TIDMBGUK
RNS Number : 9816H
Baillie Gifford UK Growth Trust PLC
30 November 2022
RNS Announcement
Baillie Gifford UK Growth Trust plc
Legal entity identifier: 549300XX386SYWX8XW22
For the six months to 31 October 2022
Over the six month period to 31 October 2022, the Company's net
asset value per share total return was negative 10.9% compared to a
negative 5.8% for the FTSE All-Share Index total return. The share
price total return for the same period was negative 11.9%.
3/4 Two new positions were initiated in the period: IT
infrastructure provider Softcat; and, the digitisation specialist
Kainos. One position was sold: online food ordering and delivery
company Just Eat Takeaway.com.
3/4 The net revenue return per share was 2.22p compared to 2.28p
in the corresponding period last year. As highlighted previously,
no interim dividend will be declared as all dividends are paid as a
single final dividend.
3/4 Over the period a total of 2,100,000 shares were bought back
for treasury. Following the purchase of a further 300,000 shares
since the period end, as at 28 November 2022 the Company has
9,821,700 shares held in treasury accounting for 6.5% of the
Company's current shares in issue. (*)
3/4 Notwithstanding the near term economic challenges, the Board
and portfolio managers believe that there is an interesting and
growing disconnect between top-down perceptions of the UK market
and the long-term opportunities for growth investors.
* This percentage calculation excludes treasury shares from the
denominator.
Total return information is sourced from Baillie
Gifford/Refinitiv. See disclaimer at the end of this announcement.
For a definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Baillie Gifford UK Growth Trust plc invests to achieve capital
growth predominantly from investment in UK equities with the aim of
providing a total return in excess of the FTSE All-Share Index.
The Company is managed by Baillie Gifford & Co, an Edinburgh
based fund management group with around GBP227 billion under
management and advice as at 29 November 2022.
Baillie Gifford UK Growth is a listed UK company. The value of
its shares and any income from them can fall as well as rise and
investors may not get back the amount invested. The Company is
listed on the London Stock Exchange and is not authorised or
regulated by the Financial Conduct Authority. You can find up to
date performance information about Baillie Gifford UK Growth at
bgukgrowthtrust.com (++) .
Past performance is not a guide to future performance. See
disclaimer at end of this announcement.
++ Neither the contents of the Managers' website nor the
contents of any website accessible from hyperlinks on the Managers'
website (or any other website) is incorporated into, or forms part
of, this announcement.
29 November 2022
For further information please contact:
Anzelm Cydzik, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
Responsibility Statement
We confirm that to the best of our knowledge:
a) the condensed set of Financial Statements has been prepared
in accordance with FRS 104 'Interim Financial Reporting';
b) the Interim Management Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.7R (indication of important events during the first six months,
their impact on the Financial Statements and a description of the
principal risks and uncertainties for the remaining six months of
the year); and
c) the Interim Financial Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.8R (disclosure of related party transactions and changes
therein).
By order of the Board
Carolan Dobson
Chairman
29 November 2022
Interim Management Report
Performance
Over the six months to 31 October 2022, the Company's net asset
value ('NAV') total return per share declined by 10.9% which
compares to a 5.8% decrease in the FTSE All-Share Index, total
return, over the same period. The share price total return over the
six months declined by 11.9% as the shares moved from a discount of
11.8% to the NAV per share to a discount of 13.0%. Our short term
performance continued to disappoint, with the headwinds against our
pronounced growth style, that we discussed in the Annual Report,
continuing to persist. The paradox is that in operational terms the
portfolio in general is continuing to perform satisfactorily and
therefore portfolio activity was relatively low.
The main detractors from performance in the period included the
kitchen company Howden Joinery, car platform AutoTrader and clean
air solution provider Volution. In all three cases, despite strong
trading, the market is worried about the impact of an economic
downturn in the short term although all of these businesses have
compelling growth opportunities over the longer term and strong
balance sheets to weather any near term turbulence. Our exposure to
fast growing unlisted technology businesses through Molten Ventures
was another notable detractor as markets correctly assumed that the
fall in valuations in the quoted market would have an impact on the
carrying value of Molten's investments; although the pessimism
baked into its share price, when compared to its most recent
written down valuation of its assets, seems excessive to us.
Finally, not owning the major oil stocks in the period was again
the other notable detractor to our relative performance.
In terms of positives, we benefitted from a couple of businesses
that agreed to be taken over; namely the home emergency service
business HomeServe and the information, data and events business
Euromoney Institutional Investor. In both cases we were actually
supportive of management's growth strategy and although both bids
were at significant premiums to the pre bid share price, we would
have been happy to have remained owners of both businesses.
However, it was clear that the boards of both were determined to
accept the bids and we reluctantly decided to accept both offers.
