TIDMLWI
RNS Number : 5810B
Lowland Investment Co PLC
07 June 2019
Legal Entity Identifier: 2138008RHG5363FEHV19
LOWLAND INVESTMENT COMPANY PLC
Unaudited results for the half-year ended 31 March 2019
This announcement contains regulated information.
Investment objective
The Company aims to give shareholders a higher than average
return with growth of both capital and income over the medium to
long-term, by investing in a broad spread of predominantly UK
Companies. The Company measures its performance against the FTSE
All-Share Index Total Return.
Key data for the six months to 31 March 2019
Net Asset Value Total Return -10.6%
Benchmark(1) Total Return -1.8%
Growth in Dividend 13.5%
Dividend 29.5p
(1) FTSE All-Share Index
Half-Year Ended Half-Year Ended Year Ended
Financial highlights 31 Mar 2019 31 Mar 2018 30 Sept 2018
-------------------------------------- ---------------- ---------------- --------------
NAV Per Ordinary Share(1) 1,431p 1,553p 1,625p
Share Price(2) 1,340p 1,485p 1,515p
Market Capitalisation GBP362m GBP401m GBP409m
Dividend Per Share 29.5p 26.0p 54.0p
Ongoing Charge Including Performance
Fee 0.6% 0.6% 0.6%
Ongoing Charge Excluding Performance
Fee 0.6% 0.6% 0.6%
Dividend Yield(3) 4.3% 3.4% 3.6%
Gearing 11.9% 14.2% 12.2%
Discount 6.4% 4.4% 6.8%
(1) NAV (Net Asset Value total return) with debt at par
value
(2) Using mid-market closing price
(3) Based on dividends paid and declared in respect of the
previous twelve months
Total return performance (including dividends reinvested and
excluding transaction costs)
6 months 1 year 3 years 5 years 10 years
% % % % %
----------------- --------- ------- -------- -------- ---------
Net Asset Value -10.6 -4.8 17.7 18.5 379.8
Share Price(1) -9.8 -6.3 15.3 10.6 372.3
Benchmark(2) -1.8 6.4 31.3 34.5 186.8
(1) Using mid-market closing price
(2) FTSE All-Share Index
Sources: Morningstar, Funddata, Datastream and Janus
Henderson
Historical record - Year to 30 September
As at
31 Mar
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -----------
Net
Assets(1)
(GBPm) 174 204 214 266 347 362 355 387 440 439 387
Per Ordinary Share
Net Asset
Value(2) 657p 770p 811p 1,008p 1,307p 1,346p 1,318p 1,432p 1,628p 1,625p 1,431p
Share
Price 610p 700p 763p 992p 1,325p 1,355p 1,287p 1,337p 1,504p 1,515p 1,340p
Net
Revenue 22.7p 22.5p 28.8p 31.1p 36.7p 39.4p 46.4p 47.7p 49.1p 58.6p 22.2p
Net
Dividends
Paid 26.5p 27.0p 28.0p 30.5p 34.0p 37.0p 41.0p 45.0p 49.0p 54.0p 29.5p(3)
(1) Attributable to Ordinary Shares
(2) NAV with debt at par value
(3) First interim dividend of 14.5p per ordinary share paid on
30 April 2019 and second interim dividend of 15.0p per ordinary
share that will be paid on 31 July 2019
INTERIM MANAGEMENT REPORT
CHAIRMAN'S STATEMENT
Overview
Lowland's Net Asset Value ("NAV") fell 10.6%, compared with a
decline of 1.8% in our benchmark, the FTSE All-Share Index. This
disappointing performance is analysed by the Fund Managers in their
report, which also covers activity in the portfolio.
Lowland has always been characterised by periods of
outperformance and underperformance. Over the longer term,
performance has been strong, with an increase in NAV (total return)
of 380% over the last ten years, against 187% in our benchmark. The
Company's investment style, with a distinct bias away from the
largest stocks in the index, gives rise both to the periods of
underperformance and the long-term outperformance.
Small companies have added substantial value to the portfolio
over the long-term and they will again. The portfolio also has a
bias to industrial companies, which over the six months were weak
overall, as uncertainty over trade wars dominated investor
sentiment.
Dividend
Underlying earnings have performed well and, helped by the
change in accounting policy announced last year, earnings per share
rose to 22.2p from 18.4p. The first interim dividend was 14.5p and
the Board has today declared a second interim dividend of 15.0p.
The total distribution at the half-year stage therefore amounts to
29.5p, compared with 26.0p at this time last year. Lowland started
paying quarterly dividends in 2013 and since then each quarter's
dividend has been greater than that paid in the same quarter in the
previous year. It is the ambition to maintain this practice.
Barring unforeseen circumstances, the Board intends to pay total
dividends of 59.5p this year, extending to seven years the period
in which our annual dividends have grown at 10%.
Year ended 30 September 1st Interim 2nd Interim 3rd Interim Final
------------------------- ------------ ------------ ------------ -------
2015 10.0p 10.0p 10.0p 11.0p
2016 11.0p 11.0p 11.0p 12.0p
2017 12.0p 12.0p 12.0p 13.0p
2018 13.0p 13.0p 14.0p 14.0p
2019 14.5p 15.0p 15.0p* 15.0p*
* Intention barring unforeseen circumstances
Gearing
During the half-year, gearing was fairly constant at around 12%.
