TIDMSCIN
RNS Number : 4000I
Scottish Investment Trust PLC
19 June 2017
The Scottish Investment Trust PLC
Results for the six months to 30 April 2017
Highlights
-- Share price total return 5.0%
-- NAV total return 3.0%
-- Dividend increase of 4.8%, ahead of inflation
-- Move to quarterly dividend
-- Successful repurchase of shares from Aviva
The Scottish Investment Trust PLC invests internationally and is
independently managed. Its objective is to provide investors, over
the longer term, with above-average returns through a diversified
portfolio of international equities and to achieve dividend growth
ahead of UK inflation. Today it announces its results for the six
months to 30 April 2017. It is categorised as a global trust by the
Association of Investment Companies.
Chairman's Statement
Performance
I am pleased to report another period of positive total returns
over the six months to 30 April 2017.
The share price total return was 5.0% and the net asset value
per share (NAV) total return was 3.0% (with borrowings at market
value).
The Company does not have a formal benchmark but, by way of
comparison, the sterling total return of the international MSCI All
Country World Index (ACWI) was 5.5% while the UK-based MSCI UK All
Cap Index total return was 7.0%.
Investment approach
The high conviction, global contrarian investment approach
adopted by Alasdair McKinnon and his team
differentiates the Company from our global growth investment
trust peers and from the plethora of passive investment products
that now exist.
The approach re ects the investment team's natural style as
independent thinkers and active, long-term investors. The main
premise of the investment approach is a belief that the inherent
human desire to be part of the crowd creates an opportunity for
profit as unfashionable companies eventually become
undervalued.
The portfolio is constructed to re ect this contrarian
philosophy and the number of holdings has been
progressively reduced to the current 54 listed equity holdings,
which compares with 68 at the year-end and 96 two years ago. The
Manager believes that the best long-term returns will be generated
by having the conviction to back the best investment ideas but the
number of portfolio holdings will vary as the team unearths new
opportunities.
The portfolio is not constructed with reference to any index or
benchmark and, as such, we expect that returns will deviate from
broad equity indices but deliver above-average returns over the
longer-term.
Process of change
In previous statements, I have discussed the changes which have
been made to position the Company for future success. A key element
was the introduction of the above-mentioned high conviction, global
contrarian investment approach.
The reorganisation of the investment team and the outsourcing of
the majority of our company secretarial and back office operations
have reduced our costs on an ongoing basis and enhanced our
decision-making ability.
We have continued to develop our approach to marketing and
communications during the period and shareholders may have observed
some of our efforts to lift our profile as we have featured in a
number of prominent publications. A selection of these articles, as
well as our new newsletter, 'The Contrarian', are available to view
at our website, www.thescottish.co.uk
We think it is important to seek to raise the Company's profile,
as we believe that it is an attractive investment vehicle which
should appeal to a broad range of potential investors. I would
reiterate that we have adopted this new approach at a very
reasonable cost and within our longstanding marketing budget.
Aviva share repurchase
In March, the Company completed the repurchase and cancellation
of the shareholding of Aviva, representing 11.9% of the Company's
issued share capital at that time. Aviva had gained control of this
substantial shareholding in November 2015 through its purchase of
Friends Life. Aviva had not previously been a long-term investor in
the Company, did not have a history of holding investment trusts
and had indicated that it did not plan to retain this
shareholding.
At a specially convened General Meeting, shareholders approved
the repurchase for cancellation of 11.4m shares from Aviva at a
10.75% discount to the cum-income NAV (with borrowings at market
value). The Board considered this transaction to be in the best
interests of the Company and shareholders as it removed a known
seller of a large block of shares and enhanced this NAV for the
ongoing shareholders by 1.4%.
Income and dividends
The Board has declared an interim dividend of 5.50p per share
(2016: 5.25p), an increase of 4.8%.
As I noted in my last statement, the Board wishes to maintain
both the long track record of dividend increases and the aim of the
Company to provide dividend growth ahead of UK in ation over the
longer-term. The Board does not wish the composition of the
portfolio to be dictated by income requirements and therefore
considers that our healthy revenue reserve, which covers in excess
of four years of the last annual regular dividend, should be
utilised, if required, in the future.
