The Monks Investment Trust PLC (MNKS)
Legal Entity Identifier: 213800MRI1JTUKG5AF64
Results for the six months to 31 October 2022
The following is the unaudited Interim Financial Report for the six months to 31 October 2022 which was approved by the Board on 6 December 2022.
Interim Management Report
The performance of the Monks portfolio over the past six months has been disappointing. The backdrop of an ongoing war in Europe between Russia and Ukraine, rising inflation, and aggressive central bank rate rises have done little to ease investor nervousness. Investors’ appetite for risk has been reduced, their timeframes have shrunk, and the value the market is prepared to place on future profits has fallen. The sort of structurally expanding businesses Monks invests in, particularly those where profits lie a few years out, remain out of favour.
During the first half of our financial year, the Company produced a negative net asset value (NAV)* total return of -5.2% compared to -0.3% for the comparative index (FTSE World in sterling). The share price total return was -7.6%. Since the Global Alpha team took over the management of the portfolio in March 2015, the Company has produced a NAV total return of +118.4% compared to +119.7% for the comparative index. The share price total return was +129.7%.
Resilience, quality, growth
Given ongoing market challenges, it is important we reconfirm to shareholders our convictions. Our confidence in the portfolio is underpinned by the underlying holdings’ superior resilience, quality, and growth characteristics. The portfolio holdings remain significantly less indebted (Net Debt to Equity 10% versus 50% for the market) and have higher margin structures (for example, gross margins of 40% versus 29%) than the broader market. These are desirable in a world where both input and funding costs are rising and the demand environment for companies is less certain. The operational performance of investee companies remains strong. In aggregate, revenue and earnings growth has outpaced the broader market by a considerable margin (annualised revenue and earnings growth has been 60% and 30% faster, respectively, in the five years to end October). As we look forward, revenue and earnings are forecast to grow twice as fast as the market average over the next year – our conviction strengthens over longer periods.
Portfolio activity
Year-to-date, we have sold 20 holdings and established nine new ones. The greater number of sales reflects a proactive and ruthless portfolio ‘weeding’ exercise. These sales can be broadly categorised into three main groups.
The first comprises companies that we believe to be materially challenged in an inflationary environment or that are exposed to a potential tapering of consumer demand. Positions sold include Peloton (home fitness), Carvana (online used car retail) and Teladoc (telemedicine). Peloton and Carvana have been disappointingly short-lived holdings. In Peloton’s case, it became clear that the company had mismanaged the hardware side of its business, significantly overestimating demand for its exercise bikes. This necessitated the appointment of a new CEO and a period of stabilisation. We moved on as our confidence in management had been undermined and our original thesis overwhelmed. Carvana buys its inventory (used cars) on credit and sells to consumers who are often reliant on credit. In a period of rising interest rates and weakening demand for highly discretionary goods, our view is that Carvana’s probability of success is narrowing. Teladoc had been a longer-term holding (purchased in September 2019). A combination of slowing growth, and significant write-downs relating to an acquisition, undermined our confidence in the long-term investment case. We continue to contemplate the long-term implications for the likes of Wayfair (online furniture retail), Oscar Health (health insurance) and Adidas (sports apparel).
The second group is Chinese companies. Positions in Brilliance China Automotive (auto retail), KE Holdings (online property), Tencent Music Entertainment (online music and entertainment) and Naspers (South African investment company, included here due to its significant stake in Chinese gaming business, Tencent) have been sold. For each company, there are fundamental reasons behind our decision to sell. For example, emerging competition in the cases of KE Holdings and TME and governance concerns at Brilliance China Automotive. However, it is important to recognise the prevailing regulatory environment for private enterprise in China. We believe that it is increasingly difficult for private enterprises in China to generate supernormal profits of the sort that we seek for Monks’ portfolio. Therefore, a more modest overall exposure to China better reflects our view of the potential upside.
The third group is where the investment case has played out or where we have been disappointed by management’s ability to execute. In the former camp, Hays, Page Group (both recruitment) and ICICI Bank (retail banking), have delivered operationally and in share price terms. In Hays and Page Groups’ case, the future threat of online platforms like LinkedIn compelled us to move on, whilst ICICI Bank has grown its loan book, asset quality and net interest margins strongly. In the latter camp, Lyft (ride hailing), Stericyle (waste management) and Vimeo (video software) failed either to meet our ambitions for their business or underwhelmed operationally.
