Strategic Equity Capital PLC
RESULTS FOR THE YEAR ENDED 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
30
June
2023
|
As
at
30
June
2022
|
%
change
|
Net asset
value (“NAV”) per Ordinary share#
|
342.47p
|
316.21p
|
8.3%
|
Ordinary
share price
|
309.00p
|
280.00p
|
10.4%
|
Comparative
index*
|
4,970.43
|
5,164.05
|
(3.7)%
|
Discount
of Ordinary share price to NAV
|
(9.8)%
|
(11.5)%
|
|
Average
discount of Ordinary share price to NAV for the year
|
(7.4)%
|
(12.6)%
|
|
Total
assets (£’000)
|
170,784
|
177,198
|
(3.6)%
|
Equity
Shareholders’ funds (£’000)
|
170,223
|
175,030
|
(2.7)%
|
Ordinary
shares in issue with voting rights
|
49,704,711
|
55,352,088
|
|
Performance
|
Year
ended
30
June
2023
|
Year
ended
30
June
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:
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.
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.
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
30
June
2023
£’000
|
Period
Contribution
to
return
(%)
|
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
30
June
2023
£’000
|
Period
Contribution
to
return
(%)
|
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
Thesis
|
Developments
during the year
|
Medica
18.1% of
NAV
Healthcare
|
-
A niche market leader in
the UK 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
|
-
Fully exited in July 2023
pursuant to the Recommended Cash Offer from IK
Partners
|
XPS
14.9% of
NAV
Financial
Services
|
-
Leading ‘challenger’ brand
in the pensions consulting, advisory and administration
market
-
Highly 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
|
-
Delivered FY23 results and
outlook ahead of market expectations, leading to analyst
upgrades
-
Elevated demand for
pensions advisory (e.g. risk transfer) given Gilt volatility and
changes in funding positions
-
Announced the disposal of
its non-core NPT business for a significantly accretive valuation
multiple to the wider group
|
Brooks
Macdonald
7.0% of
NAV
Financial
Services
|
-
UK focused wealth
management platform; structural growth given 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
|
-
Positive net flows and
7.5% AUM growth in FY23
-
Good progress in replacing
previous management departures, which had weighed on the share
price, including recently hiring Aviva’s former CRO as
CFO
|
Ricardo
6.7% of
NAV
Construction
& Materials
|
-
Global strategic,
environmental and engineering consultancy
-
Ongoing strategic
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
|
-
Successfully extended its
McLaren relationship (now in its fourth generation) demonstrating
the stickiness of Ricardo’s customer
relationships
-
Strong FY23 results with
particularly high growth in its Environmental & Energy
Transition divisions, in line with the strategic
ambition
|
Fintel
6.3% of
NAV
Financial
Services
|
-
Leading UK provider of
technology enabled regulatory solutions and services to 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
|
-
Extended its strategic
distribution agreement with BlackRock
-
In-line H1’23 results with
positive outlook, leading to analyst upgrades
-
Announced two small
bolt-ons and Fintel’s first investment through its early-stage
technology incubator, Fintel Labs
|
Inspired
6.1% of
NAV
Industrial
Goods & Services
|
-
UK B2B corporate energy
assurance, procurement and optimisation service
provider
-
ESG 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
|
-
Strong FY22 results, Q1’23
momentum and FY23 outlook
-
Demonstrable progress in
