TIDMBGUK
RNS Number : 2863V
Baillie Gifford UK Growth Trust PLC
01 December 2023
RNS Announcement
Baillie Gifford UK Growth Trust plc (BGUK)
Legal Entity Identifier: 549300XX386SYWX8XW22
Results for the six months to 31 October 2023
The following is the unaudited Interim Financial Report for the
six months to 31 October 2023 which was approved by the Board on 30
November 2023.
Over the six month period to 31 October 2023, the Company's net
asset value per share total return was negative 11.9% compared to a
negative 5.9% for the FTSE All-Share Index total return. The share
price total return for the same period was negative 12.5%.
3/4 The positions in Farfetch and Abcam were sold in the period
and the complete sale of Naked Wines was concluded shortly after
the period end. No new positions were initiated in the period and
there were 43 companies held in the portfolio as at 31 October
2023.
3/4 The net revenue return per share was 2.78p compared to 2.22p
in the corresponding period last year. As highlighted previously,
no interim dividend will be declared as all dividends are paid as a
single final dividend.
3/4 Over the period a total of 538,500 shares were bought back
for treasury. Following the purchase of a further 334,500 shares
since the period end, as at 29 November 2023 the Company has
11,269,700 shares held in treasury accounting for 7.5% of the
Company's current shares in issue.(*)
3/4 There is a pattern of short-term, cyclical concerns
overshadowing what the portfolio managers view as strengthening
long-term prospects of the majority of the companies held, and
where operational and strategic progress remains in line or ahead
of expectations.
* This percentage calculation excludes treasury shares from the
denominator.
Total return information is sourced from Baillie Gifford/LSEG.
See disclaimer at the end of this announcement. For a definition of
terms see Glossary of terms and Alternative Performance Measures at
the end of this announcement.
Baillie Gifford UK Growth Trust plc invests to achieve capital
growth predominantly from investment in UK equities with the aim of
providing a total return in excess of the FTSE All-Share Index
total return.
The Company is managed by Baillie Gifford & Co, an Edinburgh
based fund management group with around GBP215 billion under
management and advice as at 29 November 2023.
Baillie Gifford UK Growth Trust plc is a listed UK company. The
value of its shares and any income from them can fall as well as
rise and investors may not get back the amount invested. The
Company is listed on the London Stock Exchange and is not
authorised or regulated by the Financial Conduct Authority. You can
find up to date performance information about Baillie Gifford UK
Growth Trust plc at bgukgrowthtrust.com++.
Past performance is not a guide to future performance. See
disclaimer at end of this announcement.
++ Neither the contents of the Managers' website nor the
contents of any website accessible from hyperlinks on the Managers'
website (or any other website) is incorporated into, or forms part
of, this announcement.
30 November 2023
For further information please contact:
Anzelm Cydzik, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
Principal risks and uncertainties
The principal risks facing the Company are financial risk,
investment strategy risk, climate and governance risk, discount
risk, regulatory risk, custody and depositary risk, operational
risk, cyber security risk, leverage risk, political risk and
emerging risks. An explanation of these risks and how they are
managed is set out on pages 7 to 9 of the Company's Annual Report
and Financial Statements for the year to 30 April 2023 which is
available on the Company's website: bgukgrowthtrust.com. The
principal risks and uncertainties have not changed since the date
of that report.
Responsibility statement
We confirm that to the best of our knowledge:
a) the condensed set of Financial Statements has been prepared
in accordance with FRS 104 'Interim Financial Reporting';
b) the Interim Management Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.7R (indication of important events during the first six months,
their impact on the Financial Statements and a description of the
principal risks and uncertainties for the remaining six months of
the year); and
c) the Interim Financial Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.8R (disclosure of related party transactions and changes
therein).
On behalf of the Board
Carolan Dobson
Chairman
30 November 2023
Interim management report
Over the six months to 31 October 2023, the Company's net asset
value ('NAV') total return per share declined by 11.9% which
compares to a 5.9% decrease in the FTSE All-Share Index, total
return, over the same period. The share price total return over the
six months declined by 12.5% as the shares moved from a discount of
14.1% to the NAV per share to a discount of 15.0%. 538,500 shares
were bought back for treasury in the period in a total of twelve
tranches. Invested gearing stood at 4% at the end of the period
having been 3% at its start .
It is disappointing to report on another period of poor
portfolio performance. The main detractors in the period were the
holdings in St James's Place, FD Technologies (both discussed
below) and Burberry (concerns about slowing growth in the luxury
fashion industry). Not owning either Shell or HSBC, which both
performed well, also hurt. The portfolio's main positive
contributor to performance was the life science supplies business
Abcam which agreed to a takeover. Other notable positives were Wise
(money transfers) and 4imprint (specialist marketing services)
where the continuation of stronger than expected trading at both
companies was well received by the market.
As the economic clouds have darkened as higher interest rates
start to bite, alongside the stalemate in Ukraine and the
horrifying recent events in the Middle East, it has been a gloomy
time for equity investors and the stock market alike. For growth
investors it has been doubly difficult as the market is seemingly
more interested in what is happening now rather than in a few
years' time. We will go on to explain why we actually remain very
upbeat about the portfolio, but first we need to cover the
performance.