Reward seeking
The significant markdown in share prices that we have seen this year has brought valuations of many attractive growth companies into our purview. We have begun to take advantage of this by investing in companies we have long admired. Examples include the purchases of Adobe (digital content), Analog Devices (semiconductors), and Royalty Pharma (healthcare funding) in the first half of the calendar year. In the last six months, we have purchased new holdings in Eaton (electrical power equipment) and Shiseido (cosmetics). Eaton is a manufacturer of vital electrical power management equipment and has a strong track record of operational efficiency. We believe that the structural trend toward digitalisation and an increased focus on higher-margin products should underpin strong growth in the future. Shiseido is a Japanese cosmetics manufacturer with a portfolio of high-end brands. Whilst pandemic lockdowns across Asia have stymied growth, we believe that over the long term the emerging middle classes are likely to underpin attractive returns for Shiseido. Elsewhere, we have been able to add to existing positions where we think that the share price falls are unjustified. This has been the case for Farfetch (online luxury), Coupang (ecommerce) and Chewy (online pet supplies).
We believe that the portfolio is opportunistically poised to deploy capital from the ‘Stalwarts’ (which have held up well in relative terms and account for nearly 40% of the portfolio) into selective opportunities where the relative return potential is greater. We have been preparing the ground for this by looking both at potential cyclical opportunities and, against a background of scarcer capital, companies that have capital readily available to deploy. We are excited about the abundance of opportunities and are building conviction in several names.
Back on the road
We have been energised by the return of in-person meetings with investee companies and prospective holdings. We have been able to travel both locally and further afield, including to the US and Latin America. We met with a variety of existing and potential holdings across a diverse range of sectors and industries.
Indeed, we were fortunate to spend significant time with the founder and four members of the executive management team of holding MercadoLibre. This access afforded us a better understanding of the depth of MercadoLibre’s executive talent pool and the future drivers of growth for the business. Likewise, we spent a day with Farfetch, which helped further our understanding of the business and the likelihood of it becoming the predominant global ecommerce platform for luxury goods.
The value of these in-person conversations should not be underestimated. Not only were we able to directly address questions about the competitive landscape for MercadoLibre’s ecommerce platform and the stability of its financing arm, but our broader view of where there may be structural growth opportunities was enriched. Our recent trip involved meetings with several innovative financial disruptors and a venture capital provider. The financial sector in many Latin American countries appears ripe for disruption given the egregious fees charged by incumbent banks. We were left in no doubt about the potential for disruption, and that this area could be subject to significant change and opportunity in the future.
Independent Investment Trust
In early November the Monks portfolio received £173m of assets following the voluntary liquidation and rollover of The Independent Investment Trust PLC. This was made up of around £100m in equity investment holdings, which have been reviewed and assessed for fit with Monks’ portfolio, and £73m in cash. The stocks inherited are a mix of cyclical companies such as UK housebuilders Persimmon, Redrow, and Bellway and early-stage growth companies like Midwich, a distributor of audiovisual equipment, and Bytes Technology, a software solutions provider. Benefits to shareholders include increased scale, resulting in an estimated reduction to its ongoing charges ratio of two basis points, and cash at an advantageous point in the performance cycle.
Gearing
The level of invested gearing at the period end stood at 8.6%, compared to 7.3% six months earlier. The modest increase in gearing levels reflects the fall in NAV and deployment of cash into equity markets. Over the medium term, and where the appropriate opportunity presents itself, we would expect to move the gearing level towards the intended long-term target position of 10%.
Dividend
No interim dividend is being paid. A single final dividend will typically be paid after the AGM, reflecting the Company’s focus on capital growth.
Outlook
Consistency of investment approach, particularly through difficult times, is of utmost importance. Our investment edge remains in identifying and owning growth companies for the long term. The purpose of this is to allow the power of compound growth in revenues, earnings, and cashflows to drive share price appreciation – shareholders should rightly challenge us if we appear to be veering off course. Operating conditions for companies change. We recognise this. This has prompted us to spend considerable time assessing where there may be quality cyclical opportunities – we are deepening our conviction in several names. We are confident that we own a collection of companies that should be well-placed to navigate a period of rising costs and potentially weaker demand. Indeed, the financial characteristics and the competitive positions of a vast majority of holdings lead us to believe many will outcompete their peers and emerge stronger .