cash conversion and cross-sell
-
New incentivisation
agreement within its energy optimisation division, with performance
hurdles significantly ahead of market forecasts
|
Wilmington
5.6% of
NAV
Media
|
-
International provider of
B2B data and training in the compliance, insurance, financial and
healthcare sectors
-
New Chair, CEO and CFO
incentivised to re-focus the business and deliver a return to
organic growth
|
-
FY22 and H1’23 results in
line with market expectations, which had increased through
2022
-
Repeat revenue now
accounts for 79% of revenue (H1’23)
-
Further portfolio
optimisation including the disposal of Spanish subsidiary Inese, in
line with Wilmington’s portfolio management
strategy
|
Iomart
5.3% of
NAV
Technology
|
-
Integrated datacentre and
cloud services provider
-
Provides both self-managed
infrastructure 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
|
-
Existing Chair has
expanded their role to become Executive Chair on a part time basis
(supported by the CEO)
-
FY23 results in line with
market expectations
-
Two strategic bolt-ons in
the period, most recently the acquisition of Extrinsica to double
Iomart’s Azure hybrid cloud capability
|
LSL
Property Services
5.1% of
NAV
Real
Estate
|
-
Leading provider of
services to the UK residential property sector with activities
spanning mortgage broking, 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
|
-
Announced in 2023 the
transition of its estate agency business from ownership to
franchise, which we believe reduces cyclicality, capital intensity,
and improves the quality of earnings
-
Post-period end forecasts
downgraded through lower UK housing / mortgage activity levels,
which particularly dampened the outlook for LSL’s surveying
business
|
Hostelworld
4.8% of
NAV
Travel
& Leisure
|
-
Category leader within the
hostelling niche of the 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
|
-
Record Q1 and
H1 revenue delivered and guidance confidently reaffirmed, following
forecast upgrades earlier in 2023
|
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
invested portfolio at
|
% of
invested portfolio at
|
%
of
|
|
|
Date of
first
|
Cost
|
Valuation
|
30
June
|
30
June
|
net
|
Company
|
Sector
Classification
|
Investment
|
£’000
|
£’000
|
2023
|
2022
|
Assets
|
Medica
Group
|
Healthcare
|
Mar
2017
|
19,120
|
30,881
|
18.2%
|
13.3%
|
18.1%
|
XPS
Pensions Group
|
Financial
Services
|
Jul
2019
|
16,850
|
25,459
|
15.0%
|
11.8%
|
14.9%
|
Brooks
Macdonald
|
Financial
Services
|
Jun
2016
|
10,563
|
11,916
|
7.0%
|
7.4%
|
7.0%
|
Ricardo
|
Construction
& Materials
Materials
|
Sep
2021
|
9,107
|
11,462
|
6.8%
|
2.5%
|
6.7%
|
Fintel
|
Financial
Services
|
Oct
2020
|
10,076
|
10,800
|
6.4%
|
5.8%
|
6.3%
|
Inspired
Energy
|
Industrial
Goods & Services
|
Jul
2020
|
13,713
|
10,327
|
6.1%
|
8.4%
|
6.1%
|
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 Services
|
Real
Estate
|
Mar
2021
|
13,256
|
8,645
|
5.1%
|
6.5%
|
5.1%
|
Hostelworld
|
Travel
& Leisure
|
Oct
2019
|
6,505
|
8,209
|
4.8%
|
5.3%
|
4.8%
|
R&Q
Insurance Holdings
|
Financial
Services
|
Jun
2022
|
10,308
|
7,429
|
4.3%
|
1.7%
|
4.4%
|
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
Entertainment
|
Travel
& Leisure
|
Oct
2020
|
3,464
|
5,539
|
3.3%
|
4.6%
|
3.3%
|
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
Investments
|
|
|
|
169,274
|
|
|
99.4%
|
Cash
|
|
|
|
1,242
|
|
|
0.7%
|
Net
current liabilities
|
|
|
|
(293)
|
|
|
(0.1)%
|
Total
shareholders’ funds |
|
|
170,223 |
|
|
100.0% |
