TIDMRCP
RNS Number : 8425N
RIT Capital Partners PLC
14 August 2017
Please click here to view the Company's Half-Yearly Financial
Report:
http://www.rns-pdf.londonstockexchange.com/rns/8425N_1-2017-8-11.pdf
14 August 2017
RIT Capital Partners plc
Results for the half year ended 30 June 2017
RIT Capital Partners plc today published its results for the
half year ended 30 June 2017.
Financial Highlights:
-- Total net assets at 30 June 2017 reached GBP2.8 billion
-- Growth in net assets of GBP104 million (before distributions) for the period
-- Net asset value (NAV) total return of 4.0% for the period
-- NAV per share 1,784 pence at 30 June 2017
-- Average premium over the period was 6.1%
Performance Highlights:
-- Defensive portfolio positioning with an emphasis on capital preservation
-- Returns achieved with prudent net quoted equity exposure, averaging 43% over the period
-- Strong performance of the quoted equity portfolio comprising
individual stocks and external managers
-- Continued steady returns from Absolute Return and Credit portfolio
-- Significant new investment with Social Capital, one of
Silicon Valley's leading technology investment firms
Dividends:
-- Dividend paid in April of 16 pence per share
-- The Board has declared a dividend of 16 pence per share for October
-- This represents an increase of 3.2% over the previous year's dividend
Summary:
-- Over the last three years, net assets have grown by GBP740 million (before dividends)
-- Over the same three-year period, the share price total return was 53%
-- Since inception, RIT has now participated in 75% of market
upside but only 39% of market declines
-- Over the same period, total shareholder return has compounded
at 12.7% per annum compared to the MSCI ACWI of 6.8%
-- GBP1,000 invested in RIT at inception in 1988 would be worth
in excess of GBP30,000 today compared to the same amount invested
in the MSCI ACWI which would be worth approximately GBP6,700
Commenting, Lord Rothschild, Chairman of RIT Capital Partners
plc, said:
"Your Company's net asset value at the end of June had risen to
1,784 pence per share, representing a total return, including the
16 pence interim dividend, of 4.0% for the half year. Over the last
three years, the NAV return stands at 34.9%, with shareholder
returns of 52.9%...
We do not believe this is an appropriate time to add to risk.
Share prices have in many cases risen to unprecedented levels at a
time when economic growth is by no means assured. The S&P is
selling at 25 times trailing 12 months' earnings, compared to a
long-term average of 15, while the adjusted Shiller price earnings
ratio, which averages profits over 10 years, is approximately 30
times. The period of monetary accommodation may well be coming to
an end. Geopolitical problems remain widespread and are proving
increasingly difficult to resolve. We therefore retain a moderate
exposure to equity markets and have diversified our asset
allocation towards equity investments where value creation is
driven by some identifiable catalyst or which are exposed to
longer-term positive structural trends. We have a particular
interest in investments which will benefit from the impact of new
technologies, and Far Eastern markets, influenced by the growing
demand from Asian consumers.
As the 'Fourth Industrial Revolution' develops, it becomes
increasingly important for your Company to be able to assess
investment opportunities in the innovation-driven changes which are
affecting almost every business sector. With this in mind, we have
entered into a partnership with Social Capital, one of Silicon
Valley's leading technology investment firms..."
ENQUIRIES:
Brunswick Group LLP:
Tom Burns / Rowan Brown 020 7404 5959
About RIT Capital Partners plc:
RIT Capital Partners plc is an investment company listed on the
London Stock Exchange. Its net assets have grown from GBP280
million on listing to GBP2.8 billion today. It is chaired by Lord
Rothschild, whose family interests retain a significant holding.
www.ritcap.com
THE FOLLOWING IS EXTRACTED FROM THE COMPANY'S HALF-YEARLY
FINANCIAL REPORT
FINANCIAL SUMMARY
30 June 2017 31 December 2016 Change
-------------------------------------- -------- ------ ------------ ---------------- --------
Net assets GBP2,771m GBP2,692m GBP79m
NAV per share(1) 1,784p 1,730p 54p
Share price 1,901p 1,885p 16p
Premium 6.6% 9.0% (2.4%)
First interim dividend paid 16.0p 15.5p 3.2%
Second interim dividend declared/paid 16.0p 15.5p 3.2%
------------ ---------------- --------
Total dividend 32.0p 31.0p 3.2%
------------ ---------------- --------
Gearing 10.2% 14.7% (4.5%)
NAV per share total return 4.0%
Share price total return 1.7%
RPI(2) plus 3.0% per annum 3.2%
MSCI All Country World Index(3) 7.4%
-------------------------------------- -------- ------ ------------ ---------------- --------
Performance History 6 Months 1 Year 3 Years 5 Years 10 Years
-------------------------------------- -------- ------ ------------ ---------------- --------
NAV per share total return 4.0% 12.6% 34.9% 66.4% 83.0%
Share price total return 1.7% 17.6% 52.9% 67.4% 112.8%
RPI plus 3.0% per annum 3.2% 6.5% 15.9% 30.1% 75.2%
MSCI All Country World Index 7.4% 20.2% 38.1% 89.5% 87.2%
-------------------------------------- -------- ------ ------------ ---------------- --------
(1) Diluted net asset value per share with debt held at fair
value.