It has increased to 13% on 4 June 2019 (the latest practicable date
prior to publication of this report) and we would expect it to
increase moderately from this level.
Share price discount
During the period the share price discount (on a total return
basis) fluctuated between 2.2% and 6.4%. At the period-end it was
6.4% and it stood at 4.6% as at 4 June 2019. The Board does not
operate a formal discount control mechanism. The policy with regard
to discount is set out in last year's Chairman's Statement.
Board
I advised at the year-end that Kevin Carter had indicated his
desire to retire, and this he will do at the end of this month. The
Board's thanks to Kevin for his first-class service to the Company
bear repeating. I am delighted to advise that following a search
and selection process, the Board has agreed that Tom Walker be
appointed to the Board with effect from 1 July 2019. Tom was
formerly a Fund Manager with Martin Currie Investment Management,
and brings valuable experience from his career. He is a director of
EP Global Opportunities Trust plc and will be appointed as a
director of JPMorgan Japan Smaller Companies Trust plc with effect
from 29 July 2019.
Outlook
In times of uncertainty, opportunities for profitable investment
occur. The Fund Managers are becoming increasingly confident that
stock prices are discounting most of the problems facing the
economy. Value is evident and therefore borrowings are being
increased. We are net buyers of equities, utilising current
uncertainties to refresh the portfolio with good-quality companies
on reasonable valuations.
On a final note, we value contact with our shareholders and I
would be delighted to be contacted at the Company Secretary's email
address (as shown at the end of this report) should you have any
matters you wish to raise with me.
Robert Robertson
Chairman
7 June 2019
Performance as at 31 March 2019
The tables below show the top contributors to and detractors
from the Company's total return performance over the six months
under review.
Top 5 Contributors
Company Sector Contribution %
----------------- ------------------------------------- ---------------
Greene King Travel & Leisure 0.39
Marshalls Construction & Materials 0.37
Churchill China Household Goods & Home Construction 0.34
Shoe Zone General Retailers 0.33
Hill & Smith Industrial Engineering 0.23
Top 5 Detractors
Company Sector Contribution %
------------- --------------------------- ---------------
Senior Aerospace & Defence -1.01
Royal Mail Industrial Transportation -0.65
Carclo Chemicals -0.51
Stobart Industrial Transportation -0.49
Low & Bonar General Industrials -0.44
Sector Analysis % as at 31 March 2019 % as at 30 September 2018
Company Benchmark(1) Company Benchmark(1)
-------------------- --------- ------------- ---------- ----------------
Financials 34.9 25.7 32.0 25.3
Industrials 25.0 11.0 27.6 11.3
Consumer Services 9.7 11.5 9.4 12.1
Oil & Gas 9.5 14.2 10.5 14.5
Health Care 5.2 8.3 4.8 9.3
Utilities 5.1 2.8 4.2 2.5
Basic Materials 4.6 8.1 5.2 7.5
Consumer Goods 4.2 14.6 3.7 13.8
Telecommunications 1.3 2.7 2.1 2.8
Technology 0.5 1.1 0.5 0.9
-------------------- --------- ------------- ---------- ----------------
Total 100.0 100.0 100.0 100.0
-------------------- --------- ------------- ---------- ----------------
(1) FTSE All-Share Index
FUND MANAGERS' STATEMENT
Performance review
Lowland's performance in the six months to the end of March was
disappointing. The NAV fell 10.6% relative to a 1.8% fall in the
FTSE All-Share (both figures on a total return basis). The fall in
NAV was concentrated in the fourth quarter of 2018, when the NAV
fell 14.9%. The NAV has recovered by 3.5% calendar year to
date.
There are two key elements to the underperformance. The first is
size, as small and medium-sized companies underperformed during the
six month period:
Total return for the
Index 6 months to 31 March 2019
(%)
-------------------- ---------------------------
FTSE All-Share -1.8
FTSE 100 -1.0
FTSE 250 -4.9
FTSE AIM All-Share -16.0
Lowland continues to invest in small and medium-sized companies,
with 55% of the portfolio invested outside of the FTSE 100 as at
the end of March. The best sales and earnings growth will, over
time, come from this portion of the portfolio and it has been the
largest source of outperformance for the Company over the long
term. Small and medium-sized companies are, however, more tied into
the domestic economic cycle and therefore they are more vulnerable
to underperformance at times when there are concerns about the UK
economy.
The second element of the underperformance was sector
allocation, specifically the industrials weighting, which as at the
end of March was 25% of the portfolio. In the fourth quarter of
2018, US economic data showed signs of weakening at a time when
Europe and China were already exhibiting signs of a slowdown. This
led to reduced (although still positive) expectations for 2019
global economic growth. For the industrials sector this resulted in
sharp and fairly indiscriminate underperformance which, in our
view, did not adequately reflect the diversity of end markets to
which the industrials held in the portfolio are exposed.
As an example, the largest industrial company held is Senior, an
engineering company that produces predominantly aerospace
components. The civil aerospace market continues to grow well.
