Baronsmead Venture Trust plc

Half-yearly report for the six months ended 31 March 2024

The Directors of Baronsmead Venture Trust plc are pleased to announce the unaudited half-yearly financial report for the six months to 31 March 2024. Copies of the half-yearly report can be obtained from the following website: www.baronsmeadvcts.co.uk.

Our investment objective

·    Baronsmead Venture Trust plc (the "Company") is a tax efficient listed company which aims to achieve long-term positive investment returns for private investors, including tax-free dividends.

Investment policy¹

·   To invest primarily in a diverse portfolio of UK growth businesses, whether unquoted or traded on the Alternative Investment Market ("AIM").

·     Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value.

Dividend policy²

·    The Board will, wherever possible, seek to pay two dividends to shareholders in each financial year, typically an interim dividend in September and a final dividend following the Annual General Meeting in February/March.

·     The Board will use, as a guide, when setting the dividends for a financial year, a sum representing 7 per cent. of the opening net asset value of that financial year.

1. This is a summary of the Company's investment policy that is set out on page 99 of the Company's Annual Report and Financial Statements for the year ended 30 September 2023.

2. This is a summary of the Company's dividend policy that is set out on page 36 of the Company's Annual Report and Financial Statements for the year ended 30 September 2023.

Key elements of the business model

Access to an attractive, diverse portfolio

The Company gives shareholders access to a diverse portfolio of growth businesses.

The Company will make investments in growth businesses, whether unquoted or traded on AIM, which are substantially based in the UK in accordance with the prevailing VCT legislation. Investments are made selectively across a range of sectors.

The Manager's approach to investing

The Manager endeavours to select the best opportunities and applies a distinctive selection criteria based on:

·      Primarily investing in parts of the economy which are experiencing long term structural growth.

·      Businesses that demonstrate, or have the potential for, market leadership in their niche.

·      Management teams that can develop and deliver profitable and sustainable growth.

·   Companies with the potential to become an attractive asset appealing to a range of buyers at the appropriate time to sell.

In order to ensure a strong pipeline of opportunities, the Manager invests in building deep sector knowledge and networks and undertakes significant proactive marketing to target companies in preferred sectors. This approach generates a network of potentially suitable businesses with which the Manager maintains a relationship ahead of possible investment opportunities.

The Manager as an influential shareholder

The Manager is an engaged and supportive shareholder (on behalf of the Company) in both unquoted and significant quoted investments.

For unquoted investments, representatives of the Manager often join the investee board.

The role of the Manager with investees is to ensure that strategy is clear, the business plan can be implemented and the management resources are in place to deliver profitable growth. The aim is to build on the business model and grow the company into an attractive target which can be sold or potentially floated in the medium term.

Financial highlights

410.8p Net Asset Value ("NAV") total return to shareholders for every 100.0p invested at launch (April 1998).

NAV per share increased 4.2 per cent. to 55.1p before the deduction of dividends in the six months to 31 March 2024.

£25.0mn raised in the period (before costs).

£7.0mn Investments made into four new and six follow-on opportunities during the period. (Unquoted: £6.1mn, Quoted: £0.9mn).

Cash returned to shareholders

The table below shows the cash returned to shareholders that invested in Baronsmead Venture Trust plc dependent on their subscription cost, including the income tax available to be reclaimed on the subscription.   

^# Includes interim dividend of 1.75p per share payable on 9 September 2024.

^‡ C Share dividend calculated using conversion ratio of 0.9657 which is the rate the C shares were converted into ordinary shares.

* Average effective offer price. Shares were allotted pursuant to the 2023 & 2024 Offers at individual prices for each investor in accordance with the allotment formula as set out in each Offer's Securities Note.

Chair's statement

I am pleased to announce that despite the volatile market conditions witnessed over the last six months, the Company's net asset value increased by 2.2p per share to 55.1p. As described more fully below, the strong performance of the Company's listed portfolio outweighed the weakness in the value of the Company's unquoted investments. Once again, this highlights the benefits of the Company's investment policy of having a combination of unquoted and listed assets. Performance in recent periods shows how this supports the Company's aim of providing a more consistent total return to shareholders over the medium to long term. After the period end, the NAV has continued to increase through further good performance of the listed portfolio, as reported on below.

