Aurora UK Alpha PLC - Half-year Report

Aurora UK Alpha plc

LEI: 2138007OUWIZFMAGO575

Half Yearly Report

for the six months ended 30 June 2025

FINANCIAL AND PERFORMANCE HIGHLIGHTS

Performance

The total returns in sterling for the period/year were as follows:

¹     Definitions of these Alternative Performance Measures ("APMs") together with how these have been calculated can be found on pages 23 and 24.

²     Including dividend reinvested.

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CHAIR'S STATEMENT

This report covers your Company's activities over the six months to 30 June 2025 and its financial position at that date.

AGM and Continuation of the Company

At the AGM in June all of the resolutions put to shareholders were passed, with more than 99% of the votes cast being in favour, including the resolution for the continuation of the Company. I would like to thank shareholders for their strong support. Together with the Company's increase in size following the combination with Artemis Alpha Trust plc last year, this helps to further strengthen the ability to generate long-term returns.

Performance

Over the six months the Company's net asset value ("NAV") per share recovered to 285.54p at 30 June 2025 from its 256.17p level at 31 December 2024, giving a total return for the period of 11.5% (six months to 30 June 2024: 0.5%). The price at which the Company's shares traded rose from 227.00p per share at 31 December 2024 to 257.00p at 30 June 2025, giving a share price total return of 13.2% (six months to 30 June 2024: 1.6%). These compare with the total return over the six months for the FTSE All-Share Index, the Company's benchmark, of 9.1% (six months to 30 June 2024: 7.4%). At the end of June the share price stood at a 10.0% discount to the NAV per share.

Top contributors to performance in the period were Lloyds Banking Group, Ryanair, Frasers Group, Nintendo and Burberry Group. The most notable detractor was Castelnau Group.

The Investment Manager's Review, starting on page 6, provides further details on activity and outlook.

Investment Manager Presentation Event

Shareholders are invited to Aurora's third Investor Event, which is being held at 3.30 p.m. on 15 October 2025 at the Chartered Accountants Hall, 1 Moorgate Place, London EC2R 6EA. Both existing and prospective Aurora shareholders are welcome and the event will follow the successful format from the last two years, with multiple speakers from the Investment Manager. We plan to record the event and publish it on the Company's website. If you would like to attend, please contact phoenix@pamp.co.uk to register.

Share Price Discount

The discount to NAV per share narrowed from 11.4% at the end of 2024 to 10.0% as at 30 June 2025. This narrowing is welcome and closing the discount continues to be one of the Board's key objectives, with marketing as a key part of the strategy. Phoenix, Deutsche Numis, and Frostrow Capital continue to promote the Company proactively. Additionally, on 11 February 2025 the Board announced the commencement of a discretionary share buyback programme and the Company undertook its first share buyback on 6 June 2025. Up to 30 June 2025 the Company bought back into treasury 871,193 ordinary shares, at an average price of 253.5p per share. These buybacks are aimed at helping to provide market liquidity when it is lacking, which should help to stabilise the discount and be accretive to remaining shareholders. Since the half year the Company has bought back a further 2,263,883 shares into treasury, at an average price of 250.1p per share. 

The Board

As mentioned in my statement in the annual report, David Stevenson will step down from the Board in December 2025. On behalf of the Board, I would like to extend my gratitude for David's contributions over what is approaching a decade. On 7 July 2025 the Board announced the appointment of Alex Denny to succeed David from 1 January 2026. Alex brings over twenty years' experience in asset management and investment trusts, with a background spanning both public and private markets. Alex is a non-executive director of Apax Global Alpha Limited, a board member of The Association of Investment Companies, a non-executive director of Margetts Fund Management and a trustee of the Nautical Archaeology Society.

Outlook

Performance in the first half of 2025 was encouraging, with the portfolio outperforming the wider market. While markets remain unsettled, history shows that periods of uncertainty are often when the most attractive long-term opportunities are created. The Investment Manager's approach remains consistent in buying exceptional companies when they are out of favour, and patiently waiting for the value to be realised.