The other notable positive in the period was Wise, the foreign
exchange platform that offers a more compelling and cheaper
proposition to consumers and small businesses than using banks.
Like many growth businesses, its shares had been pummelled but our
old adage that share prices will reflect fundamentals was partially
borne out, with the shares recovering strongly following a very
encouraging trading statement where growth was much stronger than
expected; this bodes wells for the future.
'A week is a long time in politics' and other market musings
Perhaps one of the main reasons why it's difficult to be a
long-term investor is that when events keep coming thick and fast
there is natural human tendency to want to make sense of them (or
be asked to comment on them). This six month period is no
exception. Although it seems a long time ago now, it was only at
the beginning of the period that Boris Johnson dramatically lost
the confidence of his MPs and resigned as leader of the
Conservative Party, triggering a leadership election that resulted
in Liz Truss being appointed as Prime Minister. This ceremonial
handing over of power was poignantly the last official act of our
late Queen Elizabeth. Her passing, after an incredible seventy
years on the throne, led to understandable mourning by many people
in the UK and beyond. Yet, with barely a pause, we witnessed yet
more astonishing events with the implosion of the Truss Government
after a disastrously received 'mini' budget which ultimately led to
her resignation as Prime Minister after just 49 days. The
subsequent appointment of Rishi Sunak as our first British Asian
Prime Minister, and the youngest for over a century and a half, was
a moment of tremendous symbolism, yet few would envy his task of
trying to restore calm to the market and to attempt to sort out the
finances of the Government in the midst of a difficult economic
backdrop with a fractious governing party on to its fifth prime
minister since the Brexit referendum.
What interested us in this tumultuous period was less the hurly
burly of politics and more the attempt by some commentators to sum
up the changes seen in this country over the long reign of our late
Monarch. In particular, in this 'instant analysis' there was a
fundamental misunderstanding of progress in our view. Of course,
today we have many pressing social and economic challenges and it's
also true that Britain's relative standing in the world has
declined in part because of self-inflicted mistakes over the
decades. However, what this gloomy, near term focussed analysis
forgets is the astonishing progress and general increase in
prosperity over the last seventy years. Frankly, much of this
progress would amaze previous generations so it begs the question
of why this misunderstanding? The answer is deceptively simple:
behaviourally, after the novelty wears off, we take most instances
of progress, such as a new product, for granted, but quietly and
gradually these all incrementally add up over time to something
quite dramatic. This is exactly the same when it comes to investing
in companies over the long term. However, as mentioned at the start
of this commentary, most people don't think like that and would
rather we comment on Sterling, interest rates, inflation, domestic
and world politics etc. This isn't daft, as they are big questions
and, as a former colleague said once, "we all have bosses". Why
wouldn't you want to know if you thought we might have the answer?
But we don't.
Instead, we'd rather have the honesty and humility in
communicating with fellow shareholders to acknowledge that
forecasting macro-economic events is a skill we simply don't
possess. Moreover, it is a skill that is anathema to our bottom-up
style of researching and investing in companies that we believe
have superior growth prospects. Of course, we're not blind to the
tougher near-term environment but we're also alert to understanding
what the opportunities might be for the many businesses that have
superior business models and competitive positions. As we've seen
many times before, these companies usually come out of tough times
with enhanced competitive positions.
Portfolio Update
In terms of portfolio activity, we made some modest changes in
the period. The thinking is straightforward. It has clearly been a
very tough market for growth stocks, and we have been monitoring a
number where the share price has been beaten up but the operational
performance is, in fact, ahead of expectations. We, therefore,
added to existing holdings in Wise (foreign exchange transfers) and
Experian (credit checking) as both stocks have been unfairly
derated given their strong fundamentals, and, as noted earlier, it
was pleasing that, subsequent to our purchase, Wise reported much
better than expected trading.
We also decided to take new holdings in Softcat and Kainos - two
businesses which we know well but where valuation has been a
stumbling block. Both are beneficiaries of what we think is a very
compelling long-term structural trend, namely growth in corporate
IT investment. The Covid-19 pandemic has only reinforced the
imperative for companies of all shapes and sizes to invest in their
IT estate and develop capabilities in areas such as data management
and analytics, cyber security and the cloud in order to remain
competitive. Softcat is a value-added reseller, mainly serving SMEs
in the UK. We think it possesses a differentiated corporate culture
which has enabled it to outperform the underlying market
consistently and meaningfully. Kainos is a Northern Irish company
which leads digitisation projects for the government (but
increasingly corporates as well) and is also one of only a handful
of Workday software implementation partners globally. Workday is a
US enterprise software company which has successfully disrupted the
on-premise HR and financial software market with its cloud-based
offering. We think Kainos will continue to benefit from the global
roll out of Workday's product suite.