Nobody likes it when a stock you own performs poorly. Moreover,
we are in the difficult part of the performance cycle when stock
markets punish companies severely if they report disappointing
news, as has been the case for some of the holdings. The difficulty
is that it is not unreasonable to use the said stocks as examples
of why the portfolio managers' philosophy and process might be
flawed. We understand this concern given performance, but we would
strongly refute it. To attempt to outperform a benchmark one has to
accept, whether as a portfolio manager or a shareholder, that
investing carries with it risk. It's totally reasonable to expect a
portfolio manager, with a well-established investment process to
carry out careful analysis of any existing or potential investment.
Ultimately though, everyone has to accept that when we invest we
are investing in future outcomes, and they are unknowable. Mistakes
in investment are therefore an unfortunate fact of life for an
investor in good times as well as bad.
What we have to focus on is whether a poor share price is
signalling that we have fundamentally made a mistake in an
individual investment, whether it is random noise or if there is
something broader going on. In regard to the latter, what we mean
is something we have referenced previously, namely that our
pronounced 'growth' style is out of favour in an environment of
higher interest rates. We have written at length about this before
and we continue to believe that it is the main factor affecting our
performance. When digging into the data we can point to many
companies that have had respectable, or better, operating
performance that has not been reflected in their share price.
Nevertheless, it is also true that we have seen some individual
disappointments in the portfolio over the period and our actions
have varied depending on the circumstances.
A couple of stocks that we decided to exit recently were
Farfetch and Naked Wines. We have to admit that both investments
have proven to be mistakes. In both cases, there was a long-term
growth opportunity from using technology and an interesting
business model to disrupt traditional forms of distribution in
their respective markets. The challenge for the management teams
was to capitalise and execute on the opportunities. Both companies
fell short of our expectations. We did recognise this as a risk in
both cases and had, therefore, reflected it in the relatively
modest position sizing. In the case of Farfetch, the online
marketplace for luxury goods, the issue which became increasingly
clear to us was that the business, through a series of deals and
new initiatives, had become too complex and management, despite its
admirable vision and ambition, appeared to be struggling with
execution. This really mattered as, after years of heavy
investment, the business required a clear path to
profitability.
In the case of Naked Wines, an online wine subscription
business, we made the mistake of assuming a step change in consumer
habits during the pandemic (and hence the ability of the company to
acquire customers efficiently) would continue and underestimated
the normalisation of demand that followed. Unfortunately, the post
Covid period threw the business significantly off course and it
suffered from a weak balance sheet that carried too much inventory.
The company faced an unattractive choice of trying to stem the red
ink and potentially sacrificing the future value of the business by
not fully committing to new, and more promising, avenues of growing
the customer base. The significant board and management turmoil
that ensued made the situation more challenging.
With hindsight, we were overly patient in both cases. However,
patience is a key part of our process and we have exercised similar
patience with other companies which have gone on to successfully
manage their way through tricky situations. To us, these undoubted
mistakes are painful but ones that we ultimately recognised and
dealt with as part of our investment process.
There are other businesses in the portfolio which were hard hit
in the period in share price terms but where we continue to believe
the investment thesis remains intact. For example, the technology
and IT services business FD Technologies was hit hard by the
announcement that it was going to spend significant money on
further developing its database business KX. Although this is a hit
to profits in the short term, to us it was a deliberate action of
investment for future business growth in high-performance software
which has a rapidly expanding set of growth opportunities. Is there
a risk that this investment does not pay off? The answer is 'of
course' but we think management has done a decent job in
establishing the case for allocating resource to this division and
deserves our support.
Perhaps the trickiest assessment of a stock detractor is where
there is genuine doubt in our belief. The shares of wealth manager
St James's Place slid following reporting of both a slowdown in new
business inflows, and more importantly, a package of fee reduction
changes that will eat into cash flow and profits in the short term
when the changes are fully implemented in 2025. The main point of
the changes is to lower costs for clients. The controversy for many
years for the company has been whether the fees for a fully advised
business model were too high. The positive case is that the company
has addressed this issue without impacting its very important
self-employed partner salesforce. Surely, management should be
applauded for taking a tough decision to benefit clients. The
business continues to grow successfully after all. The bear case is
that this is only just the beginning of pressure on fees and
therefore profits. The announcement of a new CEO starting
imminently from outside the business (the former well regarded
finance director of Prudential) comes at a critical time for the
company and we will be engaging with him to understand his thoughts
and plans for the future. In the meantime, the very low rating
which discounts a very pessimistic scenario provides breathing
space to take stock.
It is probably natural to sound defensive or despondent
following what up until now has sounded like a tale of woes. This
is not our position though. While we are truly cognisant of the
difficult time for shareholders in recent years, we hope that we
tried to be both open and frank about what has happened. It is our
style and we certainly do not think glib spin cuts it. But here is
the great paradox: despite all you have read so far, both of your
portfolio managers, who are shareholders themselves, are actually
feeling as upbeat about the portfolio as we can remember. This is
not bravado. Be assured that our feet are firmly on the ground, and
we continue to challenge ourselves on what we are doing. However,
we see a pattern of short-term, cyclical concerns overshadow what
we view as strengthening long-term prospects of the majority of the
companies held and where the operational and strategic progress
remains in line or ahead of expectations. We view this as a real
opportunity for patient investors.
Although the Abcam takeover is likely to complete next year, we
elected to sell because we saw the opportunity to use the sales
proceeds to add to a range of existing holdings in portfolio such
as the life insurers Prudential and Legal & General, the animal
genetics business Genus, the specialist engineer Renishaw, the
investment platform AJ Bell and the IT services provider Kainos.