* With debt at fair value
The principal risks and uncertainties facing the Company are set out at the end of this document.
6 December 2022
For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this document
Total return information sourced from Refinitiv/Baillie Gifford. See disclaimer at end of this document.
Past performance is not a guide to future performance.
The Managers’ Core Investment Beliefs
We believe the following features of Monks provide a sustainable basis for adding value for shareholders.
Active Management
– We invest in attractive companies using a ‘bottom-up’ investment process. Macroeconomic forecasts are of relatively little interest to us.
– High active share* provides the potential for adding value.
– We ignore the structure of the index – for example the location of a company’s HQ and therefore its domicile are less relevant to us than where it generates sales and profits.
– Large swathes of the market are unattractive and of no interest to us.
– As index agnostic global investors we can go anywhere and only invest in the best ideas.
– As the portfolio is very different from the index, we expect portfolio returns to vary – sometimes substantially and often for prolonged periods.
Committed Growth Investors
– In the long run, share prices follow fundamentals; growth drives returns.
– We aim to produce a portfolio of stocks with above average growth – this in turn underpins the ability of Monks to add value.
– We have a differentiated approach to growth, focusing on the type of growth that we expect a company to deliver. All holdings fall into one of three growth categories – as set out below.
– The use of these three growth categories ensures a diversity of growth drivers within a disciplined framework.
Long-Term Perspective
– Long-term holdings mean that company fundamentals are given time to drive returns.
– We prefer companies that are managed with a long-term mindset, rather than those that prioritise the management of market expectations.
– We believe our approach helps us focus on what is important during the inevitable periods of underperformance.
– Short-term portfolio results are random.
– As longer-term shareholders we are able to have greater influence on environmental, social and governance matters.
Dedicated Team with Clear Decision-making Process
– Senior and experienced team drawing on the full resources of Baillie Gifford.
– Alignment of interests – the investment team responsible for Monks all own shares in the Company.
Portfolio Construction
– Investments are held in three broad holding sizes – as set out below.
– This allows us to back our judgement in those stocks for which we have greater conviction, and to embrace the asymmetry of returns through ‘incubator’ positions in higher risk/return stocks.
– ‘Asymmetry of returns’: some of our smaller positions will struggle and their share prices will fall; those that are successful may rise many fold. The latter should outweigh the former.
Low Cost
– Investors should not be penalised by high management fees.
– Low turnover and trading costs benefit shareholders.
For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this document
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 and Transparency Rule 4.2.7R (indication of important events during the first six months, 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
c) the Interim Financial Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).
By order of the Board
KS Sternberg
Chairman
6 December 2022
Thirty Largest Holdings as at 31 October 2022
| Name | Growth category | Business description | Fair value£’000 | % of totalassets* |
| Elevance Health | Stalwart | Healthcare insurer | 116,152 | 4.8 |
| Martin Marietta Materials | Cyclical | Cement and aggregates manufacturer | 69,112 | 2.8 |
| Reliance Industries | Rapid | Indian energy conglomerate | 67,944 | 2.8 |