Passenger miles flown per year are growing considerably above
global economic growth, driven by emerging market demand. This
trend is unlikely to change, leading to greater demand for new
planes to which Senior is well exposed. Senior is winning
considerable amounts of new civil aerospace work which is
pressuring short-term margins. We see this work being won as a
positive - it will lead to higher sales and earnings growth in
future. The market, however, is sceptical that they will make a
good return on this investment and as a result the shares fell 30%
on a total return basis during the six months to the end of March,
making it the largest individual detractor from performance. We
continue to hold the position as in our view the shares are not
reflecting the potential for future sales and earnings growth.
The top five active contributors to performance relative to the
benchmark were:
1. Greene King - a UK pub and brewery. Shares recovered well
from a low valuation as sales growth proved encouraging and a peer
(Fuller's) sold their brewery asset at a high valuation.
2. Marshalls - a building materials company, primarily paving
stones. Shares have performed well as a result of ongoing good
organic growth. We have reduced the position on valuation
grounds.
3. Churchill China - a crockery company based in Stoke-on-Trent.
Management have done well to position the company as selling
primarily to the restaurant industry where repeat sales are of
greater importance and they have successfully grown market
share.
4. Shoe Zone - a UK shoe retailer positioned at the 'value' end
of the market. The management team have done an excellent job of
reducing costs (such as rent) and we think the company can begin to
grow sales via their website and a new, larger store format.
5. Hill & Smith - an industrial company that makes products
including road crash barriers and messaging signs for roads. The
shares recovered well following a difficult first half of 2018 as
extremely cold weather delayed road building programmes.
The top five active detractors from performance relative to the
benchmark were:
1. Senior - a predominantly aerospace components supplier.
Earnings are under short-term pressure but they have good prospects
to grow sales and earnings over the longer term.
2. Royal Mail - the largest deliverer of letters and parcels in
the UK. Letter volumes have declined more steeply than anticipated
as spending by businesses on direct marketing mail has decreased in
the face of economic uncertainty. It is difficult to offset this
reduced volume in the short term via cost reductions, as
simplistically it means that each postman is delivering less volume
but still has to do the same daily route. The position continues to
be held as, in our view, the shares are factoring in a permanent
deterioration in margins which we think is unlikely to
materialise.
3. Carclo - a manufacturer of technical plastics for use in
medical devices and LED lighting for high-end cars. Production
problems in their LED lighting division have led to material cost
increases and the balance sheet is heavily indebted. This position
has been a mistake. It is a small position in the overall portfolio
(0.3% as at 31 March 2019).
4. Stobart Group - a conglomerate which owns Southend airport
and supplies biomass facilities in the UK. During the period the
dividend was cut in order to reinvest in the business and this
caused the shares to perform poorly. The position continues to be
held as the company has excellent potential for earnings growth
driven by more passengers travelling through Southend airport.
5. Low & Bonar - a buildings material manufacturer that had
a high level of indebtedness and as a result needed to raise money
from shareholders in order to strengthen the balance sheet (we
participated in the equity raise). Under a new management team the
business is becoming more focused on its core product areas, where
they continue to make good operating margins.
Activity
The largest purchase during the period was a new position in
Royal Bank of Scotland. Its legacy issues (such as PPI) are largely
resolved and it has retreated to its core competency of commercial
and personal lending in the UK. The primary reason for the purchase
is their potential to return capital to shareholders via dividends
and share buy-backs, which we think is underappreciated by the
market.
The largest individual sale during the period was a reduction in
the holding in Royal Dutch Shell. This continues to be the largest
position in the portfolio (5.7% as at the end of March 2019). The
position was added to in 2015 and 2016 during a period of severe
oil price weakness. At the trough in the share price, the dividend
yield rose to over 8% due to question marks about the dividend's
sustainability. The company has since done an excellent job of
reducing capital expenditure and operating costs and as a result
their ability to generate enough cash flow to cover the dividend
has greatly improved. As a result the shares have re-rated and as
at the time of writing are yielding below 6%. As and when we find
more exciting value opportunities elsewhere we expect to reduce the
position further.
The outlook for the global economy remains uncertain, with a
much greater divergence than usual among economic growth forecasts.
This is partly as a result of the US and Chinese trade war, in
which there is no clarity regarding the level or duration of
tariffs. Aside from economic uncertainty, there is ongoing
political uncertainty, with the result of Brexit still unclear and
the possibility of a general election. However, the most likely
outcome is that the global economy will continue to grow (albeit at
a reduced pace) and domestically focused equities are already
trading at a considerable valuation discount.
In the context of very low bond yields, equities continue to
look excellent value - the forecast yield on the portfolio over the
next twelve months is currently 4.8% with scope for dividends to
grow modestly while the 10-year gilt yield is under 1%. While there
is considerable uncertainty, it is the cash returns available to
shareholders that give us confidence in the outlook for equities
and for this reason we expect to be net investors over the upcoming
period.
James Henderson and Laura Foll
Fund Managers
7 June 2019
Related party transactions
The Company's current related parties are its Directors and
Janus Henderson. There have been no material transactions between
the Company and its Directors during the year and the only amounts
paid to them were in respect of Directors' remuneration and
expenses incurred on the Company's business, for which there were
no outstanding amounts payable at the period end.
In relation to the provision of services by Janus Henderson,
other than fees payable by the Company in the ordinary course of
business and the provision of sales and marketing services, there
have been no material transactions with Janus Henderson affecting
the financial position of the Company during the year under
review.
