bank of England’s (BoE) inflation target and increasing
the likelihood of a summer cut in the base rate of
interest.
Investor sentiment, and
importantly risk appetite, appear to have improved during the
period and UK equity markets continued upward with the FTSE 100
Index hitting an all-time high in early May. Market performance has
been supported by a more benign economic backdrop of falling
inflation, lower cost of borrowing, rising consumer confidence,
high employment and strong wage growth. These factors have been
positive for our asset class and this momentum has been reflected
in the strong performance of our portfolio in the first six months
of our financial year.
Another feature of the
period under review has been continued merger and acquisition
(M&A) activity by those recognising the value on offer in the
UK market. As our portfolio manager, Dan
Whitestone, explains in his report which follows, portfolio
performance was boosted by several bids for companies within our
portfolio and this activity is indicative of quite how cheap UK
smaller companies are at the
moment.
Post the period end, the
Government’s announcement of an early General Election took many by
surprise. The
election was held on 4 July with Labour winning a landslide
majority and taking power. There is now likely to be a great deal
of activity as the new government takes the reins and seeks to
implement its policies and reform agenda. Although the market has
responded positively to the news, the immediate impact of the new
government on the economy is likely to be minimal, although the
resulting political certainty and pro-growth policies should aid
market sentiment and be broadly positive for UK equities, in
particular those smaller companies exposed to the domestic
economy.
As you will read in his
report which follows, our portfolio manager is upbeat about the
opportunities available in UK smaller companies. As a Board we
share his optimism about the outlook for our portfolio and the
opportunities currently available in our asset
class.
Performance
Over the six months to
31 May 2024, the Company’s Net Asset
Value (NAV) total return was +19.2% compared to a return of +16.8%
from the Company’s Benchmark Index, an outperformance of 2.4
percentage points. The Company’s share price returned 12.5%,
underperforming the Benchmark Index by 4.3 percentage points as our
discount widened during period. Since the period end and up to the
close of business on 19 July 2024,
the Company’s NAV has risen by 0.7%, and the Benchmark Index has
risen by 0.2% (all figures with dividends
reinvested).
Over the longer term our
performance remains strong. For the five and ten-year periods to
31 May 2024, the Company’s NAV
returned +33.0% and +147.9%, and the share price returned +30.7%
and +162.5%, comparing favourably to the Benchmark Index returns of
+20.8% and +58.3% over the same
periods.
Performance record to
31 May 2024 (with dividends
reinvested)
|
1 Year change
% |
3 Year change
% |
5 Year change
% |
10 Year change
% |
NAV per
share |
16.4 |
-16.0 |
33.0 |
147.9 |
Share
price |
11.6 |
-24.2 |
30.7 |
162.5 |
Benchmark
Index |
12.5 |
-11.7 |
20.8 |
58.3 |
The Board and our
portfolio manager remain resolutely focused on achieving the
Company’s objectives of providing shareholders with long-term
capital growth and an attractive total return through investment in
primarily UK smaller and mid-capitalisation
companies.
Further information on the
Company’s performance and the factors that contributed to
performance during the period and the outlook for the second half
of the financial year are set out in the Investment Manager’s
Report below.
Revenue return and
dividends
The revenue return per
share for the period amounted to 9.44
pence per share, compared to 8.46
pence per share earned during the same six-month period last
year, an increase of 11.6%. It is positive to see that the level of
income generated from our investment portfolio has
increased.
The Board recognises that,
although the Company’s objective is capital growth, shareholders
value consistency of dividends paid by the Company; an interim
dividend of 3.75p per share has therefore been declared (2023:
3.30p per share), payable on 27 August
2024 to shareholders on the register on 2 August 2024 (the ex-dividend date is
1 August 2024). The interim dividend
is fully covered by revenue generated by the portfolio during the
period.
Policy on share price
premium/discount
The Board believes that
the best way of addressing any discount to NAV over the longer term
is to generate good performance and to create demand for the
Company’s shares in the secondary market through broadening
awareness of the Company’s unique structure and other attractions.
In determining whether the premium/discount to NAV (the share
rating) at which the Company’s shares trade is excessive or
otherwise, the Board considers several factors. These may include
but are not limited to whether the share rating is commensurate
with the current demand for UK smaller companies and whether the
Company’s shares were trading in normal market conditions; the
ongoing attractiveness of the investment proposition, in particular
the strength of the portfolio management team and process; and the
strong long-term performance delivered for shareholders, both in
absolute and relative
terms.
Share buy back
activity
During the six months to
31 May 2024, the Company’s share
rating ranged between a discount to NAV of 3.6% at its narrowest
(at the start of the period) to its widest discount of 11.0% in
mid-April and ended the period at a discount of 9.2% (30 November 2023: 3.6%). This compares with the
weighted average discount of the UK smaller companies peer group
which ended the period at an average discount of
10.4%.
During the period under
review, the Company bought back a total of 4,265,234 ordinary
shares for a total consideration of £25,477,000. Since 31 May 2024 and up to the latest practicable date
of 19 July 2024, a further 836,063
shares have been bought back for a total consideration of
£5,166,000. As at 19 July 2024, the
Company’s shares were trading at a discount of 7.7% versus an
average discount for the rest of the peer group of 10.9%. All
shares were bought back at a discount to the prevailing NAV and
were therefore accretive to existing
shareholders.
The Board’s objectives are
to seek to minimise share price volatility and encourage the
Company’s share price to trade within as tight a range as possible,
taking into account the various factors described above. However,
despite our consistent and targeted action in support of the share
rating, it was disappointing to see our discount widen during the
period. The Board recognises that shareholders experience the share
price performance of the Company and, in conjunction with our
Broker and the Manager, we keep the share rating under continuous
review seeking to understand and address the drivers of the
widening discount.
There are of course
several factors which influence the level of premium/discount at
which a Company’s shares trade in the market, many of which are
outside of the Board’s direct scope of control or influence; not
least the pervasive selling we have witnessed since early 2022
which has depressed share prices in our asset class and acted to
widen discounts. It is important to view the Company’s share rating
in the wider market context, noting that the Investment Trust
sector average discount at 31 May
2024 had widened to 14.1% compared to 12.8% at the end of
2023 and 11.2% at the end of 2022, remaining correlated with Gilt
yields. Buy back activity was significantly elevated across the
sector as a whole as boards grappled with selling pressure. In
April (when your Company’s discount was at its widest) 118
investment trusts repurchased shares (representing the highest
monthly figure for the number of investment companies buying back
shares since 1996).
Overall, we believe the
share buy back activity undertaken has been beneficial in reducing
the volatility of our share rating and delivering NAV accretion.
Your Board will continue to monitor the Company’s share rating and
may deploy its powers to support it by issuing or buying back the
Company’s shares where it believes that it is in shareholders’
long-term best interests to do
so.
Corporate
governance
The Board takes its
governance responsibilities very seriously and follows best
practice requirements as closely as possible. As I reported in our
Annual Report, we have complied with all applicable regulation and
guidance with regard to matters of board diversity such as the FTSE
Women Leaders Review and the recommendations of the Parker Review,
now enshrined in the UK Listing Rules. The Board remains committed
to exercising the highest standards of good governance and, as we
do each year, will report to shareholders in the Annual Report on
our compliance with the UK Code of Corporate Governance and other
matters of good
governance.
Change of
advisor
Following a competitive
process, and as announced on 18 June
2024, the Board resolved to appoint Winterflood Securities
Limited as sole corporate broker and financial
adviser.
On behalf of the Board I
would like to thank our previous broker, Stifel, who played a key
role in 2018 during a period of pivotal strategic change for the
Company and supported our growth and subsequent ascent into the
FTSE 250 Index. We thank the team for their service to the Company
over many years.
Shareholder
communication
As we do each year, our
Senior Independent Director and I recently met with several of our
largest shareholders to answer any questions they had and encourage
candid feedback on the Company. We believe both parties find this
direct engagement insightful and beneficial. As a Board, we would
of course like to hear the views of all shareholders. With this in
mind, should you have any questions or feedback for the Board, you
can write to me at our registered office address (given within the
half yearly financial report) or by email at:
cosec@blackrock.com.
We appreciate how
important access to regular information is to our shareholders. To
supplement our Company website, we offer shareholders the ability
to sign up to the BlackRock Trust Matters newsletter which includes
information on the Company as well as news, views and insights on
the investment trust market. Information on how to sign up is
included on the inside cover of the half yearly financial
report.
Outlook
As you will read in his
report which follows, Dan describes a more promising environment
for growth. He is optimistic about the future and emboldened by
what he believes is a significant mispricing within UK small and
mid-caps, driven by pervasive outflows of capital from the UK
small-cap market over several years. This can be seen in the
disconnect between the sales and earnings growth delivered by
companies and the prevailing share price. Therefore, he believes
our asset class currently presents investors with a clear and
compelling investment opportunity, the like of which has not been
seen for many
years.
Our portfolio manager’s
fundamental approach has not changed. He focuses on identifying
financially strong, cash generative companies, those which have
innovative and disruptive business models and market leading
offerings that can compound returns over time. The Board remains
fully supportive of his investment approach and philosophy,
moreover we share his enthusiasm around the opportunities available
in UK smaller companies.
CHRISTOPHER SAMUEL
Chairman
24
July
2024
Investment Manager’s
Report For the six months ended
31 May
2024
Market review and overall
investment performance
For the first half of
2024, the Company’s NAV delivered a positive return (net of fees)
of +19.2%, outperforming the Benchmark Index by +2.4%. The
Company’s share price returned +12.5%. Despite the omnipresent dark
cloud of negative sentiment that envelopes this exciting and
differentiated universe, it was somewhat heartening to witness a
meaningful period of positive returns. It may surprise some to see
that the returns of our Benchmark Index (+16.8%), the FTSE 250
Index (+15.6%) and the FTSE Small Cap Index (+15.0%) don’t look out
of place alongside the Nasdaq Composite Index (+17.6%) which itself
has benefitted from the inexorable growth of Nvidia which accounted
for 31% of that return. My own hope (belief) is that this is just
the start, reflecting a combination of i) continued resilient
trading, ii) low valuations (versus their own history, versus large
caps, and versus their own prospects for profit and cash flow
growth), iii) an improving macro environment (falling inflation,
increasing consumer confidence and household cash flows, high
savings rates, and real wage growth), iv) strong balance sheets,
and v) elevated levels of merger and acquisition (M&A) activity
underpinning the valuation argument. I dare put forward a sixth
point, which is the election of the Labour Government would herald
not only a period of political stability but also a “pro-growth”
agenda which could benefit many holdings in the
Company.
Whilst the last six months
witnessed another period of fund outflows for UK small and medium
sized companies, May 2024 marked the
first monthly net inflow since May
2021. That’s an incredible statistic really; the first
monthly inflow after 35 consecutive months of outflows. Indeed,
those 35 months of outflows total to around $16.5 billion, which in our view has acted as a
significant drag on returns, overpowering fundamentals.
Accordingly, the value of any listed UK small and medium sized
company has increasingly been dictated by the clearing price of an
outflow, a trend that looks to be ameliorating at long last,
reflecting the slowdown in outflows through the period and finally
the inflow in May. Maybe this is in part because so many market
participants have effectively given up on the UK? Thinking about
the UK more broadly, the allocation from UK pension funds to the UK
stock market has shrunk from 52% in 1990 down to circa 4% now,
which represents a withdrawal of circa £1.9 trillion from UK listed
equities over the last 25 years. Our discussions with UK Wealth
Managers suggest a similar path, and I would suspect the retail
platforms of direct investments too. Maybe there’s just not much
left to sell now? The challenges and industry concentration of the
FTSE 100 Index are well understood, but the UK small and mid-cap
market is a much more diverse and differentiated opportunity set
comprised of many idiosyncratic compelling investment cases. One
should not overlook the comparable returns that UK small and
mid-sized companies have delivered in the last six months versus
the US indices, so to go a step further, with such an extreme
change in investor positioning, any improvement in the
macro-economic backdrop that lifts sentiment could see the recent
rally really accelerate considering how extreme positioning has now
become.
Performance
review
For the Company, stock
specifics were the dominant driver of returns for the period, so we
take some assurance that we got more things right than wrong and
the returns were not driven by one big thematic bet or factor move.
Assessing the impact of the increasing levels of M&A activity
we have seen in recent months is complicated with several
considerations. If M&A helps underpin valuations more broadly
in the sector that is a positive, but short term returns today need
to be judged against the long term opportunity cost we may forgo.
Value is in the eye of the beholder, to us some of the recently
announced bids feel very opportunistic, others more perplexing.
