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Strategic Equity Capital PLC   -  SEC   

Final Results

Released 07:00 02-Oct-2019

Final Results

To:                   PRNewswire

From:              Strategic Equity Capital plc

Date:               2 October 2019

Results for the year ended 30 June 2019

The Directors of Strategic Equity Capital plc are pleased to announce the Company’s results for the year ended 30 June 2019.

Annual Financial Report for the year ended 30 June 2019

Key highlights:

Richard Hills, Chairman of Strategic Equity Capital plc, commented:

Consensus weighted average portfolio characteristics Strategic Equity Capital  FTSE Small Cap ex Investment Trusts
Price/Earnings ratio (FY1) 15.0x   15.1x 
Dividend yield 2.4%  3.7%
Price/Sales ratio 2.2x   0.5x 
Price/Cashflow ratio 17.9x  6.7x 
GVQIM Cashflow yield* 9.9% n/a 
Forecast earnings growth (FY1) 11.4% 7.0%
Forecast net debt to EBITDA 0.1x 1.9x

Source: Factset Portfolio Analysis System, Bloomberg, FTSE Russell

*GVQIM cashflow yield: (12m forward Cash EBITDA minus maintenance capex)/(market capitalisation plus 12 month forward net debt).

The portfolio’s aggregate valuation (in terms of the P/E ratio) is broadly in line with the constituents of the broader FTSE Small Cap ex Investment Trusts Index. The portfolio companies enjoy less geared balance sheets and are forecast to grow earnings faster.

Portfolio as at 30 June 2019

Company Sector Classification Date of first Investment Cost £’000
Valuation £’000
% of invested portfolio at 30 June 2019 % of invested portfolio at 30 June 2018 % of net assets
Equiniti Support Services Mar 2016 18,351 20,668 13.3 8.9 12.2
Tyman Industrials Apr 2007 10,510 11,211 7.2 7.1 6.6
Clinigen Healthcare Jul 2014 5,940 11,070 7.1 7.8 6.5
Tribal Technology Dec 2014 11,343 10,983 7.1 9.5 6.5
Wilmington Media Oct 2010 11,502 10,793 7.0 9.2 6.4
4imprint Support Services Feb 2006 2,330 10,648 6.9 7.5 6.3
Ergomed Healthcare Apr 2018 6,070 9,427 6.1 2.6 5.6
EMIS Technology Mar 2014 5,594 8,622 5.5 7.5 5.1
Medica Healthcare Mar 2017 9,673 8,361 5.4 5.5 4.9
Brooks Macdonald Financials Jun 2016 6,880 7,738 5.0 3.8 4.6
IFG Financials Apr 2015 5,704 7,695 5.0 8.4 4.6
Alliance Pharma Healthcare May 2017 6,444 7,610 4.9 4.1 4.5
Dialight Electronics Jun 2017 8,260 6,196 4.0 2.7 3.7
Harworth Property Jul 2016 3,798 5,555 3.6 4.9 3.3
Oxford Metrics Technology Dec 2014 2,321 5,387 3.5 2.4 3.2
Numis Financials Oct 2017 3,700 3,330 2.1 3.2 2.0
Strix Industrials May 2019 2,569 2,602 1.7 - 1.5
Proactis Technology Nov 2017 9,308 1,801 1.2 4.6 1.1
Benchmark Healthcare Jun 2019 1,717 1,716 1.1 - 1.0
Eckoh Technology Mar 2019 1,273 1,518 1.0 - 0.9
JTC Support Services Jun 2019 1,293 1,329 0.9 - 0.7
Vintage 1 Unquoted Investments Mar 2007 30 628 0.4 0.5 0.4
Total Investments 154,888 91.6
Cash 16,311 9.7
Net current liabilities (2,162) (1.3)
Total shareholders’ funds 169,037 100.0

Portfolio as at 30 June 2019 – Sector split by industry

Sector Percentage
Healthcare 22.5
Support Services 19.2
Technology 16.8
Financials 11.2
Net cash 8.4
Industrials 8.1
Media 6.4
Electronics 3.7
Property 3.3
Unquoted Investments 0.4

Portfolio as at 30 June 2019 – Size split by market capitalisation

Size Percentage
Greater than £500m 30.2
£300m - £500m 15.2
£100m - £300m 44.7
Less than £100m 1.1
Net cash 8.4
Unquoted Investments 0.4

Unquoted Investments

Over the period, the Company received a capital distribution of £0.3m from Vintage I. The outstanding commitment relating to Vintage I is €1,560,000 and its adviser has communicated that it does not expect to make any further net draw downs.