The combination with Artemis Alpha, completed late last year, has already strengthened the Company through greater scale and lower ongoing charges. The Board is confident that the Company is well positioned for the years ahead.

We remain grateful for the continued support of our shareholders and look forward to welcoming many of you to the Investor Event in October.

Lucy Walker

Chair

24 September 2025

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OBJECTIVE AND INVESTMENT POLICY

Investment Objective

Aurora UK Alpha plc's (the "Company") objective is to provide shareholders with long-term total returns by investing predominantly in a portfolio of UK listed companies.

Investment Policy

The Company seeks to achieve its investment objective by investing predominantly in a portfolio of UK listed companies. The Company may from time to time also invest in companies listed outside the UK and unlisted securities. The investment policy is subject to the following restrictions, all of which are at the time of investment:

•        The maximum permitted investment in companies listed outside the UK at cost price is 20% of the Company's gross assets.

•        The maximum permitted investment in unlisted securities at cost price is 10% of the Company's gross assets.

•        There are no pre-defined maximum or minimum sector exposure levels but these sector exposures are reported to and monitored by the Board in order to ensure that adequate diversification is achieved.

•        The Company's policy is not to invest more than 15% of its gross assets in any one underlying issuer (measured at the time of investment) including in respect of any indirect exposure through Castelnau Group Limited.

•        The Company may from time to time invest in other UK listed investment companies, but the Company will not invest more than 10% in aggregate of the gross assets of the Company in other listed closed-ended investment funds.

•        Save for Castelnau Group Limited, the Company will not invest in any other fund managed by the Investment Manager.

While there is a comparable index for the purposes of measuring performance over material periods, no attention is paid to the composition of this index when constructing the portfolio and the composition of the portfolio is likely to vary substantially from that of the index. The portfolio will be relatively concentrated.

The exact number of individual holdings will vary over time but typically the portfolio will include core holdings in 15 to 20 companies. The Company may use derivatives and similar instruments for the purposes of capital preservation.

The Company does not currently intend to use gearing. However, if the Board did decide to utilise gearing the aggregate borrowings of the company would be restricted to 30% of the aggregate of the paid-up nominal capital plus the capital and revenue reserves.

Any material change to the investment policy of the Company will only be made with the approval of shareholders at a general meeting. In the event of a breach of the Company's investment policy, the Directors will announce through a Regulatory Information Service the actions that will be taken to rectify the breach.

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INVESTMENT MANAGER'S REVIEW

Performance

The NAV per share total return over the half year was 11.5% and the share price total return was 13.2%. At the end of June, the shares were trading at a 10.0% discount to NAV. The FTSE All-Share total return index rose 9.1% over the same period.

At the stock level, Nintendo was the standout performer in the period, rising 65.6% following a positive reception to its Switch-2 product launch. Lloyds Banking Group gained 44.5%, supported by sector-wide strength and a more constructive view on the motor financing ruling. Other notable risers included Ryanair, up 27.6%, Burberry, up 20.6%, Bellway, up 16.7%, and Frasers, up 11.7%.

Castelnau Group, a closed-end fund managed by Phoenix Asset Management Partners, was the only meaningful faller, down 13.8%. Its NAV rose 3.2% over the period, so the detraction came from a wider discount rather than operational setbacks. Following a portfolio review, Castelnau is simplifying and re-focusing the group around its holding in Dignity. We continue to see Dignity as a high-quality business bought at an attractive price and remain confident about the progress we are seeing. There are exciting growth initiatives across the company, and we see positive shareholder value drivers in those initiatives, with clear milestones to measure progress. Further details can be found in the Castelnau Q2 investor report, at www.castelnaugroup.com/investor-relations/reports-factsheets.

In terms of contribution, Lloyds Banking Group added 3.8% to returns, with Ryanair and Frasers adding 2.3% and 1.8%, respectively. Castelnau Group was the main detractor, reducing performance by 2.2%.

Activity

Our confidence in the portfolio remains high, and as is our style, activity in the half year was limited. 

