TIDMSVM
SVM UK EMERGING FUND PLC
(the "Fund")
HALF YEARLY REPORT
(FOR THE SIX MONTHS TO 30 SEPTEMBER 2023)
A copy of the Half Yearly Report will be available to download from the
Manager's website at www.svmonline.co.uk and a copy will shortly be available
for inspection at the National Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism in due course. Copies are
also available at 7 Castle Street, Edinburgh EH2 3AH, the registered office of
the Fund.
HIGHLIGHTS
· Over the 6 months to 30 September 2023, net asset value per share fell 4.1% to
89.21p, while the share price gained 3.1% compared to a return of 0.1% in the
chosen comparator, the IA UK Companies Sector Average Index.
· Over the five years to 30 September 2023, net asset value per share has fallen
30.6% and the share price 46.0%, against the comparator index return of +10.0%.
· Medium sized companies lagged the FTSE 100 and smaller companies over the
period.
· Three portfolio companies attracted takeovers, indicating share prices have
fallen below underlying business value.
"Long term capital growth from investments in smaller UK companies. Its aim is
to outperform the IA UK All Companies Sector Average Index on a total return
basis"
Financial Highlights
Total Return 6 months 3 years 5 Years 10 Years
Performance to 30
September 2023
Net Asset Value -4.1% -15.0% -30.6% 39.7%
Share Price 3.1% -4.9% -46.0% 22.2%
Comparator Index* 0.1% 26.5% 10.0% 59.5%
* The comparator index for the Fund was changed to the IA UK All Companies
Sector Average Index from 1 October 2013 prior to which the FTSE AIM Index was
used.
SVM UK EMERGING FUND plc
Half Yearly Report 2023
CHAIRMAN'S STATEMENT
During the six months to 30 September 2023, net asset value per share fell 4.1%
to 89.21p, while the share price gained 3.1% compared to a return of 0.1% in the
chosen comparator, the IA UK Companies Sector Average Index. In the five years
to 30 September 2023, net asset value per share has fallen 30.6% and the share
price 46.0%, against the comparator index return of +10.0%.
During the period under review the UK economy continued to grow despite the rise
in interest rates. There was, however, market concern that the delay in bringing
UK inflation under control would involve a longer period of tight monetary
policy, constraining demand. This led to falls in property shares and those in
consumer sectors. The sectors that performed best reflected mainly those with
global exposure; information technology, energy, financials and industrials.
The strongest contributions to performance over the period were Dechra
Pharmaceuticals, 4Imprint Group, Instem, Kooth and Computacenter. Three
portfolio holdings were taken over; Dechra, Instem and Kape Technologies. Merger
and acquisition activity may point to recognition that share prices of a number
of successful British businesses have become attractive to corporate or private
equity buyers. Negative performers included Watches of Switzerland, Impax Asset
Management. FDM Group, Jet2 and JD Sports fashion . Sales were made of
Activeops, Revolution Beauty, Frontier Developments, Avon Protection, Molten
Ventures, Maxcyte, Genus, Libertine and Impax. The holding in Watches of
Switzerland was reduced after its prospects were adversely impacted by a change
in strategy of its main supplier. These sales funded new investments in Melrose
Industries, JTC, CRH, Intercontinental Hotels, Greggs, Informa and Compass
Group. Portfolio changes emphasised improved liquidity, growth prospects and
earnings visibility.
The UK economy has held up better in 2023 than feared. Consumer spending has
proved resilient, driven by significant excess savings. Amongst international
investors, the UK continues to be out of favour, with historically low
valuations of smaller and medium-sized companies. Many UK mid-cap and smaller
companies now look inexpensive. There is a risk both in the UK and US of
excessive tightening by central banks, possibly misunderstanding the supply-side
nature of current inflation.
The portfolio focuses on resilient growing businesses, with low exposure to
commodities, oils and banks. Portfolio investments are typically scalable
businesses with a competitive edge. The Fund remains fully invested with minimal
gearing.