Over this six month period the Company has benefitted from Mattioli
Woods and to a lesser extent Spirent, but we have also experienced
a headwind of around 1% from not owning other shares in our
benchmark that have been bid for in the period. We continue to run
with a small number of short positions versus history to protect
against increasing levels of M&A activity and also because we
believe that in aggregate the sector is simply far too cheap and
due a re-rating. If we are right in our views on recovery then
history would suggest that will lead to another fertile period for
shorting as a rising tide will lift all boats including some with
large structural flaws, or an over exuberant or complacent crew, or
indeed those exposed to changing currents if we were to stretch the
analogy
further.
The top contributor to
performance was 4imprint rising over 50% in the
period on the back of successive strong financial updates with
positive revisions to forecasts. Despite a broader slowdown in the
wider US promotional products market, 4Imprint has continued to
deliver impressive revenue growth reflecting ongoing market share
gains (helps when you have a differentiated business model but have
less than 5% market share) and expanding profit margins on
increased marketing efficiencies. We remain long term supporters
but have taken advantage of the share price rally to reduce our
holding at all-time highs, which gives us the flexibility to buy
more on any pull back.
The second biggest
contributor was SigmaRoc, which has continued to
trade strongly delivering full year 2023 results ahead of
expectations and subsequently delivering a strong quarter one of
2024 trading update. Shares in SigmaRoc hit a valuation of around
6x current year’s earnings towards the end of last year, one of
many examples of some of the valuation opportunities that this
market has thrown up. Gamma Communications rose
after the company delivered another set of robust results, showing
over 9% organic revenue growth. Highlighting their resilience as UK
corporate demand for cloud telecoms remains positive. With over 10%
of their market cap in net cash the company’s board has recently
initiated a share buyback
programme.
Turning to the detractors,
the biggest was WH Smith which fell despite
“in-line” results. The contentious issue is the mix of profits with
UK better and US worse reflecting timing of store opening
programme, refurbishments and also a slowdown in their In-Motion
business (weaker product cycle). As the US is the key driver of
future profit growth we understand the concerns, albeit see the
slowdown as temporary, not structural, whilst Management continue
to deliver an impressive rate of contract wins in the US which
should lead to a materially higher profit base in time. The second
biggest detractor was Watches of
Switzerland which issued
a profit warning in January. As I covered this in some detail in
our January monthly update I will merely reiterate that we reduced
the position significantly back then reflecting the evolving
investment case and now have an effective benchmark weight as we
weigh up valuation and long term opportunity versus near term
uncertainty. Shares in CVS Group fell in response
to an announcement from the Competition and Markets Authority (CMA)
that they would be progressing to a full Market Investigation into
the veterinary market in the UK. The CMA had announced an initial
review in September last year and we reduced the position to
reflect uncertainty then. With a circa 18 month investigation
hanging over the company we have reduced the position size
further.
Portfolio positioning
The portfolio continues to
be built from a myriad of idiosyncratic investment opportunities
where we see a compelling runway for growth. However, no investment
can be viewed without some broader macro context, and as consumer
and industrial shares are two of the biggest areas of exposure, I
thought it instructive to share some thoughts here. To summarise
briefly, I believe the operating environment for the majority of
the UK small and medium-sized complex is likely to improve through
the year, something still to be reflected in consensus forecasts
and valuations. My argument is broadly two
fold:
·
First is that the economic backdrop is better than feared and there
are several reasons why this should improve further, which I’ve
outlined
below.
·
Second is that many of our consumer and industrial companies have
done a better job than appreciated in mitigating the reduction in
like for like volumes they’ve experienced through price increases,
cost re-engineering, and further market share gains. Therefore, we
think many of our holdings are in a position to achieve far higher
levels of profitability in the recovery which could drive a
significant increase in valuation and in some specific cases drive
a higher cross-cycle multiple of
earnings.
As a team, we believe the
operating environment is better than feared and there is a strong
case why this should improve further. Inflation in the UK has
fallen materially through 2024, and whilst each inflation print is
scrutinised (some beats, some misses, some noticeable lags such as
Services) the big picture is that it continues to fall and is
indeed running closer to the 2% level if we annualise the last few
months. Oil and gas looks less of a risk to inflation (at the time
of writing), whilst food continues to fall. Services continues to
lag but we hope falls in the months ahead. Wage inflation certainly
has the capacity to upend the broader trend in inflation, however,
we observe from many of our interactions with management teams that
there are reasons for optimism. This reflects growing first hand
evidence that although wage inflation is running ahead of the
Consumer Price Index, it reflects the timing of wage settlements
still to annualise, whilst labour availability is improving as job
vacancies fall and companies have been able to revise their
internal budgets for staff
costs.
Contrary to what you might
think, consumer confidence in the UK is now running at the highest
in over 20 years, whereas the ASDA Income tracker (a proxy for
household cash flow) has reached a 30 month high with quite an
extraordinary positive reading in May at 16% year over year.
Despite the consensus view that the UK’s savings rate would be
depleted through 2023 in a cost of living crisis, it actually
increased so the average UK consumer has more money to spend and
feels confident. This no doubt reflects that many are experiencing
real wage growth for the first time in decades and retain a high
degree of job security. Business conditions continue to improve,
see the Purchasing Managers’ Index or the Lloyds Business Survey as
exemplars, which in turn should help drive economic growth from its
current low level. The election of the Labour Government removed a
prolonged period of uncertainty and could hopefully usher in a
period of stability which will promote business confidence further,
allied to a pro-growth agenda which could be particularly
beneficial for our positions in housebuilders, construction and the
supply chain.
In terms of positioning,
Consumer and Industrials are the two biggest areas of gross
exposure, reflecting where we see some of the most compelling stock
specific opportunities. Many of our investments here have not only
protected profitability better than expected, but have also
developed an impressive track record of shareholder returns. So
depressed valuations, a protected profit base which can grow
meaningfully from here, combined with a permanently reduced share
count is an attractive proposition which could reward the Company
handsomely in time.
We have continued
to add to heavy construction and aggregates (e.g. Breedon)
on the back of an improving demand backdrop and an industry
structure that has seen the permanent withdrawal of capacity which
has been reflected in strong pricing to offset volume reductions.
Consequently, profits have still demonstrated impressive year on
year growth despite the reduction in volumes, so with a
reengineered cost base, profits in the next cycle could reach new
highs as volumes recover. Indeed, we expect 2024 to mark the trough
for volumes, not just for Breedon but for many other “growth
cyclicals” we own, and so thinking more broadly the recovery could
translate into better-than-expected profit recovery across a range
of companies, benefitting the likes of the brick manufacturers, or
the “repair, maintenance and improve” (RMI) sector. In many cases
we find these investments trading on close to trough multiples on
trough earnings and accordingly we have continued to add to our
exposure here believing the risk/reward to be particularly
compelling.
We have also continued to
build up our exposure to housebuilders in the last
6 months from very low levels, a sector we feel will consolidate
further in the pursuit of landbank and operational synergies to
deliver faster profit recovery. Indeed, the sector has had a torrid
time in the last couple of years with housing starts down almost
25% in 2023 and now running at roughly half the level to reach the
governments targets. This malaise has spread into associated
industries, for example brick dispatches are at a low not seen
outside the financial crisis. Compounding this, and I am sure
something you can all relate to, the last 6 months has seen the
wettest weather in the UK since the 1870’s! Current trading across
the sector therefore has been poor, as it has for the supply chain
and the light industrial RMI space as so many home improvement
projects have stalled on weather related issues. However there are
genuine green shoots emerging, with housebuilders reporting
interest levels and sales rates increasing slowly as swap rates
come down and mortgages become more affordable. No one denies the
importance of housebuilding as a national industry and in time we
would expect volumes to recover towards 200,000 new houses per
annum and, with the right policy support (Labour’s proposed
supply-side reforms could make a real difference) potentially some
way beyond. For context we really need to be building somewhere in
the order of 500,000 new houses per annum for some years to really
address the UK’s supply
imbalance.
Another area we have been
adding to is Property. We think Great Portland’s
capital raise, whilst calling the bottom of the prime London office market is noteworthy when
trading on a 40% discount to net asset value. Yield compression
would of course be additive, but isn’t required in our view to make
the investment case work considering the outlook for rental rates
(supply constraints high occupancy) and expanding development
profits on cost. This is a share we have added to in addition to
Workspace, another company that has recently called the trough
whilst trading at a +30% discount to a depressed cyclical low net
asset value, whilst delivering 10% like for like rent roll
growth.
Reflecting on our
non-domestic exposure, this tends to lean towards
Industrials where despite a broader moderation in activity levels,
there have been many cross currents and high levels of dispersion
between companies and sub-sectors and geographies. Destocking has
been a big theme in the sector, with supply chain issues initially
leading to overordering, and then in turn overstocking (as supply
chain issues resolved); this then led many businesses to destock,
cutting orders and resulting in a slowdown in revenues. The
stop-start nature of these supply chain issues throughout the year
has impacted a range of geographies and sub-sectors differently, as
they are all at different points in the cycle. We got some of these
dynamics right and some wrong in 2023 and the same is true in 2024.
On the whole, within General Industrial we have noticed an
improvement in the book-to-bill ratios as many have turned a corner
and can hopefully accelerate through second half of 2024 and into
the financial year 2025. Reshoring in the US, as well as several
Government programmes (Chips, Inflation Reduction Act) continue to
provide additional tailwinds of growth for quite a few US focused
but UK listed small and mid caps we have exposure to e.g. Oxford
Instruments, Rotork, Hill &
Smith.
Outlook
Looking ahead to 2024
market volatility is unlikely to abate and clearly this marks a
significant year for elections worldwide, which may inject further
turbulence into the macro backdrop. As I’ve outlined above, I think
the valuation case for UK small and medium sized companies remains
compelling, with many of the holdings in the Company trading on
single digit price to earnings ratios and high Free Cash Flow
yields but unlike so many archetypical “value” sectors, have far
superior growth prospects. Whilst our global facing companies trade
on higher valuations, these look low to us compared to their
prospects for growth and certainly against their US listed
counterparts despite similar growth rates and end market exposures.
We’ve long maintained the view that flows have been the primary
headwind to valuations, and so any change in the flow picture could
prompt a material valuation rebound. The progress of the assets
class against this flow backdrop in the last six months should not
be underestimated and maybe May’s month of inflows might just
herald in a new dawn. Time will tell. But the bigger picture for us
is one of a gradual recovery, and in our view this is not reflected
in valuations so remains the biggest risk/reward opportunity for
us.
DAN WHITESTONE
BlackRock
Investment Management (UK) Limited
24
July
2024
Portfolio of
investments
1.
▲ Oxford
Instruments (2023: 3rd)
Electronic & Electrical Equipment
Market value: £20,161,000
Share of net assets: 3.1% (2023:
2.8%)
Designer and manufacturer
of tools and systems for industry and
research
2.
▼
Breedon
(2023: 1st)
Construction & Materials
Market value: £19,219,000
Share of net assets: 3.0% (2023:
3.3%)
Supplier of construction
materials
3.
▼
Gamma
Communications* (2023: 2nd)
Mobile Telecommunications
Market value: £18,499,000
Share of net assets: 2.9% (2023:
3.0%)
Provider of communication
services to UK businesses
4.
► Grafton
Group (2023: 4th)
Support Services
Market value: £17,316,000
Share of net assets: 2.7% (2023:
2.8%)
Builders’ merchants in the
UK, Ireland and Netherlands
5.
▲
IntegraFin (2023: 15th)
Financial Services
Market value: £16,604,0001
Share of net assets: 2.6% (2023:
1.8%)
UK savings platform for
financial advisors
6.
▲ Hill & Smith
Holdings (2023: 12th)
Industrial Metals & Mining
Market value: £15,989,000
Share of net assets: 2.5% (2023:
2.2%)
Supplier of infrastructure
products and galvanizing
services
7.
► Rotork
(2023: 7th)
Electronic & Electrical Equipment
Market value: £15,881,000
Share of net assets: 2.5% (2023:
2.5%)
Manufacturer of industrial
flow equipment
8.
► WH
Smith (2023: 8th)
General Retailers
Market value: £15,270,000
Share of net assets: 2.4% (2023:
2.5%)
Retailer of books,
stationery, magazines, newspapers and
confectionary
9.
▲ Tatton Asset
Management* (2023: 11th)
Financial Services
Market value: £14,988,000
Share of net assets: 2.3% (2023:
2.2%)
Provision of discretionary
fund management services to the IFA
market
10.