(2) Retail Price Index.
(3) The MSCI All Country World Index (ACWI) we have adopted is a
total return index and is based on 50% of the ACWI measured in
Sterling and 50% measured in local currencies.
CHAIRMAN'S STATEMENT
Your Company's net asset value at the end of June had risen to
1,784 pence per share, representing a total return, including the
16 pence interim dividend, of 4.0% for the half year. Over the last
three years, the NAV return stands at 34.9%, with shareholder
returns of 52.9%.
Results for the half year reflect the performance of your
Company's quoted equity portfolio, both from individual stocks and
external managers, while an increased allocation to Absolute Return
& Credit contributed. The private investment portfolio has
benefitted from a number of cash distributions from external
managers, together with underlying growth in the value of some of
our directly held investments. Offsetting these results in Sterling
terms, has been the effect of our diversified currency holdings at
a time when Sterling appreciated against the US Dollar, following
its decline after the Brexit vote. As of now, our currency holdings
are spread mainly between Sterling, the Dollar and the Euro.
We do not believe this is an appropriate time to add to risk.
Share prices have in many cases risen to unprecedented levels at a
time when economic growth is by no means assured. The S&P is
selling at 25 times trailing 12 months' earnings, compared to a
long-term average of 15, while the adjusted Shiller price earnings
ratio, which averages profits over 10 years, is approximately 30
times. The period of monetary accommodation may well be coming to
an end. Geopolitical problems remain widespread and are proving
increasingly difficult to resolve. We therefore retain a moderate
exposure to equity markets and have diversified our asset
allocation towards equity investments where value creation is
driven by some identifiable catalyst or which are exposed to
longer-term positive structural trends. We have a particular
interest in investments which will benefit from the impact of new
technologies, and Far Eastern markets, influenced by the growing
demand from Asian consumers.
As the 'Fourth Industrial Revolution' develops, it becomes
increasingly important for your Company to be able to assess
investment opportunities in the innovation-driven changes which are
affecting almost every business sector. With this in mind, we have
entered into a partnership with Social Capital, one of Silicon
Valley's leading technology investment firms, led by Chamath
Palihapitiya. We will invest in a range of their funds to benefit
from Social Capital's data-driven approach and expertise in this
area, as well as looking at specific opportunities. The
relationship will be strengthened by Francesco Goedhuis, the Chief
Executive of J. Rothschild Capital Management, joining the Advisory
Board of Social Capital, and Social Capital will open an office in
St. James's Place, where your Company is situated.
Your Company's Board
As we announced towards the end of July, your Board has been
strengthened by the appointment of Philippe Costeletos as a
non-executive Director. Philippe has over 25 years' experience in
private equity investments, having held senior management roles in
TPG Capital and Colony Northstar.
Dividend
Following the first interim dividend of 16 pence per share paid
in April, we have declared a second interim dividend of the same
amount. This will be paid on 31 October to shareholders registered
on 6 October, and will provide shareholders with a total dividend
of 32 pence, a 3.2% increase over 2016.
Rothschild
11 August 2017
ASSET ALLOCATION AND PORTFOLIO CONTRIBUTION, 6 MONTHS TO 30 JUNE
2017
30 June 2017 Contribution
Asset Category % NAV %
-------------------------------------- ------------ ------------
Quoted Equities 55.1% 5.0%
Private Investments 22.2% 0.9%
Absolute Return & Credit 23.0% 0.8%
Real Assets 3.2% 0.5%
Government Bonds & Rates 0.2% 0.1%
Currency 0.8% (2.5%)(1)
------------ ------------
Total Investments 104.5% 4.8%
Liquidity, Borrowings & Other (4.5%) (0.8%)(2)
-------------------------------------- ------------ ------------
Total 100.0% 4.0%
-------------------------------------- ------------ ------------
Average Net Quoted Equity Exposure(3) 43%
-------------------------------------- ------------ ------------
(1) Currency exposure is managed centrally on an overlay basis
with the translation impact and the results of the currency hedging
and overlay activity included in this category.
(2) This category includes interest, mark-to-market movements on
the fixed interest notes and expenses.
(3) Exposure reflects notional exposure through derivatives and
adjustments for derivatives and/or liquidity held by managers.
NET ASSET VALUE BY ASSET CATEGORY (%)
30 June 2017 31 December 2016
Asset Category % NAV % NAV
----------------------- ------------ ----------------
Quoted Equities 55% 56%
Private Investments 22% 24%
Absolute Return
& Credit 23% 23%
Real Assets 3% 3%
Government Bonds
& Rates 0% 0%
Currency 1% 0%
Liquidity, Borrowings,
Other -4% -6%
Net Assets 100% 100%
----------------------- ------------ ----------------
Note: This table excludes exposure from derivatives.