These purchases have been funded by reductions in our holdings
in the information business RELX and the distributor Bunzl. Both
have held up much better in share price terms than many holdings,
but their growth profiles are more sedate, so we decided to
reallocate capital to our new holdings. We also decided to sell
Just Eat Takeaway.com. Although we reduced our holding when it
completed the now disastrous US acquisition, it was a mistake not
to sell out completely. Our worry is that fierce competition by
incumbents and other parties encouraging competition, such as
Amazon, will result in businesses never able to exploit network
benefits. We have also utilised some borrowings to fund some of
purchases and equity gearing stood at 3% as at 31 October 2022.
Outlook
We're currently working hard at developing a pipeline of new
investment ideas that might be mispriced in the current
environment. We are not market timers or forecasters, but the
evidence of a growing opportunity set of potential investments
shows there is an interesting and growing disconnect between
top-down perceptions of the UK market and what we are starting to
see in terms of long-term opportunities for growth investors,
notwithstanding the near term economic challenges. In plain English
and with apologies to Charles Dickens: it was the worst of times,
it was the best of times.
Iain McCombie & Milena Mileva
Baillie Gifford & Co
29 November 2022
Valuing Private Companies
We aim to hold our private company investments at `fair value'
i.e., the price that would be paid in an open-market transaction.
Valuations are adjusted both during regular valuation cycles and on
an ad hoc basis in response to `trigger events'. Our valuation
process ensures that private companies are valued in both a fair
and timely manner.
The valuation process is overseen by a valuations committee at
Baillie Gifford which takes advice from an independent third party
(S&P Global). The portfolio managers feed into the process, but
the valuations committee owns the process and the portfolio
managers only receive final valuation notifications once they have
been applied.
We revalue the private holdings on a three-month rolling cycle,
with one-third of the holdings reassessed each month. The prices
are also reviewed twice per year by the Company's Board and are
subject to the scrutiny of external auditors in the annual audit
process.
Beyond the regular cycle, the valuations committee also monitors
the portfolio for certain `trigger events'. These may include:
changes in fundamentals; a takeover approach; an intention to carry
out an Initial Public Offering (IPO); or significant changes to the
valuation of comparable public companies.
The valuations committee also monitors relevant market indices
on a weekly basis and updates valuations in a manner consistent
with our external valuer's (S&P Global) most recent valuation
report where appropriate. When market volatility is particularly
pronounced the team undertake these checks daily. Any ad hoc change
to the fair valuation of any holding is implemented swiftly and
reflected in the next published NAV. There is no delay.
As at 31 October 2022, the valuation for Wayve was based on the
recent purchase price adjusted for market movements in comparable
companies.
List of Investments at 31 October 2022
Value % of total
Name Business GBP'000 assets
======================== =============================================== ======== ==========
Basic Materials
Rio Tinto Metals and mining company 6,856 2.5
Speciality high-performance chemicals
Victrex manufacturer 3,835 1.4
Bodycote Heat treatment and materials testing 3,422 1.2
======== ==========
14,113 5.1
======== ==========
Consumer Discretionary
Games Workshop Toy manufacturer and retailer 9,519 3.5
Manufacturer and distributor of kitchens
Howden Joinery to trade customers 7,393 2.7
Burberry Luxury goods retailer 7,252 2.6
Professional publications and information
RELX provider 6,758 2.5
4imprint Direct marketer of promotional merchandise 6,039 2.2
Technology platform for the global fashion
Farfetch industry 3,138 1.1
Boohoo.com Online fashion retailer 1,213 0.4
Naked Wines Online wine retailer 383 0.1
======== ==========
41,695 15.1
======== ==========
Consumer Staples
Diageo International drinks company 10,231 3.7
======== ==========
10,231 3.7
======== ==========
Financials
St. James's Place UK wealth manager 11,419 4.1
Legal & General Insurance and investment management company 7,554 2.7
Prudential International life insurer 6,176 2.2
Lancashire Holdings General insurance 6,006 2.2
AJ Bell Investment platform 5,675 2.1
Provider of retirement income products
Just Group and services 4,542 1.7
Hiscox Property and casualty insurance 4,353 1.6
Hargreaves Lansdown UK retail investment platform 4,082 1.6
HomeServe Domestic insurance 3,792 1.4
Provides platform services to financial
IntegraFin clients 3,654 1.3
Molten Ventures Technology focused venture capital firm 3,423 1.2
IG Group Spread betting website 3,419 1.2
======== ==========
64,095 23.3
======== ==========
Healthcare
Online platform selling antibodies to life
Abcam science researchers 11,469 4.2
Genus World leading animal genetics company 8,158 2.9
Oxford Nanopore Novel DNA sequencing technology 813 0.3
Exscientia Biotech company 803 0.3
Creo Medical Designer and manufacturer of medical equipment 205 0.1
======== ==========
21,448 7.8
======== ==========
Industrials
Experian Global provider of credit data and analytics 11,234 4.1
Ashtead Construction equipment rental company 10,950 4.0
Volution Group Supplier of ventilation products 9,906 3.6
Wise Online platform to send and receive money 9,064 3.3
Renishaw World leading metrology company 8,357 3.0
Bunzl Distributor of consumable products 7,327 2.6