▼ 4imprint
Group (2023: 6th)
Media
Market value: £14,859,000
Share of net assets: 2.3% (2023:
2.7%)
Supplier of promotional
merchandise in the US
*
Traded on the Alternative Investment Market (AIM) of the London
Stock Exchange.
1
Includes long derivative
positions.
Percentages shown are the
share of net assets.
The market value shown is
the gross exposure to the shares through equity investments and
long derivative positions. For equity investments, the market value
is the fair value of the shares. For long derivative positions, it
is the market value of the underlying shares to which the portfolio
is exposed via the contract.
Percentages in brackets
represent the portfolio holding as at 30
November 2023. Arrows indicate the change in relative
ranking of the position in the portfolio compared to its ranking as
at 30 November
2023.
# |
Company |
£’000^ |
% |
Description |
|
|
|
|
|
11 |
Baltic Classifieds
Group |
13,962 |
2.2 |
Operator of online
classified businesses in the
Baltics |
|
Software & Computer
Services |
|
|
|
12 |
GlobalData* |
13,100¹ |
2.0 |
Data analytics and
consulting |
|
Media |
|
|
|
13 |
Chemring
Group |
12,243 |
1.9 |
Provider of technology
products and services to aerospace, defence and security
markets |
|
Aerospace &
Defence |
|
|
|
14 |
Boku* |
11,932 |
1.9 |
Digital payments
platform |
|
Support
Services |
|
|
|
15 |
Workspace
Group |
11,559 |
1.8 |
Supply of flexible
workspace to businesses in
London |
|
Real Estate Investment
Trusts |
|
|
|
16 |
Computacenter |
10,935 |
1.7 |
Computer
services |
|
Software & Computer
Services |
|
|
|
17 |
FTSE 250 Index
Future |
9,619¹ |
1.5 |
Index
future |
|
Financial
Services |
|
|
|
18 |
GPE |
9,608¹ |
1.5 |
Owner of commercial real
estate in central
London |
|
Real Estate Investment
Trusts |
|
|
|
19 |
Morgan
Sindall |
9,485¹ |
1.5 |
Supplier of office fit
out, construction and urban regeneration
services |
|
Construction &
Materials |
|
|
|
20 |
Hunting |
9,438¹ |
1.5 |
Oil services
business |
|
Oil Equipment and
Services |
|
|
|
21 |
Next Fifteen
Communications* |
9,283 |
1.4 |
Provider of digital
communication products and
services |
|
Media |
|
|
|
22 |
TT
Electronics |
9,111¹ |
1.4 |
Global manufacturer of
electronic
components |
|
Electronic &
Electrical Equipment |
|
|
|
23 |
Vesuvius |
9,064¹ |
1.4 |
British engineered
ceramics company |
|
Industrial
Engineering |
|
|
|
24 |
Bellway |
8,647 |
1.3 |
UK
housebuilder |
|
Household Goods and Home
Construction |
|
|
|
25 |
Intermediate Capital
Group |
8,460 |
1.3 |
Private equity
business |
|
Investment Banking &
Brokerage |
|
|
|
26 |
Indivior
PLC |
8,267 |
1.3 |
Pharmaceuticals business
specialising in addiction and mental health
treatments |
|
Pharmaceuticals &
Biotechnology |
|
|
|
27 |
SIG |
8,226 |
1.3 |
Supplier of building,
roofing and insulation
products |
|
Industrial Support
Services |
|
|
|
28 |
JET2* |
8,168 |
1.3 |
Low cost tour operator and
airline |
|
Travel &
Leisure |
|
|
|
29 |
Dunelm
Group |
7,960 |
1.2 |
Retailer of homeware
products |
|
General
Retailers |
|
|
|
30 |
Luceco |
7,783 |
1.2 |
Supplier and manufacturer
of high quality LED lighting
products |
|
Electronic &
Electrical Equipment |
|
|
|
31 |
Zotefoams |
7,644¹ |
1.2 |
Manufacturer of polyolefin
foams used in sport, construction, marine, automation, medical
equipment and
aerospace |
|
Chemicals |
|
|
|
32 |
Alfa Financial
Software |
7,265 |
1.1 |
Provider of software to
the finance industry |
|
Software & Computer
Services |
|
|
|
33 |
Victorian
Plumbing* |
7,197¹ |
1.1 |
Online retailer of
bathroom products |
|
Home Improvement
Retailers |
|
|
|
34 |
IG Group
Holdings |
7,151 |
1.1 |
Online provider of spread
betting and CFD trading
services |
|
Financial
Services |
|
|
|
35 |
Porvair |
7,024¹ |
1.1 |
Specialist filtration and
environmental
technology |
|
Industrial
Engineering |
|
|
|
36 |
Cranswick |
6,978 |
1.1 |
Producer of premium, fresh
and added-value food
products |
|
Food
Producers |
|
|
|
37 |
MJ
Gleeson |
6,969 |
1.1 |
UK
housebuilder |
|
Household Goods and Home
Construction |
|
|
|
38 |
CVS
Group* |
6,927 |
1.1 |
Operator of veterinary
surgeries |
|
General
Retailers |
|
|
|
39 |
Genuit |
6,867 |
1.1 |
Manufacturer of plastic
piping systems |
|
Construction &
Materials |
|
|
|
40 |
Lok’nStore* |
6,760 |
1.0 |
Provider of self-storage
space in the UK |
|
Real Estate Investment
& Services |
|
|
|
41 |
TP
ICAP |
6,689 |
1.0 |
Inter-dealer
broker |
|
Investment Banking &
Brokerage |
|
|
|
42 |
FRP Advisory Group
PLC* |
6,658 |
1.0 |
Provider of forensics,
corporate finance, debt and financial advisory
services |
|
Support
Services |
|
|
|
43 |
Kier
Group |
6,642 |
1.0 |
UK construction, services
and property group |
|
Support
Services |
|
|
|
44 |
Clarkson |
6,566 |
1.0 |
Provider of shipping
services |
|
Industrial
Transportation |
|
|
|
45 |
SigmaRoc* |
6,431 |
1.0 |
Buy-and-build group
targeting construction materials assets in the UK and Northern
Europe |
|
Construction &
Materials |
|
|
|
46 |
Moneysupermarket.com |
6,379¹ |
1.0 |
Provider of price
comparison website specialising in financial
services |
|
Software & Computer
Services |
|
|
|
47 |
Cairn
Homes& |
6,322¹ |
1.0 |
Builder of community
apartments and homes |
|
Household Goods and Home
Construction |
|
|
|
48 |
Robert
Walters |
6,188 |
1.0 |
Provider of specialist
recruitment services |
|
Support
Services |
|
|
|
49 |
Xero& |
6,121¹ |
0.9 |
Software company
specialising in accounting for small
businesses |
|
Software & Computer
Services |
|
|
|
50 |
Judges
Scientific* |
5,977 |
0.9 |
Designer and producer of
scientific
instruments |
|
Electronic &
Electrical Equipment |
|
|
|
51 |
Euronext* |
5,932¹ |
0.9 |
European stock
exchange |
|
Financial
Services |
|
|
|
52 |
Balfour
Beatty |
5,778 |
0.9 |
Multinational
infrastructure group |
|
Construction &
Materials |
|
|
|
53 |
Senior
Plc |
5,717 |
0.9 |
Specialist engineering
business |
|
Aerospace &
Defence |
|
|
|
54 |
YouGov* |
5,570 |
0.9 |
Provider of survey data
and specialist data
analytics |
|
Media |
|
|
|
55 |
Ibstock |
5,563 |
0.9 |
Manufacturer of clay
bricks and concrete
products |
|
Construction &
Materials |
|
|
|
56 |
AB
Dynamics* |
5,554 |
0.9 |
Developer and supplier of
specialist automotive testing
systems |
|
Industrial
Engineering |
|
|
|
57 |
Sirius Real
Estate |
5,529 |
0.9 |
Owner and operator of
business parks, offices and industrial complexes in
Germany |
|
Real Estate Investment
& Services |
|
|
|
58 |
Ashtead* |
5,411 |
0.8 |
International equipment
rental business |
|
Oil, Gas &
Coal |
|
|
|
59 |
Spectris |
5,287 |
0.8 |
Supplier of productivity
enhancing instrumentation and
controls |
|
Electronic &
Electrical Equipment |
|
|
|
60 |
SThree |
5,179 |
0.8 |
Provider of specialist
professional recruitment
services |
|
Support
Services |
|
|
|
61 |
Zegona
Communications |
5,121 |
0.8 |
Provider of
telecommunications
services |
|
Mobile
Telecommunications |
|
|
|
62 |
DiscoverIE |
5,015 |
0.8 |
International designer,
manufacturer and supplier of customised
electronics |
|
Electronic &
Electrical Equipment |
|
|
|
63 |
Polar Capital
Holdings* |
4,920 |
0.8 |
Provider of investment
management services |
|
Financial
Services |
|
|
|
64 |
Future |
4,841 |
0.8 |
Multi-platform media
business covering technology, entertainment, creative arts, home
interest and
education |
|
Media |
|
|
|
65 |
Crest
Nicholson |
4,752 |
0.7 |
UK
housebuilder |
|
Household Goods and Home
Construction |
|
|
|
66 |
Applied Industrial
Technologies& |
4,591¹ |
0.7 |
Provider of fluid power
solutions |
|
Industrial Support
Services |
|
|
|
67 |
Londonmetric
Property |
4,591¹ |
0.7 |
Investor in, and developer
of property |
|
Real Estate Investment
Trusts |
|
|
|
68 |
Young & Co’s
Brewery* |
4,569 |
0.7 |
Owner and operator of pubs
mainly in the London
area |
|
Travel &
Leisure |
|
|
|
69 |
Oxford
Biomedica |
4,455¹ |
0.7 |
Gene cell
therapy |
|
Pharmaceuticals &
Biotechnology |
|
|
|
70 |
Serica
Energy* |
4,369 |
0.7 |
Oil and gas
producer |
|
Oil, Gas &
Coal |
|
|
|
71 |
Renishaw |
4,338 |
0.7 |
Engineering and scientific
technology company |
|
Electronic &
Electrical Equipment |
|
|
|
72 |
Accesso
Technology* |
4,305¹ |
0.7 |
Provider of ticketing and
virtual queuing
solutions |
|
Software & Computer
Services |
|
|
|
73 |
Kainos
Group |
4,275¹ |
0.7 |
Provider of digital
technology solutions |
|
Software & Computer
Services |
|
|
|
74 |
Auction Technology
Group |
4,162 |
0.6 |
Operator of marketplaces
for curated online
auctions |
|
General
Retailers |
|
|
|
75 |
OSB
Group |
4,143 |
0.6 |
Specialist lending
business |
|
Financial
Services |
|
|
|
76 |
Medpace
Holdings& |
4,088¹ |
0.6 |
Clinical research
organization (CRO) conducting global clinical research for the
development of drugs and medical
devices |
|
Pharmaceuticals &
Biotechnology |
|
|
|
77 |
Lundin
Mining& |
3,865¹ |
0.6 |
Diversified base metals
miner |
|
Industrial Metals &
Mining |
|
|
|
78 |
Central Asia
Metals* |
3,803¹ |
0.6 |
Production of base metals
with operations in Kazakhstan and North
Macedonia |
|
Industrial Metals &
Mining |
|
|
|
79 |
Ashmore
Group |
3,802¹ |
0.6 |
Emerging market focused
investment manager |
|
Financial
Services |
|
|
|
80 |
XP
Power |
3,791 |
0.6 |
Leading provider of power
solutions |
|
Electronic &
Electrical Equipment |
|
|
|
81 |
TI Fluid
Systems |
3,767 |
0.6 |
Manufacturer of thermal
management and fluid handling
systems |
|
Automobiles &
Parts |
|
|
|
82 |
Glenveagh
Properties& |
3,761¹ |
0.6 |
Builder of community
apartments and homes |
|
Household Goods and Home
Construction |
|
|
|
83 |
Babcock International
Group |
3,745 |
0.6 |
British aerospace, defence
and nuclear engineering services
company |
|
Aerospace &
Defence |
|
|
|
84 |
Deliveroo |
3,616 |
0.6 |
Online food delivery
business |
|
Software & Computer
Services |
|
|
|
85 |
Cerillion* |
3,561 |
0.6 |
Provider of billing,
charging and customer management
systems |
|
Software & Computer
Services |
|
|
|
86 |
Restore* |
3,472 |
0.5 |
Records management
business |
|
Support
Services |
|
|
|
87 |
Safestore |
3,469 |
0.5 |
Provider of self-storage
units |
|
Real Estate Investment
Trusts |
|
|
|
88 |
Rambus& |
3,464¹ |
0.5 |
US listed chip and silicon
IP producer |
|
Technology Hardware &
Equipment |
|
|
|
89 |
Inficon& |
3,442¹ |
0.5 |
Provider of innovative
instrumentation and critical sensor
technologies |
|