NET ASSET VALUE BY CURRENCY (%)
30 June 2017 31 December 2016
Asset Category % NAV % NAV
--------------- ------------ ----------------
US Dollar 37% 62%
Sterling 38% 24%
Euro 16% 4%
Japanese Yen 0% 3%
Other 9% 7%
Net Assets 100% 100%
--------------- ------------ ----------------
Note: This table excludes exposure from currency options
CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2017 2016
GBP million Notes Revenue Capital Total Revenue Capital Total
------------------------------------------------ ----- ------- ------- ------ ------- ------- ------
Income and Gains
Investment income 12.3 - 12.3 15.5 - 15.5
Other income 6.3 - 6.3 3.0 - 3.0
Gains/(losses) on fair value investments - 119.3 119.3 - 131.1 131.1
Gains/(losses) on monetary items and borrowings - (7.3) (7.3) - (41.6) (41.6)
------------------------------------------------ ----- ------- ------- ------ ------- ------- ------
18.6 112.0 130.6 18.5 89.5 108.0
Expenses
Operating expenses (11.1) (2.5) (13.6) (10.6) (2.0) (12.6)
------------------------------------------------ ----- ------- ------- ------ ------- ------- ------
Profit/(loss) before finance costs and tax 2 7.5 109.5 117.0 7.9 87.5 95.4
Finance costs (5.9) - (5.9) (5.8) - (5.8)
------------------------------------------------ ----- ------- ------- ------ ------- ------- ------
Profit/(loss) before tax 1.6 109.5 111.1 2.1 87.5 89.6
Taxation (0.5) - (0.5) 0.2 - 0.2
------------------------------------------------ ----- ------- ------- ------ ------- ------- ------
Profit/(loss) for the period 3 1.1 109.5 110.6 2.3 87.5 89.8
------------------------------------------------ ----- ------- ------- ------ ------- ------- ------
Earnings per ordinary share - basic 3 0.7p 71.0p 71.7p 1.5p 56.6p 58.1p
Earnings per ordinary share - diluted 3 0.7p 70.7p 71.4p 1.5p 56.5p 58.0p
------------------------------------------------ ----- ------- ------- ------ ------- ------- ------
The total column of this statement represents the Group's
Consolidated Income Statement, prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The supplementary revenue return and capital
return columns are both prepared under guidance published by the
Association of Investment Companies (AIC). All items in the above
statement derive from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2017 2016
GBP million Revenue Capital Total Revenue Capital Total
-------------------------------------------------------------- ------- ------- ----- ------- ------- -----
Profit/(loss) for the period 1.1 109.5 110.6 2.3 87.5 89.8
Other comprehensive income/(expense)
that will not be subsequently reclassified to profit or loss:
Revaluation gain/(loss) on property, plant and equipment - 0.2 0.2 - 0.1 0.1
Actuarial gain/(loss) in defined benefit pension plan 1.0 - 1.0 (3.5) - (3.5)
Deferred tax (charge)/credit allocated to actuarial loss (0.3) - (0.3) 0.6 - 0.6
-------------------------------------------------------------- ------- ------- ----- ------- ------- -----
Total comprehensive income/(expense) for the period 1.8 109.7 111.5 (0.6) 87.6 87.0
-------------------------------------------------------------- ------- ------- ----- ------- ------- -----
CONSOLIDATED BALANCE SHEET (UNAUDITED)
30 June 31 December
GBP million Notes 2017 2016
--------------------------------------------- ------ ------- -----------
Non-current assets
Investments held at fair value 2,826.6 2,938.8
Investment property 36.0 35.5
Property, plant and equipment 28.7 28.8
Deferred tax asset 3.4 3.7
Derivative financial instruments 6.3 6.1
---------------------------------------------- ----- ------- -----------
2,901.0 3,012.9
---------------------------------------------- ----- ------- -----------
Current assets
Derivative financial instruments 33.5 35.0
Other receivables 121.8 178.6
Amounts owed by group undertakings 5.4 0.9
Tax receivable 0.1 0.1
Cash at bank 203.8 131.2
---------------------------------------------- ----- ------- -----------
364.6 345.8
---------------------------------------------- ----- ------- -----------
Total assets 3,265.6 3,358.7
---------------------------------------------- ----- ------- -----------
Current liabilities
Borrowings (275.0) (275.0)
Derivative financial instruments (13.5) (35.6)
Provisions - (0.9)
Other payables (40.7) (61.2)
Amounts owed to group undertakings - (128.5)
---------------------------------------------- ----- ------- -----------
(329.2) (501.2)
---------------------------------------------- ----- ------- -----------
Net current assets/(liabilities) 35.4 (155.4)
---------------------------------------------- ----- ------- -----------
Total assets less current liabilities 2,936.4 2,857.5
---------------------------------------------- ----- ------- -----------
Non-current liabilities
Borrowings (161.4) (156.4)
Derivative financial instruments (0.5) (4.0)
Provisions (2.6) (2.7)
Finance lease liability (0.5) (0.5)
Retirement benefit liability (0.3) (1.8)
---------------------------------------------- ----- ------- -----------
(165.3) (165.4)
---------------------------------------------- ----- ------- -----------
Net assets 2,771.1 2,692.1
---------------------------------------------- ----- ------- -----------
Equity attributable to owners of the Company
Share capital 155.4 155.4
Share premium 17.3 17.3
Capital redemption reserve 36.3 36.3
Own shares reserve (19.0) (14.4)
Share-based payment reserve 4.3 7.5
Capital reserve 2,556.4 2,471.6
Revenue reserve 2.9 1.1
Revaluation reserve 17.2 17.0
Other reserves 0.3 0.3
---------------------------------------------- ----- ------- -----------
Total equity 2,771.1 2,692.1
---------------------------------------------- ----- ------- -----------