The Board also considers that income generated in excess of the
requirement of the regular dividend should be distributed as a
special dividend.
The Board believes that distributing income on a more regular
basis is desirable for the majority of shareholders, who are retail
investors. The current schedule of dividend payments will continue
for the current fiscal year but, thereafter, dividends will be paid
on a quarterly basis. Further details will be provided in the
Annual Report.
Discount and share buybacks
The Company currently follows a policy that aims, in normal
market conditions, to maintain the discount to the ex-income NAV
(with borrowings at market value) at or below 9%.
During the period, 12.8m shares were purchased for cancellation
(2016: 4.1m) at an average discount of 10.0% and a cost of GBP101m.
Excluding the repurchase of the Aviva shares, 1.4m shares were
repurchased at an average discount of 9.5% and a cost of
GBP10.7m.
The Company was an early adopter of a buyback policy in 2006
and, since then, it has become more normal industry practice to
calculate the discount with reference to the cum-income NAV rather
than the ex-income NAV. The Board considers this is now a more
appropriate basis and, henceforth, the buyback policy will aim, in
normal market conditions, to maintain the discount to the
cum-income NAV (with borrowings at market value) at or below
9%.
Gearing
Gearing ended the period largely unchanged at 5%. The Company
brie y moved to a net cash position to facilitate the transaction
with Aviva.
Outlook
Markets were electrified by the election of the new US
President, Donald Trump, as investors reasoned that his campaign
pledges would translate into investor-friendly policies. However,
more recently, a concern has developed that President Trump's
unorthodox style, which was crucial to his victory, may prove a
barrier to garnering the necessary political support to enact
change.
The recent UK election result, the election of President Trump
and the earlier Brexit vote all embody a growing mood to reject the
political status quo driven by a perceived decline in living
standards. That said, the rejection of anti-EU candidates in
elections in the Netherlands and France reassured markets about the
political stability of the Eurozone.
Mainstream politicians have reacted to this change in mood and
have shown a tendency to adopt some of the popular policies of
their more maverick opponents, which is a trend that is likely to
continue. Much has been written elsewhere about the Brexit
negotiations and, by way of further observation, I only add that
the process is likely to drag on for longer than expected as
neither side seems to have a clear vision of what they want from
the process.
The US Federal Reserve, which unofficially sets the cost of
money for much of the world, took advantage of the improved mood
engendered by rising markets and increased interest rates. Interest
rates remain very low, but breaking an addiction to cheap money may
prove traumatic. An important component in the outlook for markets
is the perceived timetable and extent to which the Federal Reserve
will tighten monetary policy. However, markets have taken some
comfort from a view that politicians and officials remain keen to
preserve investor confidence.
Politics and investment markets will doubtless continue to
deliver surprises in the forthcoming period. The Board believes
that the Company remains well-placed as a differentiated, low-cost
investment vehicle focused on delivering above-average returns and
dividend growth over the longer-term.
James Will
Chairman
16 June 2017
Manager's Review
Our contrarian approach
Before reviewing the interim period, I thought it would be
useful to summarise our contrarian investment
philosophy and the way in which we apply it to our investments.
This will mainly serve as a reminder to most shareholders but I
wished to ensure that new investors were informed about the way in
which we invest.
At the heart of our philosophy is a belief that humans
inherently prefer to be part of a crowd or a cohesive
group. Humans have evolved to abide instinctively by the rules
and norms of a group as, in a harsh physical
environment, this state of affairs offers greater security and a
higher standard of living.
However, when applied to financial markets, we believe that this
crowding instinct works against the best
interests of an investor and that a willingness to take a
different stance is required to profit. This instinct can
become particularly disadvantageous when investors, in their
zeal to become part of the crowd, conduct their analysis to justify
a pre-determined conclusion. The actions of company management
teams serve to
reinforce this crowding instinct as they are equally prone to
excessive optimism and unjustified pessimism.
We believe the biggest challenge for an investor is to recognise
when the beguiling views of the crowd no
longer offer an acceptable balance between risk and reward. We
do not attempt to follow investment fashions and instead seek
investments in which we can foresee long-term upside. This requires
lateral thinking, a willingness to question widely-held views and
the confidence to adopt a contrarian point of view if we think an
investment is mispriced.
