TIDMSIGT
RNS Number : 7579Q
Seneca Global Income & Growth PLC
02 December 2016
To: RNS
From: Seneca Global Income & Growth Trust plc
Date: 2 December 2016
SENECA GLOBAL INCOME & GROWTH TRUST PLC
ANNOUNCES INTERIM RESULTS
Seneca Global Income & Growth Trust plc, (the Trust), with
total assets of GBP70.4 million, announces its interim results for
the six months ended 31 October 2016.
-- Net Asset Value total return +10.1%
-- Share Price total return +9.8%
-- Quarterly Dividend increased by 3.4% to 1.52p
-- Annualised volatility 12.6% compared with 15.5% for the FTSE All-Share Index
-- Multi-Asset value investment policy - coherent and transparent
-- Discount Control Mechanism effective since 1 August
-- Shares have traded in a very narrow range around Net Asset Value
The Trust has a distinctive multi-asset value approach to
investing, focusing on quality and price. This has contributed to a
good six months for the share price, increasing from 147.8 pence to
159.0 pence and providing a total return of 9.8% for the
period.
Reflecting the period of strong returns, the Trust has again
been successful in meeting its income and volatility objectives.
The dividend for the quarter increased 3.4% to 1.52p, extending
further the Trust's record of growing its dividend whilst adding to
its revenue reserves. Unlike many Trusts, SIGT draws its income
from a very wide range of sources, providing a strong platform from
which to generate dividends. In addition, despite the market
disruption caused by the Brexit vote, the Trust maintained a level
of volatility significantly below that of a pure equity
portfolio.
During the period, the Trust enhanced its commitment to
shareholders with the introduction of a Discount Control Mechanism.
The Board believes this policy will provide the comfort that
Shareholders can invest without taking material discount risk. This
initiative is complementary to the transparent approach to
portfolio management espoused by Seneca Investment Managers, both
in regard to the generation of income and of capital growth.
Richard Ramsay, Chairman, said: 'Following this successful
period, we will seek to further develop the good investment track
record achieved since 2012, when the Trust's investment policy
changed. We believe the Manager's multi-asset value style of
investing is well suited to the current environment, and forms a
strong basis for the future growth of the Trust as conditions
allow'.
The detailed interim results announcement follows.
Unaudited results for the six months ended 31 October 2016
Highlights for the period
-- Net Asset Value total return +10.1%
-- Share Price total return +9.8%
-- Quarterly Dividend increased by 3.4% to 1.52p
-- Annualised volatility 12.6% compared with 15.5% for the FTSE All-Share Index
-- Multi-Asset value investment policy - coherent and transparent
-- Discount Control Mechanism effective since 1 August
-- Shares have traded in a very narrow range around Net Asset Value
Performance
Seneca Global Income & Growth Trust plc ('SIGT'), your
Company, generated a net asset value per share ('NAV') total return
of +10.1% for the six months to 31st October 2016, which was better
than the benchmark return of +1.8%, being 3-month LIBOR plus 3%.
While a strong absolute performance, SIGT's NAV return was less
than the main equity only comparator indices, particularly those
that benefited from the weak performance of Sterling since the 23
June Brexit Referendum result. Your Manager's Review provides more
details on performance. It is clear that investment markets did not
expect the outcomes of the Referendum and, since the period end,
the USA Presidential Election. The lasting effects of these
outcomes remain to be seen but, your Board believes, they reinforce
the worth of the Multi-Asset value investment policy of your
Company providing, as it does, transparent and straight-forward
exposure to a range of assets, which together provide lower
volatility (i.e. lower risk) returns than equity only
portfolios.
Dividends
Your Company paid two interim dividends of 1.52p per share for
the period, an increase of 3.4% on the equivalent dividends last
year. It is your Board's intention, barring unforeseen
circumstances, that it will at least maintain the quarterly rate of
1.52p per share for the full year to 30 April 2017.
Gearing
During the period, SIGT announced an increase of its rolling
debt facility from GBP7m to GBP11m on similar commercial terms. The
actual gearing level through-out the period was around 10% which
was achieved using a little less than GBP7m of net debt. The extra
GBP4m has been put in place largely to assist with the operation of
the Discount Control Mechanism ('DCM'). This will enable gearing
levels to be maintained should the DCM result in the issuance of
new shares, or will provide short term working capital should
shares be bought-in.