Net asset value per ordinary share - basic 4 1,792p 1,739p
Net asset value per ordinary share - diluted 4 1,784p 1,730p
---------------------------------------------- ----- ------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Share-
Capital Own based
Period ended 30 June
2017 Share Share redemption shares payment Capital Revenue Revaluation Other Total
GBP million capital premium reserve reserve reserve reserve reserve reserve reserves equity
Balance at 1 January
2017 155.4 17.3 36.3 (14.4) 7.5 2,471.6 1.1 17.0 0.3 2,692.1
Profit/(loss) for
the period - - - - - 109.5 1.1 - - 110.6
Revaluation gain on
property, plant
and equipment - - - - - - - 0.2 - 0.2
Actuarial
gain/(loss) in
defined
benefit plan - - - - - - 1.0 - - 1.0
Deferred tax
(charge)/credit
relating to pension
plan - - - - - - (0.3) - - (0.3)
-------------------- ------- ------- ---------- ------- ------- ------- ------- ----------- -------- -------
Total comprehensive
income/(expense) for
the period - - - - - 109.5 1.8 0.2 - 111.5
-------------------- ------- ------- ---------- ------- ------- ------- ------- ----------- -------- -------
Dividends paid (note
5) - - - - - (24.7) - - - (24.7)
Movement in Own
shares reserve - - - (4.6) - - - - - (4.6)
Movement in
Share-based
payment reserve - - - - (3.2) - - - - (3.2)
Movement in Other
reserves - - - - - - - - - -
-------------------- ------- ------- ---------- ------- ------- ------- ------- ----------- -------- -------
Balance at 30 June
2017 155.4 17.3 36.3 (19.0) 4.3 2,556.4 2.9 17.2 0.3 2,771.1
-------------------- ------- ------- ---------- ------- ------- ------- ------- ----------- -------- -------
Share-
Capital Own based
Period ended 30 June
2016 Share Share redemption shares payment Capital Revenue Revaluation Other Total
GBP million capital premium reserve reserve reserve reserve reserve reserve reserves equity
-------------------- ------- ------- ---------- ------- ------- ------- ------- ----------- -------- -------
Balance at 1 January
2016 155.4 17.3 36.3 (13.0) 6.2 2,216.3 5.1 17.4 0.3 2,441.3
Profit/(loss) for
the period - - - - - 89.0 0.8 - - 89.8
Revaluation gain on
property, plant
and equipment - - - - - - - 0.1 - 0.1
Actuarial
gain/(loss) in
defined
benefit pension plan - - - - - - (3.5) - - (3.5)
Deferred tax
(charge)/credit
relating to pension
plan - - - - - - 0.6 - - 0.6
Reallocation of
segregated account
fees - - - - - (1.5) 1.5 - - -
-------------------- ------- ------- ---------- ------- ------- ------- ------- ----------- -------- -------
Total comprehensive
income/(expense) for
the period - - - - - 87.5 (0.6) 0.1 - 87.0
-------------------- ------- ------- ---------- ------- ------- ------- ------- ----------- -------- -------
Dividends paid (note
5) - - - - - (23.9) - - - (23.9)
Movement in Own
shares reserve - - - (0.5) - - - - - (0.5)
Movement in
Share-based
payment reserve - - - - 1.4 - - - - 1.4
Movement in Other
reserves - - - - - - - - - -
-------------------- ------- ------- ---------- ------- ------- ------- ------- ----------- -------- -------
Balance at 30 June
2016 155.4 17.3 36.3 (13.5) 7.6 2,279.9 4.5 17.5 0.3 2,505.3
-------------------- ------- ------- ---------- ------- ------- ------- ------- ----------- -------- -------
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Six months Six months
ended ended
30 June 30 June
GBP million 2017 2016
--------------------------------------------------------------------- ---------- ----------
Cash flows from operating activities:
Cash inflow/(outflow) before interest 75.1 27.6
Interest paid (5.9) (5.7)
---------------------------------------------------------------------- ---------- ----------
Net cash inflow/(outflow) from operating activities 69.2 21.9
---------------------------------------------------------------------- ---------- ----------
Cash flows from investing activities:
Purchase of property, plant and equipment - -
--------------------------------------------------------------------- ---------- ----------
Net cash inflow/(outflow) from investing activities - -
--------------------------------------------------------------------- ---------- ----------
Cash flows from financing activities:
Purchase of ordinary shares by Employee Benefit Trust(1) (10.9) (2.9)
Equity dividend paid (24.7) (23.9)
---------------------------------------------------------------------- ---------- ----------
Net cash inflow/(outflow) from financing activities (35.6) (26.8)
---------------------------------------------------------------------- ---------- ----------
Increase/(decrease) in cash and cash equivalents in the period 33.6 (4.9)
---------------------------------------------------------------------- ---------- ----------
Cash and cash equivalents at the start of the period 170.5 134.8
---------------------------------------------------------------------- ---------- ----------
Effect of foreign exchange rate changes on cash and cash equivalents (0.3) (13.4)
---------------------------------------------------------------------- ---------- ----------
Cash and cash equivalents at the period end 203.8 116.5
---------------------------------------------------------------------- ---------- ----------
Reconciliation:
Cash at bank 203.8 82.4
Money market funds (included in portfolio investments) - 34.1
---------------------------------------------------------------------- ---------- ----------
Cash and cash equivalents at the period end 203.8 116.5
---------------------------------------------------------------------- ---------- ----------
(1) Shares are disclosed in 'Own shares reserve' on the
Consolidated Balance Sheet.