In early April we took advantage of volatility related to President Trump's initial tariff announcement to increase positions in Burberry and Barratt Redrow by 1% each. We also initiated a new position that currently sits below our 3% reporting threshold, which we will introduce once it exceeds that level. 

After the period end, in late July, we added a further 1% to Barratt Redrow following share price weakness.

Outlook

Momentum has pulled prices from fundamentals, patience captures the payoff

We are again in one of those stretches where value investing can look unrewarding. Prices can run on momentum rather than fundamentals, narratives take hold, and, for a time, the scoreboard does not reflect the work undertaken. 

Our experience is that these periods set up future returns. On the quality of what we own and the depth of knowledge we have about the businesses we have invested in, today's portfolio ranks highly. The right response is to stay disciplined and patient: keep doing the work and explain it plainly.

Headlines shift price; business economics determine value

Headline noise has quietened, yet concerns over fiscal spending, tariff policy and the path of interest rates can still move prices for reasons other than business progress. This is when a patient, valuation led approach tends to earn its keep.

Prices keep the score by the day; cash flow settles the account over time. We do not try to forecast policy paths. We aim to be prepared, keep hurdle rates high and act only when dislocation improves the odds.

UK policy backdrop is improving

Closer to home, the UK backdrop is improving in ways that matter to owners of productive assets. This is not the prevailing view, and progress is uneven and not always visible in the data. For long-term owners, direction matters more than today's snapshot because the impact of change compounds over time.

Planning reform is moving beyond rhetoric, with housebuilders reporting practical changes. Aviation capacity at Heathrow and Gatwick now has government backing after years of stasis. Financial services are again treated as a national strength, with regulators asked to support growth. There are early signs of a more pragmatic stance towards Europe and, following the initial tariff deal with the US in May, the prospect of a broader agreement. Any one of these would help; together they suggest a turn after years of drift.

AI will reshape returns

Alongside policy, one structural change deserves mention. For the last 25 years we have said that the most important factor impacting business values is the internet; that is no longer the case. AI is the greatest threat and opportunity. We are analysing it closely, business by business and industry by industry, asking how demand, competition and business models may change. We are also using it to augment and improve our own work. 

We keep in mind what is often called Amara's Law (after Roy Amara): the impact of a new technology is usually overestimated in the short term and underestimated in the long term. That lens reminds us to look past the early narratives and focus on the economics that should matter as adoption deepens.

Confidence is highest where the risk of obsolescence is low and the capability to benefit is real. The need for a home does not change; the demands on service at death are exacting and enduring. That resilience is not being rewarded today; over time lower risk and steady cash generation tend to be. In other areas we expect able operators to use the tools to improve service and strengthen moats rather than be disrupted by them.

Valuation and time are on our side

Our discipline is simple: we value businesses by estimating the durable cash returns on the core capital they require and testing why those returns should persist. If we get that right most of the time, and we are long-term holders, then we will produce returns for shareholders that approximate the underlying returns of those businesses. 

On that footing, we see a wide gap between price and value today. Our intrinsic values across the portfolio have continued to rise with reinvestment and operating progress, while market prices have not always kept up, leaving an estimated upside to intrinsic value of about 140%. 

Private buyers are acting on similar arithmetic, which is a useful check on what the screen is missing. Time is on our side because cash generation and sensible reinvestment compound, and the gap between price and value tends to close as the economics show through.

Steve Tatters

Director

Phoenix Asset Management Partners Ltd

24 September 2025

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Top holdings

As at 30 June 2025

^#  Castelnau is a multi-sector financial holding company, listed on the Specialist Fund Segment of the London Stock Exchange. Castelnau is also managed by Phoenix and its value is excluded from the Company's net assets when calculating performance fees earned by Phoenix to avoid double charging.