As we enter the new quarter, consumer and business confidence remains fragile with continued macroeconomic and geopolitical uncertainty expected to drive market volatility over the coming months. However, your Board continues to believe that, in aggregate, the fundamentals of the underlying portfolio companies remain robust. Having said that, it is in the nature of VCT qualifying investments that some portfolio companies will fail to achieve their potential, despite the efforts of the Manager to mitigate these risks.

Results

During the six months to 31 March 2024, the Company's NAV per share increased 4.2 per cent. from 52.9p to 55.1p after the payment of the final dividend of 2.5p per share on 8 March 2024. The following table breaks down the movement in NAV over the 6 months.

The Board is pleased to report as at 31 May 2024, the NAV was 57.1p per share, a 3.6 per cent. increase over the NAV as at 31 March 2024. This was driven by firmer quoted markets and further increases in the value of the Company's listed investments.

Dividends

The Board has declared an interim dividend of 1.75p per share to be paid on 9 September 2024 to shareholders on the register as of 9 August 2024. The Board is aware that dividends are an important part of the total return to the shareholders' investment in the Company. As such, the Board is aiming to achieve its dividend policy objective of an annual yield of 7.0 per cent. based on the NAV at the beginning of the financial year. I must of course remind shareholders this is not a guarantee and that payment dates and the amount of future dividends depend on the level and timing of profitable realisations.

Portfolio review

The table below provides a summary of each asset class and the return generated during the period under review.

* By value at 31 March 2024.
** Includes investee companies held in more than one fund. Total number of individual companies held is 160.
*** Return includes interest received on unquoted realisations during the period.
^# Represents cash, cash liquidity funds and net current assets. % return in the period relates only to the cash liquidity funds.

The value of the unquoted portfolio decreased 3.6 per cent. in the six months to 31 March 2024. The drop in value was driven by the reduction in value of one key asset, with the remaining portfolio showing an increase in value over the period. The Manager continues to focus on improving and sustaining unquoted performance.

The value of the Company's portfolio of investments directly held in AIM‑traded companies increased 8.6 per cent in the six months to 31 March 2024. The value of the Company's investment into the WS Gresham House Equity Funds increased by 7.7 per cent. in the period. This was primarily due to positive news flow across the portfolio being well received by the markets with a number of trading updates demonstrating better than expected financial performance.

Investments

In the six months to 31 March 2024, the Company made four new investments totalling £4.4mn and six follow‑ on investments with a combined value of £2.6mn. Descriptions of the new investments are as follows:

·      Azarc (unquoted) - £0.7mn - Cross‑border customs automation software provider.

·      CitySwift (unquoted) - £0.9mn - Passenger transport data and scheduling software provider.

·      Ozone API (unquoted) - £1.9mn - Open banking software developer

·      SciLeads (unquoted) - £0.9mn - Life Sciences data and lead generation provider

Following the period end, a total of £2.1mn was invested in one new unquoted investment, OnSecurity Technology, and follow‑on investments in three unquoted companies, Rockfish, Yappy and Counting.

Realisations

In the listed portfolio, Gresham House was acquired via a recommended cash offer resulting in a gross money multiple of 3.9x original cost. The Manager also continued to take profits from partial sales of the Company's holding of Cerillion resulting in proceeds of £3.4mn, and a gross money multiple of 21.0x original cost.

During the period, in the unquoted portfolio, Funding Xchange, a SME lending marketplace, was acquired resulting in a gross money multiple of 0.1x original cost and Armstrong Craven, a recruitment company, went into administration. The business had experienced very challenging trading conditions over the past year. Both of these investments had previously been written down to zero.

Fundraising

During the period, the Company successfully raised £25.0mn (before costs) through an offer for subscription which became fully subscribed in March 2024. The Directors want to welcome the 669 new shareholders who invested for the first time and also thank the 491 existing shareholders who continue to support the Company.

The Board will consider whether to raise new funds in the 2024/25 tax year. This will be determined by the Company's cashflow, the overall balance of the Company's portfolio, and its anticipated requirements and opportunities to fund new and follow‑on investments over the next two to three years. The Board appreciates that shareholders would like plenty of notice of its fundraising intentions and will ensure that shareholders are informed of the Board's intention to raise new funds, as soon as it becomes practical.