Discount Control Mechanism ('DCM')
At the Company's Annual General Meeting in July, all the
resolutions proposed were passed by a majority of over 99% of
shares voted. These resolutions included SIGT's continuation as
well as the authority to buy-in up to 14.99% of the outstanding
shares and to issue new shares equivalent to up to 20% of the
outstanding issued shares. These buy-in and issuance authorities
are essential to enable the DCM to operate, and your Board
appreciates Shareholders' support. The DCM has been effective since
1 August since when buyers of shares in the ordinary course, have
been able to do so with the comfort of knowing they are not taking
any material discount risk. Since the shares have traded
consistently in a very narrow range around NAV, there has been no
call on the Company to buy-in any shares though your Board stands
ready and very willing to do so. In due course, your Board hopes to
see sufficient demand for SIGT's shares such that new ones will be
issued, but meantime is content to see matched buying and selling
of shares by investors at very close to NAV, supported by the
presence of the DCM.
Investment Outlook
As already mentioned, there have been at least two significant
and unexpected political events of late. What will their impact be
on economies and investment markets? Will there be more political
change elsewhere? Is the unexpected now to be expected? Will fiscal
stimulus usurp monetary stimulus as the weapon of choice from
policy makers? Anyone who thinks they know the answers to all these
questions is probably delusional! Of course we all have an opinion
on these issues and will make investment decisions accordingly, but
the great strength of SIGT's Multi-Asset value investment policy is
that it provides investors with diversification in a manner that
should both reduce any negative impacts from unexpected outcomes
and provide an attractive risk adjusted return over the medium to
long term.
Richard Ramsay
Chairman
1 December 2016
Manager's Review
Overview
If the US presidential election had taken place two weeks
earlier, we would be reporting about two extraordinary events
during the review period not one. The Brexit result and its
aftermath certainly dominated the period in a way that few events
can. The sharp fall in sterling, the fall and subsequent rise in UK
mid-caps as well as the economic shock that never materialized - at
least not yet - were all outcomes that affected the portfolio in
some way, both positively and negatively.
In terms of the performance of markets and currencies, the
period was one that saw the US dollar strengthen as the case for
further monetary tightening became stronger. 10-year bond yields
across developed markets fell for the first half of the period,
particularly in the weeks following Brexit, but then rose in the
second half. Equity markets on the whole were strong throughout the
six months with the exception of days following Brexit. Thus on the
whole it was a decent period for investors, particularly those who
are sterling-based.
Despite assertions by the Fed in December 2015 that 2016 would
see 4 quarter point hikes in interest rates, the likelihood of such
declined as the year progressed. Expectations of hikes were dashed
on various occasions, either because of weak jobs data or Brexit,
and at the time of writing there has not been one increase.
Furthermore, the Fed is not in the business of making accurate
predictions but in the business of promoting full employment and
price stability. The bullish December 2015 statement may well have
been based on hope rather than expectation, as well as a wish to
boost the private sector's confidence in the economy. Second, it is
very possible that the Fed may allow inflation to rise above its 2%
target, either because it does not want to damage growth
unnecessarily or simply because if inflation has been below 2%
which it has been at times in recent years, then it must be allowed
to rise above it to average 2% over time. Nevertheless, at the time
of writing, a quarter point hike in December appears to have been
baked into markets.
The Brexit result came as a shock to markets, as expectations
leading up to the vote were that the 'Remain' camp would win. The
shock wave spread around the world, with equity markets almost
everywhere falling sharply. In the UK, mid-caps were particularly
badly hit, as they are generally seen as being more domestically
oriented and thus vulnerable to the economic carnage that had been
predicted to follow a 'Leave' vote and that was no doubt around the
corner.
As is often the case with such events, markets recovered
quickly, though as of the end of the review period UK mid-caps had
only recovered around half of the ground they had lost to their
large-cap counterparts in the days following the vote. It appears
that, as is often the case, markets were relieved that the vote was
behind them, and once they saw that the world did not fall apart,
embarked on a steady climb.
As July progressed and then August, it became clear that
economic activity was not falling. If anything, the opposite was
the case, with confidence surveys showing marked improvements. The
fact is that household and perhaps even business confidence has
been depressed ever since the 2008/9 crisis, so it is prone to the
occasional bout of euphoria.
Indeed, there was evidence during the review period that growth
globally was improving, with the OECD global leading index picking
up after a couple of years of declines.
Elsewhere, Japan appeared to be heading back towards deflation,
and the central bank governor Haruhiko Kuroda announced that the 2%
inflation target would not be met during his term, which ends in
April 2018.