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Sector Breakdown

As at 30 June 2025

* Includes holding in Castelnau Group Ltd

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INTERIM MANAGEMENT REPORT

The Directors are required to provide an Interim Management Report in accordance with the Financial Conduct Authority's ("FCA") Disclosure Guidance and Transparency Rules ("DTR"). The Directors consider that the Chair's Statement on pages 3 and 4 and the Investment Manager's Review on pages 6 to 7 of this Half Yearly Financial Report provide details of the important events in the period and their impact on the financial statements. The following statement on the Principal Risks and Uncertainties, the Related Party Transactions, the Statement of Directors' Responsibilities, and the Investment Manager's Review together constitute the Interim Management Report of the Company for the six months ended 30 June 2025. The outlook for the Company for the remaining six months of the year ending 31 December 2025 is discussed in the Investment Manager's Review.

Details of the investments held at the period end and the structure of the portfolio at the period end are provided on pages 8 and 9.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company are set out on pages 24 to 26 of the Company's most recent Annual Report, for the year ended 31 December 2024, which can be found on the Company's website at www.auroraukalpha.com. The Board believes that the Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the remaining six months of the Company's financial year.

In summary, the principal risks and uncertainties facing the Company comprise:

•        Geopolitical and economic risks: including from rising interest rates, inflation, possible recession, local and global politics; and disruptive local and global events;

•        Investment objective and strategy risks: the investment policy may not achieve the published investment objective;

•        Risks related to the Investment Manager: the Company's success is closely dependent on the performance of the Investment Manager;

•        Discount risk: the return to shareholders could be compromised by the discount at which the Company's shares trade;

•        Operational risks: incorporates, amongst other things, the potential for errors or irregularities in published information, cyber risks, business continuity risks, and regulatory risks;

•        ESG risks: Portfolio companies could be affected by ESG factors; and

•        Financial Risks: The Company is exposed to liquidity and other financial risks.

Related Party Transactions

The Company's Investment Manager is Phoenix Asset Management Partners Limited, ("Phoenix" or the "Investment Manager"). Phoenix is considered a related party in accordance with the Listing Rules. Phoenix does not earn an ongoing annual management fee. It will be paid an annual performance fee equal to one third of the outperformance of the Company's net asset value total return (including dividends and adjusted for the impact of share buybacks and the issue of new shares) over the FTSE All-Share Index total return for each financial year. Details of the investment management arrangements are shown in Note 5 on pages 20 and 21 of these accounts.

The Directors are also considered to be related parties. Details of the Board's remuneration and shareholdings can be found on pages 47 to 51 of the Company's Annual Report for the year ended 31 December 2024.

Castelnau Group Limited, one of the Company's holdings, is also managed by Phoenix and is considered a related party.

Going Concern

The financial statements have been prepared on the going concern basis. The Directors have a reasonable expectation, after making enquiries, that the Company has adequate resources to continue in existence for at least 12 months from the date of approval of this Interim Report. In reaching this conclusion, the Directors have taken account of the principal risks and uncertainties the Company faces and considered the liquidity of the Company's portfolio of investments, together with its cash position, income and expense flows.

As at 30 June 2025, the Company held £5,892,000 (30 June 2024: £7,329,000) in cash and cash equivalents, £308,256,000 (30 June 2024: £197,708,000) in quoted investments and £9,655,000 (30 June 2024: £476,000) in unquoted investments. It is estimated that 61.7% of the portfolio could be realised in seven days under normal conditions. The total operating expenses for the six months to 30 June 2025 was £559,000 (30 June 2024: £466,000). The total income during the half-year period was £3,780,000 (30 June 2024: £1,728,000).

For and on behalf of the Board of Directors

Lucy Walker

Chair

24 September 2025

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STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm to the best of their knowledge that:

•        The condensed set of financial statements contained within the Half Yearly Financial Report have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", gives a true and fair view of the assets, liabilities, financial position and profit and loss of the Company; and

•        The Interim Management Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FCA's DTR Rules.

Approved by the Board on 24 September 2025.

Lucy Walker

Chair

24 September 2025

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Condensed Income Statement

The total column of this statement is the Income Statement of the Company, prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the United Kingdom. The supplementary revenue and capital columns are presented in accordance with the Statement of Recommended Practice issued by the AIC ("AIC SORP").

