TIDMSEC
Strategic Equity Capital PLC
RESULTS FOR THE YEARED 30 JUNE 2023
The Directors of Strategic Equity Capital plc are pleased to announce the
Company's results for the year ended 30 June 2023.
+-----------------------------+----------+----------+--------+
|Capital Return |As at |As at |% change|
| | | | |
| |30 June |30 June | |
| | | | |
| |2023 |2022 | |
+-----------------------------+----------+----------+--------+
|Net asset value ("NAV") per |342.47p |316.21p |8.3% |
|Ordinary share# | | | |
+-----------------------------+----------+----------+--------+
|Ordinary share price |309.00p |280.00p |10.4% |
+-----------------------------+----------+----------+--------+
|Comparative index* |4,970.43 |5,164.05 |(3.7)% |
+-----------------------------+----------+----------+--------+
|Discount of Ordinary share |(9.8)% |(11.5)% | |
|price to NAV | | | |
+-----------------------------+----------+----------+--------+
|Average discount of Ordinary |(7.4)% |(12.6)% | |
|share price to NAV for the | | | |
|year | | | |
+-----------------------------+----------+----------+--------+
|Total assets (£'000) |170,784 |177,198 |(3.6)% |
+-----------------------------+----------+----------+--------+
|Equity Shareholders' funds |170,223 |175,030 |(2.7)% |
|(£'000) | | | |
+-----------------------------+----------+----------+--------+
|Ordinary shares in issue with|49,704,711|55,352,088| |
|voting rights | | | |
+-----------------------------+----------+----------+--------+
+--------------------------------------------+----------+----------+
|Performance |Year ended|Year ended|
| | | |
| |30 June |30 June |
| | | |
| |2023 |2022 |
+--------------------------------------------+----------+----------+
|NAV total return for the year |9.2% |(9.2)% |
+--------------------------------------------+----------+----------+
|Share price total return for the year |11.2% |(9.5)% |
+--------------------------------------------+----------+----------+
|Comparative index* total return for the year|(0.4)% |(14.6)% |
+--------------------------------------------+----------+----------+
|Ongoing charges |1.22% |1.08% |
+--------------------------------------------+----------+----------+
|Ongoing charges (including performance fee) |1.22% |1.08% |
+--------------------------------------------+----------+----------+
|Revenue return per Ordinary share |3.53p |2.43p |
+--------------------------------------------+----------+----------+
|Dividend yield |0.81% |0.71% |
+--------------------------------------------+----------+----------+
|Proposed final dividend for the year |2.50p |2.00p |
+--------------------------------------------+----------+----------+
+----------------------+-------+-------+
|Year's Highs/Lows |High |Low |
+----------------------+-------+-------+
|NAV per Ordinary share|346.28p|279.69p|
+----------------------+-------+-------+
|Ordinary share price |320.00p|258.00p|
+----------------------+-------+-------+
# Net asset value or NAV, the value of total assets less current liabilities.
The net asset value divided by the number of shares in issue produces the net
asset value per share.
*FTSE Small Cap (ex Investment Trusts) index
Chairman's Statement
Results for the Year
I am pleased to report that, despite difficult market conditions, during the 12
months to 30 June 2023, the Company's NAV per share (on a total return basis)
increased by 9.2%. The FTSE Small Cap (ex Investment Trusts) Total Return Index
("FTSE Small Cap Index"), which we use for comparison purposes only, decreased
by 0.4%. Over the same period, the share price of the Company increased by 11.2%
on a total return basis.
NAV performance during the period was encouraging, reflecting the focus on
higher quality companies exposed to areas of structural growth where they have a
degree of pricing power. The Board believes that continuing to prioritise
companies with resilient business fundamentals and strong balance sheets should
enable the Company to continue outperforming over the medium to long term.
The Company's Strategy and Investment Process are discussed in detail in the
Investment Manager's Report on pages 6 to 8 of the Annual Report.
As a direct result of our deliberate and distinctive investment process, the
Company provides notable benefits for investors:
· Performance
Our performance has been strong relative to our peers and has been positive even
in falling markets driven by the idiosyncratic nature of returns. This is a
reflection of the skills of our fund manager Ken Wotton and his team and the
benefits of taking a private equity approach to public markets. The construction
of the portfolio has been deliberately designed to offer a real return. There
continues to be demonstrable and significant private equity interest in UK
stocks given compelling valuations, for example Medica (see page 23 of the
Annual Report), and the potential upside on the Company's other investments
remains substantial in the view of the Investment Manager.
· Risk Management
For investors looking for high quality, but relatively cheap, small UK cap
exposure, SEC offers low correlations and a low beta to the broader market.
This, together with low valuations, see below, provides a strong margin of
safety to underpin the long-term upside potential of the portfolio.
· Valuation
SEC currently offers investors an attractive discount at four different levels:
- UK equities stand at a substantial discount to global markets, currently at
a 15 year low;
- Within the UK market, smaller capitalisation stocks are on a notable
discount to large caps;
- The SEC portfolio of companies are both cheaper (and higher quality) than UK
small Cap indices;
- Investors are today able to purchase SEC shares at a significant discount to
NAV.
Discount and Discount Management
The average discount to NAV of the Company's shares during the period was 7.4%,
compared to the equivalent 12.6% figure from the prior year. The discount range
was 3.3% to 12.5%.
Many of the measures implemented in Q1 2022 to address the persistent share
price discount to NAV are now complete. These included a 10 per cent. tender
offer; the implementation of a share buyback programme with 5,598,886 shares
repurchased during the 2022 calendar year; and a commitment by Gresham House to
use £5 million of its cash resources to purchase shares in the Company. Gresham
House now has a 10.7% equity stake in the Company. These have been successful,
resulting in the discount narrowing from 11.5% at the beginning of the period to
9.8% at the end of the period. For comparison, over the same period the average
UK Smaller Company Investment Trust discount increased from 8.2% to 11.5%.
Other measures, also implemented in Q1 2022, remain ongoing. These include: a
buy back policy to return 50 per cent. of proceeds from profitable realisations,
at greater than a 5 per cent. discount on an ongoing basis, in each financial
year; an ongoing commitment by Gresham House Asset Management to reinvest 50 per
cent. of its management fee per quarter in shares if the Company's shares trade
at an average discount of greater than 5 per cent. for the quarter; and the
deferral of an annual continuation resolution in favour of the implementation of
a 100 per cent. realisation opportunity for shareholders in 2025.
Marketing
A priority of the Board over the last eighteen months has been a focused
marketing plan and strategy to increase awareness of the Company and to ensure a
clear investment proposition is presented to the market.