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 at fair value
through
profit or loss
|
-
|
10,602
|
10,602
|
|
-
|
10,602
|
10,602
|
|
|
|
|
Income
|
|
|
|
Dividends
|
3,782
|
-
|
3,782
|
Interest
|
78
|
-
|
78
|
Total
income
|
3,860
|
-
|
3,860
|
|
|
|
|
Expenses
Investment
Manager’s fee
|
(1,228)
|
-
|
(1,228)
|
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 comprehensive income for the
year
|
1,829
|
10,602
|
12,431
|
|
|
|
|
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 at fair value
through
profit or loss
|
-
|
(21,776)
|
(21,776)
|
|
-
|
(21,776)
|
(21,776)
|
|
|
|
|
Income
|
|
|
|
Dividends
|
4,173
|
-
|
4,173
|
Interest
|
6
|
-
|
6
|
Total
income
|
4,179
|
-
|
4,179
|
|
|
|
|
Expenses
Investment
Manager’s fee
|
(1,564)
|
-
|
(1,564)
|
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 comprehensive income for the
year
|
1,487
|
(21,776)
|
(20,289)
|
|
|
|
|
Return
per Ordinary share
|
2.43p
|
(35.53)p
|
(33.10)p
|
Balance
Sheet
|
|
|
As
at
30
June 2023
|
|
|
As
at
30 June
2022
|
|
|
|
£'000
|
|
|
£'000
|
Non-current
assets
|
|
|
|
|
|
|
Investments
held at fair value though profit and loss
|
|
|
169,274
|
|
|
159,950
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Trade and
other receivables
|
|
|
268
|
|
|
885
|
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 ended
30
June 2023
|
Share
capital
|
Share
premium
account
|
Special
reserve
|
Capital
reserve
|
Capital
redemption reserve
|
Revenue
reserve
|
Total
|
|
£’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
and total comprehensive income for the year
|
-
|
-
|
-
|
10,602
|
-
|
1,829
|
12,431
|
Dividends
paid
|
-
|
-
|
-
|
-
|
-
|
(1,061)
|
(1,061)
|
Share
buy-backs
|
-
|
-
|
(16,177)
|
-
|
-
|
-
|
(16,177)
|
30
June 2023
|
6,353
|
11,300
|
3,590
|
142,952
|
2,897
|
3,131
|
170,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
year ended
30 June
2022
|
Share
capital
|
Share
premium
account
|
Special
reserve
|
Capital
reserve
|
Capital
redemption reserve
|
Revenue
reserve
|
Total
|
|
£’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
and total comprehensive income for the year
|
-
|
-
|
-
|
(21,776)
|
-
|
1,487
|
(20,289)
|
Dividends
paid
|
-
|
-
|
-
|
-
|
-
|
(1,013)
|
(1,013)
|
Share
buy-backs
|
(633)
|
(20,437)
|
(4,800)
|
-
|
633
|
-
|
(25,237)
|
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 (gains)/losses on investments
|
(10,602)
|
21,776
|
Operating
cash flows before movements in working capital
|
1,829
|
1,487
|
Decrease/(increase)
in receivables
|
374
|
(219)
|
Increase/(decrease)
in payables
|
22
|
(19)
|
Purchases
of portfolio investments
|
(30,473)
|
(36,443)
|
Sales of
portfolio investments
|
30,463
|
70,129
|
Net
cash flow from operating activities
|
2,215
|
34,935
|
|
|
|
Financing
activities
|
|
|
Equity
dividend paid
|
(1,061)
|
(1,013)
|
Shares
bought back in the year
|
(16,275)
|
(25,139)
|
Net
cash outflow from financing activities
|
(17,336)
|
(26,152)
|
|
|
|
(Decrease)/increase
in cash and cash equivalents for year
|
(15,121)
|
8,783
|
Cash and
cash equivalents at the start of the year
|
16,363
|
7,580
|
Cash
and cash equivalents at 30 June
|
1,242
|
16,363
|
|
|
|
|
|
|
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
£’000
|
Level
2
£’000
|
Level
3
£’000
|
Total
£’000
|
Equity
investments
|
169,274
|
-
|
-
|
169,274
|
Liquidity
funds
|
-
|
1
|
-
|
1
|
Total
|
169,274
|
1
|
-
|
169,275
|
30 June
2022
|
Level
1
£’000
|
Level
2
£’000
|
Level
3
£’000
|
Total
£’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.