Emerging market economies showed tentative signs of improvement
such as declines in inflation and unemployment, and indeed these
improvements were reflected in equity market performance. Asia ex
Japan and Emerging Markets were the two best performing equity
regions during the period, though they still have much of the
ground lost in the last five or so years to recover.
Overall, it was a volatile but decent period for risk assets as
well as safe haven bonds, though in the weeks since the end of the
period bond yields have continued to rise.
Performance
Performance over the period was positive with a net asset value
total return of +10.1%, whilst the share price total return was
slightly lower at +9.8%. These outturns were well ahead of the
benchmark (3 month Libor +3%) return of +1.8%. This outturn was
again achieved with a level of volatility which was lower than the
FTSE All Share Index, albeit that the Company's focus on mid cap UK
equities and lack of exposure to perceived safe haven assets such
as gilts did lead to higher volatility in the period immediately
after the Brexit vote.
Over the period the FTSE All Share total return was +12.2%,
whilst overseas market returns were boosted for UK investors due to
the extreme weakness in sterling following the shock UK vote to
leave the European Union. Amongst the best performing equity
regions were those of Japan and the emerging markets, where gains
stretched to 30%. Gilt yields continued to fall in the early part
of the period, with the gilt market being particularly strong
following the Brexit vote. However, yields started to rise again
towards the end of the period as investors' thoughts turned to the
prospects of a pick-up in UK inflation, following such severe
declines in the value of sterling.
Positive contributions to your Company's returns were made from
all major asset classes. However, the UK equity performance was
well below the benchmark, with mid-sized companies, in which the UK
portfolio is largely invested, underperforming their larger
brethren. Overseas equity managers in general produced good
absolute returns but have struggled to match their respective local
indices over the period. A drag on returns came within the European
equity investments, which were hurt by the currency hedged position
held going into the Brexit vote, which amounted to around 65% of
the Euro exposure (this hedging was subsequently reduced to around
25%).
The largest positive contribution came from Fair Oaks Income
Fund, which benefitted from an uplift in net asset value, a very
high dividend yield together with exposure to the US dollar in
which its assets are denominated. It is perhaps unsurprising that
the Asian funds were also amongst the most positive contributors,
with Japanese equity and commodity related equity holdings also
providing solid contributions.
The major detractors from returns all came from within the UK
equity portfolio. Concerns over the ability of UK retailers to pass
on increased import costs due to weaker sterling undermined
investor confidence in Halfords and Marks & Spencer, with
similar worries also afflicting Britvic. Senior and BT Group both
fell on company specific issues, which we felt presented a further
buying opportunity in both companies, as we took a long-term view
of their prospects.
Asset Allocation
There have been few changes to asset class allocations over the
period. The only significant change being a reduction of 2% in the
overseas equity weighting, which was reduced following the strong
returns seen over the period. To achieve this lower weighting the
European equity position was reduced as we took the view that,
following the Brexit vote, political pressures in Europe were
likely to grow. However, we still believe that Europe is in the
early stages of its economic cycle and that equity valuations there
remain attractive. The tactical asset allocation to European
equities remains overweight against the long term strategic asset
allocation.
We continue to place emphasis on real assets within the
portfolio, such as equities and property, which offer the potential
to provide capital growth and improved income over time. Property
exposure is gained through REITs operating in niche areas such as
student accommodation and primary healthcare practices. We are also
attracted to property managers operating a very active management
approach, which should add value in a UK commercial property market
where yields overall have compressed over recent years. Other
specialist assets held are in quoted vehicles where underlying
assets span private equity, infrastructure and specialist
financials, such as leasing vehicles and direct lending. These
investments are targeted at exposure to strong asset backed assets,
which have high and dependable income streams, often linked to
inflation, whilst also offering potential for capital growth.
The portfolio has no exposure to developed market sovereign
bonds as we continue to feel they offer very poor value despite the
pick-up in yields seen late in the period.
UK Equities (32.6%)
The early signs post the vote to leave the European Union have
been relatively positive, with little evidence so far to suggest
that the UK economy is in immediate danger of sinking into a severe
recession. Indeed, domestic based exporters have experienced a
significant boost to their competitive position from the fall in
sterling. Unemployment remains on an improving trend and consumer
confidence, whilst not robust, is far from despondent. It is now
clear following the Autumn Statement that fiscal policy in the UK
will now be more expansive, as the Government seeks to boost the
economy to counter any detrimental effects of Brexit.