In a competitive marketplace, and for a relatively under-appreciated asset
class, communicating differentiation is vitally important. The Investment
Manager's highly disciplined private equity approach to public markets, with
constructive corporate engagement, thorough due diligence and a powerful network
of advisers, alongside an active, high conviction concentrated portfolio of only
15-20 companies, are a source of competitive advantage and sustained
performance. This is reflected in all communications including the Company's
webpage (www.strategicequitycapital.com).
The Company has also been developing new content to engage investors and
potential investors, including an innovative video series where the Investment
Manager has interviewed the chief executives of portfolio companies to provide
investors with a greater insight into the companies that the Company invests in.
Extending insights and views of the Investment Manager have also been
incorporated within the Company's co-ordinated PR programme to engage key
national, trade and specialist investment publications resulting in coverage
including in the Mail on Sunday, Daily Mail's This Money, Shares Magazine,
Interactive Investor, Investment Week, Trustnet and Citywire Funds Insider.
The Board is ambitious with its plans to build the profile and positioning of
the Company over time.
Gearing and Cash Management
The Company has maintained its policy of operating without a banking loan
facility. This policy is periodically reviewed by the Board in conjunction with
the Manager and remains under review.
Dividend
For the year ended 30 June 2023 the basic revenue return per share was 3.53p
(2022: 2.43p). Although the Company is predominantly focused on delivering long
term capital growth, due to the strongly cash generative nature of the majority
of the portfolio companies and low capital intensity, many pay an attractive
dividend. Accordingly, the Board is proposing a final dividend of 2.50p per
share for the year ending 30 June 2023 (2022: 2.00p per share), payable on 15
November 2023 to shareholders on the register as at 13 October 2023.
The Board
I am delighted to welcome Brigid Sutcliffe and Howard Williams to the Board as
non-executive Directors. Both joined in February 2023 and bring a wealth of
experience and knowledge that will be of enormous benefit to the Company.
It is intended that Brigid will take over as the Company's Audit Committee Chair
after Jo Dixon retires at the Company's AGM in November.
The Board would like to convey its sincere thanks to Jo for the significant
contribution she has made to the Company and for her excellent leadership of the
Audit Committee.
Outlook
The global macroeconomic and geopolitical environment remains highly uncertain,
although signs of normalising inflation (and implications for monetary policy)
are welcome. Closer to home the UK economy is proving to be relatively
resilient, although certain sectors (for example housing and construction) are
showing signs of challenge, which could promote further volatility in company
earnings and equity market ratings as macroeconomic developments unfold.
Despite these obvious challenges the Investment Manager is observing an
increasing number of attractive long term investment opportunities. Strong
underlying fundamentals across the existing portfolio provide a robust and
resilient platform for future investment returns. The significant dislocation
between current UK public market valuations and the comparators in private
markets provide good grounds for optimism about the prospects for positive
valuation momentum over the medium term.
The resilient positioning of the Company's portfolio should enable it to
outperform in the current challenging environment and continue to deliver
attractive long-term capital growth when markets stabilise. Furthermore, the
enhanced marketing programme and ongoing share buybacks should support the
Company's ability to maintain a structurally narrower share price discount to
NAV over the coming year.
The Board, once again, thanks you for your continued support.
William Barlow
Chairman
26 September 2023
The Investment Manager's Report
Investment Strategy
In the following section, we remind shareholders of our strategy and investment
process.
Our Strategic Public Equity strategy
The appointment of Gresham House as Manager in May 2020 and the subsequent
appointment of Ken Wotton as Lead Fund Manager in September 2020 resulted in a
refocus of the investment strategy ensuring that it is strictly applied and is
able to effectively leverage the experienced resource of the Gresham House
Strategic Equity team, the wider Group platform and its extensive network. We
set out this strategy in detail in the Company's 2022 Annual Report which we
summarise again below.
Investment focus
Our investment focus is to invest into high quality, publicly listed companies
which we believe can materially increase their value over the medium to long
term through strategic, operational or management change. To select suitable
investments and to assist in this process we apply our proprietary Strategic
Public Equity ("SPE") investment strategy. This includes a much higher level of
engagement with management than most investment managers adopt and is closer in
this respect to a private equity approach to investing in public markets
companies. Our path to achieving this involves constructing a high conviction,
concentrated portfolio; focusing on quality business fundamentals; undertaking
deep due diligence including engaging our proprietary network of experts and
assessing ESG risks and opportunities through the completion of the ESG decision
tool; and maintaining active stewardship of our investments. Through
constructive, active engagement with the management teams and boards of
directors, we seek to ensure alignment with shareholder objectives and to
provide support and access to other resource and expertise to augment a
company's value creation strategy.
We are long-term investors and typically aim to hold companies for three-to-five
years to back a thesis that includes an entry and exit strategy and a clearly
identified route to value creation. We have clear parameters for what we will
invest in and areas which we will deliberately avoid.
Smaller company focus
We believe that UK Smaller Companies represent a structurally attractive part of
the public markets. Academic research demonstrates that smaller companies in the
UK have delivered substantial outperformance over the long term (see Figure 1 on
page 6 in the Annual Report). This is partially because there are a large number
of under-researched and under-owned businesses that typically trade at a
valuation discount to larger companies (see Figure 2 on page 7 in the Annual
Report) and relative to their prospects. A highly selective investor with the
resources and experience to navigate successfully this part of the market can
find exceptional long-term investment opportunities.
The key attractions of smaller companies are:
· Inefficient markets - Smaller companies remain under-researched and below
the radar for most investors thus creating an opportunity for those willing to
devote time and resource to this area.
· A large universe - Most UK listed companies are in the smaller companies
category and are listed on the main market or AIM. Two-thirds of UK listed
companies have a market capitalisation below £500m, offering a large opportunity
set for smaller company specialists.
· Valuation discounts - Such discounts, arising for whatever reason, present
attractive entry points at which the intrinsic worth of a company's long-term
prospects are undervalued.
· M&A activity - Smaller companies often offer strategic opportunities within
their niche markets and can become attractive, bolt-on acquisitions to both
trade and private equity buyers. These buyers provide an additional source of
liquidity and realisation of value for smaller company investors.
Portfolio Construction
We will maintain a concentrated portfolio of 15-25 high conviction holdings with
prospects for attractive absolute returns over our investment holding period.
The majority of portfolio value is likely to be concentrated in the top 10-15
holdings with other positions representing potential "springboard" investments
where we are awaiting a catalyst to increase our stake to an influential,
strategic level.