Principal risks and uncertainties
The principal risks and uncertainties associated with the
Company's business can be divided into various areas:
-- Investment Activity and Strategy;
-- Portfolio and Market Price;
-- Financial;
-- Gearing;
-- Operational; and
-- Accounting, Legal and Regulatory.
Information on these risks is given in the Annual Report for the
year ended 30 September 2018. In the view of the Board, these
principal risks and uncertainties are as applicable to the
remaining six months of the financial year as they were to the six
months under review.
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge:
(a) the set of financial statements for the half-year to 31
March 2019 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
and description of principal risks and uncertainties for the
remaining six months of the year); and
(c) the Interim Management Report includes a fair review of the
information required by the Disclosure Guidance and Transparency
Rule 4.2.8R (disclosure of related party transactions and changes
therein).
For and on behalf of the Board
Robert Robertson
Chairman
7 June 2019
PORTFOLIO INFORMATION
As at 31 March 2019
Market value % of
Company Sector GBP'000 portfolio
Royal Dutch Shell Oil & Gas Producers 24,786 5.7
HSBC Banks 11,874 2.8
Phoenix Life Insurance 11,330 2.6
Senior Aerospace & Defence 10,910 2.5
Hiscox Non-Life Insurance 10,629 2.5
Prudential Life Insurance 9,994 2.3
GlaxoSmithKline Pharmaceuticals & Biotechnology 9,980 2.3
Severn Trent Gas Water & Multiutilities 8,398 1.9
BP Oil & Gas Producers 8,098 1.9
Irish Continental (Ireland) Travel & Leisure 7,890 1.8
----------------------------- ------------------------------------- ------------- -----------
10 Largest 113,889 26.3
-------------------------------------------------------------------- ------------- -----------
Standard Chartered Banks 7,857 1.8
Rolls-Royce Aerospace & Defence 7,451 1.7
Relx Media 7,387 1.7
Direct Line Insurance Non-Life Insurance 7,237 1.7
Johnson Service (1) Support Services 7,011 1.6
National Grid Gas Water & Multiutilities 6,948 1.6
Aviva Life Insurance 6,392 1.5
International Personal
Finance Financial Services 6,160 1.5
Churchill China (1) Household Goods & Home Construction 6,089 1.4
Greene King Travel & Leisure 5,989 1.4
20 Largest 182,410 42.2
-------------------------------------------------------------------- ------------- -----------
Avon Rubber Aerospace & Defence 5,980 1.4
Rio Tinto Mining 5,806 1.3
Henderson Opportunities
Trust Equity Investment Instruments 5,742 1.3
Vodafone Mobile Telecommunications 5,687 1.3
Land Securities Real Estate Investment Trusts 5,480 1.3
Ten Entertainment Travel & Leisure 5,395 1.2
Randall & Quilter (1) Non-Life Insurance 5,146 1.2
Croda Chemicals 5,038 1.2
Headlam Household Goods & Home Construction 5,017 1.2
Somero Enterprises (1)
(USA) Industrial Engineering 4,860 1.1
----------------------------- ------------------------------------- ------------- -----------
30 Largest 236,561 54.7
-------------------------------------------------------------------- ------------- -----------
Shoe Zone (1) General Retailers 4,733 1.1
St Modwen Properties Real Estate Investment Services 4,728 1.1
FBD (Ireland) Non-Life Insurance 4,591 1.0
Royal Bank of Scotland Banks 4,446 1.0
Hill & Smith Industrial Engineering 4,369 1.0
BAE Systems Aerospace & Defence 4,342 1.0
Mondi Forestry & Paper 4,245 1.0
Standard Life Aberdeen Financial Services 4,199 1.0
Park (1) Financial Services 4,163 1.0
Provident Financial Financial Services 4,014 0.9
----------------------------- ------------------------------------- ------------- -----------
40 Largest 280,391 64.8
-------------------------------------------------------------------- ------------- -----------
Morgan Advanced Materials Electronic & Electrical Equipment 4,010 0.9
Babcock Support Services 3,948 0.9
AstraZeneca Pharmaceuticals & Biotechnology 3,926 0.9
DS Smith General Industrials 3,909 0.9
Consort Medical Health Care Equipment & Services 3,860 0.9
Clarkson Industrial Transportation 3,832 0.9
TT Electronics Electronic & Electrical Equipment 3,806 0.9
Castings Industrial Engineering 3,749 0.9
Pennon Gas Water & Multiutilities 3,718 0.9
Royal Mail Industrial Transportation 3,694 0.9
----------------------------- ------------------------------------- ------------- -----------
50 Largest 318,843 73.8
-------------------------------------------------------------------- ------------- -----------
Market value % of
Company Sector GBP'000 portfolio
---------------------------- ------------------------------------- --------------- ------------
Balfour Beatty Construction & Materials 3,688 0.9
H&T (1) Financial Services 3,688 0.9
Sabre Insurance Non-Life Insurance 3,642 0.8
Chesnara Life Insurance 3,618 0.8
International Consolidated
Airlines Travel & Leisure 3,584 0.8
Stobart Industrial Transportation 3,572 0.8
Anexo (1) Support Services 3,510 0.8
Redde (1) Financial Services 3,391 0.8
Gibson Energy (Canada) Oil & Gas Producers 3,216 0.7
Palace Capital Real Estate Investment Services 3,179 0.7
---------------------------- ------------------------------------- --------------- ------------