New money has been committed to the UK equity portfolio over the
period to maintain the weighting, with the UK market
underperforming against international equity markets in sterling
terms. The emphasis within the portfolio remains on mid-cap stocks,
where we continue to find good quality companies trading on
attractive valuations. New holdings introduced during the period
were Britvic, Essentra and Ultra Electronics. All three companies
we believe have been bought on valuations which underestimate the
medium to long term prospects for the companies. We also added to
positions in mid-cap holdings which sold off aggressively in the
period immediately following the EU referendum vote. We welcome
such short term volatility when it provides opportunity to invest
at better levels in companies we expect to hold on at least a five
year timeframe.
New positions were largely financed by sales of Royal Dutch
Shell and Ashmore Group, which had both performed extremely well
since acquisition in January 2016, hitting prices where we felt
they no longer offered good value on a long term view.
Overseas Equities (31.9%)
Economic conditions have, in general, been stable over the
period and there have been some tentative signs that growth has
stabilised in China, which has supported a rally in Asian and
emerging market equities. The two tier monetary policy being
pursued within developed economies provides, we feel, opportunities
to emphasise regions where policy is still loose, namely Europe
and, to a lesser extent, Japan. We also continue to feel that the
longer term attractions offered by Asia and the emerging markets
should be emphasised within the portfolio.
We have moved to consolidate the funds held within the overseas
equity element of the portfolio by increasing emphasis on managers
sharing our views on quality and value within their investment
process. We are also keen to concentrate positions on managers
taking a focussed approach to stock selection, with little
adherence to benchmark indices.
The move towards consolidation of holdings in the United States
saw the sale of the IShare MSCI USA Dividend ETF, in favour of an
increased position in the Cullen North American High Dividend Value
Fund.
In Europe the Blackrock Continental European Income Fund and
Schroder European Alpha Income Fund were sold, with proceeds being
committed to the InvescoPerpetual European Equity Income Fund, a
new holding which is run with an explicit value approach. In
addition, an increased position was taken in the holding of
Liontrust European Enhanced Equity Income Fund, with this fund also
being run with a strict adherence to value principles. This fund is
invested in through a hedged share class, which provides some
protection against Euro weakness against sterling.
Asian equity positions have been consolidated by the sale of the
Liontrust Asian Income Fund. Proceeds from this sale were
reinvested into the existing position in the Schroder Asian Income
Maximiser Fund, which offers a yield of 7% by operating a 'covered
call writing' strategy to enhance income.
The Company's positions in emerging market equity funds was top
sliced during the period to lock in profits following very strong
advances.
Specialist Assets (26.8% including property)
Your Company's exposure to specialist assets encompasses the
following sectors:
-- Commercial property - focused on UK secondary and niche markets
-- Infrastructure - Renewable energy and proven social infrastructure
-- Speciality Finance - Leasing, mortgages, global reinsurance
and direct lending to SME market
-- Private equity - A J Bell Holdings and private equity fund of funds
There were few significant transactions during the period with
the sale of Bluefield Solar Income Fund being used to finance a new
holding in International Public Partnerships Limited (INPP). INPP
invests across a number of infrastructure sectors including
transport, education, military housing, energy transmission and
water. It is part of the Bazalgette Consortium which is building
the new 'Super Sewer' in London. We view this as a secure source of
asset backed and growing dividends. This switch gives an increased
level of diversification within infrastructure related assets held.
Towards the end of the period the holding in SQN Asset Finance was
reduced, with the company's shares trading on a large premium to
net asset value.
Fixed Income (8.7% - inclusive of cash)
Fixed income exposure has been maintained but no significant
transactions were undertaken over the period. The bulk of exposure
is held in high yield corporate bond funds operating within niche
credit areas and also in short duration bonds. The portfolio also
has exposure to emerging market sovereign debt through the very
actively positioned Templeton Emerging Market Debt Fund.
Portfolio Income
One of the major benefits derived from operating a multi-asset
approach is the wide range of sources from which income can be
derived. This high level of diversification provides a good degree
of certainty around the portfolio's ability to produce an income
stream that is not only robust but also capable of growth over
time. The weakness in sterling seen post the EU referendum result
has further boosted income over the period. If the pound should
remain at current depressed levels we would expect this enhancement
to overseas asset dividends to continue into the second half of the
year, further enhancing the strong level of cash-flows already
expected.
Outlook
Economies remain at different stages of their business cycle,
but it appears that the US and perhaps the UK are entering the
stage at which inflation may continue to rise. On the other hand,
Japan and Europe are at an earlier stage where inflation pressures
still remain weak and where central bank support is still required.