Electronic &
Electrical Equipment |
|
|
|
90 |
Gooch &
Housego* |
3,392 |
0.5 |
Designer and manufacturer
of advanced photonic
systems |
|
Electronic &
Electrical Equipment |
|
|
|
91 |
Bytes
Technology |
3,284 |
0.5 |
Specialist in software,
security and cloud
services |
|
Software & Computer
Services |
|
|
|
92 |
Eckoh* |
3,256 |
0.5 |
Global provider of secure
payments products |
|
Software & Computer
Services |
|
|
|
93 |
Forterra |
3,170 |
0.5 |
Manufacturer of building
products |
|
Construction &
Materials |
|
|
|
94 |
RHI
Magnesita |
3,165 |
0.5 |
Supplier of refractory
products, systems and
services |
|
Chemicals |
|
|
|
95 |
Marshalls |
3,088¹ |
0.5 |
British construction
materials group |
|
Construction &
Materials |
|
|
|
96 |
PayPoint |
3,051¹ |
0.5 |
Digital payments
business |
|
Industrial Support
Services |
|
|
|
97 |
Herc
Holdings* |
3,029¹ |
0.5 |
Equipment rental
business |
|
Industrial
Transportation |
|
|
|
98 |
Hiscox |
3,004¹ |
0.5 |
Provision of insurance
services |
|
Non-life
Insurance |
|
|
|
99 |
Creo Medical Group
PLC* |
2,989¹ |
0.4 |
Manufacturer of medical
devices |
|
Medical Equipment and
Services |
|
|
|
100 |
Permanent
TSB |
2,981 |
0.4 |
Irish
bank |
|
Banks |
|
|
|
101 |
BE
Semiconductor& |
2,913¹ |
0.4 |
Manufacturer of
semiconductor
equipment |
|
Technology Hardware &
Equipment |
|
|
|
102 |
Wetherspoon
(J.D) |
2,891 |
0.4 |
Ownership and management
of pubs in the UK |
|
Travel &
Leisure |
|
|
|
103 |
Domino’s |
2,881 |
0.4 |
Multinational pizza
restaurant chain |
|
Travel &
Leisure |
|
|
|
104 |
Dowlais
Group |
2,846 |
0.4 |
Provider of specialist
automotive engineering
services |
|
Automobiles &
Parts |
|
|
|
105 |
Team17* |
2,773 |
0.4 |
Video game developer and
publisher |
|
Leisure
Goods |
|
|
|
106 |
RH& |
2,612¹ |
0.4 |
Retailer of home
furnishings |
|
General
Retailers |
|
|
|
107 |
Animalcare
Group* |
2,513 |
0.4 |
Veterinary pharmaceuticals
business |
|
Pharmaceuticals &
Biotechnology |
|
|
|
108 |
Watches of
Switzerland |
2,510 |
0.4 |
Retailer of luxury
watches |
|
Personal
Goods |
|
|
|
109 |
Videndum |
2,447¹ |
0.4 |
Provider of media hardware
products and software
solutions |
|
Industrial
Engineering |
|
|
|
110 |
The Pebble
Group* |
2,302 |
0.4 |
Designer and manufacturer
of promotional goods |
|
Media |
|
|
|
111 |
Maxcyte* |
1,767 |
0.3 |
Clinical-stage global
cell-based therapies and life sciences
company |
|
Media |
|
|
|
112 |
Trainline |
1,685¹ |
0.3 |
Provider of online rail
and train ticketing
services |
|
Travel &
Leisure |
|
|
|
113 |
Advanced Medical
Solutions* |
1,293¹ |
0.2 |
Developer and manufacturer
of advanced wound care
solutions |
|
Healthcare Equipment &
Services |
|
|
|
114 |
Funding Circle
Holdings |
185 |
– |
Provider of funding
services to small
businesses |
|
Financial
Services |
|
|
|
|
|
--------------- |
--------------- |
|
|
Long investment positions (excluding BlackRock’s Institutional Cash
Series plc – Sterling Liquid Environmentally Aware
Fund) |
742,031 |
115.2 |
|
|
|
========= |
========= |
|
|
Short investment
positions |
(14,544) |
(2.3) |
|
|
|
========= |
========= |
|
1
Includes long derivative
positions.
*
Traded on the Alternative Investment Market (AIM) of the London
Stock Exchange.
&
Holdings listed on exchanges outside of the
UK.
^
The market value shown is the gross exposure to the shares through
equity investments and long derivative positions. For equity
investments, the market value is the fair value of the shares. For
long derivative positions, it is the market value of the underlying
shares to which the portfolio is exposed via the
contract.
Percentages shown are the
share of net assets.
At 31 May 2024, the Company held equity interests in
three companies comprising more than 3% of a company’s share
capital as follows: Tatton Asset Management (4.0%); TT Electronics
(3.4%); and Eckoh (3.1%).
Fair value and gross
market exposure of investments as at 31 May
2024
|
|
Gross
market |
Gross market exposure as a
%
of net
assets2 |
|
Fair
value1
£’000 |
exposure2,3
£’000 |
31 May
2024 |
31 May
2023 |
30 November
2023 |
|
|
|
|
|
|
Long equity investment
positions (excluding BlackRock’s Institutional Cash Series plc -
Sterling Liquid Environmentally Aware
Fund) |
612,126 |
612,126 |
95.0 |
98.3 |
96.8 |
Long derivative
positions |
2,230 |
129,905 |
20.2 |
13.6 |
14.6 |
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Subtotal of long investment
positions |
614,356 |
742,031 |
115.2 |
111.9 |
111.4 |
|
========= |
========= |
========= |
========= |
========= |
Short investment
positions |
(354) |
(14,544) |
(2.3) |
(3.6) |
(3.8) |
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Subtotal of long and short investment
positions |
614,002 |
727,487 |
112.9 |
108.3 |
107.6 |
|
========= |
========= |
========= |
========= |
========= |
Cash and cash
equivalents |
43,517 |
(69,968) |
(10.9) |
(7.8) |
(6.7) |
Other net current
liabilities |
(13,021) |
(13,021) |
(2.0) |
(0.5) |
(0.9) |
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Net
assets |
644,498 |
644,498 |
100.0 |
100.0 |
100.0 |
|
========= |
========= |
========= |
========= |
========= |
The Company was geared
through the use of long and short derivative positions. Gross and
net gearing as at 31 May 2024 was
117.4% and 112.9% respectively (31 May
2023: 115.5% and 108.3%; 30 November
2023: 115.2% and 107.6% respectively). Gross and net gearing
are Alternative Performance Measures, see Glossary contained within
the half yearly financial
report.
1 Fair
value is determined as
follows:
– Long
equity investment positions are valued at bid prices where
available, otherwise at latest market traded quoted
prices.
– The
exposure to securities held through long derivative positions
directly in the market would have amounted to £127,675,000 at the
time of purchase, and subsequent movement in market prices have
resulted in unrealised gains on the long derivative positions of
£2,230,000 resulting in the value of the total long derivative
market exposure to the underlying securities increasing to
£129,905,000 as at 31 May 2024. If
the long positions had been closed on 31 May
2024, this would have resulted in a gain of £2,230,000 for
the Company.
– The
notional exposure of selling the securities via the short
derivative positions would have been £14,190,000 at the time of
entering into the contract, and subsequent movement in market
prices have resulted in unrealised losses on the short derivative
positions of £354,000 resulting in the value of the total short
derivative market exposure of these investments decreasing to
£14,544,000 as at 31 May 2024. If the
short positions had been closed on 31 May
2024, this would have resulted in a loss of £354,000 for the
Company.
2 Gross
market exposure for equity investments is the same as fair value;
bid prices are used where available and, if unavailable, latest
market traded quoted prices are used. For both long and short
derivative positions, the gross market exposure is the market value
of the underlying shares to which the portfolio is exposed via the
contract.
3 The
gross market exposure column for cash and cash equivalents has been
adjusted to assume the Company traded direct holdings, rather than
exposure being gained through long and short derivative
positions.
Distribution of
investments as at 31 May
2024
Sector |
% of
long portfolio |
% of
short
portfolio |
% of net
portfolio |
Oil, Gas &
Coal |
1.3 |
0.0 |
1.3 |
Oil Equipment &
Services |
1.3 |
0.0 |
1.3 |
|
--------------- |
--------------- |
--------------- |
Oil &
Gas |
2.6 |
0.0 |
2.6 |
|
========= |
========= |
========= |
Chemicals |
1.5 |
0.0 |
1.5 |
Industrial Metals &
Mining |
3.2 |
0.0 |
3.2 |
|
--------------- |
--------------- |
--------------- |
Basic
Materials |
4.7 |
0.0 |
4.7 |
|
========= |
========= |
========= |
Aerospace &
Defence |
3.0 |
0.0 |
3.0 |
Construction &
Materials |
8.2 |
(0.3) |
7.9 |
Electronic &
Electrical Equipment |
11.6 |
0.0 |
11.6 |
Industrial
Engineering |
3.3 |
0.0 |
3.3 |
Industrial Support
Services |
2.2 |
(0.1) |
2.1 |
Industrial
Transportation |
1.3 |
(0.3) |
1.0 |
Support
Services |
7.9 |
0.0 |
7.9 |
|
--------------- |
--------------- |
--------------- |
Industrials |
37.5 |
(0.7) |
36.8 |
|
========= |
========= |
========= |
Food
Producers |
1.0 |
0.0 |
1.0 |
Personal
Goods |
0.3 |
0.0 |
0.3 |
|
--------------- |
--------------- |
--------------- |
Consumer
Staples |
1.3 |
0.0 |
1.3 |
|
========= |
========= |
========= |
Healthcare Equipment &
Services |
0.2 |
0.0 |
0.2 |
Pharmaceuticals &
Biotechnology |
2.9 |
(0.3) |
2.6 |
Medical Equipment and
Services |
0.4 |
0.0 |
0.4 |
|
--------------- |
--------------- |
--------------- |
Health
Care |
3.5 |
(0.3) |
3.2 |
|
========= |
========= |
========= |
Automobiles &
Parts |
0.9 |
0.0 |
0.9 |
General
Retailers |
5.1 |
(0.3) |
4.8 |
Home Improvement
Retailers |
1.0 |
0.0 |
1.0 |
Household Goods and Home
Construction |
4.2 |
0.0 |
4.2 |
Leisure
Goods |
0.4 |
0.0 |
0.4 |
Media |
6.9 |
0.0 |
6.9 |
Travel &
Leisure |
2.8 |
0.0 |
2.8 |
|
--------------- |
--------------- |
--------------- |
Consumer
Discretionary |
21.3 |
(0.3) |
21.0 |
|
========= |
========= |
========= |
Banks |
0.4 |
0.0 |
0.4 |
Financial
Services |
9.3 |
0.0 |
9.3 |
Investment Banking &
Brokerage |
2.1 |
0.0 |
2.1 |
Non-life
Insurance |
0.4 |
0.0 |
0.4 |
|
--------------- |
--------------- |
--------------- |
Financials |
12.2 |
0.0 |
12.2 |
|
========= |
========= |
========= |
Real Estate Investment
& Services |
1.7 |
0.0 |
1.7 |
Real Estate Investment
Trusts |
4.0 |
0.0 |
4.0 |
|
--------------- |
--------------- |
--------------- |
Real
Estate |
5.7 |
0.0 |
5.7 |
|
========= |
========= |
========= |
Software & Computer
Services |
9.2 |
(0.4) |
8.8 |
Technology Hardware &
Equipment |
0.9 |
(0.3) |
0.6 |
|
--------------- |
--------------- |
--------------- |
Technology |
10.1 |
(0.7) |
9.4 |
|
========= |
========= |
========= |
Mobile
Telecommunications |
3.1 |
0.0 |
3.1 |
|
--------------- |
--------------- |
--------------- |
Telecommunications |
3.1 |
0.0 |
3.1 |
|
========= |
========= |
========= |
Total
Investments |
102.0 |
(2.0) |
100.0 |
|
========= |
========= |
========= |
The above percentages are
calculated on the net portfolio as at 31 May
2024. The net portfolio is calculated as long equity and
derivative positions, less short derivative positions as at
31 May
2024.