Inchcape Car wholesaler and retailer 7,289 2.6
Halma Specialist engineer 6,777 2.5
Provider of professional services focusing
FDM Group on information technology 4,916 1.8
PageGroup Recruitment consultancy 4,609 1.7
Euromoney Institutional
Investor Specialist publisher 4,589 1.7
======== ==========
85,018 30.9
======== ==========
Real Estate
Rightmove UK's leading online property portal 7,994 2.9
Helical Property developer 5,988 2.2
======== ==========
13,982 5.1
======== ==========
Technology
Advertising portal for second hand cars
Auto Trader Group in the UK 11,252 4.1
First Derivatives IT consultant and software developer 3,431 1.2
Kainos Group IT services and implementer 2,397 0.9
IT reseller and infrastructure solutions
Softcat provider 1,723 0.6
Wayve Technologies
Ltd
Series B Pref. (U) Developer of full autonomous driving systems 1,055 0.4
======== ==========
19,858 7.2
======== ==========
Total Equities 270,440 98.2
========================================================================= ======== ==========
Net Liquid Assets 4,993 1.8
========================================================================= ======== ==========
Total Assets 275,433 100.0
========================================================================= ======== ==========
(U) Denotes unlisted (private company) investment.
Stocks highlighted in bold are the 20 largest holdings.
Income Statement (unaudited)
For the six months
ended 31 October For the six months For the year ended
2022 ended 31 October 2021 30 April 2022 (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================ ======== ======== ======== ======== ======== ======== ======== ======== ========
(Losses)/gains on
investments - (35,463) (35,463) - 7,350 7,350 - (63,036) (63,036)
Currency gains - - - - 18 18 - 40 40
Income from investments and
interest receivable 3,912 - 3,912 4,047 - 4,047 7,787 - 7,787
Investment management fee
(note 3) (209) (489) (698) (280) (653) (933) (519) (1,211) (1,730)
Other administrative
expenses (265) - (265) (248) - (248) (498) - (498)
============================ ======== ======== ======== ======== ======== ======== ======== ======== ========
Net return before finance
costs and taxation 3,438 (35,952) (32,514) 3,519 6,715 10,234 6,770 (64,207) (57,437)
============================ ======== ======== ======== ======== ======== ======== ======== ======== ========
Finance costs of borrowings (50) (118) (168) (18) (42) (60) (33) (76) (109)
============================ ======== ======== ======== ======== ======== ======== ======== ======== ========
Net return on ordinary
activities
before taxation 3,388 (36,070) (32,682) 3,501 6,673 10,174 6,737 (64,283) (57,546)
============================ ======== ======== ======== ======== ======== ======== ======== ======== ========
Tax on ordinary activities - - - - - - - - -
============================ ======== ======== ======== ======== ======== ======== ======== ======== ========
Net return on ordinary
activities
after taxation 3,388 (36,070) (32,682) 3,501 6,673 10,174 6,737 (64,283) (57,546)
============================ ======== ======== ======== ======== ======== ======== ======== ======== ========
Net return per ordinary
share
(note 4) 2.22p (23.66p) (21.44p) 2.28p 4.35p 6.63p 4.39p (41.89p) (37.50p)
============================ ======== ======== ======== ======== ======== ======== ======== ======== ========
Note:
Dividends paid and payable
per share (note 5) - - 3.91p
============================ ======== ======== ======== ======== ======== ======== ======== ======== ========
The total column of this statement is the profit and loss
account of the Company. The supplementary revenue and capital
columns are prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in the above statements derive
from continuing operations.
A Statement of Comprehensive Income is not required as all gains
and losses of the Company have been reflected in the above
statement.
The accompanying notes below are an integral part of the
Financial Statements.
Balance Sheet (unaudited)
At 30 April
At 31 October 2022
2022 (audited)
GBP'000 GBP'000
======================================= ================= ===========
Fixed assets
Investments held at fair value through
profit or loss (note 6) 270,440 306,585
======================================= ================= ===========
Current assets
Debtors 236 1,824
Cash and cash equivalents 5,329 1,491
======================================= ================= ===========
5,565 3,315
======================================= ================= ===========
Creditors
Amounts falling due within one year:
Bank loan (note 7) (14,450) (6,450)
Other creditors (572) (517)
======================================= ================= ===========
(15,022) (6,967)
======================================= ================= ===========
Net current liabilities (9,457) (3,652)
======================================= ================= ===========
Net assets 260,983 302,933
======================================= ================= ===========
Capital and reserves
Share capital 40,229 40,229
Share premium account 11,664 11,664
Capital redemption reserve 19,759 19,759
Warrant exercise reserve 417 417
Share purchase reserve 57,116 60,433
Capital reserve 119,433 155,503
Revenue reserve 12,365 14,928
======================================= ================= ===========
Shareholders' funds 260,983 302,933
======================================= ================= ===========
Net asset value per ordinary share
* 172.4p 197.4p
======================================= ================= ===========
Ordinary shares in issue (note 8) 151,395,484 153,495,484
======================================= ================= ===========
* See Glossary of Terms and Alternative Performance Measures
below.