60 Largest 353,931 81.8
------------------------------------------------------------------- --------------- ------------
Elementis Chemicals 3,169 0.7
IMI Industrial Engineering 3,148 0.7
Centrica Gas Water & Multiutilities 3,140 0.7
XP Power Electronic & Electrical Equipment 3,125 0.7
HICL Infrastructure Equity Investment Instruments 3,118 0.7
Daily Mail & General
Trust Media 3,068 0.7
Epwin (1) Construction & Materials 3,066 0.7
Marshalls Construction & Materials 2,969 0.7
Numis (1) Financial Services 2,937 0.7
K3 Capital (1) Financial Services 2,683 0.7
---------------------------- ------------------------------------- --------------- ------------
70 Largest 384,354 88.8
------------------------------------------------------------------- --------------- ------------
Airea (1) Personal Goods 2,681 0.6
Renold Industrial Engineering 2,661 0.6
Low & Bonar General Industrials 2,626 0.6
A & J Mucklow Real Estate Investment Trusts 2,620 0.6
Gordon Dadds (1) Support Services 2,567 0.6
Helical Real Estate Investment Services 2,479 0.6
Findel General Retailers 2,366 0.6
Elecosoft (1) Technology 2,365 0.6
Herald Investment Trust Equity Investment Instruments 2,242 0.5
Ibstock Construction & Materials 2,225 0.5
---------------------------- ------------------------------------- --------------- ------------
80 Largest 409,186 94.6
------------------------------------------------------------------- --------------- ------------
4D Pharma (1) Pharmaceuticals & Biotechnology 2,207 0.5
IP Group Financial Services 2,067 0.5
Oxford Sciences Innovation
(2) Pharmaceuticals & Biotechnology 1,548 0.4
Bellway Household Goods & Home Construction 1,523 0.3
Ilika (1) Alternative Energy 1,406 0.3
Carr's Group Food Producers 1,365 0.3
Indus Gas (1) Oil & Gas Producers 1,257 0.3
Taylor Wimpey Household Goods & Home Construction 1,228 0.3
Hammerson Real Estate Investment Trusts 1,175 0.3
Premier Oil Oil & Gas Producers 1,174 0.3
---------------------------- ------------------------------------- --------------- ------------
90 Largest 424,136 98.1
------------------------------------------------------------------- --------------- ------------
Carclo Chemicals 1,165 0.3
Renewi Support Services 1,116 0.2
Wadworth - ordinary shares
(2) Travel & Leisure 723 0.2
Horizon Discovery (1) Pharmaceuticals & Biotechnology 721 0.2
SIMEC Atlantis Energy
(1) Alternative Energy 689 0.1
Moss Bros General Retailers 573 0.1
Flowtech Fluidpower (1) Industrial Engineering 512 0.1
Modern Water (1) Gas Water & Multiutilities 424 0.1
Providence Resources
(1) (Ireland) Oil & Gas Producers 386 0.1
Velocys (1) Chemicals 371 0.1
---------------------------- ------------------------------------- --------------- ------------
100 Largest 430,816 99.6
------------------------------------------------------------------- --------------- ------------
(1) AIM Stocks
(2) Unlisted Investments
Source: Janus Henderson
CONDENSED INCOME STATEMENT
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
31 March 2019 31 March 2018 30 September 2018
Revenue Capital Revenue Capital Revenue Capital
return return Total return return Total return return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ---------- --------- ---------- ---------- --------- ---------- ---------- ---------- ----------
Losses on
investments
held at fair
value through
profit or loss - (49,907) (49,907) - (18,550) (18,550) - (3,032) (3,032)
Income from
investments 7,117 - 7,117 6,888 - 6,888 19,757 - 19,757
Other interest
receivable and
similar income 51 - 51 93 - 93 190 - 190
--------- -------- --------- --------- -------- --------- --------- --------- ---------
Gross revenue
and capital
losses 7,168 (49,907) (42,739) 6,981 (18,550) (11,569) 19,947 (3,032) 16,915
Management fee
and
performance
fee (note 2) (488) (488) (976) (1,009) - (1,009) (2,048) - (2,048)
Other
administrative
expenses (note
2) (271) - (271) (296) - (296) (520) - (520)
--------- -------- --------- --------- -------- --------- --------- --------- ---------
Net
return/(loss)
before finance
costs and
taxation 6,409 (50,395) (43,986) 5,676 (18,550) (12,874) 17,379 (3,032) 14,347
Finance costs (324) (324) (648) (606) - (606) (1,347) - (1,347)
--------- -------- --------- --------- -------- --------- --------- --------- ---------
Net
return/(loss)
before
taxation 6,085 (50,719) (44,634) 5,070 (18,550) (13,480) 16,032 (3,032) 13,000
Taxation on net
return (82) - (82) (95) - (95) (183) - (183)
--------- -------- --------- --------- -------- --------- --------- --------- ---------
Net
return/(loss)
after taxation 6,003 (50,719) (44,716) 4,975 (18,550) (13,575) 15,849 (3,032) 12,817
====== ====== ====== ====== ====== ====== ===== ====== =====
Return/(loss)
per ordinary
share - basic
and diluted
(note 3) 22.2p (187.7p) (165.5p) 18.4p (68.7p) (50.3p) 58.6p (11.2p) 47.4p
====== ====== ====== ====== ====== ====== ===== ====== ======
The total columns of this statement represent the Income
Statement of the Company, prepared in accordance with FRS 104. The
revenue and capital columns are supplementary to this and are
published under guidance from the Association of Investment
Companies.