| Microsoft | Stalwart | Software and cloud computing enterprise | 64,818 | 2.7 |
| The Schiehallion Fund * | Rapid | Global unlisted growth equity investment company | 35,234 | 1.5 |
| The Schiehallion Fund – C Shares * | Rapid | Global unlisted growth equity investment company | 27,058 | 1.1 |
| 62,292 | 2.6 | |||
| Arthur J. Gallagher | Stalwart | Insurance broker | 62,122 | 2.5 |
| Alphabet | Stalwart | Online search engine | 60,729 | 2.5 |
| Moody’s | Stalwart | Credit rating agency | 58,574 | 2.4 |
| Service Corporation International | Stalwart | Death care services | 56,697 | 2.3 |
| Prosus | Rapid | Media and ecommerce company | 54,518 | 2.2 |
| Olympus | Stalwart | Optoelectronic products | 49,051 | 2.0 |
| MasterCard | Stalwart | Electronic payments network and related services | 46,753 | 1.9 |
| Pernod Ricard | Stalwart | Global spirits manufacturer | 46,748 | 1.9 |
| Royalty Pharma | Cyclical | Biopharmaceutical royalties portfolio | 45,050 | 1.9 |
| CRH | Cyclical | Diversified building materials company | 43,596 | 1.8 |
| Thermo Fisher Scientific | Stalwart | Scientific instruments, consumables and chemicals | 41,764 | 1.7 |
| Amazon.com | Rapid | Online retailer | 41,559 | 1.7 |
| Ryanair | Cyclical | Low cost European airline | 40,965 | 1.7 |
| BHP Group | Cyclical | Mineral exploration and production | 40,867 | 1.7 |
| Albemarle | Cyclical | Speciality chemicals | 36,357 | 1.5 |
| Charles Schwab | Cyclical | Online savings and trading platform | 36,307 | 1.5 |
| Alnylam Pharmaceuticals | Rapid | RNA interference based biotechnology | 35,991 | 1.5 |
| AIA | Stalwart | Asian life insurer | 34,523 | 1.4 |
| Rio Tinto | Cyclical | Global commodities businesses | 31,966 | 1.3 |
| Moderna | Rapid | Drug discovery using mRNA technology | 30,809 | 1.3 |
| Prudential | Stalwart | International life insurance | 30,465 | 1.3 |
| HDFC | Rapid | Indian mortgage provider | 29,797 | 1.2 |
| Estee Lauder | Stalwart | Global cosmetic brands business | 29,294 | 1.2 |
| B3 Group | Rapid | Brazilian stock exchange operator | 28,389 | 1.2 |
| TSMC | Cyclical | Semiconductor manufacturer | 27,790 | 1.1 |
| 1,420,999 | 58.4 |
For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this document
Investment Portfolio by Growth Category as at 31 October 2022*
| Holding Size | Growth Stalwarts | % | Rapid Growth | % | Cyclical Growth | % | |
| (c.10% p.a. earnings growth) | (c.15% to 25% p.a. earnings growth) | (c.10% to 15% p.a. earnings growth through a cycle) | |||||
| Company Characteristics¾ Durable franchise¾ Deliver robust profitability in most macroeconomic environments¾ Competitive advantage includes dominant local scale, customer loyalty and strong brands | Company Characteristics¾ Early stage businesses with vast growth opportunity¾ Innovators attacking existing profit pools or creating new markets | Company Characteristics¾ Subject to macroeconomic and capital cycles with significant structural growth prospects¾ Strong management teams highly skilled at capital allocation | |||||
| Highest conviction holdings c.2.0% each Total: 47.7% | Elevance Health | 4.8 | Reliance Industries | 2.8 | Martin Marietta Materials | 2.9 | |
| Microsoft | 2.7 | Prosus | 2.3 | Royalty Pharma | 1.9 | ||
| Arthur J. Gallagher | 2.6 | Amazon.com | 1.7 | CRH | 1.8 | ||
| Alphabet | 2.5 | Alnylam Pharmaceuticals | 1.5 | Ryanair | 1.7 | ||
| Moody’s | 2.4 | The Schiehallion Fund | 1.5 | BHP Group | 1.7 | ||
| Service Corporation International | 2.4 | Albemarle | 1.5 | ||||
| Olympus | 2.0 | Charles Schwab | 1.5 | ||||
| MasterCard | 1.9 | ||||||
| Pernod Ricard | 1.9 | ||||||
| Thermo Fisher Scientific | 1.7 | ||||||
| Average sized holdingsc.1.0% each Total: 33.3% | AIA | 1.4 | Moderna | 1.3 | Rio Tinto | 1.3 | |
| Prudential | 1.3 | HDFC | 1.2 | TSMC | 1.2 | ||
| Estee Lauder | 1.2 | B3 Group | 1.2 | Markel | 1.1 | ||
| S&P Global | 1.1 | The Schiehallion Fund – C Shares | 1.1 | Booking Holdings | 1.1 | ||