Outlook

The broader market view is one of nervousness; global political and economic (trade) relations remain fractious and macro-economic data is softening. This is filtering through into weakening business sentiment and reflected in companies warning on profits. This has, in part, contributed to a period of underperformance for smaller companies recently, as they are generally viewed as riskier, more domestically focussed and, with the changes brought around by MiFID II, less well researched and more illiquid.

Liquidity has been very poor in smaller companies with over £400m cumulatively withdrawn from UK Smaller Companies open-ended funds in the last three months according to the Investment Association. This is significant at around three percent of total assets in the space. This is further depressing smaller company share prices and favours a closed-ended strategy with a long-term investment approach.

Further, we don’t believe the above generalisation of small caps is apt for the portfolio. In our view, much of the portfolio is characterised by quality features, such as high recurring revenue (e.g. Equiniti, EMIS and Ergomed), limited exposure to economic cycles (e.g. Alliance Pharma, Medica, Tribal) and financial security (almost half of investee companies have net cash balance sheets).

This trepidation has created opportunities. Conditions are ripe for Private Equity activity. Valuations are low, financing is generationally cheap and there is significant dry powder; $2.5 trillion globally according to Preqin; the alternative asset industry data provider. This is evidenced, in part, through an increase in takeover activity in the UK. The Company has benefitted more recently in the take-privates of IFG Group and Servelec.

According to Preqin, investors view small to mid-market buyout funds as presenting the best opportunities. We believe the portfolio’s characteristics with a strong combination of structural growth and cash flow, in many cases trading at a material discount to precedent transaction multiples, position the portfolio well to continue to benefit from this trend.

Top 10 Investee Company Review (as at 30 June 2019)

4imprint is a leading direct marketer of promotional products in North America and the UK. It processes over one million customised orders. We have been involved with the company since a change of management in 2003. Virtually all of the profits of the group are generated by the fast growing US business. The company has a significant net cash balance. Funds managed by the Investment Manager currently hold approximately 2% of the company’s equity.

Brooks Macdonald is an investment management company. The company provides a range of investment management services and advice to individuals, pension funds, institutions, charities and trusts. It also provides offshore fund management and administration services. The company has offices across the UK and the Channel Islands. The company has one of the strongest rates of organic growth in its sector given its relationship with independent financial advisers and its large exposure to self-invested personal pension schemes. New management have undertaken ‘catch-up’ investment to fit the increased size of the group and are now focusing on growing the group margin and matching the performance of the international business to the successful onshore business. The company is highly cash generative and has a healthy net cash balance. Funds managed by the Investment Manager currently hold approximately 3% of the company’s equity.

Clinigen is a speciality pharmaceutical and services company. It has three business units – Clinical Trial Services, Unlicensed Medicines and Commercial Medicines. Activities undertaken by these businesses include: acquiring, licencing and revitalising hospital-only critical care medicines; and providing patient access to its own or other pharmaceutical companies’ products, whether to meet unmet medical needs or for use in clinical trials. The company has grown rapidly since its IPO in 2012, both organically and through targeted acquisitions. In April 2015 it acquired Idis, a peer, for £225m through a mixture of debt and equity and in September 2015, acquired Link Healthcare, a specialist pharmaceutical and medical business focused on the Asia, Africa and Australasia region. In September 2017, Clinigen acquired Quantum Pharma and in 2018, it acquired CSM and iQone. We believe the cash flow characteristics are underappreciated. The company has a leading position in a multi-year growth market. Funds managed by the Investment Manager currently hold approximately 2% of the company’s equity.

EMIS is a specialist healthcare software and services provider. It is the UK market leader in the provision of electronic patient records for GPs, with a 55% market share, and over 80% of total revenues are recurring. It also supplies electronic patient records to other healthcare organisations including community pharmacies, community and mental health trusts and accident & emergency departments. With solutions across every major healthcare setting, we believe EMIS is uniquely positioned to benefit from the NHS’s connected care strategy. The company is continuing to develop Patient, an online platform with 18 million unique monthly users to provide high quality healthcare information and solutions. EMIS is highly cash generative with a strong balance sheet providing future opportunity. Funds managed by the Investment Manager currently hold approximately 1% of the company’s equity.