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. All revenue is attributable to the equity holders of the Company.

There is no other comprehensive income, and therefore the net return for the period is also the total comprehensive income.

The notes on pages 18 to 22 form part of these accounts.

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Condensed Statement of Financial Position

The notes on pages 18 to 22 form part of these accounts.

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Condensed Statement of Changes in Equity

Six months to 30 June 2025 (unaudited)

The notes on pages 18 to 22 form part of these accounts.

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Condensed Statement of Changes in Equity

Six months to 30 June 2024 (unaudited)

The notes on pages 18 to 22 form part of these accounts.

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CASH FLOW STATEMENT

The notes on pages 18 to 22 form part of these accounts.

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NOTES TO THE FINANCIAL STATEMENTS

1.      Status of the financial statements

The condensed financial statements contained in this half yearly report do not constitute statutory accounts as defined in s434 of the Companies Act 2006. The financial information for the six months to 30 June 2025 and 30 June 2024 has not been audited or reviewed by the Company's external auditor.

The information for the year ended 31 December 2024 has been extracted from the latest published audited financial statements. Those statutory financial statements have been filed with the Registrar of Companies and included the report of the auditor, which was unqualified and did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006.

No statutory accounts in respect of any period after 31 December 2024 have been reported on by the Company's auditor or delivered to the Registrar of Companies.

Returns for the first six months should not be taken as a guide to the results for the full year.

2.      Accounting policies

The half yearly financial information has been prepared in accordance with IAS34 Interim Financial Reporting. The accounting policies are unchanged from those used in the last published annual financial statements except where otherwise stated.

3.      Investments held at Fair Value Through Profit or Loss

Under IFRS13 investment companies are required to disclose the fair value hierarchy that classifies financial instruments measured at fair value at one of three levels according to the relative reliability of the inputs used to estimate the fair values.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.

The movement on the Level 3 unquoted investments during the period/year is shown below:

4.      Income

5.      Investment management fees

The Company's Investment Manager does not earn an ongoing annual management fee, but is instead paid an annual performance fee equal to one third of any outperformance of the Company's NAV per share total return (including dividends and adjusted for the impact of share buybacks and the issue of new shares) over the FTSE All-Share Index total return for each financial year.

The total annual performance fee is capped at 4% per annum of the NAV of the Company at the end of the relevant financial year if the NAV per share has increased in absolute terms over the period and 2% if the NAV per share has decreased in absolute terms over the period. Any outperformance that exceeds these caps will be carried forward and only paid if the Company outperforms, and the annual cap is not exceeded, in subsequent years.

The performance fee is subject to a high-water mark so that no fee will be payable in any year until all underperformance of the Company's net asset value since the last performance fee was paid has been made up.

Performance fees are settled by issuance of the Company's ordinary shares. Such shares are issued at the NAV per share on the date of issue, so that the then current value of the shares equates in terms of NAV to the performance fees liability.

Any part of the performance fee that relates to the performance of Phoenix SG will be accrued but will not be paid until such time as the Company's investment in Phoenix SG has been realised or is capable of realisation. The position will be reviewed at that time by reference to the realised proceeds of sale or the fully realisable value of Phoenix SG as compared to the original cost of acquisition.

Any performance of Castelnau Group Limited will be excluded from the calculation of the performance fee payable by the Company to Phoenix.

All other performance fees are subject to a review and clawback procedure if the Company underperforms its benchmark over a period of three years following the end of the financial year in respect of which the relevant fee was paid. Shares received by the Investment Manager under this arrangement must be retained by the Investment Manager throughout the three-year period to which the clawback procedure applies.

As a result of the above all or any part of the performance fees might become recoverable. The Company reflects this in the charge recognised in subsequent accounting periods within the vesting period of the Investment Manager through the true-up mechanism in IFRS 2.