Bottom-up stock picking determines SEC's sector weightings which are not
explicitly managed relative to a target benchmark weighting. The absence of
certain sectors such as oil & gas, mining, and banks, as well as limited
exposure to overtly cyclical parts of the market, and the absence of early stage
or pre-profit businesses typically result in a portfolio weighted towards, but
not exclusively, profitable cash generative service sector businesses
particularly in technology, healthcare, business services, financials and
industrials. The underlying value drivers are typically company specific and
exhibit limited correlation even within the same broad sectors. Figure 3 on page
7 of the Annual Report sets out the sector exposure of the Company as at 30 June
2023.
Our smaller company focus and specialist expertise leads us to prioritise
companies with a market capitalisation between £100m and £300m at the point of
investment. This focus, in combination with the size of the Company and its
concentrated portfolio approach, provides the potential to build a strategic and
influential stake in the highest conviction holdings. In turn this provides a
platform to maximise the likelihood that our constructive active engagement
approach will be effective and ultimately successfully contribute to shareholder
value creation.
Once purchased there is no upper limit restriction on the market capitalisation
of an individual investment. We will run active positions regardless of market
capitalisation provided they continue to deliver the expected contribution to
overall portfolio returns and subject to exposure limits and portfolio
construction considerations.
The weighted average market capitalisation of portfolio holdings increased to
£252m as at 30 June 2023 compared to £231m as at 30 June 2022, largely
reflecting share price growth across the portfolio, particularly in the case of
the two largest holdings (Medica Group and XPS Pensions Group), both of which
were top performers throughout the period and traded at market capitalisations
greater than the portfolio average as at 30 June 2023. This level of average
market capitalisation supports the Investment Manager's strategy of focusing on
smaller market capitalisation companies where SEC has the potential to take a
meaningful equity stake as a platform to effectively apply its active engagement
strategy.
We set out a description of the Top 10 holdings as at 30 June 2023 on page 11 of
the Annual Report together with a high level summary of the investment case and
recent developments for each position.
Constructive Active Engagement Approach
As far as possible, SEC aims to build consensus with other stakeholders. We want
to unlock value for shareholders, but also create stronger businesses over the
long term. The objective is to develop a dialogue with management so that the
GHAM team and its network are seen as trusted advisors.
Operating with a highly-focused portfolio, SEC's management team can build and
maintain a deep understanding of its portfolio companies and their potential.
The team engages with company management teams and boards in a number of areas
including:
· Strategy - Working with boards to ensure that business strategy and
operations are effectively aligned with long term value creation and focused on
building strategic value within a company's market.
· Corporate activity - Support for acquisition and divestment activity through
advice, network introductions and the provision of cornerstone capital.
· Capital allocation - Seeking to work with boards to optimise capital
allocation by prioritising the highest return and value added projects and areas
of focus for investment of both capital and resource.
· Board composition - Ensuring that boards are appropriately balanced between
executive and non-executive directors and contain the right balance of skills
and experience; we actively use our talent network to introduce high quality
candidates to enhance the quality of investee company boards as appropriate.
· Management incentivisation - Ensuring that key management are appropriately
retained and incentivised to deliver long term shareholder value with schemes
that fit with GHAM's principles and are well aligned to our objectives as
shareholders.
· ESG - Leveraging the Gresham House sustainable investing framework and
central resource to help to identify, understand and monitor key ESG risks and
opportunities as well as seeking to drive enhancements to a company's approach
where there are critical material issues with a particular focus on corporate
governance.
· Investor Relations - Helping management teams to hone their equity story,
select appropriate advisors and target their investor relations activities in
the most effective way to ensure that value creation activity is understood and
reflected by the market.
Engagement is undertaken privately, leveraging the wider platform and resources
of the Gresham House group, as far as possible. The team will also work to
leverage its extensive network to the benefit of portfolio companies. We seek to
make introductions to our network in as collaborative way as appropriate where
we believe there is an opportunity to support initiatives to create shareholder
value.
In summary, we follow a practice of constructive corporate engagement and aim to
work with management teams in order to support and enhance shareholder value
creation. We attempt to build a consensus with other stakeholders and prefer to
work collaboratively alongside like-minded co-investors.
Portfolio review for the twelve months to 30 June 2023
Over the course of the twelve months to 30 June 2023 we continued to evolve the
portfolio at a more normalised pace than in the previous two financial years:
purchasing two new holdings which represented 4.3% of NAV at the end of the
period, and fully exiting four positions which represented 8.2% at the start of
the period. We have also exited our position in Medica post period end as its
recommended cash takeover offer from IK Partners completed, which represented
18% of closing NAV. As of 30 June 2023, the number of influential equity stakes
where GHAM funds, in aggregate, hold a 5% or more equity stake stood at 11, and
represented 77% of the portfolio by value at 30 June 2023.
Market Background
Over the twelve months to the end of June, the FTSE Smaller Companies (ex
Investment Trusts) Index ("the index") fell by 0.4% on a total return basis
underperforming the FTSE All Share (+3.9%) but outperforming the FTSE AIM (
-14.0%). Following the substantial style shift from growth to value in the first
half of 2022, the 12 months to 30 June 2023 saw a small revival of growth style
investing, with the MSCI UK Growth index outperforming its value peer. However,
energy and mining stocks (in which the Company does not invest) continued to
perform well given geopolitical developments, and were key contributors to the
overall index performance.
The UK equity market continued to be out of favour with asset allocators,
reaching 25 consecutive months of outflows by June 2023 (1). This continued
selling pressure from UK equities has weighed on valuations, with the UK at
multi-decade lows relative to other developed markets, particularly the US,
despite the drawdowns experienced last year (see figure 5 on page 9 of the
Annual Report). Whilst this demonstrates the value opportunities in the UK
market, we believe that the challenging macroeconomic backdrop further fuels the
need for careful assessment of the bottom up characteristics of each company.
This suits the private equity approach taken by the Manager to investing on
behalf of the Company.
Performance Review
The net asset value ("NAV") increased 9.2%, on a total return basis, over the
twelve months to the end of June, closing at 342.5p per share. This increase in
NAV reflected the positive returns delivered by the majority of portfolio
companies throughout the period, despite volatile equity market conditions as
geopolitical and macroeconomic concerns weighed on investor sentiment. The
Company outperformed its benchmark during the period, as the FTSE Smaller
Companies (ex Investment Trusts) index fell by 0.4% on a total return basis.
This reflected the relatively defensive positioning of the portfolio compared to
the wider market - focused on high quality businesses in less cyclical parts of
the market and with resilient business models and robust balance sheets.
Despite the market volatility experienced over the year, we remain confident
about the resilient underlying fundamentals of the portfolio companies and their
ability to withstand the macroeconomic headwinds that look set to persist
through the current financial year.