Given that equity valuations in Europe and Japan remain reasonable,
this suggests that markets there have the scope to outperform. With
valuations in the US looking less compelling, and with the prospect
of interest rate hikes, the equity market there looks less
attractive, if only in relative terms.
With inflation rising in many parts of the developed world,
bonds have started to underperform. This underperformance may well
continue given tightening labour markets as well as the prospect of
less fiscal austerity in the wake of both Brexit as well as the US
presidential election.
Seneca Investment Managers Limited
1 December 2016
Enquiries:
Alan Borrows
Seneca Investment Managers Limited Tel: 0151 906 2461
Steven Cowie, Company Secretary
PATAC Limited Tel: 0131 538 6610
Unaudited Income Statement
Six months ended Six months ended 31
31 October 2016 (unaudited) October 2015 (unaudited)
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------ ---------- ---------- --------- -------- ---------- --------
Gains/(losses) on
investments - 4,784 4,784 - (1,827) (1,827)
Income 2 1,788 - 1,788 1,567 - 1,567
Investment management
fee (130) (130) (260) (124) (124) (248)
Administrative expenses (246) - (246) (204) - (204)
Exchange gains - 6 6 - - -
-------------------------- ------ ---------- ---------- --------- -------- ---------- --------
Profit before finance
costs and taxation 1,412 4,660 6,072 1,239 (1,951) (712)
Finance costs (24) (24) (48) (30) (30) (60)
-------------------------- ------ ---------- ---------- --------- -------- ---------- --------
Profit before taxation 1,388 4,636 6,024 1,209 (1,981) (772)
Taxation - - - - - -
-------------------------- ------ ---------- ---------- --------- -------- ---------- --------
Profit for period/
total comprehensive
income 1,388 4,636 6,024 1,209 (1,981) (772)
-------------------------- ------ ---------- ---------- --------- -------- ---------- --------
Return per share (pence) 3 3.48 11.62 15.10 3.03 (4.97) (1.94)
The total column of this statement represents the profit and
loss account of the Company. The supplementary revenue and capital
columns are both prepared under guidance published by the
Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
Audited Income Statement
Year ended 30 April
2016 (audited)
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
-------------------------- ------ -------- ---------- --------
Losses on investments - (1,723) (1,723)
Income 2 3,120 - 3,120
Investment management
fee (247) (247) (494)
Administrative expenses (434) - (434)
Exchange gains - 16 16
-------------------------- ------ -------- ---------- --------
Profit before finance
costs and taxation 2,439 (1,954) 485
Finance costs (52) (52) (104)
-------------------------- ------ -------- ---------- --------
Profit before taxation 2,387 (2,006) 381
Taxation - - -
-------------------------- ------ -------- ---------- --------
Profit for period/
total comprehensive
income 2,387 (2,006) 381
-------------------------- ------ -------- ---------- --------
Return per share (pence) 3 5.98 (5.03) 0.95
The total column of this statement represents the profit and
loss account of the Company. The supplementary revenue and capital
columns are both prepared under guidance published by the
Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
Balance Sheet
As at As at As at
31 October 31 October 30 April
2016 2015 2016
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Fixed assets
Investments at fair value through
profit or loss 69,121 64,599 64,668
------------------------------------ ------------ ------------ ----------
Current assets
Debtors and prepayments 304 218 396
Cash and short term deposits 1,182 953 676
------------------------------------ ------------ ------------ ----------
1,486 1,171 1,072
------------------------------------ ------------ ------------ ----------
Creditors: amounts falling
due within one year
Bank loan (7,000) (7,000) (7,000)
Other creditors (184) (125) (112)
------------------------------------ ------------ ------------ ----------
(7,184) (7,125) (7,112)
------------------------------------ ------------ ------------ ----------
Net current liabilities (5,698) (5,954) (6,040)
------------------------------------ ------------ ------------ ----------
Net assets 63,423 58,645 58,628
------------------------------------ ------------ ------------ ----------
Capital and reserves
Called-up share capital 9,974 9,974 9,974
Share premium account 1,428 1,445 1,445
Special reserve 41,783 41,783 41,783
Capital redemption reserve 2,099 2,099 2,099
Capital reserve 5 6,955 2,344 2,319