VCT Regulation

Retirement Date of the UK Government's Venture Capital Schemes

The Government has paved the way for the extension of the availability of upfront tax relief for subscriptions for new shares in VCTs from April 2025 to April 2035 by including the relevant provisions in the Finance Act 2024. Although the extension to the Sunset Clause remains subject to EU approval, it is very welcome news and the Board is especially pleased that both the government and the opposition remain so supportive of the EIS and VCT schemes and for this extension of the sunset clause.

Financial Health Test

Following discussions between VCT representative bodies and government officials, it would appear that HMRC is now prepared to consider a somewhat broader application of a Financial Test when a VCT is making a follow‑on investment. The Board continues to closely monitor developments in this area and remains fully supportive of the representations being made by the Association of Investment Companies ("AIC") and the Venture Capital Trust Association ("VCTA").

Board Change

Susannah Nicklin has informed the Board that she wishes to step down from the Board at the end of June 2024 due to an increase in her other work commitments. Susannah has been a Director since February 2018 and before that was a Director of Baronsmead VCT plc from May 2014 to February 2016. Her insight and dedication to the Company have been of significant value to the Company as well as our predecessor sister Company over the past 10 years. The Board will miss her and would like to thank her for her input and expertise and wish her continued success in her other ventures. I will be taking over the role of Chair of Nomination Committee and Michael Probin will become our Senior Independent Director when Susannah steps down.

The Board has started its search for a new Director and will keep shareholders updated regarding this.

Outlook

The General Election has now been confirmed for 4^th July in the UK. Whilst this may create uncertainty for some of our investments, we look forward to working with whichever government is elected to help maintain and improve the VCT scheme given its vital role investing in small businesses that would otherwise find it difficult to find funding. It has been encouraging to see the AIC and the VCTA working in a cross party way to highlight the important role that VCTs play in the funding landscape.

The Board expects that elevated macroeconomic and geopolitical uncertainty will continue to drive market volatility over the coming months, and this has the potential to impact our investments beyond the risks that would normally be associated with investing in smaller companies.

Against this the Company's portfolio remains highly diversified and is largely positioned in sectors which the Manager expects to provide long‑term growth potential. We remain committed to investing through the economic cycle as experience suggests that this can produce superior returns over the longer term. This can also provide an opportunity for the Company to make high quality investments and build strategic stakes in businesses with great potential at good prices. This applies to both new investments and follow‑on investments in the portfolio. The Manager sees a good pipeline of potential investments and the Company remains focussed on ensuring that it and the Manager are suitably resourced to support investment into new and existing portfolio companies.

Fiona Miller Smith

Chair

10 June 2024

Investments in the period

^#  Includes unquoted and AIM investments only.

Realisations in the period

Liquidation proceeds of £114k were received during the period from InterQuest Group plc, which was written off in September 2023.

^#  Residual book cost at realisation date.

^‡  Proceeds at time of realisation including interest.

*  Includes interest/dividends received, loan note redemptions and partial realisations accounted for in prior periods.

** Includes unquoted and AIM investments only.

Responsibility statement of the Directors in respect of the half-yearly report

Half-yearly report

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal uncertainties for the remaining six months of the financial year are set out in the Chair's statement and the Strategic report.

The principal risks facing the Company are unchanged since the date of the Company's Annual Report for the financial year ended 30 September 2023 and continue to be as set out in that Report on pages 22 and 23.

Risks faced by the Company include but are not limited to; loss of approval as a Venture Capital Trust, legislative risk, investment performance risk, risk of economic, political and other external factors, regulatory and compliance risk and operational risk. The Board considers the conflicts in Ukraine and the Middle East to be factors which permeate these risks, and their impacts for the remaining six months of the year continue to be kept under review.

Responsibility statement

Each Director confirms that to the best of their knowledge:

·   the condensed set of financial statements has been prepared in accordance with FRS 104 Interim Financial Reporting Standards and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company.

·      This half-yearly report includes a fair review of the information required by: 

a)  DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being 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 year; and

b)   DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last annual report that could do so.

The half-yearly report was approved by the Board of Directors on 10 June 2024 and was signed on its behalf by Ms Fiona Miller Smith, Chair.

Fiona Miller Smith

Chair

10 June 2024 

Condensed income statement

For the six months to 31 March 2024 (Unaudited)

All items in the above statement derive from continuing operations.