(1) Source: Investec Market Review July 2023
Top Five Absolute Contributors to Performance
Security Valuation Period
30 June Contribution
2023 to return
£'000 (%)
Medica Group 30,881 5.82
XPS Pensions Group 25,459 4.92
Wilmington 9,482 2.28
Hostelworld 8,209 2.19
Ricardo 11,462 1.96
Medica, a leading provider of teleradiology services, was the subject of a
recommended cash takeover offer from IK Partners, a European private equity
firm, at a 32.5% premium, and the takeover has since completed (post period
-end). XPS Pensions, a pensions consulting, advisory and administration services
provider, which delivered results in excess of market expectations, resulting in
analyst upgrades, and divested a non-core business at a significantly accretive
valuation multiple to the wider group; Wilmington, a professional media
provider, which demonstrated strong operating fundamentals and forecast upgrades
whilst successfully refocussing the business on a digital first strategy in the
governance, risk and compliance market; Hostelworld, an online travel agent
focussed on the hostelling segment, following strong results (including a record
first quarter) and an improving industry outlook; and Ricardo, a global
strategic, environmental and engineering consultancy, which has delivered strong
performance particularly in its environmental & energy transition divisions,
which are key focus areas over the medium term.
Bottom Five Absolute Contributors to Performance
Security Valuation Period
30 June Contribution
2023 to return
£'000 (%)
Tribal 6,580 (5.24)
Inspired 10,327 (2.25)
R&Q Insurance Holdings 7,429 (1.76)
LSL Property Services 8,645 (0.91)
Tyman - (0.35)
In challenging equity market conditions certain portfolio holdings suffered from
share price weakness during the period, typically in response to short term
developments that, we believe, do not fundamentally change the long term values
of the holdings. The largest detractors included Tribal, an international
provider of student administration software, following a profit downgrade
resulting from an onerous contract; Inspired, which de-rated on no specific news
and despite delivering strong results and reaffirming expectations in line with
market consensus; R&Q Insurance Holdings, a global non-life specialty insurance
company, following weaker than expected interim results, and an equity raise
(through a preferred instrument) in order to bolster capital adequacy and
facilitate a separation of the group's two businesses in line with our view of
the optimal path to value creation for the group; LSL Property Services, a
leading provider of services to the UK residential property sector, which has
been impacted by the slowdown in activity within the UK housing market,
particularly within its surveying business; Tyman, a global building materials
and component manufacturer and distributor (which the Company has now fully
exited), which faced analyst downgrades reflecting end market challenges.
Portfolio Review
The portfolio remained highly focused with a total of 16 holdings and the top 10
accounted for around 80% of the NAV at the end of the period. 1% of the NAV was
held in cash at period end. This had subsequently increased to c. 13% by the end
of July 2023 following the receipt of the proceeds from the Medica Group
takeover.
Over the period positions in Nexus (IRR of -18%), Assetco (IRR of 30%), Tyman
(IRR of 23%), and IDOX (IRR of 6%) were fully exited, with Medica (IRR of 12% /
25% (2)) also fully exited post period end.
The Company currently has a number of key holdings that we believe trade at
material valuation discounts to comparable private market transaction values,
which provides a strong margin of safety underpinning the long term upside
potential of the portfolio.
Changes in sector weightings have seen exposure to Healthcare increase from
16.2% to 21.6%, with exposure to Financial Services increasing from 25.2% to
32.6%. The largest decrease has been in cash, which decreased from 9.3% to 0.7%
(although, as above, this increased substantially in July following the receipt
of Medica Group sale proceeds).
(2) 12% reflects the IRR from the Company's initial investment in Medica
Group in 2017. 25% reflects the IRR since Ken Wotton became Manager of the
Company in September 2020, and actively decided to upweight the Company's
holding in Medica Group
Top 10 Investee Company Review
(as at 30 June 2023)
+------------+----------------+-----------------------------------------------+
|Company |Investment |Developments during the year |
| |Thesis | |
+------------+----------------+-----------------------------------------------+
|Medica | | |
| | · A niche | · Fully exited in July 2023 pursuant to the |
|18.1% of NAV|market leader in|Recommended Cash Offer from IK Partners |
| |the UK | |
|Healthcare |teleradiology | |
| |sector which is | |
| |acyclical and is| |
| |growing rapidly | |
| |driven by | |
| |increasing | |
| |healthcare | |
| |requirements and| |
| |a structural | |
| |shortage of | |
| |radiologists | |
| | | |
| | · Above market| |
| |organic growth | |
| |and | |
| |underappreciated| |
| |cash generation | |
| |characteristics | |
+------------+----------------+-----------------------------------------------+
|XPS | | |
| | · Leading | · Delivered FY23 results and outlook ahead of|
|14.9% of NAV|`challenger' |market expectations, leading to analyst |
| |brand in the |upgrades |
|Financial |pensions | · Elevated demand for pensions advisory (e.g.|
|Services |consulting, |risk transfer) given Gilt volatility and |
| |advisory and |changes in funding positions |
| |administration | · Announced the disposal of its non-core NPT |
| |market |business for a significantly accretive |
| | · Highly |valuation multiple to the wider group |
| |defensive - high| |
| |degree of | |
| |revenue | |
| |visibility and | |
| |largely non | |
| |-discretionary, | |
| |regulation | |
| |driven client | |
| |activity | |
| | · Significant | |
| |inflation pass | |
| |-through ability| |
| | · Highly | |
| |fragmented | |
| |sector with | |
| |recent M&A | |
| |activity, | |
| |providing | |
| |opportunity to | |
| |XPS as a | |
| |consolidator and| |
| |potential target| |
+------------+----------------+-----------------------------------------------+
|Brooks | | |
|Macdonald | · UK focused | · Positive net flows and 7.5% AUM growth in |
| |wealth |FY23 |
|7.0% of NAV |management | · Good progress in replacing previous |
| |platform; |management departures, which had weighed on the|
|Financial |structural |share price, including recently hiring Aviva's |
|Services |growth given |former CRO as CFO |
| |continuing | |
| |transition to | |
| |self-investment | |
| | · Opportunity | |
| |to leverage | |
| |operational | |
| |investments to | |
| |grow margin and | |
| |continue strong | |
| |cash flow | |
| |generation | |
| | · A | |
| |consolidating | |
| |market; | |
| |opportunity for | |
| |Brooks as both | |
| |consolidator and| |
| |potential target| |
| |with recent | |
| |takeover | |
| |interest for | |
| |sector peers | |
+------------+----------------+-----------------------------------------------+