During the period under review, the Manager agreed to waive its management fee,
with effect from 1st September 2023, reflecting its assessment of the
implications of Consumer Duty regulation. This will be reviewed if circumstances
change. The lead portfolio manager of the Fund, Margaret Lawson, retired on 1st
October 2023 and is succeeded by Colin McLean, previously deputy investment
manager. The Board thanks Margaret for her enthusiasm and valuable advice.
Peter Dicks
Chairman
3 November 2023
SVM UK EMERGING FUND plc
Half Yearly Report 2023
INVESTMENT OBJECTIVE and POLICY
The investment objective of SVM UK Emerging Fund plc (the "Fund" or the
"Company") is long term capital growth from investments in medium-sized and
smaller UK companies. Its aim is to outperform the IA UK All Companies Sector
Average Index on a total return basis.
The Fund aims to achieve its objective and to diversify risk by investing in
shares and related instruments, controlled by a number of limits on exposures.
Appropriate guidelines for the management of the investments, gearing and
financial instruments have been established by the Board. This is an abridged
version of the Fund's investment policy. The full investment policy can be
found in the Strategic Report within the Fund's latest Annual Report & Accounts.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Half Yearly Report in accordance
with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
(i) the condensed set of financial statements have been
prepared in accordance with the Financial Reporting Council Statement 104
"Interim Financial Reporting" on a going concern basis, taking in to account
guidance on Covid-19, and give a true and fair view of the assets, liabilities,
financial position and gain or loss of the Fund;
(ii)the Half Yearly Report includes a fair review of the information required by
the Disclosure and Transparency Rules DTR 4.2.7R (an indication of important
events that have occurred during the first six months of the financial year, and
their impact on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months of the
financial year); and DTR 4.2.8R (disclosure of related party transactions and
changes therein that could have a material effect on the financial position or
performance of the Fund during the first six months of the current financial
year).
(iii)No related party transactions have taken place during the first six months
of the year that have materially affected the financial position of the Fund
during the period and there have been no changes in the related party
transactions as described in the Annual Report & Accounts for the year end 31
March 2023 that could do so.
The Directors consider that the Half Yearly Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Fund's performance and strategy,
The Half Yearly Report has not been audited or reviewed by the Fund's auditors.
By Order of the Board
Peter Dicks
Chairman
3 November 2023
SVM UK EMERGING FUND plc
Half Yearly Report 2023
UNAUDITED ACCOUNTS
Income Statement
Six Six
months to months to
30 30
September September
2022
2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net loss on - (214) (214) - (1,787) (1,787)
investments at
fair value
Income 95 - 95 61 - 61
Investment - (17) (17) - (22) (22)
management fees
Other expenses (76) - (76) (72) - (72)
Gain/(loss) before 19 (231) (212) (11) (1,809) (1,820)
finance costs and
taxation
Finance costs (17) - (17) (9) - (9)
Gain/(loss) on 2 (231) (229) (20) (1,809) (1,829)
ordinary
activities before
taxation
Taxation - - - - - -
Gain/(loss) 2 (231) (229) (20) (1,809) (1,829)
attributable to
ordinary
shareholders
Gain/(loss) per 0.03p (3.85)p (3.82)p (0.33)p (30.18)p (30.51)p
Ordinary Share
The Total column of
this statement is the
profit and loss
account of the Fund.
All revenue and
capital items are
derived from
continuing
operations. No
operations were
acquired or
discontinued in the
year. A Statement of
Comprehensive Income
is not required as all
gains and losses of
the Fund have been
reflected in the above
statement.