| Broadridge Financial Solutions | 1.1 | The Trade Desk | 1.1 | Richemont | 0.9 | ||
| CoStar | 0.9 | Tesla | 1.1 | Teradyne | 0.9 | ||
| Shiseido | 0.9 | Illumina | 0.9 | CBRE Group | 0.9 | ||
| Analog DevicesSysmex | 0.70.7 | Epic Games | Atlas Copco | 0.8 | |||
| MercadoLibre | 0.8 | SMC | 0.7 | ||||
| ByteDance | 0.7 | Deutsche Boerse | 0.7 | ||||
| Genmab | 0.7 | SiteOne Landscape Supply | 0.7 | ||||
| Coupang LLC | 0.7 | Nexans | 0.7 | ||||
| Alibaba | 0.7 | ||||||
| Shopify | 0.7 | ||||||
| Incubator Holdings c.0.5% each Total: 19.0% | Adobe Systems | 0.6 | Axon Enterprise | 0.6 | Epiroc | 0.6 | |
| Chewy Inc | 0.6 | Farfetch | 0.6 | DENSO | 0.5 | ||
| Meta Platforms Inc | 0.6 | Ping An Insurance | 0.6 | Eaton | 0.5 | ||
| adidas | 0.4 | Schibsted | 0.6 | Howard Hughes | 0.4 | ||
| Topicus.com | 0.4 | Abiomed | 0.5 | Woodside Energy Group | 0.3 | ||
| Certara | 0.3 | Cloudflare | 0.5 | Sands China | 0.2 | ||
| Hoshizaki Corp | 0.3 | Snowflake | 0.5 | Silk Invest Africa Food Fund | 0.2 | ||
| Sea Limited | 0.5 | Wizz Air Holdings | 0.2 | ||||
| ICICI Prudential Life Insurance | 0.5 | IAC/Interactivecorp | 0.2 | ||||
| Netflix | 0.5 | Sberbank of Russia | 0.0 | ||||
| Adyen | 0.5 | ||||||
| Lemonade | 0.5 | ||||||
| CyberAgent | 0.4 | ||||||
| Staar Surgical | 0.4 | ||||||
| Renishaw | 0.4 | ||||||
| Twilio | 0.4 | ||||||
| Novocure | 0.4 | ||||||
| Bumble | 0.4 | ||||||
| Doordash | 0.4 | ||||||
| Li Auto | 0.4 | ||||||
| Trupanion | 0.4 | ||||||
| Datadog | 0.4 | ||||||
| Adevinta Asa | 0.3 | ||||||
| Meituan | 0.3 | ||||||
| Space Exploration Technologies | 0.3 | ||||||
| Chegg | 0.2 | ||||||
| Spotify | 0.2 | ||||||
| Exact Sciences | 0.2 | ||||||
| Stripe | 0.2 | ||||||
| Ant International | 0.2 | ||||||
| Wayfair | 0.2 | ||||||
| Oscar Health | 0.1 | ||||||
| Illumina CVR | 0.1 | ||||||
| Total | 37.4 | Total | 35.5 | Total | 27.1 | ||
* Excludes net liquid assets.
Portfolio Positioning as at 31 October 2022*
Thematic Exposure – Risks and Opportunities
| At 31 October 2022 | ||||
| Category | % | % | % | |
| New Economy | 36.7 | |||
| Innovation | 15.4 | |||
| Transformational Health | 6.7 | |||
| Enterprise Cloud | 3.5 | |||
| Chips | 2.7 | |||
| Other Innovation | 2.5 | |||
| Platform Crush | 9.2 | |||
| Regulation/Anti-trust | 8.9 | |||
| Transformative/Unproven Model | 3.2 | |||
| Developing Economies | 16.0 | |||
| Emerging Markets Middle Classes | 9.7 | |||
| Emerging Markets Consumer Catch-up | 3.9 | |||
| Emerging Markets Financial Development | 5.8 | |||
| Carbon Heavy | 5.3 | |||
| Lending/Underwriting Risk | 0.6 | |||
| Industrial Demand | 0.4 | |||
| Economically Agnostic | 29.5 | |||
| Highly Valued Compounders | 17.3 | |||
| Idiosyncratic | 8.5 | |||
| Insurance Cycle | 3.7 | |||
| Developed Market Growth | 17.0 | |||
| Consumer Demand | 4.0 | |||
| Industrial Demand | 6.7 | |||
| Capital Markets/Asset Inflation | 3.5 | |||
| Carbon Pricing | 2.8 | |||
| Net Liquid Assets†| 0.8 | |||
| Total Assets | 100.0 |
Geographical
| At31 October 2022% | At30 April 2022% | |
| North America | 57.9 | 54.0 |
| Continental Europe | 14.0 | 14.5 |
| United Kingdom | 6.3 | 8.7 |
| China | 2.9 | 4.1 |
| Emerging Markets ex China | 8.4 | 8.1 |
| Japan | 5.5 | 4.5 |
| Developed Asia | 4.2 | 4.9 |
| Total Investments | 99.2 | 98.8 |
| Net Liquid Assets†| 0.8 | 1.2 |
| Total Assets | 100.0 | 100.0 |
Sectoral
| At31 October 2022% | At30 April 2022% | ||
| Financials | 20.5 | 21.1 | |
| Technology | 18.5 | 20.6 | |
| Consumer Discretionary | 19.1 | 19.5 | |
| Healthcare | 17.2 | 14.5 | |
| Industrials | 12.1 | 10.6 | |
| Consumer Staples | 1.9 | 2.0 | |
| Basic Materials | 4.5 | 5.0 | |
| Energy | 3.1 | 2.8 | |
| Real Estate | 2.3 | 2.7 | |
| Total Investments | 99.2 | 98.8 | |
| Net Liquid Assets†| 0.8 | 1.2 | |
| Total Assets | 100.0 | 100.0 |
* Expressed as a percentage of total assets.