|Ricardo | | |
| | · Global | · Successfully extended its McLaren |
|6.7% of NAV |strategic, |relationship (now in its fourth generation) |
| |environmental |demonstrating the stickiness of Ricardo's |
|Construction|and engineering |customer relationships |
|& Materials |consultancy | · Strong FY23 results with particularly high |
| | · Ongoing |growth in its Environmental & Energy Transition|
| |strategic |divisions, in line with the strategic ambition |
| |transformation | |
| |to refocus and | |
| |prioritise the | |
| |business towards| |
| |higher growth, | |
| |higher margin | |
| |and less capital| |
| |intensive | |
| |activities | |
| | · Strong | |
| |market position | |
| |underpinned by | |
| |significant | |
| |sector expertise| |
+------------+----------------+-----------------------------------------------+
|Fintel | | |
| | · Leading UK | · Extended its strategic distribution |
|6.3% of NAV |provider of |agreement with BlackRock |
| |technology | · In-line H1'23 results with positive |
|Financial |enabled |outlook, leading to analyst upgrades |
|Services |regulatory | · Announced two small bolt-ons and Fintel's |
| |solutions and |first investment through its early-stage |
| |services to |technology incubator, Fintel Labs |
| |IFAs, financial | |
| |institutions and| |
| |other | |
| |intermediaries | |
| | · | |
| |Strategically | |
| |valuable | |
| |technology | |
| |platform with | |
| |opportunity to | |
| |drive material | |
| |growth in | |
| |revenues and | |
| |margins through | |
| |supporting | |
| |customers' | |
| |digitisation | |
| |journeys | |
+------------+----------------+-----------------------------------------------+
|Inspired | | |
| | · UK B2B | · Strong FY22 results, Q1'23 momentum and |
|6.1% of NAV |corporate energy|FY23 outlook |
| |assurance, | · Demonstrable progress in cash conversion |
|Industrial |procurement and |and cross-sell |
|Goods & |optimisation | · New incentivisation agreement within its |
|Services |service provider|energy optimisation division, with performance |
| | · ESG |hurdles significantly ahead of market forecasts|
| |specialist, with| |
| |a track record | |
| |of advising blue| |
| |chip companies | |
| |on reducing | |
| |energy | |
| |consumption | |
| | · Leading | |
| |player in a | |
| |fragmented | |
| |industry; | |
| |significant | |
| |opportunity to | |
| |gain market | |
| |share through | |
| |client wins, | |
| |proposition | |
| |extension and | |
| |M&A | |
+------------+----------------+-----------------------------------------------+
|Wilmington | | |
| | · | · FY22 and H1'23 results in line with market |
|5.6% of NAV |International |expectations, which had increased through 2022 |
| |provider of B2B | · Repeat revenue now accounts for 79% of |
|Media |data and |revenue (H1'23) |
| |training in the | · Further portfolio optimisation including |
| |compliance, |the disposal of Spanish subsidiary Inese, in |
| |insurance, |line with Wilmington's portfolio management |
| |financial and |strategy |
| |healthcare | |
| |sectors | |
| | · New Chair, | |
| |CEO and CFO | |
| |incentivised to | |
| |re-focus the | |
| |business and | |
| |deliver a return| |
| |to organic | |
| |growth | |
+------------+----------------+-----------------------------------------------+
|Iomart | | |
| | · Integrated | · Existing Chair has expanded their role to |
|5.3% of NAV |datacentre and |become Executive Chair on a part time basis |
| |cloud services |(supported by the CEO) |
|Technology |provider | · FY23 results in line with market |
| | · Provides |expectations |
| |both self | · Two strategic bolt-ons in the period, most |
| |-managed |recently the acquisition of Extrinsica to |
| |infrastructure |double Iomart's Azure hybrid cloud capability |
| |and cloud | |
| |-managed | |
| |services, with | |
| |the latter being| |
| |a key strategic | |
| |focus area | |
| | · Highly cash | |
| |generative with | |
| |significant | |
| |recurring | |
| |revenue | |
| | · Structural | |
| |growth | |
| |opportunity from| |
| |hybrid cloud | |
| |adoption | |
+------------+----------------+-----------------------------------------------+
|LSL Property| | |
|Services | · Leading | · Announced in 2023 the transition of its |
| |provider of |estate agency business from ownership to |
|5.1% of NAV |services to the |franchise, which we believe reduces |
| |UK residential |cyclicality, capital intensity, and improves |
|Real Estate |property sector |the quality of earnings |
| |with activities | · Post-period end forecasts downgraded |
| |spanning |through lower UK housing / mortgage activity |
| |mortgage |levels, which particularly dampened the outlook|
| |broking, |for LSL's surveying business |
| |surveying and | |
| |estate agencies | |
| | · Significant | |
| |opportunity to | |
| |reallocate | |
| |capital to the | |
| |Financial | |
| |Services | |
| |division which | |
| |is strategically| |
| |valuable, high | |
| |growth and | |
| |underappreciated| |
| |by the market | |
+------------+----------------+-----------------------------------------------+
|Hostelworld | | |
| | · Category | · Record Q1 and H1 revenue delivered and |
|4.8% of NAV |leader within |guidance confidently reaffirmed, following |
| |the hostelling |forecast upgrades earlier in 2023 |
|Travel & |niche of the | |
|Leisure |online travel | |
| |agent sector | |
| | · Social media| |
| |led customer | |
| |acquisition and | |
| |engagement | |
| |strategy to | |
| |enhance | |
| |profitability | |
| |and customer | |
| |lifetime value | |
| | · Growth | |
| |driven by post | |
| |-Covid recovery | |
| |in international| |
| |travel and value| |
| |for money | |
| |positioning, | |
| |with average | |
| |order value and | |
| |customer | |
| |lifetime values | |
| |improving | |
+------------+----------------+-----------------------------------------------+
Outlook
The Investment Manager's core planning assumption is that continued geopolitical
and macroeconomic uncertainty will drive market volatility throughout the
remainder of 2023. The shift to a period of higher inflation and higher interest
rates has fundamentally impacted asset markets and equities in particular. It is
likely that increasing focus on company fundamentals and valuation discipline
will be required to outperform in this environment which plays to the strengths
of the Company's investment strategy and the Investment Manager's approach.
The elevated levels of corporate activity within the UK equity market continue
to play out and the volume of takeover activity amongst smaller companies has
not been seen since H2 2019, despite overall UK takeover volumes (of all sizes)
remaining marginally below H1 2022 levels. Bid premia in the period were also
elevated, providing further evidence of attractive valuations amongst UK smaller
companies despite the higher cost of capital environment today. The investment
process and private equity lens across public markets enables the identification
of investment opportunities with potential strategic value that could be
attractive acquisitions for both corporate and financial buyers.