Year
ended 31
March
2023
(audited)
Revenue Capital Total
£'000 £'000 £'000
Net loss on - (1,065) (1,065)
investments at fair
value
Income 104 - 104
Investment management - (42) (42)
fees
Other expenses (143) - (143)
Loss before finance (39) (1,107) (1,146)
costs and taxation
Finance costs (22) - (22)
Loss on ordinary (61) (1,107) (1,168)
activities before
taxation
Taxation - - -
Loss attributable to (61) (1,107) (1,168)
ordinary shareholders
Loss per Ordinary (1.02)p (18.46)p (19.48)p
Share
SVM UK EMERGING FUND plc
Half Yearly Report 2023
UNAUDITED ACCOUNTS
Balance Sheet
As at As at As at
30 September 31 March 30 September
2023 2023 2022
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Fixed Assets
Investments at fair 4,836 4,882 4,318
value through profit or
loss
Total current assets 979 1,272 1,264
Creditors: amounts (467) (577) (666)
falling due within one
year
Net current assets 512 695 598
Total assets less 5,348 5,577 4,916
current liabilities
Capital and Reserves 5,348 5,577 4,916
Equity shareholders' 5,348 5,577 4,916
funds
Net asset value per 89.21p 93.03p 82.00p
Ordinary Share
SVM UK EMERGING FUND plc
Half Yearly Report 2023
UNAUDITED ACCOUNTS
Statement of
Changes
in Equity
For the
period to 30
September
2023
Share Share Special Capital Capital Revenue Total
reserve reserve reserve
capital premium redemption
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 300 314 5,136 27 394 5,577
April 2023 (594)
Loss - - - - (231) 2 (229)
attributable
to
shareholders
As at 30 300 314 5,136 27 163 (592) 5,348
September
2023
For the year
to 31
March 2023
Share Share Special Capital Capital Revenue Total
reserve reserve reserve
capital premium redemption
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 300 314 5,136 27 1,501 (533) 6,745
April 2022
Loss - - - - (1,107) (61) (1,168)
attributable
to
shareholders
As at 31 300 314 5,136 27 394 (594) 5,577
March 2023
For the
period to 30
September
2022
Share Share Special Capital Capital Revenue Total
reserve reserve reserve
capital premium redemption
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 300 314 5,136 27 1,501 6,745
April 2022 (533)
Gain/(loss) - - - - (1,809) (20) (1,829)
attributable
to
shareholders
As at 30 300 314 5,136 27 (308) (553) 4,916
September
2022
SVM UK EMERGING FUND plc
Half Yearly Report 2023
UNAUDITED ACCOUNTS
Investment
Portfolio
as at 30
September
2023
Stock Market % of Sector analysis as % of
Exposure Net at 30 September Gross
2022 Assets 2023 Exposure
£000 Sector
1 4Imprint Group 364 6.8 Industrials 27.1
2 Alpha FX Group 214 4.0 Consumer 24.7
Discretionary
3 Unite Group 181 3.4 Financials 12.3
4 Beazley Group 173 3.2 Information 11.9
Technology
5 Rentokil Initial 170 3.2 Communication 10.5
Services
6 Howden Joinery 162 3.0 Real Estate 5.4
Group
7 Whitbread* 157 2.9 Consumer Staples 3.3
8 Ashtead Group 156 2.9 Materials 3.0
9 Games Workshop 153 2.9 Healthcare 1.8
Group
10 JD Sports 141 2.6 Total 100.0
Fashion*
Ten largest 1,871 34.9
investments
11 Experian 135 2.6
12 Flutter 133 2.5
Entertainment*
13 Jet2 123 2.3
14 Keystone Law 123 2.3
Group
15 JTC 119 2.2
16 CRH 112 2.1
17 Intercontinental 112 2.1
Hotels Group
18 Oxford 109 2.0
Instruments
19 Compass Group 108 2.0
20 Serco Group 107 2.0
Twenty 3,052 57.0
largest
investments
21 Computacenter 105 2.0
22 Hilton Food 105 2.0
Group
23 Watches of 99 1.9
Switzerland
Group*
24 Kainos Group 99 1.9
25 Kooth 98 1.8
26 XP Power 94 1.8
27 Renew 91 1.7
28 FDM Group 86 1.6 *Includes Contract
Holdings for Difference
("CFDs")
Market exposure for
equity investments
held is the same as
fair value and for
CFDs held is the
market value of the
underlying shares
to which the
portfolio is
exposed via the
contract. The
investment
portfolio is
grossed up to
include CFDs and
the net CFD
position is then
deducted in
arriving at the net
asset total.