Equiniti is a business services company providing administration, processing payments services and technology products typically to FTSE 350 companies. It is one of the three main share registrars for UK quoted companies. It administers company benefits schemes and share savings schemes. It also provides software and services to help manage the administration of company and public sector pension funds. We believe the business has a strong combination of stable, long-term repeatable non-discretionary corporate services alongside offering technology based solutions to growing regulatory requirements. The business was founded with the buyout of Lloyds TSB Share Registrars by private equity house Advent International in 2007. Following the buyout the company added to its product and service capability through a number of targeted acquisitions. The company IPO’d in October 2015. Whilst it was well invested under private equity ownership, there are significant medium to long term opportunities through rationalising its UK office footprint as well as offshoring more activities to its base in India. Together with moderate organic growth we believe that the company has the potential to deliver high single digit/low double digit earnings growth, which should not be significantly impacted by the broad market cycle. Despite its quality, the company trades at a moderate rating. The company has recently established a North American presence through EQ USA which provides entry to the world’s largest capital market and significant long term opportunities for the business. Funds managed by the Investment Manager currently hold approximately 6% of the company’s equity.

Ergomed is a pharmaceutical services company. The company operates across 55 countries and has provided and managed clinical development, trial management and pharmacovigilance services for over 100 clients across the pharmaceuticals industry. The company historically had three divisions; co-development, clinical research services and pharmacovigilance. The recent strategy has been to focus on the higher returning clinical research and pharmacovigilance services. These services are in a structural growth area given the increased incidence of outsourcing and regulatory requirements in the pharma industry. There has historically been a high degree of consolidation in these industries and we believe Ergomed is a highly strategic asset. Funds managed by the Investment Manager currently hold approximately 7% of the company’s equity.

Medica is the leading provider of teleradiology services in the UK. The company provides outsourced interpretation and reporting of MRI, CT and plain film X-ray images. This is delivered through three primary services to UK hospital radiology departments: Nighthawk out-of-hours service; routine cross-sectional reporting on MRI and CT scans; and routine plain film reporting on x-ray images. Teleradiology as a service aims to improve patient care through faster response and overcoming the challenge hospitals face in the increasing volume in scanning activity. Medica was previously owned by Close Brothers Private Equity following a 2013 buyout. The company was IPO’d in March 2017 on the LSE and admitted to the FTSE Small Cap index in June 2017. Funds managed by the Investment Manager currently hold just below 10% of the company’s equity.

Tribal is a global provider of products and services to the international education, training and learning markets. Today, the company focuses its activities on student records and administration systems and quality review inspection services. It has a high market share in a number of product niches and geographies. We believe that the company has the potential to grow through increasing its international sales, as well as updating and upselling to its existing UK customer base. Since November 2015 the company’s board has been substantially refreshed, a non-core subsidiary sold and equity raised to strengthen the balance sheet. The company is executing well on a strategy to reduce its overhead and develop its next generation software platform. Funds managed by the Investment Manager currently hold 8% of the company’s equity.

Tyman is a leading international supplier of engineered components to the door and window industry in the new build and repair and maintenance (RMI) markets. We originally invested in the company following the fall in residential activity around the financial crisis in 2009. The company has, through organic and inorganic investment, increased its market leadership, strengthened the product proposition and delivered significant cost and sales synergies. We believe future upside exists in the company’s ability to replicate its North American manufacturing template to its operations in Europe and the Rest of the World to achieve material efficiencies, and in the recovery of U.S. single family housing activity to long term historical levels. Funds managed by the Investment Manager currently hold approximately 6% of the company’s equity.

Wilmington provides business information and training services to professional business customers in the financial services, medical and white-collar professional service sectors. More than 80% of revenues in the main publishing and information divisions are delivered digitally, typically on a subscription basis, and with high levels of client retention. The company is highly cash generative. Growth has been held back in recent years and we believe the presence of a new chairman, CEO and CFO will improve the company’s execution and management of the portfolio to drive shareholder value. Funds managed by the Investment Manager currently hold just under 10% of the company’s equity.