We continue to believe that our fundamentals focused investment style has the
potential to continue outperforming over the long term. We see significant
opportunities for long term investors to back quality growth companies at
attractive valuations in an environment where agile smaller businesses with
strong management teams can take market share and build strong long-term
franchises. We will maintain our focus on building a high conviction portfolio
of less cyclical, high quality, strategically valuable businesses which we
believe can deliver strong returns through the market cycle regardless of the
performance of the wider economy.
Portfolio as at 30 June 2023
% of % of
% of
invested
invested
portfolio
portfolio
at at
Date of Cost Valuation 30 June 30 June
net
first
Company Sector Investment £'000 £'000 2023 2022
Assets
Classification
Medica Group Healthcare Mar 2017 19,120 30,881 18.2% 13.3%
18.1%
XPS Pensions Financial Jul 2019 16,850 25,459 15.0% 11.8%
14.9%
Group Services
Brooks Financial Jun 2016 10,563 11,916 7.0% 7.4%
7.0%
Macdonald Services
Ricardo Construction & Sep 2021 9,107 11,462 6.8% 2.5%
6.7%
Materials
Materials
Fintel Financial Oct 2020 10,076 10,800 6.4% 5.8%
6.3%
Services
Inspired Industrial Jul 2020 13,713 10,327 6.1% 8.4%
6.1%
Energy Goods &
Services
Wilmington Media Oct 2010 6,818 9,482 5.6% 7.4%
5.6%
Iomart Technology Mar 2022 8,473 9,074 5.4% 3.0%
5.3%
LSL Property Real Estate Mar 2021 13,256 8,645 5.1% 6.5%
5.1%
Services
Hostelworld Travel & Oct 2019 6,505 8,209 4.8% 5.3%
4.8%
Leisure
R&Q Insurance Financial Jun 2022 10,308 7,429 4.3% 1.7%
4.4%
Holdings Services
Tribal Technology Dec 2014 11,742 6,580 3.9% 9.0%
3.9%
Benchmark Healthcare Jun 2019 6,733 6,120 3.6% 4.3%
3.6%
Ten Travel & Oct 2020 3,464 5,539 3.3% 4.6%
3.3%
Entertainment Leisure
Carr's Group Industrial
Goods
Services]
& Services Mar 2023 3,603 4,296 2.5% -
2.5%
Netcall Technology Mar 2023 3,168 3,055 1.8% -
1.8%
Total 169,274
99.4%
Investments
Cash 1,242
0.7%
Net current (293)
(0.1)%
liabilities
Total 170,223
100.0%
shareholders'
funds
Ken Wotton
Gresham House Asset Management
26 September 2023
Statement of Comprehensive Income
Year ended 30 June 2023
Revenue Capital
return return Total
£'000 £'000 £'000
Investments
Gains on investments held - 10,602 10,602
at fair value
through profit or loss
- 10,602 10,602
Income
Dividends 3,782 - 3,782
Interest 78 - 78
Total income 3,860 - 3,860
Expenses (1,228) - (1,228)
Investment Manager's fee
Other expenses (803) - (803)
Total expenses (2,031) - (2,031)
Net return before taxation 1,829 10,602 12,431
Taxation - - -
Net return and total 1,829 10,602 12,431
comprehensive income for
the year
Return per Ordinary share 3.53p 20.44p 23.97p
The total column of this statement represents the Statement of Comprehensive
Income prepared in accordance with IFRS. The supplementary revenue and capital
return columns are both prepared under guidance published by the AIC. All items
in the above statement derive from continuing operations. No operations were
acquired or discontinued during the year.
Statement of Comprehensive Income
Year ended 30 June 2022
Revenue Capital
return return Total
£'000 £'000 £'000
Investments
Losses on investments held - (21,776) (21,776)
at fair value
through profit or loss
- (21,776) (21,776)
Income
Dividends 4,173 - 4,173
Interest 6 - 6
Total income 4,179 - 4,179
Expenses (1,564) - (1,564)
Investment Manager's fee
Other expenses (1,128) - (1,128)
Total expenses (2,692) - (2,692)
Net return before taxation 1,487 (21,776) (20,289)
Taxation - - -
Net return and total 1,487 (21,776) (20,289)
comprehensive income for
the year
Return per Ordinary share 2.43p (35.53)p (33.10)p
Balance Sheet
As at As at
30 June 2023 30 June 2022
£'000 £'000
Non-current assets
Investments held at fair 169,274 159,950
value though profit and
loss
Current assets
Trade and other 268 885
receivables
Cash and cash equivalents 1,242 16,363
1,510 17,248
Total assets 170,784 177,198
Current liabilities
Trade and other payables (561) (2,168)
Net assets 170,223 175,030
Capital and reserves
Share capital 6,353 6,353
Share premium account 11,300 11,300
Special reserve 3,590 19,767
Capital reserve 142,952 132,350
Capital redemption reserve 2,897 2,897
Revenue reserve 3,131 2,363
Total shareholders' equity 170,223 175,030
Net asset value per share 342.47p 316.21p
Ordinary shares in issue 49,704,711 55,352,088
Statement of Changes in Equity
For the year Share Share Special Capital Capital Revenue Total
ended capital premium reserve redemption reserve
reserve reserve
30 June 2023 account
£'000 £'000 £'000 £'000 £'000 £'000 £'000
1 July 2022 6,353 11,300 19,767 132,350 2,897 2,363
175,030
Net return - - - 10,602 - 1,829
12,431
and total
comprehensive
income for
the year
Dividends - - - - - (1,061)
(1,061)
paid
Share buy - - (16,177) - - -
(16,177)
-backs
30 June 2023 6,353 11,300 3,590 142,952 2,897 3,131
170,223
For the year Share Share Special Capital Capital Revenue Total
ended capital premium reserve redemption reserve
reserve reserve
30 June 2022 account
£'000 £'000 £'000 £'000 £'000 £'000 £'000
1 July 2021 6,986 31,737 24,567 154,126 2,264 1,889
221,569
Net return - - - (21,776) - 1,487
(20,289)
and total
comprehensive
income for
the year
Dividends - - - - - (1,013)
(1,013)
paid
Share buy (633) (20,437) (4,800) - 633 -
(25,237)
-backs
30 June 2022 6,353 11,300 19,767 132,350 2,897 2,363
175,030
Statement of Cash Flows
Year Ended 30 June Year Ended 30 June
2023 2022
£'000 £'000
Operating activities
Net return before taxation 12,431 (20,289)
Adjustment for (10,602) 21,776
(gains)/losses on
investments
Operating cash flows before 1,829 1,487
movements in working capital
Decrease/(increase) in 374 (219)
receivables
Increase/(decrease) in 22 (19)
payables
Purchases of portfolio (30,473) (36,443)
investments
Sales of portfolio 30,463 70,129
investments
Net cash flow from operating 2,215 34,935
activities
Financing activities
Equity dividend paid (1,061) (1,013)
Shares bought back in the (16,275) (25,139)
year
Net cash outflow from (17,336) (26,152)
financing activities
(Decrease)/increase in cash (15,121) 8,783
and cash equivalents for
year
Cash and cash equivalents at 16,363 7,580
the start of the year
Cash and cash equivalents at 1,242 16,363
30 June
Principal and Emerging Risks
The Board believes that the overriding risks to shareholders are events and
developments which can affect the general level of share prices, including, for
instance, inflation or deflation, economic recessions and movements in interest
rates and currencies which are outside of the control of the Board.