All strike us as businesses with fantastic market positions and
sensible management teams whose valuations look very attractive at
these levels. Moreover, despite this relatively modest level of
portfolio activity, there are a handful of potential new
investments on our radar.
As bottom up stock pickers, our low level of portfolio activity
is the most telling signal that we strongly believe that there is a
lot of latent potential and upside in the portfolio if you are
prepared to look through the current uncertainty.
Iain McCombie and Milena Mileva
Baillie Gifford & Co
30 November 2023
The managers' core investment principles
Investment Philosophy
The following are the three core principles underpinning our
investment philosophy. We have a consistent, differentiated
long-term investment approach to managing UK equities that should
stand investors in the Company in good stead:
Growth
We search for the few companies which have the potential to grow
substantially and profitably over many years. Whilst we have no
insight into the short-term direction of a company's share price,
we believe that, over the longer term, those companies which
deliver above average growth in cash flows will be rewarded with
above average share price performance and that the power of
compounding is often under-appreciated by investors. Successful
investments will benefit from a rising share price and also from
income accumulated over long periods of time.
Patience
Great growth companies are not built in a day. We firmly believe
that investors need to be patient to fully benefit from the scale
of the potential. Our investment time horizon, therefore, spans
decades rather than quarters and our portfolio turnover*, at 6.1%,
is significantly below the UK industry average. This patient,
long-term approach affords a greater chance for the superior growth
and competitive traits of companies to emerge as the dominant
influence on their share prices and allows compounding to work in
the investors' favour.
Active Investment Management
It is our observation that many investors pay too much attention
to the composition of market indices and active managers should
make meaningful investments in their best ideas regardless of the
weightings of the index. For example, we would never invest in a
company just because it is large or to reduce risk. As a result,
shareholders should expect the composition of the portfolio to be
significantly different from the benchmark. This differentiation is
a necessary condition for delivering superior returns over time and
shareholders should be comfortable tolerating the inevitable ups
and downs in short-term relative performance that will follow from
that. Portfolio construction flows from the investment beliefs
stated above.
* Alternative Performance Measure, see Glossary of terms and
Alternative Performance Measures below. This reflects a rolling 12
month period to 31 October 2023.
Baillie Gifford statement on stewardship
Baillie Gifford's overarching ethos is that we are 'Actual'
investors. We have a responsibility to behave as supportive and
constructively engaged long-term investors. We invest in companies
at different stages of their evolution, across many different
industries and geographies, and we focus on their unique
circumstances and opportunities. Consequently, we are wary of
prescriptive policies and rules, believing that these often run
counter to thoughtful and beneficial corporate stewardship. Our
approach favours a small number of simple principles which help
shape our interactions with companies and give appropriate latitude
to diverse processes of our different investment teams. These
principles do not all have to be positively reflected in each
holding our teams acquire.
Prioritisation of long-term value creation
We encourage our holdings to be ambitious, focusing on long-term
value creation and capital deployment for growth. Helping
management to resist demands from shareholders with shorter
horizons than ours can at times be an important way to achieve
better investment outcomes. We regard it as our responsibility to
encourage holdings away from destructive financial engineering and
towards activities that create genuine economic and stakeholder
value over the long run. We are happy that our value will often be
in supporting management when others don't.
A constructive and purposeful board
We believe that boards play a key role in supporting corporate
success and representing the interests of all capital providers.
There is no fixed formula, but we expect boards to have the
resources, information, cognitive and experiential diversity they
need to fulfil these responsibilities. We believe good governance
works best when there are diverse skill sets and perspectives,
paired with an inclusive culture and strong independent
representation with sufficient time to assist, advise and
constructively challenge the thinking of management.
Long-term focused remuneration with stretching targets
We look for remuneration policies that are simple, transparent
and reward superior strategic and operational endeavour. We believe
incentive schemes can be important drivers of behaviour, and
encourage policies which create genuine long-term alignment with
external capital providers. We are accepting of significant payouts
to executives if these are commensurate with outstanding long-run
value creation, but plans should not reward mediocre outcomes or
short-termism. We generally think that performance hurdles should
be skewed towards long-term results and that remuneration plans
should be subject to shareholder approval.
Fair treatment of stakeholders
We believe it is in the long-term interests of all companies to
maintain strong relationships with stakeholders - including
employees, customers, suppliers, regulators and the communities
they work within. We do not believe in one-size fits-all policies
and recognise that operating policies, governance and ownership
structures may need to vary according to circumstance. Nonetheless,
we believe the principles of fairness, transparency and
accountability should be prioritised at all appropriate times.
Sustainable business practices
We believe an entity's long-term success is dependent on
maintaining its social licence to operate and look for holdings to
work within the spirit and not just the letter of the laws and
regulations that govern them. We expect all holdings to consider
how their actions impact society, both directly and indirectly, and
how such actions may impact their long-term success. Environmental
practices should recognise the current pace of change in
opportunities, risks and societal expectations. Climate change,
environmental impact, social inclusion, tax and fair treatment of
workers should be addressed at board level, with appropriately
ambitious policies and targets focused on the relevant material
dimensions. Boards and senior management with superior prospects
for long-term value creation should understand, regularly review
and disclose information relevant to such targets publicly,
alongside plans for ongoing improvement.