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of Accounting
These condensed financial statements are the half-yearly
consolidated financial statements of RIT Capital Partners plc (the
Company) and its subsidiaries (together, the Group) for the six
months ended 30 June 2017. They are prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority, and with International Accounting Standard (IAS) 34,
Interim Financial Reporting, as adopted by the European Union, and
were approved on 11 August 2017. These half-yearly consolidated
financial statements should be read in conjunction with the Report
and Accounts for the year ended 31 December 2016, which were
prepared in accordance with IFRSs, as adopted by the European
Union, as they provide an update of previously reported
information.
The half-yearly consolidated financial statements have been
prepared in accordance with the accounting policies set out in the
notes to the consolidated financial statements for the year ended
31 December 2016. The Income Statement comparative figures reflect
the treatment of segregated account fees adopted in the
consolidated financial statements at 31 December 2016.
Critical Accounting Assumptions and Judgements
As further described in the Report and Accounts for the year
ended 31 December 2016, areas requiring a higher degree of judgment
or complexity and areas where assumptions and estimates are
significant to the consolidated financial statements, are in
relation to:
-- The valuation of property;
-- Share-based payments; and
-- The valuation of private investments.
Direct private investments are valued at management's best
estimate of fair value in accordance with IFRSs, having regard to
International Private Equity and Venture Capital Valuation
Guidelines as recommended by the British Venture Capital
Association. The inputs into the valuation methodologies adopted
include observable historical data such as earnings or cash flow as
well as more subjective data such as earnings forecasts or discount
rates. As a result of this, the determination of fair value
requires significant management judgement.
2. Business and Geographical Segments
For both the six months ended 30 June 2017 and the six months
ended 30 June 2016, the Group is considered to have four principal
operating segments as follows:
AUM
Segment Business GBP million(1) Employees(1)
--------- ----------------------------- -------------- ------------
RIT Investment trust - -
JRCM(2) Asset manager/administration 2,771 44
GVQ(3) Asset manager 709 10
SHL (4) Events/premises management - 13
--------- ----------------------------- -------------- ------------
(1) At 30 June 2017.
(2) J. Rothschild Capital Management Limited.
(3) GVQ Investment Management Limited.
(4) Spencer House Limited.
The Group's operations are all based in the UK.
Key financial information for the six months ending 30 June is
as follows:
2017 2016
Income/ Operating Income/ Operating
GBP million Gains(1) Expenses(1) Profit(2) Gains(1) Expenses(1) Profit(2)
--------------- -------- ----------- --------- -------- ----------- ---------
RIT 126.2 (17.9) 108.3 105.1 (15.9) 89.2
JRCM 15.7 (9.0) 6.7 14.2 (8.7) 5.5
GVQ 4.4 (2.7) 1.7 1.9 (1.4) 0.5
SHL 1.8 (1.5) 0.3 1.7 (1.5) 0.2
Adjustments(3) (17.5) 17.5 - (14.9) 14.9 -
--------------- -------- ----------- --------- -------- ----------- ---------
Total 130.6 (13.6) 117.0 108.0 (12.6) 95.4
--------------- -------- ----------- --------- -------- ----------- ---------
(1) Includes intra-group income and expenses.
(2) Profit before finance costs and tax.
(3) Consolidation adjustments in accordance with IFRS 10
'Consolidated Financial Statements'.
3. Earnings Per Ordinary Share - Basic and Diluted
The basic earnings per ordinary share for the six months ended
30 June 2017 is based on the net profit of GBP110.6 million (six
months ended 30 June 2016: net profit of GBP89.8 million) and the
weighted average number of ordinary shares for the purposes of
earnings per share (EPS) during the period of 154.2 million (six
months ended 30 June 2016: 154.4 million) as shown below:
Six months Six months
ended ended
million 30 June 2017 30 June 2016
---------------------------------------------------------------- ------------ ------------
Weighted average number of shares for the purposes of basic EPS 154.2 154.4
Weighted average effect of share-based payment awards 0.7 0.5
---------------------------------------------------------------- ------------ ------------
Total shares for the purposes of diluted EPS 154.9 154.9
---------------------------------------------------------------- ------------ ------------
The basic earnings per ordinary share figure can be further
analysed between revenue and capital as set out below:
Six months Six months
ended ended
GBP million 30 June 2017 30 June 2016
--------------------------------------------------- ------------ ------------
Net revenue profit/(loss) 1.1 2.3
Net capital profit/(loss) 109.5 87.5
--------------------------------------------------- ------------ ------------
Net profit/(loss) 110.6 89.8
--------------------------------------------------- ------------ ------------
Six months Six months
ended ended
Pence per share 30 June 2017 30 June 2016
--------------------------------------------------- ------------ ------------
Revenue earnings/(loss) per ordinary share - basic 0.7 1.5
Capital earnings/(loss) per ordinary share - basic 71.0 56.6
--------------------------------------------------- ------------ ------------
Earnings per ordinary share - basic 71.7 58.1
--------------------------------------------------- ------------ ------------
Six months Six months
ended ended
30 June 30 June
Pence per share 2017 2016
----------------------------------------------------- ---------- ----------
Revenue earnings/(loss) per ordinary share - diluted 0.7 1.5
Capital earnings/(loss) per ordinary share - diluted 70.7 56.5
----------------------------------------------------- ---------- ----------
Earnings per ordinary share - diluted 71.4 58.0
----------------------------------------------------- ---------- ----------
4. Net Asset Value Per Ordinary Share - Basic and Diluted
Net asset value per ordinary share is based on the following
data:
30 June 31 December
2017 2016