Revenue reserve 1,184 1,000 1,008
------------------------------------ ------------ ------------ ----------
Equity shareholders' funds 63,423 58,645 58,628
------------------------------------ ------------ ------------ ----------
Net asset value per share (pence): 6 158.97 146.99 146.95
------------------------------------ ------------ ------------ ----------
Statement of Changes in Equity
Six months ended 31 October 2016 (unaudited)
Capital
Share Share Special redemption Capital Revenue
Notes capital premium reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------
Balance at 30
April 2016 9,974 1,445 41,783 2,099 2,319 1,008 58,628
Total comprehensive
income - - - - 4,636 1,388 6,024
Discount control
costs - (17) - - - - (17)
Dividends paid 4 - - - - - (1,212) (1,212)
--------------------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------
Balance at 31
October 2016 9,974 1,428 41,783 2,099 6,955 1,184 63,423
--------------------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------
Six month ended 31 October 2015 (unaudited)
Capital
Share Share Special redemption Capital Revenue
Notes capital premium reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------
Balance at 30
April 2015 9,974 1,445 41,783 2,099 4,325 965 60,591
Total comprehensive
income - - - - (1,981) 1,209 (772)
Dividends paid 4 - - - - - (1,174) (1,174)
--------------------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------
Balance at 31
October 2015 9,974 1,445 41,783 2,099 2,344 1,000 58,645
--------------------- -------- ---------- ---------- ---------- ------------ ---------- ---------- ---------
Year ended 30 April 2016 (audited)
Capital
Share Share Special redemption Capital Revenue
Notes capital premium reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- ---------- ---------- ---------- ------------ ---------- ---------- --------
Balance at 30
April 2015 9,974 1,445 41,783 2,099 4,325 965 60,591
Total comprehensive
income - - - - (2,006) 2,387 381
Dividends paid 4 - - - - - (2,344) (2,344)
--------------------- -------- ---------- ---------- ---------- ------------ ---------- ---------- --------
Balance at 30
April 2016 9,974 1,445 41,783 2,099 2,319 1,008 58,628
--------------------- -------- ---------- ---------- ---------- ------------ ---------- ---------- --------
Cash Flow Statement
Six months Six months Year
ended 31 ended 31
October 2016 October 2015 ended 30
April 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Net return before finance costs
and taxation 6,072 (712) 485
Adjustments for:
(Gain)/loss on investments (4,784) 1,827 1,723
Exchange movements (6) - (16)
Dividend income (1,788) (1,567) (3,118)
Dividends received 1,959 1,862 3,227
Interest income - - (2)
Interest income received - - 2
Loan interest paid (45) (60) (117)
Increase in other debtors (27) (12) (4)
Increase in other creditors 70 10 10
--------------------------------- -------------- -------------- -------------
Net cash inflow from operating
activities 1,451 1,348 2,190
--------------------------------- -------------- -------------- -------------
Investing activities
Net cash inflow/(outflow) from
financial investment 261 (438) (403)
--------------------------------- -------------- -------------- -------------
Net cash inflow/(outflow) from
investing activities 261 (438) (403)
--------------------------------- -------------- -------------- -------------
Financing activities
Equity dividends paid (1,212) (1,174) (2,344)
--------------------------------- -------------- -------------- -------------
Net cash outflow from financing
activities (1,212) (1,174) (2,344)
--------------------------------- -------------- -------------- -------------
Increase/(decrease) in cash 500 (264) (557)
Exchange movements 6 - 16
Opening balance 676 1,217 1,217
--------------------------------- -------------- -------------- -------------
Closing balance 1,182 953 676
--------------------------------- -------------- -------------- -------------
Notes
1. Accounting policies
Basis of accounting
The half yearly financial statements have been prepared in
accordance with FRS 104 'Interim Financial Reporting', UK Generally
Accepted Accounting Practice (UK GAAP) and with the Statement of
Recommended Practice 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' (issued in November 2014).
They have also been prepared on the assumption that approval as an
investment trust will continue to be granted. The half yearly
financial statements have been prepared on a going concern basis
and have been prepared using the same accounting policies as the
preceding annual financial statements.