GVQ Investment Management Limited                      020 3907 4190

Jeff Harris

Adam Khanbhai

Investec Bank plc (Corporate broker)                         020 7597 4000

Lucy Lewis

Lansons Communications on behalf of                      020 7294 3687

GVQ Investment Management Limited

David Masters

The Company’s Statement of Comprehensive Income, Statement of Changes in Equity, Balance Sheet, and Statement of Cash Flows follow.

Statement of Comprehensive Income

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Investments
Gains on investments held at fair value
through profit or loss
- 1,449 1,449
- 1,449 1,449
Income                                  
Dividends 3,116 - 3,116
Interest 73 - 73
Total income 3,189 - 3,189
Expenses
Investment Manager’s fee
(1,235) - (1,235)
Investment Manager’s performance fee - (484) (484)
Other expenses (576) - (576)
Total expenses (1,811) (484) (2,295)
Net return before taxation 1,378 965 2,343
Taxation - - -

Net return and total comprehensive income for the year
1,378 965 2,343
Return per Ordinary share 2.11p 1.48p 3.59p

The total column of this statement represents the Statement of comprehensive income. 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 2018
Revenue Capital
return return Total
£'000 £'000 £'000
Investments
Gains on investments held at fair value
through profit or loss
- 1,640 1,640
- 1,640 1,640
Income                                  
Dividends 3,156 - 3,156
Interest 36 - 36
Total income 3,192 - 3,192
Expenses
Investment Manager’s fee
(1,449) - (1,449)
Other expenses (592) - (592)
Total expenses (2,041) - (2,041)
Net return before taxation 1,151 1,640 2,791
Taxation (30) - (30)

Net return and total comprehensive income for the year
1,121 1,640 2,761
Return per Ordinary share 1.65p 2.41p 4.06p

Balance Sheet

As at
30 June 2019
As at
30 June 2018
£'000 £'000
Non-current assets
Investments held at fair value though profit or loss 154,888 161,055
Current assets
Trade and other receivables 1,244 75
Cash and cash equivalents 16,311 14,094
Total current assets 17,555 14,169
Current liabilities
Trade and other payables (3,406) (943)

Total assets less current liabilities
169,037 174,281
Net assets 169,037 174,281
Capital and reserves:
Share capital 6,986 6,986
Share premium account 31,737 31,737
Special reserve 25,595 32,521
Capital reserve 99,910 98,945
Capital redemption reserve 2,264 2,264
Revenue reserve 2,545 1,828
Total shareholders’ equity 169,037 174,281

Ordinary shares in issue
63,759,589 66,990,660

Net asset value per share
265.12p 260.16p

Statement of Changes in Equity

For the year ended
30 June 2019
Share capital Share premium
account
Special
reserve

Capital reserve
Capital redemption reserve Revenue reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance as at 1 July 2018 6,986 31,737 32,521 98,945 2,264 1,828 174,281
Net return and total comprehensive income for the year - - - 965 - 1,378 2,343
Dividends paid - - - - - (661) (661)
Share buy-backs - - (6,926) - - - (6,926)
Balance as at 30 June 2019 6,986 31,737 25,595 99,910 2,264 2,545 169,037
For the year ended
30 June 2018
Share capital Share premium
account
Special
reserve

Capital reserve
Capital redemption reserve Revenue reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance as at 1 July 2017 6,986 31,737 36,814 97,305 2,264 1,238 176,344
Net return and total comprehensive income for the year - - - 1,640 - 1,121 2,761
Dividends paid - - - - - (531) (531)
Share buy-backs - - (4,293) - - - (4,293)
Balance as at 30 June 2018 6,986 31,737 32,521 98,945 2,264 1,828 174,281

Statement of Cash Flows

Year Ended 30 June Year Ended 30 June
2019 2018
£’000 £’000
Operating activities
Net return before taxation 2,343 2,791
Adjustment for gains on investments (1,448) (1,631)
Adjustment for revaluation of foreign currency balances (1) (9)
Irrecoverable overseas withholding tax - (30)
Operating cash flows before movements in working capital 894 1,121
(Increase)/decrease in receivables (57) 54
Increase/(decrease) in payables 433 (2,241)
Purchase of portfolio investments (26,508) (47,839)
Sales of portfolio investments 34,953 51,869
Net cash flow from operating activities 9,715 2,964
Financing activities
Equity dividend paid (661) (531)
Shares bought back in the year (6,838) (4,239)
Net cash outflow from financing activities (7,499) (4,770)
Increase/(decrease) in cash and cash equivalents for year 2,216 (1,806)
Cash and cash equivalents at the start of the year 14,094 15,891
Revaluation of foreign currency balances 1 9
Cash and cash equivalents at 30 June 16,311 14,094

Principal Risks and Uncertainties

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 16 and 17 of the Annual Report for the year ended 30 June 2019, which is available at www.strategicequitycapital.com.