--------------------------------------------- ------- -----------
Net assets (GBP million) 2,771.1 2,692.1
--------------------------------------------- ------- -----------
Number of shares in issue (million) 155.4 155.4
Own shares (million) (0.7) (0.6)
--------------------------------------------- ------- -----------
Basic shares (million) 154.7 154.8
Effect of share-based payment
awards (million) 0.6 0.8
--------------------------------------------- ------- -----------
Diluted shares (million) 155.3 155.6
--------------------------------------------- ------- -----------
30 June 31 December
Pence per share 2017 2016
--------------------------------------------- ------- -----------
Net asset value per ordinary share - basic 1,792 1,739
--------------------------------------------- ------- -----------
Net asset value per ordinary share - diluted 1,784 1,730
--------------------------------------------- ------- -----------
5. Dividends
Six months Six months
ended ended
30 June 30 June
2017 2016
---------------------------- ---------- ----------
Dividends (GBP million) 24.7 23.9
---------------------------- ---------- ----------
Dividends (Pence per share) 16.0 15.5
---------------------------- ---------- ----------
The Board of Directors declared an interim dividend of 16.0
pence per ordinary share (GBP24.7 million) on 27 February 2017.
This amount was paid on 28 April 2017. The Board has declared the
payment of a second interim dividend of 16.0 pence per ordinary
share (GBP24.7 million) in respect of the year ending 31 December
2017. This will be paid on 31 October 2017 to shareholders on the
register on 6 October 2017.
A more detailed commentary may be found in the Chairman's
Statement in the Report and Accounts for the year ended 31 December
2016.
6. Financial Instruments
IFRS 13 requires the Group to classify its financial instruments
held at fair value using a hierarchy that reflects the significance
of the inputs used in the valuation methodologies. These are as
follows:
-- Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2: Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: Inputs for the asset or liability that are not based
on observable market data (i.e. unobservable inputs).
The vast majority of the Group's financial assets and
liabilities and the investment properties are measured at fair
value on a recurring basis.
The Group's policy is to recognise transfers into and transfers
out of fair value hierarchy levels at the end of the reporting
period when they are deemed to occur.
A description of the valuation techniques used by the Group with
regard to investments categorised in each level of the fair value
hierarchy is detailed below. Where the Group invests in a fund or a
partnership, which is not itself listed on an active market, the
categorisation of such investment between levels 2 and 3 is
determined by reference to the nature of the underlying
investments. If such investments are categorised across different
levels, the lowest level that forms a significant proportion of the
fund or partnership exposure is used to determine the reporting
disclosure.
If the proportion of the underlying investments categorised
between levels changes during the period, these will be
reclassified to the most appropriate level.
Level 1
The fair value of financial instruments traded in active markets
is based on quoted market prices at the balance sheet date. A
market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry
group, pricing service, or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an
arm's length basis. The quoted market price used for financial
assets held by the Group is the current bid price or the last
traded price depending on the convention of the exchange on which
the investment is quoted. Where a market price is available but the
market is not considered active, the Group has classified these
investments as level 2.
Level 2
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques which
maximise the use of observable market data where it is available.
Specific valuation techniques used to value OTC derivatives include
quoted market prices for similar instruments, counterparty quotes
and the use of forward exchange rates to estimate the fair value of
forward foreign exchange contracts at the balance sheet date.
Investments in externally managed funds which themselves invest
primarily in listed securities are valued at the price or net asset
value released by the investment manager/fund administrator as at
the balance sheet date.
Level 3
The Group considers all Private Investments, whether direct or
funds, as level 3 assets, as the valuations of these assets are not
based on observable market data. Where other funds invest into
illiquid stocks, these are also considered by the Group to be level
3 assets.
For the private fund investments, fair value is deemed to be the
capital statement account balance as reported by the General
Partner of the investee fund, and which represents the Group's
pro-rata proportion of the fund's net asset value. Where such
statements are dated prior to the period end, the valuation is
adjusted for subsequent investments or distributions. A review is
conducted annually in respect of the valuation basis of the
investee funds to confirm these are valued in accordance with fair
value methodologies.
The directly held private investments are valued on a
semi-annual basis using techniques including a market approach,
cost approach and/or income approach. The valuation process
involves the finance and investment functions, with the final
valuations being reviewed by the Valuation Committee. The specific
techniques used will typically include earnings multiples,
discounted cash flow analysis, the value of recent transactions
and, where appropriate, industry rules of thumb. The valuations
will often reflect a synthesis of a number of distinct approaches
in determining the final fair value estimate. The individual
approach for each investment will vary depending on relevant
factors that a market participant would take into account in
pricing the asset. These might include the specific industry
dynamics, the company's stage of development, profitability, growth
prospects or risk as well as the rights associated with the
particular security.