Our style is distinct and, depending on market conditions, we
would expect other investors to ebb and ow in their support for our
way of thinking. We aim to achieve above-average long-term
performance, although we do not expect this to be achieved in a
linear manner.
To apply our approach, we divide the stocks in which we invest
into three categories.
First, we have those that we describe as ugly ducklings -
unloved shares that most investors shun. These
companies have endured an extended period of poor operating
performance and, for the majority, the near-term outlook continues
to appear uninspiring. However, we see their out-of-favour status
as an opportunity and can foresee the circumstances in which these
investments will surprise on the upside.
The second category consists of companies where change is afoot.
These companies have also endured a long period of poor operating
performance but have recently demonstrated that their prospects
have significantly improved. However, other investors continue to
overlook this change for historical reasons.
In our third category, more to come, we have investments that
are more generally recognised as good businesses with decent
prospects. However, we see an opportunity as we believe there is
scope for further improvement that is not yet fully recognised.
The interim period
During the period, markets demonstrated less concern about
unexpected political events and embraced the election of the new US
president, Donald Trump, and shrugged off other potentially
destabilising events such as the resignation of the Italian prime
minister, Matteo Renzi.
Markets were not necessarily enamoured by Donald Trump himself
but more by the global shift that he represented - a challenge to
the status quo and an opportunity to inject stimulus into economies
perceived by many as moribund. Banks performed particularly
strongly as they had previously been inexpensively valued and
because they stood to benefit from the prospect of 'Trump ation'.
Towards the end of the period, doubts began to creep in about the
ability of President Trump, or any other politician, to force
through change without the support of the establishment. Investors
sought the perceived safety of stocks with 'cycle-proof' growth
prospects, although we intentionally limited our exposure to these
stocks.
Turnover in the portfolio was elevated by the need to raise
funds for the buyback transaction with Aviva and, rather than apply
a blanket sale across the portfolio, we used this opportunity to
reduce selectively the number of holdings in the portfolio.
Given our focus on individual stock ideas, I thought it would be
more meaningful to discuss some of our notable gains and losses, in
total return terms, within the context of our investment
categories.
Within our ugly ducklings, our banks were notably good
performers aided by the helpful backdrop outlined above. Two of the
larger gains came from our holdings in ING (+GBP3.9m) and BNP
Paribas (+GBP2.3m) with more modest gains from Intesa Sanpaolo
(+GBP1.2m), Citigroup (+GBP1.1m) and Bank of Ireland (+GBP0.7m).
Marks & Spencer (+GBP2.0m) has delivered the first tentative
signs of operating improvement but remains an unloved stock and we
continue to see upside from the changes that will be implemented by
the new leadership. In contrast, our holding in Tesco (-GBP3.6m)
produced a loss over the period as the turnaround strategy was
obscured by a proposed acquisition. However, we still believe the
company remains on a recovery track. We sold our entire holding in
Kingfisher
(-GBP2.0m), prompted by a need to raise funds for the Aviva
transaction but also because we preferred the outlook for Marks
& Spencer. BT (-GBP1.9m) also generated a loss as, despite
having passed the nadir of concern about regulatory issues,
investors were further depressed by a disappointing trading update
in January.
Within our investments where we see change is afoot, our holding
in Rentokil Initial (+GBP3.1m) appreciated as the company continued
to demonstrate the merits of a refocused strategy. Likewise,
Treasury Wine Estates (+GBP2.6m) continued to perform well as it
maintained focus on a brand-led strategy. Citizens Financial
(+GBP1.9m), which was until recently an underappreciated subsidiary
of RBS, performed well in common with banks, but with the
additional benefit of a management team able to focus on improving
the business. Roche (+GBP1.7m) reported a successful outcome from
an important clinical trial which gave credence to the corporate
plan to sustain the core oncology franchise.