There are no recognised gains and losses other than those disclosed in the Income Statement.

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the realised and unrealised profit or loss on investments and the proportion of the management fee charged to capital.

The total column of this statement is the unaudited Statement of Total Comprehensive Income of the Company prepared in accordance with the Financial Reporting Standard ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies ("AIC SORP").

Condensed statement of changes in equity

For the six months to 31 March 2024 (Unaudited)

For the six months to 31 March 2023 (Unaudited)

For the year ended 30 September 2023 (Audited)

Condensed balance sheet

As at 31 March 2024 (Unaudited)

Condensed statement of cash flows

For the six months to 31 March 2024 (Unaudited)

Notes to the financial statements

For the six months to 31 March 2024 (Unaudited)

1. Basis of preparation

The condensed financial statements for the six months to 31 March 2024 comprise the unaudited financial statements set out on pages 13 to 16 together with the related notes on pages 17 to 20. The Company applies FRS 102 and the AIC SORP for its annual financial statements. The condensed financial statements for the six months to 31 March 2024 have therefore been prepared in accordance with FRS 104 'Interim Financial Reporting' and the principles of the AIC SORP. They have been prepared on a going concern basis. The financial statements have been prepared on the same basis as the accounting policies set out in the Company's Annual Report and Financial Statements for the year ended 30 September 2023.

The financial information contained in this half‑yearly report does not constitute statutory accounts as defined in sections 434 - 436 of the Companies Act 2006. The half‑yearly report for the six months ended 31 March 2024 and for the six months ended 31 March 2023 have been neither audited nor reviewed by the Company's Auditor. The information for the year to 30 September 2023 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the Auditor for the audited financial statements for the year to 30 September 2023 was: (i) unqualified; (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. No statutory accounts in respect of any period after 30 September 2023 have been reported on by the Company's Auditor or delivered to the Registrar of Companies.

The Company's half yearly report has been made available on the Company's website (www.baronsmeadvcts.co.uk) and sent to shareholders where requested.

2.   Performance and shareholder returns

Return per share is based on a weighted average of 358,163,251 ordinary shares in issue (31 March 2023 - 321,742,586 ordinary shares; 30 September 2023 - 337,263,955 ordinary shares).

Earnings for the first six months to 31 March 2024 should not be taken as a guide to the results of the full financial year to 30 September 2024.

3.  Called-up share capital

Allotted, called-up and fully paid:

During the six months to 31 March 2024, the Company issued 42,843,562 shares at net proceeds of £23,925,000 (after costs). During the same period, the Company purchased 3,100,659 shares to be held in treasury at a cost of £1,650,000. The Company also sold 15,000 treasury shares at a cost of £8,000. At 31 March 2024 the Company held 33,172,409 ordinary shares in treasury. Shares may be sold out of treasury below Net Asset Value as long as the discount at issue is narrower than the average discount at which the shares were bought into treasury.

Excluding treasury shares, there were 391,292,410 ordinary shares in issue at 31 March 2024 (31 March 2023 - 350,947,945 ordinary shares; 30 September 2023 - 351,534,507 ordinary shares).

4.  Dividends

The final dividend for the year ended 30 September 2023 of 2.50p per share (2.40p capital, 0.10p revenue) was paid on 8 March 2024 to shareholders on the register on 9 February 2024. The ex‑dividend date was 8 February 2024.

During the year to 30 September 2023, the Company paid an interim dividend on 8 September 2023 of 1.75p per share  (1.65p capital, 0.10p revenue).

An interim dividend of 1.75p per share has been declared for the year to 30 September 2024 and is payable on 9 September 2024 to shareholders on the register as of 9 August 2024. The ex dividend date is 8 August 2024.

5.  Investments

All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement.

The methods of fair value measurement are classified into a hierarchy based on reliability of the information used to determine the valuation.

·      Level 1 - Fair value is measured based on quoted prices in an active market.

·      Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices.

·      Level 3 - Fair value is measured using a valuation technique that is not based on data from an observable market.

The valuation of unquoted investments contained within level 3 of the Fair Value hierarchy involves key assumptions dependent upon the valuation methodology used. The primary methodologies applied are:

·      Cost of recent investment.

·      Earnings multiple.

·      Offer less 10 per cent.