List of investments as at 31 October 2023 (unaudited)
Name Business Value % of
GBP'000 total
assets
----------------------- -------------------------------------- -------- -------
Basic materials
Rio Tinto Metals and mining company 7,939 2.9
Speciality high-performance chemicals
Victrex manufacturer 3,196 1.2
-------- -------
11,135 4.1
-------------------------------------------------------------- -------- -------
Consumer discretionary
Games Workshop Toy manufacturer and retailer 14,698 5.4
Direct marketer of promotional
4imprint merchandise 9,508 3.5
Manufacturer and distributor
of kitchens
Howden Joinery to trade customers 9,171 3.4
Professional publications and
RELX information provider 8,280 3.1
Burberry Luxury goods retailer 6,761 2.5
Boohoo.com Online fashion retailer 944 0.4
Naked Wines Online wine retailer 60 -
-------- -------
49,422 18.3
-------------------------------------------------------------- -------- -------
Consumer staples
Diageo International drinks company 8,837 3.3
-------- -------
8,837 3.3
-------------------------------------------------------------- -------- -------
Financials
Legal & General UK wealth manager 8,231 3.0
Prudential International life insurer 7,911 2.9
AJ Bell Investment platform 7,473 2.8
Lancashire Holdings General insurance 6,889 2.6
St. James's Place UK wealth manager 6,856 2.5
Provider of retirement income
Just Group products and services 5,905 2.2
Hiscox Property and casualty insurance 4,538 1.7
Provides platform services to
IntegraFin financial clients 4,296 1.6
Hargreaves Lansdown UK retail investment platform 3,781 1.4
IG Group Spread betting website 2,742 1.0
Technology focused venture capital
Molten Ventures firm 2,503 0.9
-------- -------
61,125 22.6
-------------------------------------------------------------- -------- -------
Healthcare
World leading animal genetics
Genus company 8,540 3.2
Designer and manufacturer of
Creo Medical medical equipment 675 0.3
Oxford Nanopore Novel DNA sequencing technology 631 0.2
Exscientia Biotech company 582 0.2
-------- -------
10,428 3.9
-------------------------------------------------------------- -------- -------
Industrials
Volution Group Supplier of ventilation products 11,605 4.3
Global provider of credit data
Experian and analytics 11,363 4.2
Construction equipment rental
Ashtead company 11,318 4.2
Online platform to send and
Wise receive money 9,072 3.4
Renishaw World leading metrology company 7,845 2.9
Bunzl Distributor of consumable products 7,551 2.8
Inchcape Car wholesaler and retailer 6,525 2.4
Halma Specialist engineer 5,916 2.2
Heat treatment and materials
Bodycote testing 5,338 2.0
PageGroup Recruitment consultancy 4,100 1.5
Provider of professional services
FDM Group focusing on information technology 3,417 1.2
-------- -------
84,050 31.1
-------------------------------------------------------------- -------- -------
Real estate
UK's leading online property
Rightmove portal 5,030 1.9
Helical Property developer 3,480 1.3
-------- -------
8,510 3.2
------------------------------------------------------------- ------- -----
Technology
Advertising portal for second
Auto Trader Group hand cars in the UK 13,396 5.0
Kainos Group IT services and implementer 8,389 3.1
IT reseller and infrastructure
Softcat solutions provider 7,831 2.9
First Derivatives IT consultant and software developer 2,188 0.8
Wayve Technologies Ltd Developer of full autonomous
Series B Pref. (U) driving systems 582 0.2
------- -----
32,386 12.0
------------------------------------------------------------- ------- -----
Total equities 265,893 98.5
-------------------------------------------------------------- ------- -----
Net liquid assets 3,990 1.5
-------------------------------------------------------------- ------- -----
Total assets 269,883 100.0
-------------------------------------------------------------- ------- -----
(U) Denotes unlisted investment (private company).
Stocks highlighted in bold are the 20 largest holdings.
Income statement (unaudited)
For the six months ended For the six months to For the year ended
31 October 2023 31 October 2022 30 April 2023 (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ----- -------- --------- --------- -------- -------- -------- -------- -------- --------
Losses on
investments - (38,005) (38,005) - (35,463) (35,463) - (2,542) (2,542)
Currency gains - 54 54 - - - - - -
Income from
investments
and interest
receivable 4,812 - 4,812 3,912 - 3,912 7,260 - 7,260
Investment
management
fee 3 (208) (484) (692) (209) (489) (698) (432) (1,009) (1,441)
Other
administrative
expenses (267) - (267) (265) - (265) (533) - (533)
------------------- ----- -------- --------- --------- -------- -------- -------- -------- -------- --------
Net return before
finance costs
and taxation 4,337 (38,435) (34,098) 3,438 (35,952) (32,514) 6,295 (3,551) 2,744
------------------- ----- -------- --------- --------- -------- -------- -------- -------- -------- --------
Finance cost
of borrowings (155) (361) (516) (50) (118) (168) (150) (349) (499)
------------------- ----- -------- --------- --------- -------- -------- -------- -------- -------- --------
Net return on
ordinary
activities
before taxation 4,182 (38,796) (34,614) 3,388 (36,070) (32,682) 6,145 (3,900) 2,245
------------------- ----- -------- --------- --------- -------- -------- -------- -------- -------- --------
Tax on ordinary - - - - - - - - -
activities
------------------- ----- -------- --------- --------- -------- -------- -------- -------- -------- --------
Net return on
ordinary
activities
after taxation 4,182 (38,796) (34,614) 3,388 (36,070) (32,682) 6,145 (3,900) 2,245
------------------- ----- -------- --------- --------- -------- -------- -------- -------- -------- --------
Net return per
ordinary share 4 2.78p (25.81p) (23.03p) 2.22p (23.66p) (21.44p) 4.05p (2.57p) 1.48p
------------------- ----- -------- --------- --------- -------- -------- -------- -------- -------- --------
Note:
Dividends paid
and payable per
share 5 - - 3.60p
------------------- ----- -------- --------- --------- -------- -------- -------- -------- -------- --------
The total column of this statement is the profit and loss
account of the Company. The supplementary revenue and capital
columns are prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in the above statements derive
from continuing operations.