†For a definition of terms used see Glossary of Terms and Alternative Performance Measures at the end of this announcement.
Income Statement (unaudited)
| For the six months ended31 October 2022 | For the six months ended31 October 2021 | For the year ended30 April 2022 (audited) | |||||||
| Revenue£’000 | Capital£’000 | Total£’000 | Revenue£’000 | Capital£’000 | Total£’000 | Revenue£’000 | Capital£’000 | Total£’000 | |
| (Losses)/gains on investments | – | (164,112) | (164,112) | – | 203,591 | 203,591 | – | (631,829) | (631,829) |
| Currency losses | – | (120) | (120) | – | (383) | (383) | – | (308) | (308) |
| Income from investments and interest receivable | 15,932 | – | 15,932 | 16,018 | – | 16,018 | 27,811 | – | 27,811 |
| Investment management fee (note 3) | (4,419) | – | (4,419) | (5,719) | – | (5,719) | (10,465) | – | (10,465) |
| Other administrative expenses | (1,000) | – | (1,000) | (869) | – | (869) | (1,888) | – | (1,888) |
| Net return before finance costs and taxation | 10,513 | (164,232) | (153,719) | 9,430 | 203,208 | 212,638 | 15,458 | (632,137) | (616,679) |
| Finance costs of borrowings | (3,515) | – | (3,515) | (2,507) | – | (2,507) | (5,298) | – | (5,298) |
| Net return on ordinary activities before taxation | 6,998 | (164,232) | (157,234) | 6,923 | 203,208 | 210,131 | 10,160 | (632,137) | (621,977) |
| Tax on ordinary activities (note 4) | (863) | (183) | (1,046) | (910) | (793) | (1,703) | (1,516) | 293 | (1,223) |
| Net return on ordinary activities after taxation | 6,135 | (164,415) | (158,280) | 6,013 | 202,415 | 208,428 | 8,644 | (631,844) | (623,200) |
| Net return per ordinary share (note 5) | 2.75p | (73.78p) | (71.03p) | 2.54p | 85.61p | 88.15p | 3.67p | (268.58p) | (264.91p) |
The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital return columns are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing operations.
A Statement of Comprehensive Income is not required as the Company does not have any other comprehensive income and the net return on ordinary activities after taxation is both the profit and total comprehensive income for the period.
Balance Sheet (unaudited)
| Notes | At 31 October2022£’000 | At 30 April2022 (audited)£’000 | |
| Fixed assets | |||
| Investments held at fair value through profit or loss | 7 | 2,410,723 | 2,662,015 |
| Current assets | |||
| Debtors | 2,200 | 8,072 | |
| Cash and cash equivalents | 23,365 | 35,879 | |
| 25,565 | 43,951 | ||
| Creditors | |||
| Amounts falling due within one year: | |||
| National Australia Bank Limited Loan | (75,000) | (75,000) | |
| Debenture stock | (39,989) | (39,973) | |
| Other creditors | (4,115) | (11,284) | |
| (119,104) | (126,257) | ||
| Net current liabilities | (93,539) | (82,306) | |
| Total assets less current liabilities | 2,317,184 | 2,579,709 | |
| Creditors | |||
| Amounts falling due after more than one year: | |||
| Loan notes | 8 | (99,855) | (99,853) |
| Provision for tax liability | 9 | (875) | (692) |
| (100,730) | (100,545) | ||
| 2,216,454 | 2,479,164 | ||
| Capital and reserves | |||
| Share capital | 11,823 | 11,823 | |
| Share premium account | 261,635 | 262,183 | |
| Capital redemption reserve | 8,700 | 8,700 | |
| Capital reserve | 1,866,453 | 2,129,483 | |
| Revenue reserve | 67,843 | 66,975 | |
| Shareholders’ funds | 10 | 2,216,454 | 2,479,164 |
| Shareholders’ funds per ordinary share(borrowings at book value) | 10 | 1,017.4p | 1,089.0p |
| Net asset value per ordinary share *(borrowings at par value) | 1,017.4p | 1,089.0p | |
| Net asset value per ordinary share *(borrowings at fair value) | 1,040.1p | 1,099.8p | |
| Ordinary shares in issue | 10 | 217,849,065 | 227,645,309 |
* See Glossary of Terms and Alternative Performance Measures at the end of this announcement.