The earnings multiple approach involves more subjective inputs than the cost of recent investment and offer approaches and therefore presents a greater risk of over or under estimation. Key assumptions for the earnings multiple approach are the selection of comparable companies and the use of either historic or forecast revenue or earnings, as considered most appropriate. Other assumptions include the appropriateness of the discount magnitude applied for reduced liquidity and other qualitative factors. These assumptions are described in more detail in note 2.3 in the Company's Report and Financial Statements for the year to 30 September 2023. The techniques used in the valuation of unquoted investments have not changed materially since the date of that Report.

6.  Other required disclosures

6.1 Segmental reporting

The Company has one reportable segment being investing in primarily a portfolio of UK growth businesses, whether unquoted, traded on AIM or collective investment vehicles.

6.2 Principal risks and uncertainties

The Company's financial instruments consist of equity and fixed interest investments, shares in collective investment schemes, cash balances and liquid resources. Its principal risks are therefore market risk, price risk, credit risk and liquidity risk. Other risks faced by the Company include loss of approval as a Venture Capital Trust, legislative, investment performance, economic, political and other external factors, regulatory and compliance and operational risks. These risks, and the way in which they are managed, are described in more detail in the principal risks and uncertainties table within the Strategic report section in the Company's Report and Financial Statements for the year to 30 September 2023. The Board continues to regularly review the risk environment in which the Company operates.

6.3 Related parties

Gresham House Asset Management Ltd (the "Manager") manages the investments of the Company. The Manager also provides or procures the provision of secretarial, administrative and custodian services to the Company. Under the management agreement, the Manager receives a fee of 2.0 per cent. per annum of the net assets of the Company. This is described in more detail under the heading 'The management agreement' within the Strategic Report in the Company's Annual Report and Financial Statements for the year to 30 September 2023. During the period the Company has incurred management fees of £1,667,000 (31 March 2023 - £1,752,000; 30 September 2023 - £3,542,000) and secretarial fees of £83,000 (31 March 2023 - £74,000; 30 September 2023 - £155,000) payable to the Manager. A performance fee of £nil has been accrued at 31 March 2024 (31 March 2023 - £nil; 30 September 2023 - £nil). This is described in more detail under the heading 'Performance fees' within the Strategic Report in the Company's Annual Report and Financial Statements for the year to 30 September 2023.

Under the terms of an Offer for Subscription, launched on 4 December 2023, the Manager was entitled to fees of 4.50% of the investment amount received from investors. This amount totalled £679,000 out of which all the costs associated with the allotments were met.

6.4 Going concern

After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion, the Directors have considered the Company's cash balances, the liquidity of the Company's investments and the absence of any gearing. The Directors are therefore also satisfied that the Company has adequate financial resources to continue in operation for at least the next 12 months and that, accordingly, it is appropriate to adopt the going concern basis in preparing the financial statements.

6.5 Post balance sheet events

The following events occurred between the balance sheet date and the signing of these financial statements:

·    The 30 April 2024 NAV of 55.8p was announced on 7 May 2024 and the 31 May 2024 NAV of 57.1p was announced on 6 June 2024. At the date of publishing this report, the Board is unaware of any matter that will have caused the NAV per share to have changed significantly since the latest NAV.

·    Purchased 0.8mn Ordinary Shares of 10.0p on 2 April 2024 at a price of 52.5p per share to be held in Treasury.

·    Purchased 1.3mn Ordinary Shares of 10.0p on 24 May 2024 at a price of 53.0p per share to be held in Treasury.

·      One new investment, into OnSecurity Technology, completed in June 2024 totalling £1.2mn.

·    Three follow‑on investments, into Yappy, Rockfish and Counting, completed between April to May 2024, totalling £0.9mn.

·      Partial realisations in Cerillion were made in May 2024, realising proceeds of £1.5mn and making a return of 21.0x cost.

·      Realised Gama Aviation in May 2024, receiving proceeds of £0.4mn and making a return of 0.6x cost.

Corporate information

^Δ Senior Independent Director

^* Chair of the Audit Committee

^† Chair of the Nomination Committee

^†† Chair of the Management Engagement and Remuneration Committee

^‡ Merger between Liberum and Panmure Gordon completed May 2024

LEI: 213800VQ1PQHOJXDDQ88