A Statement of Comprehensive Income is not required as all gains
and losses of the Company have been reflected in the above
statement.
The accompanying notes below are an integral part of the
Financial Statements.
Balance sheet (unaudited)
Notes At 31 October At 30 April
2023 2023
GBP'000 GBP'000
---------------------------------------------- ----- ------------- -----------
Fixed assets
Investments held at fair value through profit
or loss 6 265,893 302,536
---------------------------------------------- ----- ------------- -----------
Current assets
Debtors 216 1,479
Cash and cash equivalents 5,248 5,512
---------------------------------------------- ----- ------------- -----------
5,464 6,991
---------------------------------------------- ----- ------------- -----------
Creditors
Amounts falling due within one year:
Bank loan 7 (16,350) (14,450)
Other creditors (1,474) (655)
---------------------------------------------- ----- ------------- -----------
(17,824) (15,105)
---------------------------------------------- ----- ------------- -----------
Net current liabilities (12,360) (8,114)
---------------------------------------------- ----- ------------- -----------
Net assets 253,533 294,422
---------------------------------------------- ----- ------------- -----------
Capital and reserves
Share capital 40,229 40,229
Share premium account 11,664 11,664
Capital redemption reserve 19,759 19,759
Warrant exercise reserve 417 417
Share purchase reserve 54,763 55,628
Capital reserve 112,807 151,603
Revenue reserve 13,894 15,122
---------------------------------------------- ----- ------------- -----------
Shareholders' funds 253,533 294,422
---------------------------------------------- ----- ------------- -----------
Net asset value per ordinary share * 169.0p 195.6p
---------------------------------------------- ----- ------------- -----------
Ordinary shares in issue 8 149,981,984 150,520,484
---------------------------------------------- ----- ------------- -----------
* See Glossary of terms and Alternative Performance Measures
below.
The accompanying notes below are an integral part of the
Financial Statements.
Statement of changes in equity (unaudited)
For the six months ended 31 October 2023
Share Capital Warrant Share Capital
Share premium redemption exercise purchase reserve Revenue Shareholders'
capital account reserve reserve reserve * reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- ----------- --------- --------- -------- -------- -------------
Shareholders'
funds at
1 May 2023 40,229 11,664 19,759 417 55,628 151,603 15,122 294,422
Net return on
ordinary activities
after taxation - - - - - (38,796) 4,182 (34,614)
Ordinary shares
bought back into
treasury - - - - (865) - - (865)
Dividends paid 5 - - - - - - (5,410) (5,410)
--------------------- -------- -------- ----------- --------- --------- -------- -------- -------------
Shareholders'
funds at
31 October 2023 40,229 11,664 19,759 417 54,763 112,807 13,894 253,533
--------------------- -------- -------- ----------- --------- --------- -------- -------- -------------
For the six months ended 31 October 2022
Share Capital Warrant Share Capital
Share premium redemption exercise purchase reserve Revenue Shareholders'
capital account reserve reserve reserve * reserve funds
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- ----------- --------- --------- -------- -------- -------------
Shareholders'
funds at
1 May 2022 40,229 11,664 19,759 417 60,433 155,503 14,928 302,933
Net return on
ordinary activities
after taxation - - - - - (36,070) 3,388 (32,682)
Ordinary shares
bought back into
treasury - - - - (3,317) - - (3,317)
Dividends paid 5 - - - - - - (5,951) (5,951)
--------------------- -------- -------- ----------- --------- --------- -------- -------- -------------
Shareholders'
funds at
31 October 2022 40,229 11,664 19,759 417 57,116 119,433 12,365 260,983
--------------------- -------- -------- ----------- --------- --------- -------- -------- -------------
* The Capital Reserve balance at 31 October 2023 includes
investment holding losses of GBP41,156,000 (31 October 2022 -
losses of GBP38,250,000).
The accompanying notes below are an integral part of the
Financial Statements.
Cash flow statement (unaudited)
Six months Six months
to to
31 October 31 October
2023 2022
GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Cash flows from operating activities
Net return on ordinary activities before taxation (34,614) (32,682)
Net losses on investments 38,005 35,463
Currency gains (54) -
Finance costs of borrowings 516 168
Changes in debtors 1,264 1,588
Changes in creditors (84) (87)
---------------------------------------------------- ----------- -----------
Cash from operations * 5,033 4,450
Interest paid (361) (100)
---------------------------------------------------- ----------- -----------
Net cash inflow from operating activities 4,672 4,350
---------------------------------------------------- ----------- -----------
Cash flows from investing activities
Acquisitions of investments (16,732) (13,289)
Disposals of investments 16,117 13,970
---------------------------------------------------- ----------- -----------
Net cash (outflow)/inflow from investing activities (615) 681
---------------------------------------------------- ----------- -----------
Cash flows from financing activities
Bank loan drawn down 1,900 8,000
Equity dividends paid (5,410) (5,951)
Ordinary shares bought back into treasury and
stamp duty thereon (865) (3,242)
---------------------------------------------------- ----------- -----------
Net cash outflow from financing activities (4,375) (1,193)
---------------------------------------------------- ----------- -----------
(Decrease)/increase in cash and cash equivalents (318) 3,838
Exchange movements 54 -
Cash and cash equivalents at start of period 5,512 1,491
---------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of period 5,248 5,329
---------------------------------------------------- ----------- -----------
* Cash from operations includes dividends received of
GBP5,994,000 (2022 - GBP5,470,000) and GBP65,000 deposit interest
(2022 - GBP13,000).