The Company has no recognised gains or losses other than those
disclosed in the Income Statement and Statement of Changes in
Equity.
All items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the
period.
The accompanying notes are an integral part of the condensed
financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
Half-year ended 31 March 2019
Called Share premium Capital Other
up share account redemption capital Revenue
capital GBP'000 reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------------- -------------- ------------ ------------ ------------ ------------
At 1 October 2018 6,755 61,619 1,007 353,998 15,555 438,934
Net (loss)/return after
taxation - - - (50,719) 6,003 (44,716)
Third interim dividend
(14.0p) for
the year ended 30 September
2018 - - - - (3,783) (3,783)
Final dividend (14.0p)
for
the year ended 30 September
2018 - - - - (3,782) (3,782)
------------ ------------ ----------- ----------- ----------- -----------
At 31 March 2019 6,755 61,619 1,007 303,279 13,993 386,653
======= ======= ======= ====== ======= =======
(Unaudited)
Half-year ended 31 March 2018
Share premium Capital Other
Called account redemption capital Revenue
up share GBP'000 reserve reserves reserve Total
capital GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
------------------------------ ------------- -------------- ------------ ------------ ------------ ------------
At 1 October 2017 6,755 61,619 1,007 357,030 13,485 439,896
Net (loss)/return after
taxation - - - (18,550) 4,975 (13,575)
Third interim dividend
(12.0p) for
the year ended 30 September
2017 - - - - (3,242) (3,242)
Final dividend (13.0p)
for
the year ended 30 September
2017 - - - - (3,512) (3,512)
------------ ------------ ----------- ----------- ----------- -----------
At 31 March 2018 6,755 61,619 1,007 338,480 11,706 419,567
======= ======= ======= ======= ======= =======
(Audited)
Year ended 30 September 2018
Share Capital Other
Called premium redemption capital
up share account reserve reserves Revenue
capital GBP'000 GBP'000 GBP'000 reserve Total
GBP'000 GBP'000 GBP'000
------------ ------------ ------------ ------------ ------------- ------------
At 1 October 2017 6,755 61,619 1,007 357,030 13,485 439,896
Net (loss)/return after
taxation - - - (3,032) 15,849 12,817
Third interim dividend
(12.0p) for
the year ended 30 September
2017 - - - - (3,242) (3,242)
Final dividend (13.0p)
for
the year ended 30 September
2017 - - - - (3,512) (3,512)
First interim dividend
(13.0p) for the
year ended 30 September
2018 - - - - (3,512) (3,512)
Second interim dividend
(13.0p) for the
year ended 30 September
2018 - - - - (3,513) (3,513)
----------- ----------- ----------- ----------- ------------ -----------
At 30 September 2018 6,755 61,619 1,007 353,998 15,555 438,934
======= ======= ======= ======= ======= =======
The accompanying notes form an integral part of these condensed
financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
31 March 2019 31 March 2018 30 September
GBP'000 GBP'000 2018
GBP'000
Fixed assets
Investments held at fair value
through profit or loss (note
4) 432,493 479,143 492,659
----------- ----------- -----------
Current assets
Debtors 2,263 2,479 2,018
Cash at bank 1,983 1,115 1,445
----------- ----------- -----------
4,246 3,594 3,463
Creditors: amounts falling due
within one year (20,312) (33,409) (27,421)
----------- ----------- -----------
Net current liabilities (16,066) (29,815) (23,958)
----------- ----------- -----------
Total assets less current liabilities 416,427 449,328 468,701
----------- ----------- -----------
Creditors: amounts falling due
after more than one year (29,774) (29,761) (29,767)
----------- ----------- -----------
Net assets 386,653 419,567 438,934
====== ====== =======
Capital and reserves
Called up share capital 6,755 6,755 6,755
Share premium account 61,619 61,619 61,619
Capital redemption reserve 1,007 1,007 1,007
Other capital reserves 303,279 338,480 353,998
Revenue reserve 13,993 11,706 15,555
----------- ----------- -----------
Total shareholders' funds 386,653 419,567 438,934
====== ====== =======
Net asset value per ordinary
share - basic and diluted (note
7) 1,431.1p 1,552.9p 1,624.6p
======= ======= =======
The accompanying notes form an integral part of these condensed
financial statements.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited) (Audited)
(Unaudited) Half-year Year ended
Half-year ended ended 31 30 September
31 March 2019 March 2018 2018
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------------ -------------- ---------------
Cash flows from operating activities
Net (loss)/return before taxation (44,634) (13,480) 13,000
Add back: finance costs 648 606 1,347
Add: losses on investments held
at fair value through profit or
loss 49,907 18,550 3,032
Withholding tax on dividends deducted
at source (107) (109) (228)
(Increase)/decrease in debtors (220) (404) 89
Increase/(decrease) in creditors 523 (410) (371)
----------- ----------- -----------
Net cash inflow from operating
activities 6,117 4,753 16,869
====== ====== ======
Cash flows from investing activities
Purchase of investments (28,240) (50,043) (76,383)
Sale of investments 38,776 24,862 48,182
----------- ----------- -----------
Net cash inflow/(outflow) from
investing activities 10,536 (25,181) (28,201)
Cash flows from financing activities
Equity dividends paid (net of refund
of unclaimed distributions and
reclaimed distributions) (7,565) (6,754) (13,779)
Net loans (repaid)/drawn down (7,885) 17,540 16,507
Interest paid (665) (600) (1,310)
----------- ----------- -----------
Net cash (outflow)/inflow from
financing activities (16,115) 10,186 1,418
Net increase/(decrease) in cash
and cash equivalents 538 (10,242) (9,914)
Cash and cash equivalents at start
of year 1,445 11,362 11,362
Effect of foreign exchange rates - (5) (3)
----------- ----------- -----------
Cash and cash equivalents at end
of year 1,983 1,115 1,445
====== ====== ======
Comprising:
Cash at bank 1,983 1,115 1,445
====== ====== ======
The accompanying notes are an integral part of these condensed
financial statements.