Analysis of the
Portfolio
Market
capitalisation as at 31 May
2024
|
Long
positions1%
of net
portfolio |
Short
positions% of net
portfolio |
£5bn –
£10bn |
4.1% |
0.0% |
£2.5bn –
£5bn |
11.5% |
-0.6% |
£2bn –
£2.5bn |
2.6% |
0.0% |
£1.5bn –
£2bn |
15.6% |
-0.1% |
£1bn –
£1.5bn |
27.7% |
-0.5% |
£500m –
£1bn |
19.0% |
-0.6% |
£0m –
£500m |
20.7% |
-0.2% |
1
The above investments may
comprise exposures to long equity and long derivative
positions.
Source:
BlackRock
Position
size as at 31 May
2024
Market
value |
Long
positions1 |
Short
positions |
£20m+ |
1 |
0 |
£15m –
£20m |
7 |
0 |
£10m –
£15m |
8 |
0 |
£5m –
£10m |
46 |
0 |
£2.5m –
£5m |
46 |
-1 |
£0m –
£2.5m |
6 |
-8 |
1
The above investments may
comprise exposures to long equity and long derivative
positions.
Source:
BlackRock.
Portfolio holdings within
Key Indices as at 31 May
2024
|
Gross
Basis1 |
Net
Basis2 |
FTSE
250 |
55.9% |
55.3% |
FTSE
AIM |
26.1% |
27.0% |
FTSE Small
Cap |
10.2% |
10.6% |
Other |
6.7% |
5.9% |
FTSE
100 |
1.1% |
1.2% |
Portfolio holdings within
Benchmark Index (the Deutsche Numis Smaller Companies plus
AIM
(excluding Investment
Companies)
Index)
|
Gross
Basis1,3 |
Net
Basis2,3 |
Within
Benchmark |
83.5% |
80.7% |
Off-Benchmark |
16.5% |
19.3% |
Source:
BlackRock.
1
Long exposure plus short
exposure as a percentage of the portfolio in aggregate excluding
investment in BlackRock’s Institutional Cash Series plc – Sterling
Liquid Environmentally Aware
Fund.
2
Long exposure less short
exposure as a percentage of the portfolio excluding investment in
BlackRock’s Institutional Cash Series plc – Sterling Liquid
Environmentally Aware
Fund.
3
Holdings included within
the Benchmark Index as at 30 November
2023 were 68.2% on a Gross Basis and 70.4% on a Net
Basis.
Interim Management Report
and Responsibility Statement
The Chairman’s Statement
and the Investment Manager’s Report above give details of the
important events which have occurred during the period and their
impact on the financial
statements.
Principal risks and
uncertainties
The principal risks faced
by the Company can be divided into various areas as
follows:
·
Performance;
·
Market;
·
Income/dividend;
·
Financial;
·
Operational;
and
·
Regulatory.
The Board reported on the
principal risks and uncertainties faced by the Company in the
Annual Report and Financial Statements for the year ended
30 November 2023. A detailed
explanation can be found in the Strategic Report on pages 43 to 46
and in note 16 on pages 111 to 122 of the Annual Report and
Financial Statements which are available on the website maintained
by BlackRock at www.blackrock.com/uk/thrg.
The Directors have also
assessed the impact of market conditions arising from the conflicts
in Russia/Ukraine and the Middle East on the Company’s ability to meet
its investment objective. Based on the latest available
information, the Company continues to be managed in line with its
investment objective, with no disruption to its
operations.
In the view of the Board,
there have not been any changes to the fundamental nature of the
principal risks and uncertainties since the previous report and
these are equally applicable to the remaining six months of the
financial year as they were to the six months under
review.
Related party disclosure
and transactions with the Investment
Manager
BlackRock Fund Managers
Limited (BFM) was appointed as the Company’s Alternative Investment
Fund Manager (AIFM) with effect from 2 July
2014. BFM has (with the Company’s consent) delegated certain
portfolio and risk management services, and other ancillary
services, to BlackRock Investment Management (UK) Limited
(BIM (UK)). Both BFM and
BIM (UK) are regarded as related
parties under the Listing Rules. Details of the fees payable are
set out in note 4 and note 11 of the financial
statements.
The related party
transactions with the Directors are set out in note 12 of the
financial statements.
Going
concern
The Board remains mindful
of the ongoing uncertainty surrounding the potential duration of
the conflicts in Russia/
Ukraine and the Middle East and its longer-term effects on the
global economy and the current heightened geopolitical risk.
Nevertheless, the Directors, having considered the nature and
liquidity of the portfolio, the Company’s investment objective and
the Company’s projected income and expenditure, are satisfied that
the Company has adequate resources to continue in operational
existence for the foreseeable future and is financially
sound.
The Company has a
portfolio of investments which are predominantly readily realisable
and is able to meet all its liabilities from these assets.
Accounting revenue and expense forecasts are maintained and
reported to the Board regularly and it is expected that the Company
will be able to meet all its obligations. Ongoing charges for the
year ended 30 November 2023 were
0.54% of net assets and it is expected that this is unlikely to
change significantly going
forward.
Based on the above, the
Board is satisfied that it is appropriate to continue to adopt the
going concern basis in preparing the financial
statements.
Directors’ responsibility
statement
The Disclosure Guidance
and Transparency Rules (DTR) of the UK Listing Authority require
the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Management Report and
Financial
Statements.
The Directors confirm to
the best of their knowledge
that:
·
the condensed set of financial statements contained within the Half
Yearly Financial Report has been prepared in accordance with
International Accounting Standard 34, Interim Financial Reporting;
and
·
the Interim Management Report, together with the Chairman’s
Statement and Investment Manager’s report, include a fair review of
the information required by 4.2.7R and 4.2.8R of the FCA’s
Disclosure Guidance and Transparency
Rules.
The Half Yearly Financial
Report has not been audited or reviewed by the Company’s
Auditor.
The Half Yearly Financial
Report was approved by the Board on 24 July
2024 and the above responsibility statement was signed on
its behalf by the Chairman.
CHRISTOPHER SAMUEL
For and on behalf of the Board
24
July
2024
Statement of Comprehensive
Income for the six months ended
31 May
2024
|
Notes |
Six months ended
31 May 2024
(unaudited) |
Six months ended
31 May 2023
(unaudited) |
Year ended
30 November 2023
(audited) |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
|
|
|
|
|
|
|
|
|
|
|
Income from investments
held at fair value through profit or
loss |
3 |
8,240 |
518 |
8,758 |
7,869 |
— |
7,869 |
15,981 |
— |
15,981 |
Net income from
derivatives |
3 |
768 |
— |
768 |
655 |
— |
655 |
830 |
— |
830 |
Other
income |
3 |
625 |
— |
625 |
754 |
— |
754 |
1,139 |
— |
1,139 |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Total
income |
|
9,633 |
518 |
10,151 |
9,278 |
— |
9,278 |
17,950 |
— |
17,950 |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
Net profit/(loss) on
investments held at fair value through profit or
loss |
|
— |
83,772 |
83,772 |
— |
(4,300) |
(4,300) |
— |
(28,389) |
(28,389) |
Net loss on foreign
exchange |
|
— |
(43) |
(43) |
— |
(42) |
(42) |
— |
(114) |
(114) |
Net profit/(loss) from
derivatives |
|
— |
15,517 |
15,517 |
— |
(980) |
(980) |
— |
242 |
242 |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Total |
|
9,633 |
99,764 |
109,397 |
9,278 |
(5,322) |
3,956 |
17,950 |
(28,261) |
(10,311) |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
Expenses |
|
|
|
|
|
|
|
|
|
|
Investment management fee
and performance fees |
4 |
(321) |
(3,713) |
(4,034) |
(325) |
(2,461) |
(2,786) |
(629) |
(3,903) |
(4,532) |
Other operating
expenses |
5 |
(406) |
(11) |
(417) |
(405) |
(10) |
(415) |
(792) |
(20) |
(812) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Total operating
expenses |
|
(727) |
(3,724) |
(4,451) |
(730) |
(2,471) |
(3,201) |
(1,421) |
(3,923) |
(5,344) |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
Net profit/(loss) on ordinary activities before finance costs and
taxation |
|
8,906 |
96,040 |
104,946 |
8,548 |
(7,793) |
755 |
16,529 |
(32,184) |
(15,655) |
Finance
costs |
|
(11) |
(34) |
(45) |
(10) |
(30) |
(40) |
(25) |
(75) |
(100) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Net profit/(loss) on ordinary activities before
taxation |
|
8,895 |
96,006 |
104,901 |
8,538 |
(7,823) |
715 |
16,504 |
(32,259) |
(15,755) |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
Taxation
(charge)/credit |
|
(10) |
– |
(10) |
6 |
– |
6 |
6 |
– |
6 |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Net profit/(loss) on ordinary activities after
taxation |
|
8,885 |
96,006 |
104,891 |
8,544 |
(7,823) |
721 |
16,510 |
(32,259) |
(15,749) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Earnings/(loss) per ordinary share
(pence) |
7 |
9.44 |
101.97 |
111.41 |
8.46 |
(7.75) |
0.71 |
16.56 |
(32.36) |
(15.80) |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
The total columns of this
statement represent the Company’s Statement of Comprehensive
Income, prepared in accordance with UK-adopted International
Accounting Standards (IAS). The supplementary revenue and capital
accounts are both prepared under guidance published by the
Association of Investment Companies (AIC). All items in the above
statement derive from continuing operations. No operations were
acquired or discontinued during the period. All income is
attributable to the equity holders of the
Company.
The Company does not have
any other comprehensive income/(loss). The net profit/(loss) for
the period disclosed above represents the Company’s total
comprehensive income/(loss).
Statement of Changes in
Equity for the six months ended
31 May
2024
|
Note |
Called
up share
capital
£’000 |
Share
Premium
account
£’000 |
Capital
Redemption
reserve
£’000 |
Special
reserve
£’000 |
Capital
reserves
£’000 |
Revenue
reserve
£’000 |
Total
£’000 |
For the six months ended 31 May 2024
(unaudited) |
|
|
|
|
|
|
|
|
At 30 November
2023 |
|
5,160 |
242,122 |
11,905 |
3,231 |
295,624 |
17,883 |
575,925 |
Total comprehensive
income: |
|
|
|
|
|
|
|
|
Net profit for the
year |
|
— |
— |
— |
— |
96,006 |
8,885 |
104,891 |
Transactions with owners,
recorded directly to
equity: |
|
|
|
|
|
|
|
|
Ordinary shares bought
back into treasury |
|
— |
— |
— |
(7,821) |
(17,529) |
— |
(25,350) |
Share purchase
costs |
|
— |
— |
— |
(47) |
(80) |
— |
(127) |
Transfer of special
reserve |
|
— |
— |
— |
4,637 |
(4,637) |
— |
— |
Dividends
paid1 |
6 |
— |
— |
— |
— |
— |
(10,841) |
(10,841) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
At 31 May
2024 |
|
5,160 |
242,122 |
11,905 |
— |
369,384 |
15,927 |
644,498 |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
For the six months ended 31 May 2023
(unaudited) |
|
|
|
|
|
|
|
|
At 30 November
2022 |
|
5,160 |
242,122 |
11,905 |
33,038 |
327,883 |
13,249 |
633,357 |
Total comprehensive
(loss)/income: |
|
|
|
|
|
|
|
|
Net (loss)/profit for the
period |
|
— |
— |
— |
— |
(7,823) |
8,544 |
721 |
Transactions with owners,
recorded directly to
equity: |
|
|
|
|
|
|
|
|
Ordinary shares bought
back into treasury |
|
— |
— |
— |
(5,053) |
— |
— |
(5,053) |
Share purchase
costs |
|
— |
— |
— |
(23) |
— |
— |
(23) |
Dividends
paid2 |
|
— |
— |
— |
— |
— |
(8,595) |
(8,595) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
At 31 May
2023 |
|
5,160 |
242,122 |
11,905 |
27,962 |
320,060 |
13,198 |
620,407 |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
For the year ended 30 November 2023
(audited) |
|
|
|
|
|
|
|
|
At 30 November
2022 |
|
5,160 |
242,122 |
11,905 |
33,038 |
327,883 |
13,249 |
633,357 |
Total comprehensive
(loss)/income: |
|
|
|
|
|
|
|
|
Net (loss)/profit for the
year |
|
— |
— |
— |
— |
(32,259) |
16,510 |
(15,749) |
Transactions with owners,
recorded directly to
equity: |
|
|
|
|
|
|
|
|
Ordinary shares bought
back into treasury |
|
— |
— |
— |
(29,646) |
— |
— |
(29,646) |
Share purchase
costs |
|
— |
— |
— |
(161) |
— |
— |
(161) |
Dividends
paid3 |
|
— |
— |
— |
— |
— |
(11,876) |
(11,876) |
|
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
At 30 November
2023 |
|
5,160 |
242,122 |
11,905 |
3,231 |
295,624 |
17,883 |
575,925 |
|
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
1 Final
dividend of 11.45p per share for the year ended 30 November 2023, declared on 2 February 2024 and paid on 28 March
2024.