Responsibility statement of the Directors in respect of the Annual Financial Report

We confirm that to the best of our knowledge:

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

The Company has adequate financial resources to meet its investment commitments and, as a consequence, the Directors believe that the Company is well placed to manage its business risks. After making appropriate enquiries and due consideration of the Company’s cash balances, the liquidity of the Company’s investment portfolio and the cost base of the Company, the Directors have a reasonable expectation that the Company has adequate available financial resources to continue in operational existence for the foreseeable future and accordingly have concluded that it is appropriate to continue to adopt the going concern basis in preparing the Annual Financial Report, consistent with previous periods.

Related Party Transactions

The amounts payable to the Investment Manager are disclosed in note 3. The amount due to the Investment Manager for management fees at 30 June 2019 was £318,000 (2018: £329,000). The amount due to the Investment Manager for performance fees at 30 June 2019 was £484,000 (2018: £Nil).

Fees paid to Directors are disclosed in the Directors‘ Remuneration Report on page 30 of the Annual Report. Full details of Directors‘ interests are set out on page 31 of the Annual Report.

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 2019 were authorised for issue in accordance with a resolution of the Directors on 1 October 2019

1.2 Basis of preparation and statement of compliance

The financial statements of the Company have been prepared in accordance with IFRS issued by the International Accounting Standards Board (as adopted by the EU), interpretations issued by the International Financial Reporting Interpretations Committee, and applicable requirements of United Kingdom company law, 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 is applied to the extent it 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, on the assumption the continuation vote is passed by Shareholders at the forthcoming Annual General Meeting.

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.

1.3 Accounting policies

The accounting policies used in the preparation of the Annual Report can be found on pages 43 to 45 of the Annual Report for the year ended 30 June 2019.

1.4 New standards and interpretations not applied

IASB and IFRIC have issued the following standards and interpretations which are not effective for the year ended 30 June 2019 and have not been applied in preparing these financial statements.

International Accounting Standards (IAS/IFRS)        Effective date*

IFRS 16 Leasing                                                         1 January 2019

IFRIC 23 Uncertainty over Income Tax Treatments  1 January 2019

* Years beginning on or after.

2. Income

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Income from investments:                          
UK dividend income 3,116 - 3,116
Liquidity interest 73 - 73
3,189 - 3,189
Total income comprises:                            
Dividends 3,116 - 3,116
Interest 73 - 73
3,189 - 3,189
Income from investments:
Quoted UK 3,116 - 3,116
Liquidity interest 73 - 73
3,189 - 3,189

   

Year ended 30 June 2018
Revenue Capital
return return Total
£'000 £'000 £'000
Income from investments:                             
UK dividend income 3,008 - 3,008
Overseas dividend income 148 - 148
3,156 - 3,156
Liquidity interest 36 - 36
3,192 - 3,192
Total income comprises:                               
Dividends 3,156 - 3,156
Interest 36 - 36
3,192 - 3,192
Income from investments:
Quoted UK 3,008 - 3,008
Quoted overseas 148 - 148
Liquidity interest 36 - 36
3,192 - 3,192

3. Investment Manager’s fee

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Management fee 1,235 - 1,235
Performance fee - 484 484
1,235 484 1,719

   

Year ended 30 June 2018
Revenue Capital
return return Total
£'000 £'000 £'000
Management fee 1,449 - 1,449
1,449 - 1,449

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 Companies) 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 Companies) 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 £484,000 been accrued in respect of the year ended 30 June 2019 (30 June 2018: £nil).