In our investments where we see more to come, our holding in
KDDI (-GBP2.7m) declined in value, as investors sold more defensive
investments in the aftermath of the US presidential election. Our
investment in Microsoft (+GBP2.8m), continued to gain credit from a
shift to a subscription model. However, we took some profits to
help finance the Aviva transaction and have subsequently further
reduced our holding as we believe that these prospects are now more
widely appreciated. We sold our holding in Comcast (+GBP3.6m),
which benefited from greater demand for high-speed broadband
services, as we judged that the valuation adequately re ected these
prospects.
Arguably, the political events of the past year represent the
beginning of the end, or at least the end of the beginning, for a
long period of economic policy that has favoured asset values over
the general standard of living. Populations have become disgruntled
while the compelling need to repair the financial system has,
apparently, diminished.
A change in the policy backdrop, assuming it actually occurs,
will undoubtedly change the investment
environment and favour some companies and areas of the economy
more than others. However, as I noted in my last review, our
contrarian investment approach is designed to anticipate and
benefit from change and we will continue to seek opportunities
which we believe will profit a long-term investor.
Alasdair McKinnon
Manager
16 June 2017
For further information, please contact: 0131 225 7781
Financial Summary
Total
30 April 31 October Change return
2017 2016 % %
NAV with borrowings at market
value 863.4p 854.9p +1.0 +3.0
NAV with borrowings at par 896.4p 881.2p +1.7 +3.7
Ex-income NAV with borrowings
at market value 853.1p 837.5p +1.9
Ex-income NAV with borrowings
at par 886.2p 863.9p +2.6
Share price 790.0p 769.5p +2.7 +5.0
Discount to ex-income NAV
with borrowings at market
value 7.4% 8.1%
------------------------------- ----------- ------------- --------- --------
MSCI ACWI +4.5 +5.5
MSCI UK All Cap Index +5.0 +7.0
------------------------------- ----------- ------------- --------- --------
GBP'000 GBP'000
------------------------------- ----------- ------------- --------- --------
Equity investments 793,139 893,432
Net current assets 42,988 42,502
------------------------------- ----------- ------------- --------- --------
Total assets 836,127 935,934
------------------------------- ----------- ------------- --------- --------
Long-term borrowings at par (83,690) (83,645)
Pension liability (3,272) (3,272)
------------------------------- ----------- ------------- --------- --------
Shareholders' funds 749,165 849,017
------------------------------- ----------- ------------- --------- --------
Six months Six months
to 30 to 30
April April Change
2017 2016 %
GBP'000 GBP'000
---------------------------- ----------- ----------- ---------
Earnings per share 9.28p 10.12p -8.3
Interim dividend per share 5.50p 5.25p +4.8
UK Consumer Prices Index
- annual inflation +2.6
UK Retail Prices Index -
annual inflation +3.5
List of Investments
As at 30 April 2017
Listed equities
Market Cumulative Market Cumulative
value weight value weight
Holding Country GBP'000 % Holding Country GBP'000 %
------------------------ ------------- -------- ----------- ------------------- ---------- -------- -----------
Treasury
Wine Estates Australia 42,537 IBM US 8,168
Rentokil
Initial UK 32,915 Newcrest Mining Australia 8,150
Hong
Sands China Kong 32,559 Gap US 7,965
Marks & Spencer UK 27,169 Citizens Financial US 7,909
ING Netherlands 26,786 Hess US 7,541
Standard
Chartered UK 26,706 Intesa Sanpaolo Italy 7,515
GlaxoSmithKline UK 26,521 Bank of Kyoto Japan 6,681
Tesco UK 24,189 Bank of Ireland Ireland 6,065
Severn Trent UK 22,287 Exxon Mobil US 5,294
TGS NOPEC
Suncor Energy Canada 22,252 35.8 Geophysical Norway 4,807 98.5
------------------------ ------------- -------- ----------- ------------------- ---------- -------- -----------
Sumitomo
Mitsui Financial Japan 20,858 BorgWarner US 3,819
Royal Dutch Tourmaline