NOTES TO THE FINANCIAL STATEMENTS
The half-year financial statements cover the period from 1
October 2018 to 31 March 2019 and have not been audited or reviewed
by the Company's auditors.
1. Accounting policies - basis of preparation
The condensed set of financial statements has been prepared
in accordance with FRS 104, Interim Financial Reporting, FRS
102, the Financial Reporting Standard applicable in the UK and
Republic of Ireland, and the Statement of Recommended Practice
for "Financial Statements of Investment Trust Companies and
Venture Capital Trusts", which was updated by the Association
of Investment Companies in February 2018 with consequential
amendments.
For the period under review, the Company's accounting policies
have not varied from those described in the annual report for
the year ended 30 September 2018.
2. Expenses
All expenses with the exception of the performance fee, management
fee and finance costs are charged wholly to revenue. Performance
fees are charged wholly to capital. With effect from 1 October
2018, management fees and finance costs are charged 50% to revenue
and 50% to capital (previously 100% to revenue). Expenses which
are incidental to the purchase or sale of an investment are
included in the cost or deducted from the proceeds of sale of
the investment. No provision has been made for a performance
fee based on the Company's performance relative to the FTSE
All-Share Index (the benchmark) over the thirty months to 31
March 2019 (31 March 2018 and 30 September 2018: GBPnil). Any
performance fee payable will be calculated based on the actual
relative performance for the thirty-six months to 30 September
2019 and will be equal to 15% of any outperformance (on a total
return basis) of the FTSE All-Share Index by more than 10% (the
'hurdle rate'). The performance fee is capped at 0.25% of average
net chargeable assets for the year.
No performance fee will be payable if the net asset value per
share on the last day of the relevant calculation period is
lower than the net asset value per share on the first day of
the calculation period.
3. Return per ordinary share - basic and diluted
(Unaudited) (Audited)
Half-year ended (Unaudited) Year ended
31 March 2019 Half-year ended 30 September
GBP'000 31 March 2018 2018
GBP'000 GBP'000
---------------------------- ----------------- ----------------- --------------
The return/(loss)
per ordinary share
is based on the following
figures:
Net revenue return 6,003 4,975 15,849
Net capital loss (50,719) (18,550) (3,032)
---------- ---------- ----------
Net total(loss)/return (44,716) (13,575) 12,817
====== ====== ======
Weighted average number
of ordinary shares
in issue for each
period 27,018,565 27,018,565 27,018,565
Revenue return per
ordinary share 22.2p 18.4p 58.6p
Capital loss per ordinary
share (187.7p) (68.7p) (11.2p)
---------- ---------- ----------
Total (loss)/return
per ordinary share (165.5p) (50.3p) 47.4p
====== ====== ======
The Company does not have any dilutive securities; therefore,
basic and diluted returns per share are the same.
4. Fair value of financial assets and liabilities
The table below analyses fair value measurements for investments
held at fair value through profit or loss. These fair value measurements
are categorised into different levels in the fair value hierarchy
based on the valuation techniques used and are defined as follows:
Level 1: valued using quoted prices in active markets for identical
assets
Level 2: valued by reference to valuation techniques using observable
inputs other than quoted prices included in Level 1
Level 3: valued by reference to valuation techniques using inputs
that are not based on observable market data
Investments held at fair value through Level Level Level Total
profit or loss at 31 March 2019 (unaudited) 1 2 3 GBP'000
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- --------- --------- ---------
Investments 430,012 - 2,481 432,493
Investments held at fair value through Level Level Level Total
profit or loss at 1 2 3 GBP'000
31 March 2018 (unaudited) GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- --------- --------- ---------
Investments 476,874 - 2,269 479,143
Investments held at fair value through Level Level Level Total
profit or loss at 1 2 3 GBP'000
30 September 2018 (audited) GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- --------- --------- ---------
Investments 490,403 - 2,256 492,659
A reconciliation of movements within Level 3 is set out below:
2019
GBP'000
------------------------------------------------------------------------- --------- ---------
Opening balance 2,256
Transfers in 84
Total gain included in the Income Statement
- on investments held 141
Closing balance 2,481
---------
The transfer in relates to the Company's holding in ACHP, which
has been delisted from AIM.