Borrowings at 30 June 2017 comprise bank loans and senior loan
notes. The bank loans are revolving credit facilities, and are
typically drawn in tranches with a duration of three months. The
loans are therefore short-term in nature, and their fair value
approximates their nominal value. The loan notes were issued in
June 2015 with tenors of between 10 and 20 years with a weighted
average of 16 years. They are valued on a monthly basis using a
discounted cash flow model where the discount rate is derived from
the yield of similar tenor UK Government bonds, adjusted for any
significant changes in either credit spreads or the perceived
credit risk of the Company.
The fair value of investments in non-consolidated subsidiaries
is considered to be the net asset value of the individual
subsidiary as at the balance sheet date. The net asset values
typically comprise various assets and liabilities which are fair
valued on a recurring basis and are considered to be level 3.
On a semi-annual basis, the Group engages external, independent
and qualified valuers to determine the fair value of the Group's
investment properties and property, plant and equipment held at
fair value. These were valued at 30 June 2017 by JLL in accordance
with the Appraisal and Valuation Manual of the Royal Institution of
Chartered Surveyors on the basis of open market value.
The following table analyses the Group's assets and liabilities
within the fair value hierarchy at 30 June 2017:
As at 30 June 2017
GBP million Level 1 Level 2 Level 3 Total
----------------------------------------------------------------- ------- ------- ------- -------
Financial assets at fair value through profit or loss:
Portfolio investments 335.0 1,635.0 847.6 2,817.6
Non-consolidated subsidiaries - - 9.0 9.0
----------------------------------------------------------------- ------- ------- ------- -------
Investments held at fair value 335.0 1,635.0 856.6 2,826.6
Derivative financial instruments 1.9 37.9 - 39.8
----------------------------------------------------------------- ------- ------- ------- -------
Total financial assets at fair value through profit or loss 336.9 1,672.9 856.6 2,866.4
----------------------------------------------------------------- ------- ------- ------- -------
Non-financial assets measured at fair value:
Investment property - - 36.0 36.0
----------------------------------------------------------------- ------- ------- ------- -------
Financial liabilities at fair value through profit or loss:
Borrowings - - (436.4) (436.4)
Derivative financial instruments (5.5) (8.5) - (14.0)
----------------------------------------------------------------- ------- ------- ------- -------
Total financial liabilities at fair value through profit or loss (5.5) (8.5) (436.4) (450.4)
----------------------------------------------------------------- ------- ------- ------- -------
Total net assets measured at fair value 331.4 1,664.4 456.2 2,452.0
----------------------------------------------------------------- ------- ------- ------- -------
The realised and unrealised gains and losses shown in the table
below for level 3 assets are included in gains/(losses) on fair
value investments in the Consolidated Income Statement.
Movement in level 3 assets
Investments
Period ended 30 June 2017 held at fair Investment
GBP million value Property Total
------------------------------------------------- ------------ ---------- -------
Opening Balance 977.7 35.5 1,013.2
Purchases 28.7 - 28.7
Sales (226.3) - (226.3)
Realised gains/(losses) through profit or loss 9.4 - 9.4
Unrealised gains (losses) through profit or loss (9.9) 0.5 (9.4)
Reclassifications 77.0 - 77.0
------------------------------------------------- ------------ ---------- -------
Closing Balance 856.6 36.0 892.6
------------------------------------------------- ------------ ---------- -------
During the period, investments in funds with a fair value of
GBP77.0 million were reclassified from level 2 to level 3 as a
result of new financial information received in respect of the
underlying investments of the funds.
There were no reclassifications into or out of level 1.
Further information in relation to the investment property and
directly held private investment portfolio at 30 June 2017 is set
out below:
Fair Value
Sector GBP million Valuation methods/inputs
----------------------- ----------- ------------------------------------------------
UK Commercial Property 36.0 Sales comparisons (GBP1,500 - GBP2,750/ft(2)
);
Discounted expected rental values
(GBP65 - GBP83/ft(2) )
Financials 51.6 P/E (17.5x), EV/Sales (3.3x), EV/AUM
(1.9%), DCF (20% WACC)
Technology 125.9 EV/EBITDA (12.0x - 13.0x), EV/Sales
(7.2x)
Energy 4.1 EV/EBITDA (7.0x - 8.0x)
Other investments
(less than GBP3
million each) 13.8 Various methods
----------------------- ----------- ------------------------------------------------
Total 231.4
----------------------- ----------- ------------------------------------------------
The remainder of the portfolio was valued using the following
primary methods: third party valuations (GBP78.8 million), option
strike price (GBP14.0 million) and price of recent offer (GBP3.1
million).
Given the range of techniques and inputs used in the valuation
process, and the fact that in most cases more than one approach is
used, a sensitivity analysis is not considered to be a practical or
meaningful disclosure. Shareholders should note however that
increases or decreases in any of the inputs listed above in
isolation may result in higher or lower fair value
measurements.