2 Final
dividend of 8.50p per share for the year ended 30 November 2022, declared on 10 February 2023 and paid on 31 March
2023.
3 Final
dividend of 8.50p per share for the year ended 30 November 2022, declared on 10 February 2023 and paid on 31 March 2023 and interim dividend of 3.30p per
share for the year ended 30 November
2023, declared on 27 July 2023
and paid on 1 September
2023.
For information on the
Company’s distributable reserves, please refer to note 9
below.
Statement of Financial
Position as at 31 May
2024
|
Notes |
31 May
2024
(unaudited)
£’000 |
31 May
2023
(unaudited)
£’000 |
30 November
2023
(audited)
£’000 |
Non current
assets |
|
|
|
|
Investments held at fair
value through profit or
loss |
10 |
612,126 |
610,447 |
557,594 |
|
|
--------------- |
--------------- |
--------------- |
Current
assets |
|
|
|
|
Other
receivables |
|
3,503 |
3,169 |
2,280 |
Derivative financial
assets held at fair value through profit or
loss |
10 |
3,022 |
1,460 |
703 |
Current tax
asset |
|
451 |
315 |
365 |
Cash collateral pledged
with brokers |
|
380 |
1,060 |
775 |
Cash and cash
equivalents |
|
43,520 |
12,983 |
24,328 |
|
|
--------------- |
--------------- |
--------------- |
Total current
assets |
|
50,876 |
18,987 |
28,451 |
|
|
========= |
========= |
========= |
Total
assets |
|
663,002 |
629,434 |
586,045 |
|
|
========= |
========= |
========= |
Current
liabilities |
|
|
|
|
Other
payables |
|
(14,677) |
(5,629) |
(7,740) |
Derivative financial
liabilities held at fair value through profit or
loss |
10 |
(1,146) |
(1,088) |
(1,454) |
Bank
overdraft |
|
(3) |
– |
(306) |
Liability for cash
collateral received |
|
(2,678) |
(2,310) |
(620) |
|
|
--------------- |
--------------- |
--------------- |
Total current
liabilities |
|
(18,504) |
(9,027) |
(10,120) |
|
|
========= |
========= |
========= |
Net
assets |
|
644,498 |
620,407 |
575,925 |
|
|
========= |
========= |
========= |
Total
equity |
|
|
|
|
Called up share
capital |
8 |
5,160 |
5,160 |
5,160 |
Share premium
account |
|
242,122 |
242,122 |
242,122 |
Capital redemption
reserve |
|
11,905 |
11,905 |
11,905 |
Special
reserve |
|
— |
27,962 |
3,231 |
Capital
reserves |
|
369,384 |
320,060 |
295,624 |
Revenue
reserve |
|
15,927 |
13,198 |
17,883 |
|
|
--------------- |
--------------- |
--------------- |
Total shareholders’
funds |
|
644,498 |
620,407 |
575,925 |
|
|
========= |
========= |
========= |
Net asset value per ordinary share
(pence) |
7 |
703.55 |
618.58 |
600.72 |
|
|
========= |
========= |
========= |
Cash Flow
Statement for the six months ended
31 May
2024
|
Six months
ended
31 May
2024
(unaudited)
£’000 |
Six months
ended
31 May
2023
(unaudited)
£’000 |
Year
ended
30 November
2023
(audited)
£’000 |
Operating
activities |
|
|
|
Net profit/(loss) on
ordinary activities after
taxation |
104,901 |
715 |
(15,755) |
Add back finance
costs |
45 |
40 |
100 |
Net (profit)/loss on
investments held at fair value through profit or loss (including
transaction costs) |
(83,772) |
4,300 |
28,389 |
Net (profit)/loss from
derivatives (including transaction
costs) |
(15,517) |
980 |
(242) |
Financing costs on
derivatives |
(1,604) |
(1,218) |
(2,324) |
Net loss on foreign
exchange |
43 |
42 |
114 |
Sales of investments held
at fair value through profit or
loss |
149,070 |
96,831 |
207,680 |
Purchases of investments
held at fair value through profit or
loss |
(119,830) |
(134,807) |
(216,892) |
Net receipts on closure of
derivatives |
14,494 |
2,464 |
5,915 |
Increase in other
receivables |
(1,082) |
(721) |
(470) |
Increase in other
payables |
2,861 |
2,301 |
2,892 |
(Increase)/decrease in
amounts due from
brokers |
(141) |
683 |
1,321 |
Increase in amounts due to
brokers |
4,001 |
208 |
2,365 |
Net movement in cash
collateral
received/(pledged) |
2,453 |
(4,620) |
(6,025) |
|
--------------- |
--------------- |
--------------- |
Net cash inflow/(outflow) from operating activities before
taxation |
55,922 |
(32,802) |
7,068 |
|
========= |
========= |
========= |
Taxation
paid |
(96) |
(135) |
(185) |
|
--------------- |
--------------- |
--------------- |
Net cash inflow/(outflow) from operating
activities |
55,826 |
(32,937) |
6,883 |
|
========= |
========= |
========= |
Financing
activities |
|
|
|
Interest
paid |
(45) |
(40) |
(100) |
Cash paid for ordinary
shares bought back into
treasury |
(25,402) |
(4,196) |
(29,564) |
Dividends
paid |
(10,841) |
(8,595) |
(11,876) |
|
--------------- |
--------------- |
--------------- |
Net cash outflow from financing
activities |
(36,288) |
(12,831) |
(41,540) |
|
========= |
========= |
========= |
Increase/(decrease) in cash and cash
equivalents |
19,538 |
(45,768) |
(34,657) |
Effect of foreign exchange
rate changes |
(43) |
(42) |
(114) |
|
--------------- |
--------------- |
--------------- |
Change in cash and cash
equivalents |
19,495 |
(45,810) |
(34,771) |
|
========= |
========= |
========= |
Cash and cash equivalents
at start of
period/year |
24,022 |
58,793 |
58,793 |
|
--------------- |
--------------- |
--------------- |
Cash and cash equivalents at end of the
period/year |
43,517 |
12,983 |
24,022 |
|
========= |
========= |
========= |
Comprised
of: |
|
|
|
Cash at
bank |
872 |
129 |
— |
Bank
overdraft |
(3) |
— |
(306) |
Cash
Fund1 |
42,648 |
12,854 |
24,328 |
|
--------------- |
--------------- |
--------------- |
|
43,517 |
12,983 |
24,022 |
|
========= |
========= |
========= |
1
Cash Fund represents funds
held on deposit with the BlackRock Institutional Cash Series plc -
Sterling Liquid Environmentally Aware
Fund.
Notes to the financial
statements for the six months ended 31 May
2024
1. Principal
activity
The principal activity of
the Company is that of an investment trust company within the
meaning of Section 1158 of the Corporation Tax Act
2010.
2. Basis of
presentation
The half yearly financial
statements for the six month period ended 31
May 2024 have been prepared in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the
Financial Conduct Authority and with the UK-adopted International
Accounting Standard 34 (IAS 34), Interim Financial Reporting. The
half yearly financial statements should be read in conjunction with
the Company’s Annual Report and Financial Statements for the year
ended 30 November 2023, which have
been prepared in accordance with UK-adopted International
Accounting Standards (IAS) in conformity with the requirements of
the Companies Act
2006.
Insofar as the Statement
of Recommended Practice (SORP) for investment trust companies and
venture capital trusts, issued by the Association of Investment
Companies (AIC) in October 2019 and
updated in July 2022, is compatible
with UK-adopted IAS, the financial statements have been prepared in
accordance with guidance set out in the
SORP.
Adoption of new and
amended International Accounting Standards and
interpretations:
IFRS 17 - Insurance
contracts (effective 1 January 2023). This standard replaced IFRS 4
and applies to all types of insurance contracts. IFRS 17 provides a
consistent and comprehensive model for insurance contracts covering
all relevant accounting
aspects.
This standard did not have
any impact on the Company as it has no insurance
contracts.
IAS 12 - Deferred tax
related to assets and liabilities arising from a single
transaction (effective 1 January 2023). The IASB has amended IAS 12
Income Taxes to require companies to recognise deferred tax on
particular transactions that, on initial recognition, give rise to
equal amounts of taxable and deductible temporary differences.
According to the amended guidance, a temporary difference that
arises on initial recognition of an asset or liability is not
subject to the initial recognition exemption if that transaction
gave rise to equal amounts of taxable and deductible temporary
differences. These amendments might have a significant impact on
the preparation of financial statements by companies that have
substantial balances of right-of-use assets, lease liabilities,
decommissioning, restoration and similar liabilities. The impact
for those affected would be the recognition of additional deferred
tax assets and
liabilities.
The amendment of this
standard did not have any significant impact on the
Company.
IAS 8 - Definition of
accounting estimates (effective 1 January 2023). The IASB has amended IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors to
help distinguish between accounting policies and accounting
estimates, replacing the definition of accounting
estimates.
IAS 1 and IFRS Practice
Statement 2 - Disclosure of accounting
policies (effective 1 January 2023). The IASB has amended IAS 1
Presentation of Financial Statements to help preparers in deciding
which accounting policies to disclose in their financial statements
by stating that an entity is now required to disclose material
accounting policies instead of significant accounting
policies.
IAS 12 - International Tax
Reform Pillar Two Model Rules (effective 1 January 2023). The IASB has published
amendments to IAS 12 Income Taxes to respond to stakeholders’
concerns about the potential implications of the imminent
implementation of the OECD pillar two rules on the accounting for
income taxes. The amendment is an exception to the requirements in
IAS 12 that an entity does not recognise and does not disclose
information about deferred tax assets as liabilities related to the
OECD pillar two income taxes and a requirement that current tax
expenses must be disclosed separately to pillar two income
taxes.
Relevant International
Accounting Standards that have yet to be
adopted:
IAS 1 - Classification of
liabilities as current or non current
(effective 1 January 2024). The IASB has amended IAS 1
Presentation of Financial Statements to clarify its requirement for
the presentation of liabilities depending on the rights that exist
at the end of the reporting period. The amendment requires
liabilities to be classified as non current if the entity has a
substantive right to defer settlement for at least 12 months at the
end of the reporting period. The amendment no longer refers to
unconditional
rights.
IAS 1 - Non current
liabilities with covenants (effective 1 January 2024). The IASB has amended IAS 1
Presentation of Financial Statements to introduce additional
disclosures for liabilities with covenants within 12 months of the
reporting period. The additional disclosures include the nature of
covenants, when the entity is required to comply with covenants,
the carrying amount of related liabilities and circumstances that
may indicate that the entity will have difficulty complying with
the covenants.
None of the standards that
have been issued, but are not yet effective, are expected to have a
material impact on the
Company.
3.
Income
|
Six months
ended
31 May
2024
(unaudited)
£’000 |
Six months
ended
31 May
2023
(unaudited)
£’000 |
Year
ended
30 November
2023
(audited)
£’000 |
Investment
income: |
|
|
|
UK
dividends |
6,466 |
5,121 |
12,201 |
UK special
dividends |
404 |
1,175 |
1,464 |
UK REIT
dividends |
335 |
293 |
610 |
Overseas
dividends |
890 |
— |
1,706 |
Overseas special
dividends |
— |
1,280 |
— |
Overseas REIT
dividends |
145 |
— |
— |
|
--------------- |
--------------- |
--------------- |
Total investment
income1 |
8,240 |
7,869 |
15,981 |
|
========= |
========= |
========= |
Net income from
derivatives |
768 |
655 |
830 |
|
--------------- |
--------------- |
--------------- |
Other
income: |
|
|
|
Deposit
interest |
8 |
3 |
3 |
Interest from Cash
Fund |
603 |
718 |
1,083 |
Collateral
interest |
14 |
33 |
53 |
|
--------------- |
--------------- |
--------------- |
|
625 |
754 |
1,139 |
|
========= |
========= |
========= |
Total
income |
9,633 |
9,278 |
17,950 |
|
========= |
========= |
========= |
1
UK and overseas dividends
are presented based on the country of domicile of the respective
underlying portfolio
company.