29 Informa 82 1.5
30 Auto Trader 81 1.5
Group
Thirty 3,992 74.7
largest
investments
Other 1,542 28.8
investments
(30
holdings)
Total 5,534 103.5
investments
CFD (721) (13.5)
positions
CFD 23 0.4
unrealised
gains
Net current 512 9.6
assets
Net assets 5,348 100.0
SVM UK EMERGING FUND plc
Half Yearly Report 2023
UNAUDITED ACCOUNTS
Risks and Uncertainties
The major risks inherent within the Fund are market risk, liquidity risk, credit
risk and interest rate risk. It has an established environment for the
management of these risks which are continually monitored by the Manager.
Appropriate guidelines for the management of its financial instruments and
gearing have been established by the Board of Directors. It has no foreign
currency assets and therefore does not use currency hedging. It does not use
derivatives within the portfolio with the exception of CFDs. An explanation of
these risks and how they are mitigated is explained in the 2023 Annual Report,
which is available on the Manager's website: www.svmonline.co.uk. These
principal risks and uncertainties have not changed from those disclosed in the
2023 Annual Report.
Going Concern
The Board, having made appropriate enquiries has a reasonable expectation that
the Fund has adequate resources and sufficient liquidity to continue in
operational existence for the foreseeable future, a period of not less than 12
months from the date of this report. This conclusion takes in to account the
Directors' assessment of the continuing risks and impacts from the COVID-19
pandemic, the geopolitical risks relating to the conflict between Russia and
Ukraine, the conflict in the Middle East, and economic factors that are
influencing the current market volatility, such as inflation, interest rates and
supply chains. Accordingly, it continues to adopt the going concern basis in
preparing the financial statements.
Notes
1.The Financial Statements have been prepared on a going concern basis in
accordance with FRS 102 "Financial Reporting Standard applicable in the UK and
Republic of Ireland", FRS 104 "Interim Financial Reporting" and under the
Association of Investment Companies Statement of Recommended Practice "Financial
Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP")
issued in April 2021. The Company is exempt from presenting a Cash Flow
Statement as a Statement of Changes in Equity is presented and substantially all
of the Company's investments are liquid and are carried at market value. These
financial statements have been prepared in accordance with the accounting
policies used for the financial year ended 31 March 2023.
2.During the period no shares were bought back (2022: no shares were bought back
during the period).
The number of shares in issue at 30 September 2023 was 6,005,000 (2022:
6,005,000).
Returns per share are based on a weighted average of 5,995,000 (2022:
5,995,000) ordinary shares, being the number of shares in issue during the
periodexcluding the 10,000 shares held in Treasury.
Total return per share is based on the total loss for the period of £229,000
(2022: loss of £1,829,000). Capital return per share is based on the capital
loss for the period of £231,000 (2022: loss of £1,809,000). Revenue return per
share is based on the revenue gain after taxation for the period of £2,000
(2022: loss of £20,000).
SVM UK EMERGING FUND plc
Half Yearly Report 2023
UNAUDITED ACCOUNTS
3.All investments are held at fair value. At 30 September 2023 no unlisted
investments were held with value attributed (31 March 2023: same; 30 September
2022: same).
Investments have been classified using the fair value hierarchy:
+------------------+---------------+-------------+------+--------------------+
| | September 2023 |March 2023 |
| | | |
| | £000 £000| £000 £000|
+------------------+---------------+-------------+------+--------------------+
|Classification of |Assets |Liabilities |Assets|Liabilities |
|financial | | | | |
|instruments | | | | |
+------------------+---------------+-------------+------+--------------------+
|Level 1 |4,813 |- |4,860 |- |
+------------------+---------------+-------------+------+--------------------+
|Level 2 | 23|418 |22 |507 |
+------------------+---------------+-------------+------+--------------------+
|Level 3 - 2 |- |- |- |- |
|investments (March| | | | |
|2022: 3) | | | | |
+------------------+---------------+-------------+------+--------------------+
Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments whose fair value is evidenced by
comparison with other observable current market transactions in the same
instrument or based on a valuation technique whose variables include only data
from observable markets. The CFD positions are the sole Level 2 investments at
30 September 2023 and 31 March 2023.
Level 3 reflects financial instruments whose fair value is determined in whole
or in part using a valuation technique based on assumptions that are not
supported by prices from observable market transactions in the same instrument
and not based on available observable market data.