Cash and cash equivalents represent cash at bank.
The accompanying notes below are an integral part of the
Financial Statements .
Notes to the Financial Statements (unaudited)
01 Basis of accounting
The condensed Financial Statements for the six months to 31
October 2023 comprise the statements set out above together with
the related notes below. They have been prepared in accordance with
FRS 104 'Interim Financial Reporting' and the AIC's Statement of
Recommended Practice issued in November 2014 and updated in July
2022 with consequential amendments and have not been audited or
reviewed by the Auditor pursuant to the Auditing Practices Board
Guidance 'Review of Interim Financial Information'. The Financial
Statements for the six months to 31 October 2023 have been prepared
on the basis of the same accounting policies as set out in the
Company's Annual Report and Financial Statements at 30 April
2023.
Going concern
Having considered the nature of the Company's principal risks
and uncertainties, as set out above, together with its current
position, investment objective and policy, its assets and
liabilities and projected income and expenditure, together with the
Company's dividend policy, it is the Directors' opinion that the
Company has adequate resources to continue in operational existence
for the foreseeable future. The Board has, in particular,
considered the impact of heightened market volatility over recent
months due to macroeconomic and geopolitical concerns, including
increased inflation and interest rates and the Russia-Ukraine
conflict, but does not believe the Company's going concern status
is affected. The Company's assets, the majority of which are
investments in quoted securities which are readily realisable,
exceed its liabilities significantly and could be sold to repay
borrowings if required. All borrowing facilities require the prior
approval of the Board. Gearing levels and compliance with borrowing
covenants are reviewed by the Board on a regular basis. In
accordance with the Company's Articles of Association, shareholders
have a right to vote on the continuation of the Company every five
years, the next vote being in 2024. The Directors have considered
the continuation vote to be held at the 2024 Annual General
Meeting, along with the other factors set out above, and are
satisfied that it is appropriate to adopt the going concern basis
of accounting in preparing these Financial Statements and confirm
that they are not aware of any material uncertainties which may
affect the Company's ability to continue to do so over a period of
at least twelve months from the date of approval of these Financial
Statements.
02 Financial information
The financial information contained within this Interim
Financial Report does not constitute statutory accounts as defined
in sections 434 to 436 of the Companies Act 2006. The financial
information for the year ended 30 April 2023 has been extracted
from the statutory accounts which have been filed with the
Registrar of Companies. The Auditor's Report on those accounts was
not qualified, did not include a reference to any matters to which
the Auditor drew attention by way of emphasis without qualifying
their report, and did not contain a statement under sections 498(2)
or (3) of the Companies Act 2006.
03 Investment manager
Baillie Gifford & Co Limited, a wholly owned subsidiary of
Baillie Gifford & Co, has been appointed by the Company as its
Alternative Investment Fund Manager ('AIFM') and Company Secretary.
The investment management function has been delegated to Baillie
Gifford & Co. The management agreement can be terminated on six
months' notice. The annual fee is 0.5% of net asset value,
calculated and payable quarterly.
04 Net return per ordinary share
Six months Six months
to to
31 October 31 October
2023 2022
GBP'000 GBP'000
-------------------------------------------- ----------- -----------
Revenue return on ordinary activities after
taxation 4,182 3,388
Capital return on ordinary activities after
taxation (38,796) (36,070)
-------------------------------------------- ----------- -----------
Total net return (34,614) (32,682)
-------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
in issue 150,285,181 152,402,008
-------------------------------------------- ----------- -----------
Net return per ordinary share is based on the above totals of
revenue and capital and the weighted average number of ordinary
shares in issue during each period.
There are no dilutive or potentially dilutive shares in
issue.
05 Dividends
Six months Six months
to to
31 October 31 October
2023 2022
GBP'000 GBP'000
----------------------------------------------- ----------- -----------
Amounts recognised as distributions in the
period:
Previous year's final dividend of 3.60p (2022
- 3.91p), paid 15 September 2023 5,410 5,951
----------------------------------------------- ----------- -----------
06 Fixed assets - investments
Fair value hierarchy
The fair value hierarchy used to analyse the basis on which the
fair values of financial instruments held at fair value through the
profit or loss account are measured is described below. Fair value
measurements are categorised on the basis of the lowest level input
that is significant to the fair value measurement.
Level 1 - using unadjusted quoted prices for identical
instruments in an active market;
Level 2 - using inputs, other than quoted prices included within
Level 1, that are directly or indirectly observable (based on
market data); and
Level 3 - using inputs that are unobservable (for which market
data is unavailable).
As at 31 October 2023 Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- --------
Listed equities 265,311 - - 265,311
Unlisted preference shares* - - 582 582
---------------------------- -------- -------- -------- --------
Total financial asset
investments 265,311 - 582 265,893
---------------------------- -------- -------- -------- --------
Level 1 Level 2 Level 3 Total
As at 30 April 2023 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- --------
Listed equities 301,909 - - 301,909
Unlisted preference shares* - - 627 627
---------------------------- -------- -------- -------- --------
Total financial asset
investments 301,909 - 627 302,536
---------------------------- -------- -------- -------- --------
* The unlisted preference shares investment represents a holding
in Wayve Technologies Ltd.