Dividends and interest
received in cash in the six months ended 31
May 2024 amounted to £7,463,000 and £521,000 (six months
ended 31 May 2023: £7,007,000 and
£835,000; year ended 30 November
2023: £15,499,000 and
£1,191,000).
Special dividends of
£518,000 have been recognised in capital in the six months ended
31 May 2024 (six months ended
31 May 2023: £nil; year ended
30 November 2023:
£nil).
4. Investment management
and performance
fees
|
Six months ended
31 May 2024
(unaudited) |
Six months ended
31 May 2023
(unaudited) |
Year ended
30 November 2023
(audited) |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Investment management
fee |
321 |
964 |
1,285 |
325 |
974 |
1,299 |
629 |
1,889 |
2,518 |
Performance
fee |
— |
2,749 |
2,749 |
— |
1,487 |
1,487 |
— |
2,014 |
2,014 |
|
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
--------------- |
Total |
321 |
3,713 |
4,034 |
325 |
2,461 |
2,786 |
629 |
3,903 |
4,532 |
|
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
========= |
Investment management
fees
The investment management
fee is calculated at the rate of 0.35% per annum on month end Gross
Assets. For the purposes of this note, Gross Assets are defined as
the value of the portfolio of the Company, including uninvested
cash, with the portfolio valuation based on value at risk (with
value at risk being the gross asset value of the long-only
portfolio plus the gross value of the underlying equities, long and
short, to which the Company is exposed through derivatives
including CFDs and index futures). The management fee is charged
25% to the revenue account and 75% to the capital account of the
Statement of Comprehensive Income. There is no additional fee for
company secretarial and administration
services.
Performance
fees
The performance fee is
calculated at the rate of 15% of the outperformance of the Company.
For the purpose of this note, outperformance is defined as the
amount by which the annualised percentage Net Asset Value total
return of the Company arithmetically exceeds the annualised
percentage return of the Benchmark Index, measured over a rolling
two-year performance period. This rate is applied to the average
Gross Assets, in that rolling two-year performance period.
Outperformance is the amount by which the Net Asset Value total
return arithmetically exceeds the Benchmark Index total
return.
There is a cap on the
annual total management and performance fees of 1.25% per financial
year of the average Gross Assets over the rolling two-year
performance period (the “Cap” or “Capped Amount”) which has the
effect of capping the annual performance fees at circa 0.9% of
average Gross Assets and which means that the performance fee from
any performance period will not exceed 0.9% of average Gross Assets
for the relevant performance
period.
The performance fee is
calculated daily for the rolling two-year performance period ending
30 November 2024 and the rolling
two-year performance period ending 30
November 2025, and accruals are made in the NAV subject to
the Cap. The performance fee is payable on 30 November each year in
relation to the rolling two-year performance period ending on that
date. The accrual is calculated applying the following
assumptions:
·
The Benchmark Index remains
unchanged;
·
The Net Asset Value total return performs in line with the
Benchmark Index total return for the remainder of the respective
rolling two-year performance periods ending 30 November 2024 and 30
November 2025;
and
·
The future value of Gross Assets for performance fee purposes is
the same at the balance sheet
date.
The amount of
outperformance on which a performance fee has not been paid in a
financial year due to the application of the Cap, will be carried
forward to offset against future shortfall returns. As at
1 December 2023, the carried forward
unpaid net outperformance, net of prior period shortfall returns,
available to offset against future shortfall returns was 4.8%
(1 December 2022:
10.7%).
On the first day of the
financial year, due to the application of the Cap in the prior
financial year, any performance fee for the ongoing rolling
two-year performance period not yet recognised is accrued in the
daily NAV released to the London Stock Exchange on that
day.
Performance fees have been
wholly allocated to the capital account of the Statement of
Comprehensive Income as the performance has been predominantly
generated through capital returns from the investment portfolio.
The total accrual of performance fee for all rolling two-year
performance periods amounted to £4,763,000 as at 31 May 2024 (31 May
2023: £1,487,000; 30 November
2023: £2,014,000), calculated as
follows:
·
For the annualised rolling two-year performance period to
30 November 2024, the Company has
outperformed the benchmark by 3.2% as at 31
May 2024. A performance fee of £3,569,000 relating to this
performance period has been accrued at the date of this report,
which does not become payable until 30
November 2024 subject to the ongoing performance of the
Company. Of this, an amount of £2,014,000 was recognised during the
year ended 30 November
2023.
·
For the annualised rolling two-year performance period to
30 November 2025, the Company has
outperformed the benchmark by 1.0% as at 31
May 2024. A performance fee of £1,194,000 relating to this
performance period has been accrued at the date of this report,
which does not become payable until 30
November 2025 subject to the ongoing performance of the
Company.
5. Other operating
expenses
|
Six months
ended
31 May
2024
(unaudited)
£’000 |
Six months
ended
31 May
2023
(unaudited)
£’000 |
Year
ended
30 November
2023
(audited)
£’000 |
Allocated to
revenue: |
|
|
|
Custody
fees |
3 |
3 |
7 |
Auditor’s
remuneration1 |
35 |
32 |
58 |
Registrar’s
fees |
21 |
17 |
44 |
Directors’
emoluments |
111 |
115 |
224 |
Broker
fees |
18 |
18 |
36 |
Depositary
fees |
35 |
36 |
70 |
Marketing
fees |
68 |
71 |
149 |
FCA
fees |
13 |
15 |
27 |
Printing and postage
fees |
21 |
22 |
43 |
AIC
fees |
11 |
11 |
21 |
Stock exchange listing
fees |
18 |
16 |
31 |
Write back of prior year
expenses2 |
(13) |
(9) |
(12) |
Other administrative
costs |
65 |
58 |
94 |
|
--------------- |
--------------- |
--------------- |
|
406 |
405 |
792 |
|
========= |
========= |
========= |
Allocated to
capital: |
|
|
|
Custody transaction
charges3 |
11 |
10 |
20 |
|
--------------- |
--------------- |
--------------- |
|
417 |
415 |
812 |
|
========= |
========= |
========= |
1
In the six months ended 31 May 2024,
no non-audit services were provided by the auditors (six months
ended 31 May 2023 none; year ended
30 November 2023:
none).
2
Relates to Director’s expenses, legal fees, professional fees and
miscellaneous fees written back during the period (six months ended
31 May 2023: Directors’ recruitment
fees; year ended 30 November 2023:
Directors’ recruitment fees, miscellaneous fees and postage
fees).
3
For the six month period ended 31 May
2024, expenses of £11,000 (six months ended 31 May 2023: £10,000; year ended 30 November 2023: £20,000) were charged to the
capital account of the Statement of Comprehensive Income. This
relates to transaction costs charged by the custodian on sale and
purchase
trades.
The transaction costs
incurred on the acquisition of investments amounted to £555,000 for
the six months ended 31 May 2024 (six
months ended 31 May 2023: £652,000;
year ended 30 November 2023:
£975,000). Costs relating to the disposal of investments amounted
to £107,000 for the six months ended 31 May
2024 (six months ended 31 May
2023: £66,000; year ended 30 November
2023: £141,000). All transaction costs have been included
within capital reserves.
6.
Dividends
The Board has declared an
interim dividend of 3.75p per share payable on 27 August 2024 to shareholders on the register at
2 August 2024 (six months ended
31 May 2023: interim dividend of
3.30p per share paid on 1 September
2023 to shareholders on the register at 4 August 2023). This dividend has not been
accrued in the financial statements for the six months ended
31 May 2024 as, under IAS, interim
dividends are not recognised until paid. Dividends are debited
directly to
reserves.
7. Earnings/(loss) and net
asset value per ordinary share
Revenue, capital
earnings/(loss) and net asset value per ordinary share are shown
below and have been calculated using the
following:
|
Six months
ended
31 May
2024
(unaudited) |
Six months
ended
31 May
2023
(unaudited) |
Year
ended
30 November
2023
(audited) |
|
|
|
|
Net revenue profit
attributable to ordinary shareholders
(£’000) |
8,885 |
8,544 |
16,510 |
Net capital profit/(loss)
attributable to ordinary shareholders
(£’000) |
96,006 |
(7,823) |
(32,259) |
|
--------------- |
--------------- |
--------------- |
Total profit/(loss) attributable to ordinary shareholders
(£’000) |
104,891 |
721 |
(15,749) |
|
========= |
========= |
========= |
Total shareholders’ funds
(£’000) |
644,498 |
620,407 |
575,925 |
|
========= |
========= |
========= |
The weighted average
number of ordinary shares in issue during the period on which the
earnings per ordinary share was calculated
was: |
94,149,841 |
100,992,473 |
99,704,909 |
The actual number of
ordinary shares in issue at the period end on which the net asset
value per ordinary share was calculated
was: |
91,606,927 |
100,295,785 |
95,872,161 |
|
--------------- |
--------------- |
--------------- |
Earnings/(loss) per ordinary
share |
|
|
|
Revenue earnings per share
(pence) – basic and
diluted |
9.44 |
8.46 |
16.56 |
Capital earnings/(loss)
per share (pence) - basic and
diluted |
101.97 |
(7.75) |
(32.36) |
|
--------------- |
--------------- |
--------------- |
Total earnings/(loss) per share (pence) - basic and
diluted |
111.41 |
0.71 |
(15.80) |
|
========= |
========= |
========= |
|
As at
31 May
2024
(unaudited) |
As at
31 May
2023
(unaudited) |
As at
30 November
2023
(audited) |
Net asset value per
ordinary share
(pence) |
703.55 |
618.58 |
600.72 |
Ordinary share price
(pence) |
639.00 |
587.00 |
579.00 |
|
========= |
========= |
========= |
There were no dilutive
securities at the period end (six months ended 31 May 2023: none; year ended 30 November 2023
none).
8. Called up share
capital
(unaudited) |
Ordinary
shares
in issue
number |
Treasury
shares
number |
Total
shares
number |
Nominal
value
£’000 |
Allotted, called up and fully paid share capital
comprised: |
|
|
|
|
Ordinary shares of 5 pence
each: |
|
|
|
|
At 30 November
2023 |
95,872,161 |
7,337,703 |
103,209,864 |
5,160 |
Ordinary shares bought
back into treasury |
(4,265,234) |
4,265,234 |
– |
– |
|
--------------- |
--------------- |
--------------- |
--------------- |
At 31 May
2024 |
91,606,927 |
11,602,937 |
103,209,864 |
5,160 |
|
========= |
========= |
========= |
========= |
During the six months
ended 31 May 2024, the Company bought
back 4,265,234 shares into treasury (six months ended 31 May 2023: 863,079; year ended 30 November 2023: 5,286,703) for a total
consideration of £25,477,000 (six months ended 31 May 2023: £5,076,000; year ended 30 November 2023: £29,807,000) including
costs.
Since 31 May 2024 and up to the date of this report,
836,063 shares have been bought back into treasury for a total
consideration of
£5,166,000.
The ordinary shares give
shareholders voting rights, the entitlement to all of the capital
growth in the Company’s assets and to all income from the Company
that is resolved to be
distributed.
9.
Reserves
The share premium account
and capital redemption reserve are not distributable reserves under
the Companies Act 2006. In accordance with ICAEW Technical Release
02/17BL on Guidance on Realised and Distributable Profits under the
Companies Act 2006, the special reserve and capital reserves may be
used as distributable reserves for all purposes and, in particular,
the repurchase by the Company of its ordinary shares and for
payments such as dividends. In accordance with the Company’s
Articles of Association, the special reserve, capital reserve and
revenue reserve may be distributed by way of dividend. The gain on
the capital reserve arising on the revaluation of investments of
£54,473,000 (six months ended 31 May
2023: gain of £9,770,000; year ended 30 November 2023: no gain) is subject to fair
value movements and may not be readily realisable at short notice,
as such it may not be entirely distributable. The investments are
subject to financial risks, as such capital reserves (arising on
investments sold) and the revenue reserve may not be entirely
distributable if a loss occurred during the realisation of these
investments.
10. Financial risks and
valuation of financial instruments
The Company’s investment
activities expose it to the various types of risk which are
associated with the financial instruments and markets in which it
invests. The risks are substantially consistent with those
disclosed in the previous annual financial statements with the
exception of those outlined
below.
Market risk arising from
price risk
Price risk is the risk
that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market prices (other than
those arising from interest rate risk or currency risk), whether
those changes are caused by factors specific to the individual
financial instrument or its issuer, or factors affecting similar
financial instruments traded in the market. Local, regional or
global events such as war, acts of terrorism, the spread of
infectious illness or other public health issues, recessions,
climate change or other events could have a significant impact on
the Company and the market price of its investments and could
result in increased premiums or discounts to the Company’s net
asset value.