4.The Board has granted the Manager a limited authority to invest in CFDs to
achieve some degree of gearing and/or hedging without incurring the gross cost
of the investment. The Board requires the Manager to operate within certain risk
limits, as detailed in the Annual Report. The following table details the CFD
positions:
Number of CFD holdings at 30 September 2023: 8 (31 March 2023: 9)
+-----------------+--------------+----------+
|CFD positions |September 2023|March 2023|
+-----------------+--------------+----------+
| |£000 |£000 |
+-----------------+--------------+----------+
|Gross exposure |721 |892 |
+-----------------+--------------+----------+
|Net exposure |721 |892 |
+-----------------+--------------+----------+
|Unrealised gains |23 |22 |
+-----------------+--------------+----------+
|Unrealised losses|418 |507 |
+-----------------+--------------+----------+
The gearing ratio is 9.0% at 30 September 2023 (31 March 2023: 9.3%). The
gearing ratio indicates the extra amount by which the shareholders' funds would
change if total assets (including CFDs' position exposure and netting off cash
and cash equivalents) were to rise or fall. A figure of zero per cent means
that the Company has a nil geared position.
5.SVM Asset Management Limited provides investment management and secretarial
services to the Fund. The Manager is entitled to a fee for these services,
payable quarterly in arrears, equivalent to 0.75% per annum of the total assets
of the Fund, less current liabilities. The Manager has elected to waive the
investment management fee from 1 September 2023 until further notice.
SVM UK EMERGING FUND plc
Half Yearly Report 2023
UNAUDITED ACCOUNTS
6.The above figures do not constitute full or statutory accounts in terms of
Sections 434 and 435 of the Companies Act 2006. All information shown for the
six months to 30 September 2023 is unaudited. The accounts for the year to 31
March 2023, on which the auditors issued an unqualified report, have been lodged
with the Registrar of Companies and did not contain a statement required under
Section 498 of the Companies Act 2006.
For further information, please contact:
Colin McLeanSVM Asset Management
Sally Moore Four Communications
SVM UK EMERGING FUND plc
Half Yearly Report 2023
CORPORATE INFORMATION
Directors
Peter Dicks (Chairman)
Ian Gray
Jeremy Harris
Investment Manager, Secretary and
Registered Office
SVM Asset Management Limited
6th Floor
7 Castle Street
Edinburgh EH2 3AH
Telephone: +44 (0) 0131 226 6699
Facsimile: +44 (0) 131 226 7799
Email: info@svmonline.co.uk
Web: www.svmonline.co.uk
Registrars
Computershare Investor Services plc
Edinburgh House
4 North St Andrew Street
Edinburgh EH2 1HU
Telephone: +44 (0) 370 702 0003
Authorised and regulated by the Financial Conduct Authority
Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh
EH3 7PE
Custodians
State Street Bank & Trust Company
Registered Office:
20 Churchill Place
Canary Wharf
London EH14 5HJ
Correspondence Address:
Quartermile 3
10 Nightingale Way
Edinburgh EH3 9EG
Authorised and regulated by the Financial Conduct Authority and a member of the
Investment Association
Registered Number
SC211841
Company Website
www.svmonline.co.uk
© SVM Asset Management Limited 2023
This information was brought to you by Cision http://news.cision.com
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The following files are available for download:
https://mb.cision.com/Main/22438/3870864/2412805.pdf UK Emerging Interim 2023
END
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