The fair value of listed investments is quoted bid price. Listed
investments are categorised as Level 1 if they are valued using
unadjusted quoted prices for identical instruments in an active
market and as Level 2 if they do not meet all these criteria but
are, nonetheless, valued using market data. Unlisted investments
are valued at fair value by the Directors following a detailed
review and appropriate challenge of the valuations proposed by the
Managers. The Managers' unlisted investment policy applies
methodologies consistent with the International Private Equity and
Venture Capital Valuation Guidelines 2022 ('IPEV'). These
methodologies can be categorised as follows: (a) market approach
(multiples, industry valuation benchmarks and available market
prices); (b) income approach (discounted cash flows); and (c)
replacement cost approach (net assets). The Company's holding in an
unlisted investment is categorised as Level 3 as unobservable data
is a significant input to its fair value measurement.
07 Bank loans
At 31 October 2023 the Company had borrowings of GBP16,350,000
(30 April 2023 - GBP14,450,000).
This was drawn down under the one year GBP30 million unsecured
revolving credit loan facility with The Royal Bank of Scotland
International Limited which expires in July 202 4.
08 Share capital
At 31 October 2023, the Company had the authority to buy back
22,305,053 ordinary shares and to allot or sell from treasury
15,041,548 ordinary shares without application of pre-emption
rights in accordance with the authorities granted at the AGM in
September 2023. During the six months to 31 October 2023, no shares
were sold from treasury (year to 30 April 2023 - no shares were
sold from treasury). During the six months to 31 October 2023,
538,500 ordinary shares with a nominal value of GBP135,000 were
bought back at a total cost of GBP865,000 and held in treasury
(year to 30 April 2023 - 2,975,000 ordinary shares with a nominal
value of GBP744,000 were bought back at a total cost of
GBP4,805,000 and held in treasury).
09 Related party transactions
There have been no transactions with related parties during the
first six months of the current financial year that have materially
affected the financial position or the performance of the Company
during that period and there have been no changes in the related
party transactions described in the last Annual Report and
Financial Statements that could have had such an effect on the
Company during that period.
None of the views expressed in this document should be construed
as advice to buy or sell a particular investment.
Glossary of terms and Alternative Performance Measures
('APM')
An alternative performance measure is a financial measure of
historical or future financial performance, financial position, or
cash flows, other than a financial measure defined or specified in
the applicable financial reporting framework.
Total a ssets
This is the Company's definition of Adjusted Total Assets, being
the total value of all assets held less all liabilities (other than
liabilities in the form of borrowin gs).
Net Asset Value
Net Asset Value (NAV) is the value of total assets less
liabilities (including borrowings). The NAV per share is calculated
by dividing this amount by the number of ordinary shares in issue
(excluding treasury share s).
Net liquid assets
Net liquid assets comprise current assets less current
liabilities, excluding borrowings.
Discount/premium (APM)
As stockmarkets and share prices vary, an investment trust's
share price is rarely the same as its net asset value. When the
share price is lower than the net asset value per share it is said
to be trading at a discount. The size of the discount is calculated
by subtracting the share price from the net asset value per share
and is usually expressed as a percentage of the net asset value per
share. If the share price is higher than the net asset value per
share, this situation is called a premium.
31 October 2023 31 October 2022
---------------- --------------- ---------------
Closing NAV per
share 169.0p 195.6p
Closing share
price 143.7p 168.0p
---------------- --------------- ---------------
Discount (15.0%) (14.1%)
---------------- --------------- ---------------
Ongoing c harges (APM)
The total expenses (excluding borrowing costs) incurred by the
Company as a percentage of the average Net Asset Value. The ongoing
charges are calculated on the basis prescribed by the Association
of Investment Companies.
Total return (APM)
The total return is the return to shareholders after reinvesting
the net dividend on the date that the share price goes ex-
dividend.
31 October 31 October 30 April 30 April
2023 2023 2023 2023
NAV Share price NAV Share price
---------------------------- ---------- ---------- ------------ -------- ------------
Closing NAV per share/share
price (a) 169.0p 143.7p 195.6p 168.0p
Dividend adjustment factor* (b) 1.0195 1.0230 1.0204 1.0232
Adjusted closing NAV per (c = a
share/share price x b) 172.3p 147.0p 199.6p 171.9p
Opening NAV per share/share
price (d) 195.6p 168.0p 197.4p 174.2p
---------------------------- ---------- ---------- ------------ -------- ------------
(c ÷
Total return d) -1 (11.9%) (12.5%) 1.1% (1.3%)
---------------------------- ---------- ---------- ------------ -------- ------------
*The dividend adjustment factor is calculated on the assumption
that the dividends of 3.60p (2022 - 3.91p) paid by the Company
during the year were reinvested into shares of the Company at the
cum income NAV per share/share price, as appropriate, at the
ex-dividend date.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other
public company, an investment trust can borrow money to invest in
additional investments for its portfolio. The effect of the
borrowing on the shareholders' assets is called 'gearing'. If the
Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the
value of the Company's assets falls, the situation is reversed.
Gearing can therefore enhance performance in rising markets but can
adversely impact performance in falling markets.
Invested gearing is the Company's borrowings adjusted for cash
and cash equivalents expressed as a percentage of shareholders'
funds.