2. Income
Six months Six months Year ended
ended ended 30 April
31 October 31 October 2016
2016 2015 GBP'000
GBP'000 GBP'000
------------------------- ------------ ------------ -----------
Income from investments
UK franked income 914 608 1,475
UK unfranked income 379 613 922
Overseas dividends 495 344 721
------------------------- ------------ ------------ -----------
1,788 1,565 3,118
------------------------- ------------ ------------ -----------
Other income:
Deposit interest - 2 2
------------------------- ------------ ------------ -----------
- 2 2
------------------------- ------------ ------------ -----------
Total income 1,788 1,567 3,120
------------------------- ------------ ------------ -----------
3 Return per share
The revenue return of 3.48 pence (31 October 2015 - 3.03 pence;
30 April 2016 - 5.98 pence) per ordinary share is calculated on net
revenue on ordinary activities after taxation for the year of
GBP1,388,000 (31 October 2015 - GBP1,209,000; 30 April 2016 -
GBP2,387,000) and on 39,896,361 (31 October 2015 - 39,896,361; 30
April 2016 - 39,896,361) ordinary shares being the weighted average
number of ordinary shares in issue during the period.
The capital return of 11.62 pence (31 October 2015 - loss of
4.97 pence; 30 April 2016 - loss of of 5.03 pence) per ordinary
share is calculated on a net capital return for the period of
GBP4,636,000 (31 October 2015 - loss of 1,981,000; 30 April 2016 -
loss of GBP2,006,000) and on 39,896,361 (31 October 2015 -
39,896,361; 30 April 2016 - 39,896,361) ordinary shares being the
weighted average number of ordinary shares in issue during the
period.
The total return of 15.10 pence (31 October 2015 - loss of 1.94
pence; 30 April 2016 - return of 0.95 pence) per ordinary share is
calculated on the total return for the period of GBP6,024,000 (31
October 2015 - loss of GBP772,000; 30 April 2016 - return of
GBP381,000) and on 39,896,361 (31 October 2015 - 39,896,361; 30
April 2016 - 39,896,361) ordinary shares being the weighted average
number of ordinary shares in issue during the period.
4 Dividends
Ordinary dividends on equity shares deducted from reserves are
analysed below:
Six months Six months Year ended
ended 31 ended 31 30 April
October 2016 October 2016
2015
GBP'000 GBP'000 GBP'000
------------------------------ --------------- ------------- -------------
2015 fourth interim dividend
- 1.47p - 587 586
2016 first interim dividend
- 1.47p - 587 586
2016 second interim dividend
- 1.47p - - 586
2016 third interim dividend
- 1.47p - - 586
2016 fourth interim dividend 606 - -
- 1.52p
2017 first interim dividend 606 - -
- 1.52p
------------------------------ --------------- ------------- -------------
1,212 1,174 2,344
------------------------------ --------------- ------------- -------------
The Company has declared a second interim dividend in respect of
the year ending 30 April 2017 of 1.52p (2016 - 1.47p) per ordinary
share which will be paid on 16 December 2016 to ordinary
shareholders on the register on 25 November 2016.
5 Analysis of capital reserve
The capital reserve reflected in the Balance Sheet at 31 October
2016 includes gains of
GBP5,730,000 (31 October 2015 - losses of GBP3,308,000; 30 April
2016 - gains of GBP3,191,000) which relate to the revaluation of
investments held at the reporting date.
6 Net asset value per share
As at As at As at
31 October 31 October 30 April
2016 2015 2016
Attributable net assets
(GBP'000) 63,423 58,645 58,628
Number of Ordinary shares
in issue 39,896,361 39,896,361 39,896,361
Net asset value per Ordinary
share (p) 158.97 146.99 146.95
------------------------------ ------------- ------------- -----------
7 Half-Yearly Financial Report
The results for the six months ended 31 October 2015 and six
months ended 31 October 2016, which have not been reviewed by the
Company's auditors pursuant to the Auditing Practices Board
guidance on "Review of Interim Financial Information", constitute
non-statutory accounts as defined in Sections 434 - 436 of the
Companies Act 2006. The financial information for the year ended 30
April 2016 has been extracted from the latest published audited
financial statements which have been filed with the Registrar of
Companies. The report of the auditors on those accounts contained
no qualification or statement under Section 498 (2),(3) or (4) of
the Companies Act 2006.
The report and accounts for the half-year ended 31 October 2016
will be posted to shareholders and made available on the website
www.senecaim.com/. Copies may also be obtained from the Company
Secretary, PATAC Limited, 10 St. Colme Street, Edinburgh, EH3
6AA.
Principal Risks and Uncertainties
Risks are inherent in the investment process, but it is
important that their nature and magnitude are understood so that
risks, particularly those which the Company does not wish to take,
can be identified and either avoided or controlled. The Board has
established a detailed framework of the key risks that the business
is exposed to, with associated policies and processes devised to
mitigate or manage those risks. The principal risks faced by the
Company are set out below.