The principal risks and uncertainties are set out on pages 17 and 18 of the
Annual Report.
Responsibility statement of the Directors in respect of the Annual Financial
Report
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
· the Strategic Report includes a fair review of the development and
performance of the business and the position of the issuer, together with a
description of the principal risks and uncertainties that it faces.
We consider the Annual Report and accounts, taken as a whole, is fair, balanced
and understandable and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy.
Going Concern
In assessing the Company's ability to continue as a going concern the Directors
have also considered the
Company's investment objective, detailed on the inside front cover, risk
management policies, detailed on
pages 17 and 18 of the 2023 Annual Report, capital management (see note 16 to
the financial statements), the nature of its portfolio and expenditure
projections and believe that the Company has adequate resources, an appropriate
financial structure and suitable management arrangements in place to continue in
operational existence for the foreseeable future and for at least 12 months from
the date of this Report. In addition, the Board has had regard to the Company's
investment performance (see page 3 of the 2023 Annual Report) and the price at
which the Company's shares trade relative to their NAV (see page 3 of the 2023
Annual Report).
The Directors performed an assessment of the Company's ability to meet its
liabilities as they fall due. In performing this assessment, the Directors took
into consideration:
· cash and cash equivalents balances and, from a liquidity perspective, the
portfolio of readily realisable securities which can be used to meet short-term
funding commitments;
· the ability of the Company to meet all of its liabilities and ongoing
expenses from its assets;
· revenue and operating cost forecasts for the forthcoming year;
· the ability of third-party service providers to continue to provide
services; and
· potential downside scenarios including stress testing the Company's
portfolio for a 25% fall in the value of the investment portfolio; a 50% fall in
dividend income and a buy back of 5% of the Company's ordinary share capital,
the impact of which would leave the Company with a positive cash position.
Based on this assessment, the Directors are confident that the Company will have
sufficient funds to continue to meet its liabilities as they fall due for at
least 12 months from the date of approval of the financial statements, and
therefore have prepared the financial statements on a going concern basis.
Related Party Transactions and transactions with the Investment Manager
Fees paid to Directors are disclosed in the Directors` Remuneration Report on
page 39 of the 2023 Annual Report. Full details of Directors` interests are set
out on page 40 of the 2023 Annual Report.
City of London Investment Management is considered a related party by virtue of
their holding of 28.9% of the Company's total voting rights. Further details are
noted on page 27 of the 2023 Annual Report.
The amounts payable to the Investment Manager, which is not considered to be a
related party, are disclosed in note 3. The amount due to the Investment Manager
for management fees at 30 June 2023 was £311,000 (2022: £349,000). The amount
due to the Investment Manager for performance fees at 30 June 2023 was £nil
(2022: £nil).
As detailed on page 4 of the 2023 Annual Report, the Investment Manager,
directly and indirectly through its in-house funds, has continued to purchase
shares in the Company.
Notes
1.1 Corporate information
Strategic Equity Capital plc is a public limited company incorporated and
domiciled in the United Kingdom and registered in England and Wales under the
Companies Act 2006 whose shares are publicly traded. The Company is an
investment company as defined by Section 833 of the Companies Act 2006.
The Company carries on business as an investment trust within the meaning of
Sections 1158/1159 of the UK Corporation Tax Act 2010.
The financial statements of Strategic Equity Capital plc for the year ended 30
June 2023 were authorised for issue in accordance with a resolution of the
Directors on 26 September 2023.
1.2 Basis of preparation and statement of compliance
The financial statements of the Company have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006, and reflect the following policies which have been adopted
and applied consistently. Where presentational guidance set out in the Statement
of Recommended Practice ("SORP") for investment trusts issued by the AIC in
February 2019 is consistent with the requirements of IFRS, the Directors have
sought to prepare financial statements on a basis compliant with the
recommendations of the SORP.
The financial statements of the Company have been prepared on a going concern
basis.
Convention
The financial statements are presented in Sterling, being the currency of the
Primary Economic Environment in which the Company operates, rounded to the
nearest thousand, unless otherwise stated to the nearest one pound.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment
of business, being investment business.
As such, no segmental reporting disclosure has been included in the financial
statements.
2. Income
Year ended 30 June 2023
Revenue Capital
return return Total
£'000 £'000 £'000
Income from investments
UK dividend income 3,782 - 3,782
3,782 - 3,782
Other operating income
Liquidity interest 78 - 78
Total income 3,860 - 3,860
Year ended 30 June 2022
Revenue Capital
return return Total
£'000 £'000 £'000
Income from investments
UK dividend income 4,173 - 4,173
4,173 - 4,173
Other operating income
Liquidity interest 6 - 6
Total income 4,179 - 4,179
3. Investment Manager's fee
Year ended 30 June 2023
Revenue Capital
return return Total
£'000 £'000 £'000
Management fee 1,228 - 1,228
1,228 - 1,228
Year ended 30 June 2022
Revenue Capital
return return Total
£'000 £'000 £'000
Management fee 1,564 - 1,564
1,564 - 1,564
A basic management fee is payable to the Investment Manager at annual rate of
0.75% of the NAV of the Company. The basic management fee accrues daily and is
payable quarterly in arrears.
The Investment Manager is also entitled to a performance fee, details of which
are set out below.
The Company's performance is measured over rolling three-year periods ending on
30 June each year, by comparing the NAV total return per share over a
performance period against the total return performance of the FTSE Small Cap
(ex Investment Trusts) Index. A performance fee is payable if the NAV total
return per share (calculated before any accrual for any performance fee to be
paid in respect of the relevant performance period) at the end of the relevant
performance period exceeds both: (i) the NAV per share at the beginning of the
relevant performance period as adjusted by the aggregate amount of (a) the total
return on the FTSE Small Cap (ex Investment Trusts) Index (expressed as a
percentage) and (b) 2.0% per annum over the relevant performance period
("Benchmark NAV"); and (ii) the high watermark (which is the highest NAV per
share by reference to which a performance fee was previously paid).