The following table analyses the Group's assets and liabilities
within the fair value hierarchy at 31 December 2016:
As at 31 December 2016
GBP million Level 1 Level 2 Level 3 Total
----------------------------------------------------------------- ------- ------- ------- -------
Financial assets at fair value through profit or loss:
Portfolio investments 399.6 1,561.5 847.8 2,808.9
Non-consolidated subsidiaries - - 129.9 129.9
----------------------------------------------------------------- ------- ------- ------- -------
Investments held at fair value 399.6 1,561.5 977.7 2,938.8
Derivative financial instruments 1.8 39.3 - 41.1
----------------------------------------------------------------- ------- ------- ------- -------
Total financial assets at fair value through profit or loss 401.4 1,600.8 977.7 2,979.9
----------------------------------------------------------------- ------- ------- ------- -------
Non-financial assets measured at fair value:
Investment property - - 35.5 35.5
----------------------------------------------------------------- ------- ------- ------- -------
Financial liabilities at fair value through profit or loss:
Borrowings - - (431.4) (431.4)
Derivative financial instruments (7.8) (31.8) - (39.6)
----------------------------------------------------------------- ------- ------- ------- -------
Total financial liabilities at fair value through profit or loss (7.8) (31.8) (431.4) (471.0)
----------------------------------------------------------------- ------- ------- ------- -------
Total net assets measured at fair value 393.6 1,569.0 581.8 2,544.4
----------------------------------------------------------------- ------- ------- ------- -------
Movement in level 3 assets
Investments
Year ended 31 December 2016 held at fair Investment
GBP million value Property Total
---------------------------------------- ------------ ---------- -------
Opening Balance 782.0 33.7 815.7
Purchases 181.8 - 181.8
Sales (204.1) - (204.1)
Realised gains through profit or loss 23.4 - 23.4
Unrealised gains through profit or loss 134.7 1.8 136.5
Reclassifications 59.9 - 59.9
---------------------------------------- ------------ ---------- -------
Closing Balance 977.7 35.5 1,013.2
---------------------------------------- ------------ ---------- -------
Further information in relation to the investment property and
directly held private investment portfolio at 31 December 2016 is
set out below:
Fair Value
Sector GBP million Valuation methods/inputs
----------------------- ----------- ------------------------------------------------
UK Commercial Property 35.5 Sales comparisons (GBP1,500 - GBP2,500/ft(2)
); Discounted expected rental values
(GBP65 - GBP83/ft(2) )
Financials 51.9 P/E (19.4x), EV/Sales (3.4x), EV/AUM
(2.1%), DCF (20% WACC)
Technology 128.0 EV/EBITDA (12.0x - 14.0x), EV/Sales
7.5x
Other investments
(less than GBP3 22.4
million each) Various methods
----------------------- ----------- ------------------------------------------------
Total 237.8
----------------------- ----------- ------------------------------------------------
The remainder of the portfolio was valued using the following
primary methods: third party valuations (GBP54.1 million), and cost
of recent investments (GBP47.3 million).
7. Comparative Information
The financial information contained in this Half-Yearly
Financial Report does not constitute statutory accounts as defined
in section 434 of the Companies Act 2006. The financial information
for the half years ended 30 June 2017 and 30 June 2016 has been
neither reviewed nor audited.
The information for the year ended 31 December 2016 has been
extracted from the latest published audited financial statements.
The audited financial statements for the year ended 31 December
2016 have been filed with the Registrar of Companies and the report
of the auditors on those accounts contained no qualification or
statement under section 498(2) or (3) of the Companies Act
2006.
REGULATORY DISCLOSURES
Statement of Directors' Responsibilities
In accordance with the Disclosure and Transparency Rules 4.2.4R,
4.2.7R and 4.2.8R, we confirm that to the best of our
knowledge:
(a) The condensed set of financial statements has been prepared
in accordance with International Accounting Standard 34, Interim
Financial Reporting, as adopted by the European Union, as required
by the Disclosure and Transparency Rule 4.2.4R;
(b) The Chairman's Statement includes a fair review of the
information required to be disclosed under the Disclosure and
Transparency Rule 4.2.7R, interim management report. This includes
an indication of important events that have occurred during the
first six months of the financial year, and their impact on the
condensed set of financial statements presented in the Half-Yearly
Financial Report. A description of the principal risks and
uncertainties for the remaining six months of the financial year is
set out below; and
(c) In addition, in accordance with the disclosures required
under the Disclosure and Transparency Rule 4.2.8R, there were no
changes in the transactions or arrangements with related parties as
described in the Group's Report and Accounts for the year ended 31
December 2016 that would have had a material effect on the
financial position or performance of the Group in the first six
months of the current financial year.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group for the
second half of the financial year are substantially the same as
those described in the Report and Accounts for the year ended 31
December 2016. These comprise:
-- Investment Strategy Risk;
-- Market Risk;
-- Liquidity Risk;
-- Credit Risk;
-- Key Person Dependency;
-- Legal & Regulatory Risk; and
-- Operational Risk.
As with any investment company, the main risk is considered to
be market risk.
Going Concern
The factors likely to affect the Group's ability to continue as
a going concern were set out in the Report and Accounts for the
year ended 31 December 2016. As at 30 June 2017, there have been no
significant changes to these factors. Having reviewed the Company's
forecasts and other relevant evidence, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis
in preparing the half-yearly condensed financial statements.
Rothschild
11 August 2017
For and on behalf of the Board
END OF HALF-YEARLY FINANCIAL REPORT EXTRACTS
This information is provided by RNS
The company news service from the London Stock Exchange
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