Investment and Strategy Risk: The Board is responsible for
deciding the investment strategy to fulfil the Company's objectives
and monitoring the performance of the Investment Manager.
Inappropriate strategy, including country and sector allocation,
stock selection and the use of gearing, could lead to poor returns
for shareholders. To manage this risk the Board requires the
Investment Manager to provide an explanation of significant stock
selection decisions and the rationale for the composition of the
investment portfolio at each Board meeting, when gearing levels are
also reviewed. The Board monitors the spread of investments to
ensure that it is adequate to minimise the risk associated with
particular countries or factors specific to particular sectors. The
Investment Manager also provides the Board and shareholders with
monthly factsheets which include an investment commentary.
Market Risk: The Company's assets consist principally of listed
equities and fixed income securities and its greatest risks are in
consequence market-related. In addition to ordinary movements in
the prices of the Company's investments and the loss that the
Company might suffer through holding investments in the face of
negative market movements, the Company's use of gearing necessarily
amplifies this risk. The Board seeks to mitigate this risk through
the processes described in the paragraph above, monitoring the
implementation and results of the investment process with the
Investment Manager.
Financial Risk: The Company's investment activities expose it to
a variety of financial risks that include market price risk,
foreign currency risk, interest rate risk and liquidity and credit
risk.
Earnings and Dividend Risk: The earnings that underpin the
amount of dividends declared and future dividend growth are
generated by the Company's underlying portfolio. Fluctuations in
earnings resulting from changes to the underlying portfolio or
changes in the tax treatment of the dividends or interest received
by the Company could reduce the level of dividends received by
shareholders. The Board monitors and manages this risk by
considering detailed income forecasts prepared by the Investment
Manager and Company Secretary at each Board meeting and when the
quarterly dividends are declared.
Operational Risk: The Company relies upon the services provided
by third parties and is reliant on the control systems of the
Investment Manager and the Company's other service providers. The
security and/or maintenance of, inter alia, the Company's assets,
dealing and settlement procedures, and accounting records depend on
the effective operation of these systems. These are regularly
tested and monitored and are reported on at each Board meeting. An
internal control report, which includes an assessment of risks,
together with the procedures to mitigate such risks, is prepared by
the Investment Manager and the Company Secretary and reviewed by
the Audit Committee at least once a year. The Custodian, State
Street Bank and Trust Company, produces an internal control report
each year which is reviewed by its auditors and gives assurance
regarding the effective operation of controls. A summary of this
report is reviewed by the Audit Committee.
Regulatory Risk: The breach of regulatory rules could lead to a
suspension of the Company's stock exchange listing or financial
penalties. Breach of Sections 1158 to 1159 of the Corporation Tax
Act 2010 could lead to the Company being subject to tax on
chargeable gains. The Company Secretary monitors the Company's
compliance with the Listing Rules of the UK Listing Authority and
Sections 1158 to 1159 of the Corporation Tax Act 2010. Compliance
with the principal rules is reviewed by the Directors at each Board
meeting.
Key Man Risk: The Company is substantially dependent on the
services of key individuals working for its Investment Manager,
namely Alan Borrows and Peter Elston. The loss of either or both of
these individuals could have an adverse effect on the Company's
performance. The Investment Manager has a team of three other
highly experienced investment professionals to mitigate this
risk.
Directors' Statement of Responsibilities in Respect of the
Half-Yearly Financial Report
In accordance with Chapter 4 of the Disclosure and Transparency
Rules, the Directors confirm that to the best of their
knowledge:
-- the condensed set of financial statements has been prepared
in accordance with Financial Reporting Standard 104 (Interim
Financial Reporting) on a going concern basis, and gives a true and
fair view of the assets, liabilities, financial position and net
return of the Company;
-- the half-yearly report includes a fair review of the
important events that have occurred during the first six months of
the financial year and their impact on the financial
statements;
-- the Directors' Statement of Principal Risks and Uncertainties
shown above is a fair review of the principal risks and
uncertainties for the remainder of the financial year;
-- the half-yearly report includes a fair review of the related
party transactions that have taken place in the first six months of
the financial year; and
-- in light of the controls and monitoring processes that are in
place, the Company has adequate resources and arrangements to
continue operating within its stated objective and policy for the
foreseeable future. Accordingly, the accounts continue to be drawn
up on the basis that the Company is a going concern.
On behalf of the Board
Richard Ramsay
Chairman
1 December 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BRBDDBDGBGLB
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