The accompanying notes below are an integral part of the
Financial Statements.
Statement of Changes in Equity (unaudited)
For the six months ended 31 October 2022
Share capital Share Capital Warrant Share Capital Revenue Shareholders'
GBP'000 premium redemption exercise purchase Reserve* reserve funds
account reserve reserve reserve GBP'000 GBP'000 GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
================ ============= ========= ============ ========== ========== ========== ========= =============
Shareholders'
funds at 1 May
2022 40,229 11,664 19,759 417 60,433 155,503 14,928 302,933
Net return on
ordinary
activities
after taxation - - - - - (36,070) 3,388 (32,682)
Ordinary shares
bought back
into treasury - - - - (3,317) - - (3,317)
Dividends paid
(note 5) - - - - - - (5,951) (5,951)
================ ============= ========= ============ ========== ========== ========== ========= =============
Shareholders'
funds at 31
October
2022 40,229 11,664 19,759 417 57,116 119,433 12,365 260,983
================ ============= ========= ============ ========== ========== ========== ========= =============
For the six months ended 31 October 2021
Share capital Share Capital Warrant Share Capital Revenue Shareholders'
GBP'000 premium redemption exercise purchase Reserve* reserve funds
account reserve reserve reserve GBP'000 GBP'000 GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
================ ============= ========= ============ ========== ========== ========== ========= =============
Shareholders'
funds at 1 May
2021 40,229 11,328 19,759 417 60,433 218,981 11,906 363,053
Ordinary shares
sold from
treasury - 336 - - - 805 - 1,141
Net return on
ordinary
activities
after taxation - - - - - 6,673 3,501 10,174
Dividends paid
(note 5) - - - - - - (3,715) (3,715)
================ ============= ========= ============ ========== ========== ========== ========= =============
Shareholders'
funds at 31
October
2021 40,229 11,664 19,759 417 60,433 226,459 11,692 370,653
================ ============= ========= ============ ========== ========== ========== ========= =============
* The Capital Reserve balance at 31 October 2022 includes
investment holding losses of GBP38,250,000 (31 October 2021 - gains
of GBP64,943,000).
The accompanying notes below are an integral part of the
Financial Statements.
Condensed Cashflow Statement (unaudited)
Six months Six months
to 31 October to 31 October
2022 2021
GBP'000 GBP'000
------------------------------------------- -------------- --------------
Cash flows from operating activities
Net return on ordinary activities before
taxation (32,682) 10,174
Net losses/(gains) on investments 35,463 (7,350)
Currency gains - (18)
Finance costs of borrowings 168 60
Changes in debtors and creditors 1,501 1,147
=========================================== ============== ==============
Cash from operations * 4,450 4,013
Interest paid (100) (64)
=========================================== ============== ==============
Net cash inflow from operating activities 4,350 3,949
=========================================== ============== ==============
Cash flows from investing activities
Acquisitions of investments (13,289) (12,577)
Disposals of investments 13,970 16,907
=========================================== ============== ==============
Net cash inflow from investing activities 681 4,330
=========================================== ============== ==============
Cash flows from financing activities
Bank loan drawn down 8,000 2,450
Bank loan repaid - (2,450)
Equity dividends paid (5,951) (3,715)
Ordinary shares sold from treasury - 1,141
Ordinary shares bought back into treasury
and stamp duty thereon (3,242) -
=========================================== ============== ==============
Net cash outflow from financing activities (1,193) (2,574)
=========================================== ============== ==============
Increase in cash and cash equivalents 3,838 5,705
Exchange movements - 18
Cash and cash equivalents at start of
period 1,491 1,872
=========================================== ============== ==============
Cash and cash equivalents at end of period 5,329 7,595
=========================================== ============== ==============
* Cash from operations includes dividends received of
GBP5,470,000 (2021 - GBP5,218,000).
Cash and cash equivalents represent cash at bank and short term
money market deposits repayable on demand.
The accompanying notes below are an integral part of the
Financial Statements.