The valuation techniques used by the Company are explained in the
accounting policies note in the Company's Annual Report for the
year ended 30 September 2018.
The fair value of the senior unsecured loan notes at 31 March 2019
has been estimated to be GBP32,451,000 (31 March 2018: GBP31,679,000;
30 September 2018: GBP31,056,000). The fair value of the senior
unsecured loan notes is calculated using a discount rate which reflects
the yield on a UK Gilt of similar maturity plus a suitable credit
spread.
The senior unsecured loan notes are categorised as level 3 in the
fair value hierarchy.
5. Share Capital
At 31 March 2019 there were 27,018,565 ordinary shares of 25p each
in issue (31 March 2018: 27,018,565; 30 September 2018: 27,018,565).
During the half-year ended 31 March 2019 no shares were issued or
bought back (31 March 2018 and 30 September 2018: no shares issued
or bought back).
6. Transaction costs
Purchase transaction costs for the half-year ended 31 March 2019
were GBP121,000 (31 March 2018: GBP277,000; 30 September 2018: GBP328,000).
Sale transaction costs for the half-year ended 31 March 2019 were
GBP15,000 (31 March 2018: GBP12,000; 30 September 2018: GBP23,000).
These comprise mainly stamp duty and commission.
7. Net asset value per ordinary share - basic and diluted
The net asset value per ordinary share of 1,431.1p (31 March
2018: 1,552.9p; 30 September 2018: 1,624.6p) is based on the
net assets attributable to the ordinary shares of GBP386,653,000
(31 March 2018: GBP419,567,000; 30 September 2018: GBP438,934,000)
and on 27,018,565 ordinary shares (31 March 2018 and 30 September
2018: 27,018,565), being the number of ordinary shares in issue
at the end of each period.
8. Dividend
On 30 April 2019, a first interim dividend of 14.5p per ordinary
share was paid in respect of the year ending 30 September 2019.
A second interim dividend of 15.0p per ordinary share has been
declared and will be paid on 31 July 2019 to shareholders on
the register of members at the close of business on 5 July 2019.
The ex-dividend date is 4 July 2019. Based on the number of
shares in issue on 4 June 2019 of 27,018,565, the cost of the
dividend will be GBP4,053,000 (second interim dividend for the
year ended 30 September 2018: GBP3,513,000).
9. Going concern
The assets of the Company consist of securities that are readily
realisable and, accordingly, the Directors believe that the
Company has adequate resources to continue in operational existence
for at least twelve months from the date of approval of the
financial statements. Having assessed these factors and the
principal risks, the Board has determined that it is appropriate
for the financial statements to be prepared on a going concern
basis.
10. Comparative Information
The financial information contained in this half-year report
does not constitute statutory accounts as defined in section
434 of the Companies Act 2006. The financial information for
the half-years ended 31 March 2019 and 31 March 2018 has not
been audited nor reviewed by the Company's auditor.
The figures and financial information for the year ended 30
September 2018 are extracted from the latest published accounts
and do not constitute the statutory accounts for that year.
Those accounts have been delivered to the Registrar of Companies
and included the report of the independent auditors, which was
unqualified and did not include a statement under either section
498(2) or 498(3) of the Companies Act 2006.
11. Manager
Henderson Investment Funds Limited ('HIFL') is appointed to
act as the Company's Alternative Investment Fund Manager. HIFL
delegates investment management services to Henderson Global
Investors Limited. References to Janus Henderson within these
results refer to the services provided by both entities.
12. General information
Company Status
The Company is a UK-domiciled investment trust company. The
registered number is 670489.
The London Stock Exchange Daily Official List SEDOL number is
0536806
The ISIN number is GB0005368062.
The London Stock Exchange (TIDM) Code is LWI.
The Global Intermediary Identification Number (GIIN) is 2KBHLK.99999.SL.826.
The Legal Entity Identifier Number (LEI) is 2138008RHG5363FEHV19
Directors
The Directors of the Company are Robert Robertson (Chairman),
Gaynor Coley (Audit Committee Chairman), Duncan Budge, Kevin
Carter, and Karl Sternberg.
Corporate Secretary
Henderson Secretarial Services Limited, represented by Helena
Harvey ACIS.
Email: ITSecretariat@janushenderson.com
Registered Office
201 Bishopsgate, London EC2M 3AE.
Website
Details of the Company's share price and net asset value, together
with general information about the Company, monthly factsheets
and data, copies of announcements, reports and details of general
meetings can be found at www.lowlandinvestment.com.
13. Half-year report
An abbreviated version of the half-year report, the 'Update',
will be posted will be posted to shareholders in June 2019.
The Update will also be available on the Company's website,
and hard copies will be available at the Company's registered
office, 201 Bishopsgate, London EC2M 3AE.
For further information, please contact:
James Henderson / Laura Foll
Fund Managers
Lowland Investment Company plc
Tel: 020 7818 4370 / 020 7818 6364
James de Sausmarez
Director and Head of Investment Trusts
Janus Henderson Investors
Tel: 020 7818 3349
Laura Thomas
Investment Trust PR Manager
Janus Henderson Investors
Tel: 020 7818 2636
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SSIFIWFUSEFM
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June 07, 2019 11:20 ET (15:20 GMT)
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