4. Other expenses

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Secretarial services 117 - 117
Auditors’ remuneration for:
Audit services* 24 - 24
Directors’ remuneration 131 - 131
Other expenses 304 - 304
576 - 576

   

Year ended 30 June 2018
Revenue Capital
return return Total
£'000 £'000 £'000
Secretarial services 113 - 113
Auditors’ remuneration for:
Audit services* 20 - 20
Directors’ remuneration 135 - 135
Other expenses 324 - 324
592 - 592

*No non-audit fees were incurred during the year

5. Taxation

Year ended 30 June 2019
Revenue Capital
return return Total
£'000 £'000 £'000
Irrecoverable overseas withholding tax* - - -
- - -

   

Year ended 30 June 2018
Revenue Capital
return return Total
£'000 £'000 £'000
Irrecoverable overseas withholding tax* 30 - 30
30 - 30

The Company is subject to corporation tax at 19.00%. As at 30 June 2019 the total current taxation charge in the Company’s revenue account is lower than the standard rate of corporation tax in the UK.

* IFG Group withholding tax paid £Nil (2018: £29,642).

6. Return per Ordinary share

Year ended 30 June 2019
Revenue Capital
return return Total
pence pence Pence
Return per Ordinary share 2.11 1.48 3.59
2.11 1.48 3.59
Year ended 30 June 2018
Revenue Capital
return return Total
pence pence Pence
Return per Ordinary share 1.65 2.41 4.06
1.65 2.41 4.06

Returns per Ordinary share are calculated based on 65,305,594 (30 June 2018: 67,919,623) being the weighted average number of Ordinary shares, excluding shares held in treasury, in issue throughout the year.

7. Investments

30 June 2019
£’000
Investment portfolio summary:
Listed investments at fair value through profit or loss 154,260
Unlisted investments at fair value through profit or loss 628
154,888

   

30 June 2018
£’000
Investment portfolio summary:
Listed investments at fair value through profit or loss 160,198
Unlisted investments at fair value through profit or loss 857
161,055

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 listed equities. The Company does not adjust the quoted price for these instruments.

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.

Level 3 investments consist of an investment in a private equity fund of funds managed by 3i (‘the Fund’) and is valued at the Company’s attributable proportion of the reported Fund Net Asset Value in accordance with the IPEV Valuation Guidelines. The Net Asset Value of the Fund is derived from the Fair Value of the underlying funds based on the most recent financial statements of the underlying funds adjusted for any subsequent cash movements to and from the underlying funds.

The underlying funds primarily invest in private companies which are recorded at cost or Fair Value derived from private equity valuation models and techniques. The main inputs into the valuation models of the underlying funds include industry performance, company performance, quality of management, the price of the most recent financing round or prospects for the next financing round, exit opportunities which are available, liquidity preference and net present value analysis.

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 2019.

Financial instruments at fair value through profit or loss as at 30 June 2019

30 June 2019 Level 1
£’000
Level 2
£’000
Level 3
£’000
Total 
£’000 
Equity investments and limited partnership interests 154,260 - 628 154,888
Liquidity funds - 15,513 - 15,513
Total 154,260 15,513 628 170,401

   

30 June 2018 Level 1
£’000
Level 2
£’000
Level 3
£’000
Total 
£’000 
Equity investments and limited partnership interests 160,198 - 857 161,055
Liquidity funds - 10,696 - 10,696
Total 160,198 10,696 857 171,751

The below table presents the movement in level 3 instruments for the year ended 30 June 2019

by class of financial instrument.

Total unquoted 
investments 
£’000 
Opening balance at 1 July 2018 857 
Proceeds from disposals during the year (292)
Gains on disposals during the year 280
Decrease in unrealised appreciation (217)
Closing balance at 30 June 2019 628

8. Share capital

Number £’000
Allotted, called up and fully paid Ordinary shares
of 10p each:
At 30 June 2018 69,858,891 6,986
Shares held in Treasury at 30 June 2018 (2,868,231) (287)
Ordinary shares in issue per Balance Sheet at 30 June 2018 66,990,660 6,699
Share buy-backs to be held in Treasury (3,231,071) (323)
Ordinary shares in issue per Balance Sheet at 30 June 2019 63,759,589 6,376
Shares held in Treasury 6,099,302 610
Ordinary shares in circulation at 30 June 2019 69,858,891 6,986

9. Capital commitments and contingent liabilities

The Company has a commitment to invest €1,560,000 in Vintage I (30 June 2018: €1,560,000).

These are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Full audited accounts for the year to 30 June 2019 will be sent to shareholders in October 2019 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 2019 will be lodged with the Registrar of Companies.


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Final Results - RNS