Notes to the Condensed Financial Statements (unaudited)
1. The condensed Financial Statements for the six months to 31
October 2022 comprise the statements set out above together with
the related notes below. They have been prepared in accordance with
FRS 104 'Interim Financial Reporting' and the AIC's Statement of
Recommended Practice issued in November 2014 and updated in July
2022 with consequential amendments and have not been audited or
reviewed by the Auditor pursuant to the Auditing Practices Board
Guidance 'Review of Interim Financial Information'. The Financial
Statements for the six months to 31 October 2022 have been prepared
on the basis of the same accounting policies as set out in the
Company's Annual Report and Financial Statements at 30 April
2022.
Going Concern
Having considered the nature of the Company's principal risks
and uncertainties, as set out below, together with its current
position, investment objective and policy, its assets and
liabilities and projected income and expenditure, together with the
Company's dividend policy, it is the Directors' opinion that the
Company has adequate resources to continue in operational existence
for the foreseeable future. The Board has, in particular,
considered the ongoing impact of market volatility since the
Covid-19 pandemic and over recent months due to macroeconomic and
geopolitical concerns, including the Russia-Ukraine conflict, but
does not believe the Company's going concern status is affected.
The Company's assets, the majority of which are investments in
quoted securities which are readily realisable, exceed its
liabilities significantly and could be sold to repay borrowings if
required. All borrowing facilities require the prior approval of
the Board. Gearing levels and compliance with borrowing covenants
are reviewed by the Board on a regular basis. In accordance with
the Company's Articles of Association, shareholders have a right to
vote on the continuation of the Company every five years, the next
vote being in 2024. Accordingly, the Directors consider it
appropriate to adopt the going concern basis of accounting in
preparing these Financial Statements and confirm that they are not
aware of any material uncertainties which may affect the Company's
ability to continue to do so over a period of at least twelve
months from the date of approval of
these Financial Statements.
2. The financial information contained within this Interim
Financial Report does not constitute statutory accounts as defined
in sections 434 to 436 of the Companies Act 2006. The financial
information for the year ended 30 April 2022 has been extracted
from the statutory accounts which have been filed with the
Registrar of Companies. The Auditor's Report on those accounts was
not qualified, did not include a reference to any matters to which
the Auditor drew attention by way of emphasis without qualifying
their report, and did not contain a statement under sections 498(2)
or (3) of the Companies Act 2006.
3. Baillie Gifford & Co Limited, a wholly owned subsidiary
of Baillie Gifford & Co, has been appointed by the Company as
its Alternative Investment Fund Manager (AIFM) and Company
Secretary. The investment management function has been delegated to
Baillie Gifford & Co. The management agreement can be
terminated on six months' notice. The annual fee is 0.5% of net
asset value, calculated and payable quarterly.
4.
Six months Six months
to 31 October to 31 October
2022 2021
GBP'000 GBP'000
====================================== ===================== =====================
Net return per ordinary share
Revenue return on ordinary activities
after taxation 3,388 3,501
Capital return on ordinary activities
after taxation (36,070) 6,673
====================================== ===================== =====================
Total net return (32,682) 10,174
====================================== ===================== =====================
Weighted average number of ordinary
shares in issue 152,402,008 153,420,349
====================================== ===================== =====================
Net return per ordinary share is based on the above totals of
revenue and capital and the weighted average number of ordinary
shares in issue during each period. There are no dilutive or
potentially dilutive shares in issue.
5.
Six months Six months
to 31 October to 31 October
2022 2021
GBP'000 GBP'000
==================================== ===================== =====================
Dividends
Amounts recognised as distributions
in the period:
Previous year's final dividend
of 3.91p (2021 - 2.42p),
paid 16 September 2022 5,951 3,715
==================================== ===================== =====================
6. Fair Value Hierarchy
The fair value hierarchy used to analyse the basis on which the
fair values of financial instruments held at fair value through the
profit or loss account are measured is described below. Fair value
measurements are categorised on the basis of the lowest level input
that is significant to the fair value measurement.
Level 1 - using unadjusted quoted prices for identical
instruments in an active market;
Level 2 - using inputs, other than quoted prices included within
Level 1, that are directly or indirectly observable (based on
market data); and
Level 3 - using inputs that are unobservable (for which market
data is unavailable).
Level 1 Level 2 Level 3 Total
As at 31 October 2022 GBP'000 GBP'000 GBP'000 GBP'000
====================== =============== =============== =============== ===============
Listed equities 269,385 - - 269,385
Unlisted preference
shares * - - 1,055 1,055
====================== =============== =============== =============== ===============
Total financial asset
investments 269,385 - 1,055 270,440
====================== =============== =============== =============== ===============
Level 1 Level 2 Level 3 Total
As at 30 April 2022 GBP'000 GBP'000 GBP'000 GBP'000
====================== =============== =============== =============== ===============
Listed equities 305,193 - - 305,193
Unlisted preference
shares * - - 1,392 1,392
====================== =============== =============== =============== ===============
Total financial asset
investments 305,193 - 1,392 306,585
====================== =============== =============== =============== ===============
* The unlisted preference shares investment represents a holding
in Wayve Technologies Limited.