No performance fee has been charged in the Income Statement for the period ended 30 June 2025 (30 June 2024: £nil). A credit of £166,000 relating to the reversal of IFRS 2 charges previously recorded has been recognised in the Income Statement for the period ended 30 June 2024.

6.      Dividends

Following the payment of a 3.0 pence per share interim dividend in December 2024, no final 2024 dividend was recommended for payment.

7.      Share capital

The Company has a single share class, being ordinary shares that each have a nominal value of 25p, and has not issued any other forms of security.

The Company has a Block Listing Facility which was last renewed on 17 April 2020. As at period end, 14,245,062 shares remained unallotted under the facility.

No shares were issued under the Block Listing Facility, or otherwise, during the six months to 30 June 2025. During the year ended 31 December 2024 the Company issued 214,264 shares at an average price of 261.78p per share to the Company's Investment Manager, representing the performance fee earned for the year ended 31 December 2023. These are subject to a three-year lock-in and clawback period from the date of their issue. 

On 29 November 2024 the Company issued 38,369,114 shares to holders of Artemis Alpha Trust plc ("ATS") shareholders, at a deemed price of 262.58p per share, in consideration for the transfer to the Company of approximately £101 million of net assets from ATS.

During the six months to 30 June 2025 the Company bought back into treasury 871,193 ordinary shares, at an average price of 253.47p per share. The Company did not purchase any of its own shares during the year ended 31 December 2024.

The clawback period on restricted shares issued to the Investment Manager in relation to the performance period ended 31 December 2021 finished on 31 December 2024 and 89,096 shares originally issued to the Investment Manager were clawed back. These were cancelled in January 2025.

8.      Return per share

The capital, revenue and total return per share are based on the net return shown in the Income Statement and the weighted average of 114,426,991 (30 June 2024: 76,239,060) shares in issue during the period.

9.      Transactions with Related Parties and Investment Manager

The Board of Directors are key management personnel of the Company and therefore related parties. Fees payable to the Directors in respect of the period to 30 June 2025 were £72,000 (30 June 2024: £70,000).

Phoenix Asset Management Partners Limited ("Phoenix"), the Company's AIFM and Investment Manager, and Castelnau Group Limited ("Castelnau") are related parties under the Listing Rules. Castelnau is a related party as the Company is a substantial shareholder under the UK Listing Rules. 

There were no transactions between the Company and Castelnau during the six months ended 30 June 2025. Fees payable to the Investment Manager are detailed in the Income Statement and Note 5.

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ALTERNATIVE PERFORMANCE MEASURES

Annualised ongoing charges

A measure of the regular, recurring annual costs of running an investment company, expressed as a percentage of average net assets. The measure is calculated by expressing the regular expenses of the year as a percentage of the average net assets during the year.

Share price discount to NAV per share

The amount, expressed as a percentage, by which the share price is less than the NAV per share.

Total returns

A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company on the ex-dividend date.

Net Asset Value per Share (NAV per share)

The Company recognises performance fees and clawbacks on fees paid in prior performance periods under IFRS 2 - Share Based Payment in its annual and half year financial statements. However, for the purposes of the Company's unaudited NAVs that are announced daily to the London stock exchange and other regulatory information services the current performance fee, and any clawback on fees paid in prior performance periods, are recognised on a liability basis, which diverges from the Company's accounting policy. 

The table below is a reconciliation between the NAV per share as at 30 June 2025 announced on the London Stock Exchange on 1 July 2025 and the NAV per share disclosed in these financial statements. The difference is principally the result of amortising performance fees over the vesting period in accordance with IFRS 2 - Share-based Payment in these financial statements, whereas the NAV per share as at 30 June 2025 published on 1 July 2025 treated the performance fee clawback as receivable on 30 June 2025, in accordance with the investment management agreement. The remaining reconciling balances relate to adjustment of the unquoted investment valuations and expenses, due to timing lag. 

NAV Reconciliation

NAVs and performance quoted on the Company's website, other than within the Interim and Annual Reports, are based on the unaudited daily NAVs.

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Frostrow Capital LLP
Company Secretary
020 3709 8733

24 September 2025