The accompanying notes on the following pages are an integral part of the Financial Statements
Statement of Changes in Equity (unaudited)
For the six months ended 31 October 2022
| Notes | Called up sharecapital£’000 | Sharepremiumaccount£’000 | Capitalredemptionreserve£’000 | Capital reserve * £’000 | Revenuereserve£’000 | Shareholders’funds£’000 | |
| Shareholders’ funds at 1 May 2022 | 11,823 | 262,183 | 8,700 | 2,129,483 | 66,975 | 2,479,164 | |
| Net return on ordinary activities after taxation | – | – | – | (164,415) | 6,135 | (158,280) | |
| Ordinary shares issued/bought back | 11,14 | – | (548) | – | (98,615) | – | (99,163) |
| Dividends paid during the period | 6 | – | – | – | – | (5,267) | (5,267) |
| Shareholders’ funds at 31 October 2022 | 11,823 | 261,635 | 8,700 | 1,866,453 | 67,843 | 2,216,454 |
For the six months ended 31 October 2021
| Notes | Called up sharecapital£’000 | Sharepremiumaccount£’000 | Capitalredemptionreserve£’000 | Capital reserve * £’000 | Revenuereserve£’000 | Shareholders’funds£’000 | |
| Shareholders’ funds at 1 May 2021 | 11,823 | 262,183 | 8,700 | 2,859,214 | 63,060 | 3,204,980 | |
| Net return on ordinary activities after taxation | – | – | – | 202,415 | 6,013 | 208,428 | |
| Dividends paid during the period | 6 | – | – | – | – | (4,729) | (4,729) |
| Shareholders’ funds at 31 October 2021 | 11,823 | 262,183 | 8,700 | 3,061,629 | 64,344 | 3,408,679 |
* The Capital Reserve balance at 31 October 2022 includes holding gains on investments of £598,370,000 (31 October 2021 – gains of £1,608,092,000).
The accompanying notes on the following pages are an integral part of the Financial Statements
Cash Flow Statement (unaudited)
| Notes | Six months to 31 October2022£’000 | Six months to 31 October2021£’000 | |
| Cash flows from operating activities | |||
| Net return on ordinary activities before taxation | (157,234) | 210,131 | |
| Net losses/(gains) on investments | 164,112 | (203,591) | |
| Currency losses | 120 | 383 | |
| Finance costs of borrowings | 3,515 | 2,507 | |
| Overseas tax incurred | (894) | (1,010) | |
| Changes in debtors and creditors | 1,308 | 1,392 | |
| Cash from operations * | 10,927 | 9,812 | |
| Interest paid | (3,443) | (2,477) | |
| Net cash inflow from operating activities | 7,484 | 7,335 | |
| Net cash inflow/(outflow) from investing activities | 90,862 | (32,210) | |
| Cash flow from financing activities | |||
| Equity dividends paid | 6 | (5,267) | (4,729) |
| Ordinary shares bought back | (105,473) | – | |
| Net cash outflow from financing activities | (110,740) | (4,729) | |
| Decrease in cash and cash equivalents | (12,394) | (29,604) | |
| Exchange movements | (120) | (383) | |
| Cash and cash equivalents at start of period | 35,879 | 108,723 | |
| Cash and cash equivalents at end of period | 23,365 | 78,736 |
* Cash from operations includes dividends received of £17,838,000 (31 October 2021 – £17,208,000) and interest received of £94,000 (31 October 2021 – nil).