The fair value of listed investments is either bid price or last
traded price depending on the convention of the exchange on which
the investment is listed. Listed investments are categorised as
Level 1 if they are valued using unadjusted quoted prices for
identical instruments in an active market and as Level 2 if they do
not meet all these criteria but are, nonetheless, valued using
market data. Unlisted investments are valued at fair value by the
Directors following a detailed review and appropriate challenge of
the valuations proposed by the Managers. The Managers' unlisted
investment policy applies methodologies consistent with the
International Private Equity and Venture Capital Valuation
Guidelines ('IPEV').
These methodologies can be categorised as follows: (a) market
approach (multiples, industry valuation benchmarks and available
market prices); (b) income approach (discounted cash flows); and
(c) replacement cost approach (net assets). The Company's holding
in an unlisted investment is categorised as Level 3 as unobservable
data is a significant input to its fair value measurement.
7. At 31 October 2022 the Company had borrowings of
GBP14,450,000 (30 April 2022 - GBP6,450,000). This was drawn down
under the one year GBP30 million unsecured revolving credit loan
facility with The Royal Bank of Scotland International Limited
which expires in July 2023.
8. At 31 October 2022, the Company had the authority to buy back
22,226,628 ordinary shares and to allot or sell from treasury
15,299,548 ordinary shares without application of pre-emption
rights in accordance with the authorities granted at the AGM in
September 2022. During the six months to 31 October 2022, no shares
were sold from treasury (year to 30 April 2022 - 475,000 ordinary
shares were sold from treasury at a premium to net asset value,
with a nominal value of GBP119,000 raising net proceeds of
GBP1,141,000). During the six months to 31 October 2022, 2,100,000
ordinary shares with a nominal value of GBP525,000 were bought back
at a total cost of GBP3,317,000 and held in treasury (year to 30
April 2022 - no shares were bought back).
9. During the period, transaction costs on equity purchases
amounted to GBP58,000 (31 October 2021 - GBP23,000) and on equity
sales GBP6,000 (31 October 2021 - GBP2,000).
10. Related Party Transactions
There have been no transactions with related parties during the
first six months of the current financial year that have materially
affected the financial position or the performance of the Company
during that period and there have been no changes in the related
party transactions described in the last Annual Report and
Financial Statements that could have had such an effect on the
Company during that period.
None of the views expressed in this document should be construed
as advice to buy or sell a particular investment.
Glossary of Terms and Alternative Performance Measures (APM)
Total Assets
Total assets less current liabilities, before deduction of all
borrowings.
Net Asset Value
Net Asset Value (NAV) is the value of total assets less
liabilities (including borrowings). The NAV per share is calculated
by dividing this amount by the number of ordinary shares in issue
(excluding treasury shares).
Net Liquid Assets
Net liquid assets comprise current assets less current
liabilities, excluding borrowings.
Discount/Premium (APM)
As stockmarkets and share prices vary, an investment trust's
share price is rarely the same as its NAV. When the share price is
lower than the NAV per share it is said to be trading at a
discount. The size of the discount is calculated by subtracting the
share price from the NAV per share and is usually expressed as a
percentage of the NAV per share. If the share price is higher than
the NAV per share, it is said to be trading at a premium.
31 October 30 April
2022 2022
====================== ================= ===============
Closing NAV per share 172.4p 197.4p
Closing share price 150.0p 174.2p
====================== ================= ===============
Discount (13.0%) (11.8%)
====================== ================= ===============
Total Return (APM)
The total return is the return to shareholders after reinvesting
the net dividend on the date that the share price goes
ex-dividend.
31 October 31 October 30 April 30 April
2022 NAV 2022 2022 NAV 2022
Share Share
price price
============================ ========== ============== ============== ================ ===============
Closing NAV per share/share
price (a) 172.4p 150.0p 197.4p 174.2p
Dividend adjustment
factor * (b) 1.0203 1.0233 1.0096 1.0098
Adjusted closing NAV (c = a
per share/share price x b) 175.9p 153.5p 199.3p 175.9p
Opening NAV per share/share
price (d) 197.4p 174.2p 237.3p 244.0p
============================ ========== ============== ============== ================ ===============
(c ÷
Total return d) -1 (10.9%) (11.9) (16.0%) (27.9%)
============================ ========== ============== ============== ================ ===============
* The dividend adjustment factor is calculated on the assumption
that the dividends of 3.91p (2021 - 2.42p) paid by the Company
during the year were reinvested into shares of the Company at the
cum income NAV per share/share price, as appropriate, at the
ex-dividend date.