31 October 30 April
2023 2023
-------------------------------- -------------- --------------
Borrowings GBP16,350,000 GBP14,450,000
Less: cash and cash equivalents (GBP5,248,000) (GBP5,512,000)
-------------------------------- -------------- --------------
Adjusted borrowings GBP11,102,000 GBP8,938,000
Shareholders' funds GBP253,533,000 GBP294,422,000
-------------------------------- -------------- --------------
Invested gearing 4% 3%
-------------------------------- -------------- --------------
Drawn gearing is the Company's borrowings expressed as a
percentage of shareholders' funds.
31 October 30 April
2023 2023
-------------------- -------------- --------------
Borrowings GBP16,350,000 GBP14,450,000
Shareholders' funds GBP253,533,000 GBP294,422,000
-------------------- -------------- --------------
Drawn gearing 6% 5%
-------------------- -------------- --------------
Turnover (APM)
Annual turnover is a measure of portfolio change or trading
activity in a portfolio. Turnover is calculated as the minimum of
purchases and sales in a month, divided by the average market value
of the portfolio, summed to get rolling 12 month turnover data.
Private (unlisted) company
A private (unlisted) company means a company whose shares are
not available to the general public for trading and not listed on a
stock exchange.
Active share (APM)
Active share, a measure of how actively a portfolio is managed,
is the percentage of the portfolio that differs from its
comparative index. It is calculated by deducting from 100 the
percentage of the portfolio that overlaps with the comparative
index. An active share of 100 indicates no overlap with the index
and an active share of zero indicates a portfolio that tracks the
index.
Leverage (APM)
For the purposes of the UK Alternative Investment Fund Managers
(AIFM) Regulations, leverage is any method which increases the
Company's exposure, including the borrowing of cash and the use of
derivatives. It is expressed as a ratio between the Company's
exposure and its net asset value and can be calculated on a gross
and a commitment method. Under the gross method, exposure
represents the sum of the Company's positions after the deduction
of sterling cash balances, without taking into account any hedging
and netting arrangements. Under the commitment method, exposure is
calculated without the deduction of sterling cash balances and
after certain hedging and netting positions are offset against each
other.
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omissions in the index data included in this document, regardless
of cause, or for any damages (whether direct or indirect) resulting
therefrom.
No Provider has any obligation to update, modify or amend the
data or to otherwise notify a recipient thereof in the event that
any matter stated herein changes or subsequently becomes
inaccurate.
Without limiting the foregoing, no Provider shall have any
liability whatsoever to you, whether in contract (including under
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suffered by you as a result of or in connection with any opinions,
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or any course of action determined, by you or any third party,
whether or not based on the content, information or materials
contained herein.
FTSE index data
London Stock Exchange Group plc and its undertakings
(collectively, the 'LSE Group'). (c) LSE Group 2023. FTSE Russell
is a trading name of certain of the LSE Group companies. 'FTSE(R)'
'Russell(R)', 'FTSE Russell(R)', is/are a trade mark(s) of the
relevant LSE Group companies and is/are used by any other LSE Group
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The LSE Group does not promote, sponsor or endorse the content of
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Sustainable Finance Disclosure Regulation ('SFDR')
The EU SFDR does not have a direct impact in the UK due to
Brexit, however, it applies to third-country products marketed in
the EU. As Baillie Gifford UK Growth Trust plc is marketed in the
EU by the AIFM, Baillie Gifford & Co Limited, via the National
Private Placement Regime ('NPPR') the following disclosures have
been provided to comply with the high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's ESG Principles and
Guidelines as its policy on integration of sustainability risks in
investment decisions.
Baillie Gifford & Co believes that a company cannot be
financially sustainable in the long run if its approach to business
is fundamentally out of line with changing societal expectations.
It defines 'sustainability' as a deliberately broad concept which
encapsulates a company's purpose, values, business model, culture,
and operating practices.
Baillie Gifford & Co's approach to investment is based on
identifying and holding high quality growth businesses that enjoy
sustainable competitive advantages in their marketplace. To do this
it looks beyond current financial performance, undertaking
proprietary research to build an in-depth knowledge of an
individual company and a view on its long-term prospects. This
includes the consideration of sustainability factors
(environmental, social and/or governance matters) which it believes
will positively or negatively influence the financial returns of an
investment.
The likely impact on the return of the portfolio from a
potential or actual material decline in the value of investment due
to the occurrence of an environmental, social or governance event
or condition will vary and will depend on several factors including
but not limited to the type, extent, complexity and duration of an
event or condition, prevailing market conditions and existence of
any mitigating factors.
Whilst consideration is given to sustainability matters, there
are no restrictions on the investment universe of the Company,
unless otherwise stated within in its Investment Objective &
Policy. Baillie Gifford & Co can invest in any companies it
believes could create beneficial long-term returns for investors.
However, this might result in investments being made in companies
that ultimately cause a negative outcome for the environment or
society.
More detail on the Investment Manager's approach to
sustainability can be found in the ESG Principles and Guidelines
document, available publicly on the Baillie Gifford website
bailliegifford.com.
The underlying investments do not take into account the EU
criteria for environmentally sustainable economic activities
established under the EU Taxonomy Regulation.
- ends -
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END
IR WPGQUGUPWGMU
(END) Dow Jones Newswires
December 01, 2023 02:00 ET (07:00 GMT)
Grafico Azioni Baillie Gifford Uk Growth (LSE:BGUK)
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Grafico Azioni Baillie Gifford Uk Growth (LSE:BGUK)
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