The Investment Manager is entitled to 10% of any excess of the NAV total return
over the higher of the Benchmark NAV per share and the high watermark. The
aggregate amount of the Management Fee and the Performance Fee in respect of
each financial year of the Company shall not exceed an amount equal to 1.4% per
annum of the NAV of the Company as at the end of the relevant financial period.
A performance fee of £nil been accrued in respect of the year ended 30 June 2023
(30 June 2022: £nil).
4. Other expenses
Year ended 30 June 2023
Revenue Capital
return return Total
£'000 £'000 £'000
Secretarial services 171 - 171
Auditors' remuneration for:
Audit services* 65 - 65
Directors' remuneration 161 - 161
Other expenses^ 406 - 406
803 - 803
Year ended 30 June 2022
Revenue Capital
return return Total
£'000 £'000 £'000
Secretarial services 153 - 153
Auditors' remuneration for:
Audit services* 43 - 43
Directors' remuneration 140 - 140
Other expenses^ 792 - 792
1,128 - 1,128
*No non-audit fees were incurred during the year
^Other expenses in the previous year include £412,000 of costs in relation to
the Company's General Meeting and Circular to approve the various proposals
outlined in the 9 February 2022 Stock Exchange announcement.
5. Taxation
Year ended 30 June 2023
Revenue Capital
return return Total
£'000 £'000 £'000
Corporation tax at 20.50% - - -
- - -
Year ended 30 June 2022
Revenue Capital
return return Total
£'000 £'000 £'000
Corporation tax at 19.00% - - -
- - -
As at 30 June 2023 the total current taxation charge in the Company's revenue
account is lower than the standard rate of corporation tax in the UK.
6. Dividends
Under the requirements of Sections 1158/1159 of the Corporation Tax Act 2010 no
more than 15% of total income may be retained by the Company. These requirements
are considered on the basis of dividends declared in respect of the financial
year as shown below.
30 June 30 June
2023 2022
£'000 £'000
Final dividend proposed of 2.50p (2022: 2.00p) per share 1,235 1,061
The following dividends were declared and paid by the Company in the financial
year:
30 June 30 June
2023 2022
£'000 £'000
Final dividend: 2.00p (2022: 1.60p) per share 1,061 1,013
Dividends have been solely paid out of the Revenue reserve.
7. Return per Ordinary share
Year ended 30 June 2023
Revenue Capital
return return Total
pence pence Pence
Return per Ordinary share 3.53 20.44 23.97
3.53 20.44 23.97
Year ended 30 June 2022
Revenue Capital
return return Total
pence pence Pence
Return per Ordinary share 2.43 (35.53) (33.10)
2.43 (35.53) (33.10)
Returns per Ordinary share are calculated based on 51,853,838 (30 June 2022:
61,286,517) being the weighted average number of Ordinary shares, excluding
shares held in treasury, in issue throughout the year.
8. Investments
30 June 2023
£'000
Investment portfolio summary:
Quoted investments at fair value through profit or loss 169,274
169,274
30 June 2022
£'000
Investment portfolio summary:
Quoted investments at fair value through profit or loss 159,950
159,950
Under IFRS 13, the Company is required to classify fair value measurements using
a fair value hierarchy that reflects the subjectivity of the inputs used in
measuring the fair value of each asset. The fair value hierarchy has the
following levels:
Investments whose values are based on quoted market prices in active markets are
classified within level 1 and include active quoted equities.
The definition of level 1 inputs refers to `active markets', which is a market
in which transactions take place with sufficient frequency and volume for
pricing information to be provided on an ongoing basis. Due to the liquidity
levels of the markets in which the Company trades, whether transactions take
place with sufficient frequency and volume is a matter of judgement, and depends
on the specific facts and circumstances. The Investment Manager has analysed
trading volumes and frequency of the Company's portfolio and has determined
these investments as level 1 of the hierarchy.
Financial instruments that trade in markets that are not considered to be active
but are valued based on quoted market prices, dealer quotations or alternative
pricing sources supported by observable inputs are classified within level 2. As
level 2 investments include positions that are not traded in active markets
and/or are subject to transfer restrictions, valuations may be adjusted to
reflect illiquidity and/or non-transferability, which are generally based on
available market information.
Level 3 instruments include private equity, as observable prices are not
available for these securities the Company has used valuation techniques to
derive the fair value. In respect of unquoted instruments, or where the market
for a financial instrument is not active, fair value is established by using
recognised valuation methodologies, in accordance with IPEV Valuation
Guidelines.
The level in the fair value hierarchy within which the fair value measurement is
categorised is determined on the basis of the lowest level input that is
significant to the fair value of the investment.
The following table analyses within the fair value hierarchy the Company's
financial assets and liabilities (by class) measured at fair value at 30 June
2023.
Financial instruments at fair value through profit or loss
30 June 2023 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 169,274 - - 169,274
Liquidity funds - 1 - 1
Total 169,274 1 - 169,275
30 June 2022 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 159,950 - - 159,950
Liquidity funds - 2,463 - 2,463
Total 159,950 2,463 - 162,413
There were no transfers between levels for the year ended 30 June 2023 (2022:
none).
9. Nominal Share capital
Number £'000
Allotted, called up and fully paid Ordinary shares
of 10p each:
Ordinary shares in circulation at 30 June 2022 63,529,206 6,353
Shares held in Treasury at 30 June 2022 (8,177,118) (818)
Ordinary shares in issue per Balance Sheet at 30 June 2022 55,352,088 5,535
Shares bought back during the year to be held in Treasury (5,647,377) (564)
Ordinary shares in issue per Balance Sheet at 30 June 2023 49,704,711 4,971
Shares held in Treasury at 30 June 2023 13,824,495 1,382
Ordinary shares in circulation at 30 June 2023 63,529,206 6,353
These are not statutory accounts in terms of Section 434 of the Companies Act
2006. Full audited accounts for the year to 30 June 2023 will be sent to
shareholders in October 2023 and will be available for inspection at 1 Finsbury
Circus, London EC2M 7SH, the registered office of the Company. The full annual
report and accounts will be available on the Company's website
www.strategicequitycapital.com
The audited accounts for the year ended 30 June 2023 will be lodged with the
Registrar of Companies.
This information was brought to you by Cision http://news.cision.com
https://news.cision.com/strategic-equity-capital-plc/r/annual-financial-report,c3842702
END
(END) Dow Jones Newswires
September 27, 2023 02:00 ET (06:00 GMT)
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