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the
Company as a percentage of the average net asset value. The ongoing
charges have been
calculated on the basis prescribed by the Association of
Investment Companies.
Turnover (APM)
Annual turnover is a measure of portfolio change or trading
activity in a portfolio. Turnover is calculated as the minimum of
purchases and sales in a month,
divided by the average market value of the portfolio, summed to
get rolling 12 month turnover data.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other
public company, an investment trust can borrow money to invest in
additional investments for its portfolio. The effect of the
borrowing on the shareholders' assets is called 'gearing'. If the
Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the
value of the Company's assets falls, the situation is reversed.
Gearing can therefore enhance performance in rising markets but can
adversely impact performance in falling markets.
Equity gearing is the Company's borrowings adjusted for cash and
cash equivalents expressed as a percentage of shareholders'
funds.
31 October 30 April
2022 2022
================================ ===================== =====================
Borrowings GBP14,450,000 GBP6,450,000
Less: cash and cash equivalents (GBP5,329,000) (GBP1,491,000)
Adjusted borrowings GBP9,121,000 GBP4,959,000
Shareholders' funds GBP260,983,000 GBP302,933,000
================================ ===================== =====================
Equity gearing 3% 2%
================================ ===================== =====================
Potential gearing is the Company's borrowings expressed as a
percentage of shareholders' funds.
31 October 30 April
2022 2022
==================== ===================== =====================
Borrowings GBP14,450,000 GBP6,450,000
==================== ===================== =====================
Shareholders' funds GBP260,983,000 GBP302,993,000
==================== ===================== =====================
Potential gearing 6% 2%
==================== ===================== =====================
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers
(AIFM) Regulations, leverage is any method which increases the
Company's exposure, including the borrowing of cash and the use of
derivatives. It is expressed as a ratio between the Company's
exposure and its net asset value and can be calculated on a gross
and a commitment method. Under the gross method, exposure
represents the sum of the Company's positions after the deduction
of sterling cash balances, without taking into account any hedging
and netting arrangements. Under the commitment method, exposure is
calculated without the deduction of sterling cash balances and
after certain hedging and netting positions are offset against each
other.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed,
is the percentage of the portfolio that differs from its
comparative index. It is calculated by deducting from 100 the
percentage of the portfolio that overlaps with the comparative
index. An active share of 100 indicates no overlap with the index
and an active share of zero indicates a portfolio that tracks the
index.
Unlisted (Private) Company
An unlisted (private) company means a company whose shares are
not available to the general public for trading and not listed on a
stock exchange.
Principal Risks and Uncertainties
The principal risks facing the Company are financial risk,
investment strategy risk, climate and governance risk, discount
risk, regulatory risk, custody and depositary risk, operational
risk, cyber security risk, leverage risk, political risk and
emerging risks. An explanation of these risks and how they are
managed is set out on pages 7 to 9 of the Company's Annual Report
and Financial Statements for the year to 30 April 2022 which is
available on the Company's website: bgukgrowthtrust.com . The
principal risks and uncertainties have not changed since the date
of that report.
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FTSE Index Data
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(collectively, the 'LSE Group'). (c) LSE Group 2022. FTSE Russell
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Sustainable Finance Disclosure Regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does
not have a direct impact in the UK due to Brexit, however, it
applies to third-country products marketed in the EU. As Baillie
Gifford UK Growth Trust plc is marketed in the EU by the AIFM, BG
& Co Limited, via the National Private Placement Regime (NPPR)
the following disclosures have been provided to comply with the
high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's Governance and
Sustainable Principles and Guidelines as its policy on integration
of sustainability risks in investment decisions.
Baillie Gifford & Co's approach to investment is based on
identifying and holding high quality growth businesses that enjoy
sustainable competitive advantages in their marketplace. To do this
it looks beyond current financial performance, undertaking
proprietary research to build an in-depth knowledge of an
individual company and a view on its long-term prospects. This
includes the consideration of sustainability factors
(environmental, social and/or governance matters) which it believes
will positively or negatively influence the financial returns of an
investment.
More detail on the Managers' approach to sustainability can be
found in the Governance and Sustainability Principles and
Guidelines document, available publicly on the Baillie Gifford
website (bailliegifford.com).
Taxonomy Regulation
The Taxonomy Regulation establishes an EU-wide framework of
criteria for environmentally sustainable economic activities in
respect of six environmental objectives. It builds on the
disclosure requirements under SFDR by introducing additional
disclosure obligations in respect of Alternative Investment Funds
that invest in an economic activity that contributes to an
environmental objective. The Company does not commit to make
sustainable investments as defined under SFDR. As such, the
underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities.
- ends -
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END
IR PPGWCGUPPGQB
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November 30, 2022 02:00 ET (07:00 GMT)
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