Valuation of financial
instruments
Financial assets and
financial liabilities are either carried in the Statement of
Financial Position at their fair value (investments and
derivatives) or at an amount which is a reasonable approximation of
fair value (due from brokers, dividends and interest receivable,
due to brokers, accruals, cash at bank and bank overdrafts). IFRS
13 requires the Company to classify fair value measurements using a
fair value hierarchy that reflects the significance of inputs used
in making the measurements. The valuation techniques used by the
Company are explained in the accounting policies note 2(g) as set
out on page 100 in the Company’s Annual Report and Financial
Statements for the year ended 30 November
2023.
Categorisation within the
hierarchy has been determined on the basis of the lowest level
input that is significant to the fair value measurement of the
relevant asset.
The fair value hierarchy
has the following levels:
Level 1 – Quoted market
price for identical instruments in active
markets
A financial instrument is
regarded as quoted in an active market if quoted prices are readily
available from an exchange, dealer, broker, industry group, pricing
service or regulatory agency and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
The Company does not adjust the quoted price for these
instruments.
Level 2 – Valuation
techniques using observable inputs
This category includes
instruments valued using quoted prices for similar instruments in
markets that are considered less than active, or other valuation
techniques where all significant inputs are directly or indirectly
observable from market
data.
Valuation techniques used
for non-standardised financial instruments such as options,
currency swaps and other over-the-counter derivatives include the
use of comparable recent arm’s length transactions, reference to
other instruments that are substantially the same, discounted cash
flow analysis, option pricing models and other valuation techniques
commonly used by market participants making the maximum use of
market inputs and relying as little as possible on entity specific
inputs.
As at the period end the
long and short derivative positions were valued using the
underlying equity bid price (offer price in respect of short
positions) and the contract price at the inception of the trade or
at the trade reset date. There have been no changes to the
valuation technique since the previous year or as at the date of
this report.
Contracts for difference
have been classified as Level 2 investments as their valuation has
been based on market observable inputs represented by the market
prices of the underlying quoted securities to which these contracts
expose the
Company.
Level 3 – Valuation
techniques using significant unobservable
inputs
This category includes all
instruments where the valuation technique includes inputs not based
on market data and these inputs could have a significant impact on
the instrument’s
valuation.
This category also
includes instruments that are valued based on quoted prices for
similar instruments where significant entity determined adjustments
or assumptions are required to reflect differences between the
instruments and instruments for which there is no active market.
The Investment Manager considers observable data to be that 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 level in the fair
value hierarchy within which the fair value measurement is
categorised in its entirety is determined on the basis of the
lowest level input that is significant to the fair value
measurement. If a fair value measurement uses observable inputs
that require significant adjustment based on unobservable inputs,
that measurement is a Level 3
measurement.
Assessing the significance
of a particular input to the fair value measurement in its entirety
requires judgement, considering factors specific to the asset or
liability, including an assessment of the relevant risks including
but not limited to credit risk, market risk, liquidity risk,
business risk and sustainability risk. The determination of what
constitutes ‘observable’ inputs requires significant judgement by
the Investment Manager and these risks are adequately captured in
the assumptions and inputs used in measurement of Level 3 assets or
liabilities.
Fair values of financial
assets and financial liabilities
The table below sets out
fair value measurements using the IFRS 13 fair value
hierarchy.
Financial
assets/(liabilities) at fair value through profit or loss at 31 May
2024
(unaudited) |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Assets: |
|
|
|
|
Equity
investments |
612,126 |
– |
– |
612,126 |
Contracts for difference
(fair value) |
– |
2,527 |
– |
2,527 |
Index
future |
495 |
– |
– |
495 |
|
--------------- |
--------------- |
--------------- |
--------------- |
Liabilities: |
|
|
|
|
Contracts for difference
(fair value) |
– |
(1,146) |
– |
(1,146) |
|
--------------- |
--------------- |
--------------- |
--------------- |
|
612,621 |
1,381 |
– |
614,002 |
|
========= |
========= |
========= |
========= |
Financial
assets/(liabilities) at fair value through profit or loss at 31 May
2023
(unaudited) |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Assets: |
|
|
|
|
Equity
investments |
610,447 |
– |
– |
610,447 |
Contracts for difference
(fair value) |
– |
1,460 |
– |
1,460 |
|
--------------- |
--------------- |
--------------- |
--------------- |
Liabilities: |
|
|
|
|
Contracts for difference
(fair value) |
– |
(1,088) |
– |
(1,088) |
|
--------------- |
--------------- |
--------------- |
--------------- |
|
610,447 |
372 |
– |
610,819 |
|
========= |
========= |
========= |
========= |
Financial
assets/(liabilities) at fair value through profit or loss at 30
November 2023
(audited) |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Assets: |
|
|
|
|
Equity
investments |
557,594 |
– |
– |
557,594 |
Contract for difference
(fair value) |
– |
703 |
– |
703 |
|
--------------- |
--------------- |
--------------- |
--------------- |
Liabilities: |
|
|
|
|
Contract for difference
(fair value) |
– |
(1,352) |
– |
(1,352) |
Index
future |
(102) |
– |
– |
(102) |
|
--------------- |
--------------- |
--------------- |
--------------- |
|
557,492 |
(649) |
– |
556,843 |
|
========= |
========= |
========= |
========= |
There were no transfers
between levels for financial assets and financial liabilities
recorded at fair value during the six months ended 31 May 2024, six months ended 31 May 2023 or year ended 30 November 2023. The Company did not hold any
Level 3 securities during the period ended 31 May 2024 (six months ended 31 May 2023: none; year ended 30 November 2023:
none).
For exchange listed equity
investments the quoted price is the bid price. Contracts for
difference are valued based on the bid price of the underlying
quoted securities that the contracts relate to. Substantially, all
investments are valued based on unadjusted quoted market prices.
Where such quoted prices are readily available in an active market,
such prices are not required to be assessed or adjusted for any
business risks, including climate change risk, in accordance with
the fair value related requirements of the Company’s Financial
Reporting Framework.
11. Transactions with the
Investment Manager and AIFM
BlackRock Fund Managers
Limited (BFM) provides management and administration services to
the Company under a contract which is terminable on six months’
notice. BFM has (with the Company’s consent) delegated certain
portfolio and risk management services, and other ancillary
services, to BlackRock Investment Management (UK) Limited
(BIM (UK)). Further details of the
investment management contract are disclosed on pages 56 and 57 of
the Directors’ Report in the Company’s Annual Report and Financial
Statements for the year ended 30 November
2023.
The investment management
fee due for the six months ended 31 May
2024 amounted to £1,285,000 (six months ended 31 May 2023: £1,299,000; year ended 30 November 2023: £2,518,000). At the period end,
£1,869,000 was outstanding in respect of management fees
(31 May 2023: £1,906,000;
30 November 2023:
£1,864,000).
The total accrual of
performance fee for all rolling two-year performance periods
amounted to £4,763,000 as at 31 May
2024 (31 May 2023: £1,487,000;
30 November 2023: £2,014,000),
calculated as follows:
·
For the annualised rolling two-year performance period to
30 November 2024, the Company has
outperformed the benchmark by 3.2% as at 31
May 2024. A performance fee of £3,569,000 has been accrued
at the date of this report. Of this, an amount of £2,014,000 was
recognised during the year ended 30 November
2023.
·
For the annualised rolling two-year performance period to
30 November 2025, the Company has
outperformed the benchmark by 1.0% as at 31
May 2024. A performance fee of £1,194,000 has been accrued
at the date of this
report.
In addition to the above
services, BIM (UK) has provided the
Company with marketing services. The total fees paid or payable for
these services to 31 May 2024
amounted to £68,000 excluding VAT (six months ended 31 May 2023: £71,000; year ended 30 November 2023: £149,000). Marketing fees of
£192,000 excluding VAT (31 May 2023:
£192,000; 30 November 2023: £269,000)
were outstanding at 31 May
2024.
As at 31 May 2024, an amount of £193,000 (31 May 2023: £198,000; 30
November 2023: £202,000) was payable to the Manager in
respect of Directors’ fees.
The Company has an
investment in the BlackRock Institutional Cash Series plc –
Sterling Liquid Environmentally Aware Fund of £42,648,000
(31 May 2023: £12,854,000;
30 November 2023: £24,328,000) which
for the period ended 31 May 2024,
31 May 2023 and year ended
30 November 2023 has been presented
in the financial statements as a cash
equivalent.
The ultimate holding
company of the Manager and the Investment Manager is BlackRock,
Inc., a company incorporated in Delaware,
USA.
12. Related party
disclosure
Directors’
emoluments
The Board consists of six
non-executive Directors, all of whom are considered to be
independent of the Manager by the Board. None of the Directors has
a service contract with the Company. With effect from 1 December 2023, the Chairman receives an annual
fee of £48,800, the Chairman of the Audit Committee receives an
annual fee of £38,700, the Senior Independent Director receives an
annual fee of £34,100 and each of the other Directors receives an
annual fee of
£33,100.
As at 31 May 2024, an amount of £21,000 (31 May 2023: £18,000; 30
November 2023: £18,000) was outstanding in respect of
Directors’ fees.
At the period end, members
of the Board, including any connected persons, held ordinary shares
in the Company as set out
below:
|
Ordinary
shares
24 July
2024 |
Ordinary
shares
31 May
2024 |
Ordinary
shares
30 November
2023 |
|
|
|
|
Christopher Samuel
(Chairman) |
66,869 |
66,869 |
65,606 |
Nigel
Burton |
16,888 |
16,888 |
16,570 |
Angela
Lane |
11,731 |
11,731 |
11,673 |
Louise
Nash |
3,900 |
3,900 |
3,900 |
Merryn Somerset
Webb |
3,727 |
3,727 |
3,727 |
Glen
Suarez1 |
4,800 |
4,800 |
4,800 |
1
Glen Suarez was appointed as a Director on
9 January
2023.
Significant
Holdings
The following investors
are:
a.
funds managed by the BlackRock Group or are affiliates of
BlackRock, Inc. (Related BlackRock Funds);
or
b.
investors (other than those listed in (a) above) who held more than
20% of the voting shares in issue in the Company and are as a
result, considered to be related parties to the Company
(Significant Investors).
|
Total % of shares held
by
Related BlackRock
Funds |
Total % of shares held
by
Significant Investors who are
not affiliates of BlackRock
Group or BlackRock,
Inc. |
Number of
Significant
Investors who are not
affiliates of BlackRock
Group or BlackRock,
Inc. |
|
|
|
|
As at 31 May
2024 |
1.39 |
n/a |
n/a |
As at 30 November
2023 |
1.34 |
n/a |
n/a |
As at 31 May
2023 |
1.53 |
n/a |
n/a |
|
========= |
========= |
========= |
13. Contingent
liabilities
There were no contingent
liabilities as at 31 May 2024 (six
months ended 31 May 2023: none; year
ended 30 November 2023:
none).
14. Publication of non
statutory accounts
The financial information
contained in this Half Yearly Financial Report does not constitute
statutory accounts as defined in Section 435 of the Companies Act
2006. The financial information for the six months ended
31 May 2024 and 31 May 2023 has not been
audited.
The information for the
year ended 30 November 2023 has been
extracted from the latest published audited financial statements,
which have been filed with the Registrar of Companies. The report
of the auditor on those financial statements contained no
qualification or statement under Sections 498(2) or 498(3) of the
Companies Act 2006.
15. Annual
results
The Board expects to
announce the annual results for the year ending 30 November 2024 in February 2025. Copies of the results announcement
can be obtained from the Secretary on 020 7743 3000 or by email
at cosec@blackrock.com.
The Annual Report and Financial Statements should be available by
the beginning of February 2025, with
the Annual General Meeting expected to be held in March
2025.
For further information,
please contact:
Sarah Beynsberger,
Director, Closed End Funds, BlackRock Investment Management (UK)
Limited
Tel: 020 7743
3000
Press
Enquiries:
Ed
Hooper, Lansons Communications – Tel: 0207 294
3620
E-mail: edh@lansons.com;
BlackRockInvestmentTrusts@lansons.com
24
July 2024
12 Throgmorton
Avenue
London EC2N
2DL
END
The Half Yearly Financial
Report will also be available on the BlackRock website at
http://www.blackrock.com/uk/thrg. Neither the contents of the
Manager’s website nor the contents of any website accessible from
hyperlinks on the Manager’s website (or any other website) is
incorporated into, or forms part of, this
announcement.
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