Shell UK 20,730 Oil Canada 3,392
SAP Germany 18,935 Freehold Royalties Canada 2,493
United Utilities UK 18,536 Greggs UK 1,030
Total listed
BNP Paribas France 17,514 equities 791,706 99.8
------------------- -------------------- -----------
Microsoft US 17,514
Pepsico US 17,230
Roche Switzerland 17,099
Johnson &
Johnson US 16,963
Cemex Mexico 16,696 58.8 Unlisted
------------------------ ------------- -------- -----------
BHP Billiton UK 15,979
Market Cumulative
Sony Japan 15,928 value weight
Pfizer US 15,340 Holding Country GBP'000 %
------------------- ---------- -------- -----------
Heritable
property and
RSA Insurance UK 14,435 subsidiary UK 1,400
Apax Europe
Nintendo Japan 14,171 V-B UK 33
------------------- ---------- -------- -----------
British Land UK 13,848 Total unlisted 1,433 0.2
------------------- ---------- -------- -----------
Citigroup US 13,671
Total France 13,416
------------------- ---------- -------- -----------
KDDI Japan 13,108 Total equities 793,139 100.0
------------------- ---------- -------- -----------
General Electric US 12,823 76.7
------------------------ ------------- -------- -----------
National
Oilwell Varco US 12,176
Baker Hughes US 11,645
BASF Germany 11,210
Vinci France 10,967
Verizon Communications US 10,119
Ambev Brazil 9,845
Chevron US 9,432
Adecco Switzerland 9,025
East Japan
Railway Japan 8,962
BT UK 8,781 89.6
------------------------ ------------- -------- -----------
Distribution of Assets
Distribution of Total Assets
30 April 2017 31 October 2016
By Sector % %
------------------------ -------------- ----------------
Energy 13.6 12.4
Materials 6.2 7.1
Industrials 8.9 10.5
Consumer Discretionary 10.6 12.4
Consumer Staples 11.2 10.4
Health Care 9.1 8.3
Financials 17.9 15.1
Information Technology 7.0 8.0
Telecommunication
Services 3.8 5.1
Utilities 4.9 5.1
Real Estate 1.7 1.1
Net current assets 5.1 4.5
------------------------ -------------- ----------------
Total assets 100.0 100.0
------------------------ -------------- ----------------
30 April 2017 31 October 2016
By Region % %
-------------------- -------------- ----------------
UK 30.5 32.2
Europe (ex UK) 17.1 14.9
North America 24.6 24.9
Latin America 3.2 3.0
Japan 9.5 10.0
Asia Pacific (ex
Japan) 10.0 10.5
Net current assets 5.1 4.5
-------------------- -------------- ----------------
Total assets 100.0 100.0
-------------------- -------------- ----------------
Allocation of Shareholders' Funds
30 April
2017
%
-------------------------- ---------
Total equities 105
-------------------------- ---------
Net cash and equivalents 6
Borrowings at par (11)
-------------------------- ---------
Shareholders' funds 100
-------------------------- ---------
Gearing 105
-------------------------- ---------
Income Statement
Six months to 30 Six months to 30 Year to 31 October
April 2017 April 2016 2016
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net gains on investments
held at fair value
through profit and loss - 11,592 11,592 - 22,081 22,081 - 177,326 177,326
Net (losses) / gains on
currencies - (531) (531) - 1,653 1,653 - 6,024 6,024
Income 11,474 - 11,474 13,719 - 13,719 28,440 - 28,440
Expenses (959) (666) (1,625) (1,129) (784) (1,913) (2,407) (1,673) (4,080)
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Return before Finance
Costs and Taxation 10,515 10,395 20,910 12,590 22,950 35,540 26,033 181,677 207,710
Premium on repayment of
secured bonds - - - - (7,393) (7,393) - (7,393) (7,393)
Interest payable (1,237) (1,237) (2,474) (1,303) (1,302) (2,605) (2,529) (2,529) (5,058)
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Return on Ordinary
Activities
before Tax 9,278 9,158 18,436 11,287 14,255 25,542 23,504 171,755 195,259
Tax on ordinary activities (704) - (704) (750) - (750) (1,534) - (1,534)
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Return attributable to
Shareholders 8,574 9,158 17,732 10,537 14,255 24,792 21,970 171,755 193,725
Return per share 9.28p 9.92p 19.20p 10.12p 13.70p 23.82p 21.62p 169.04p 190.66p
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Weighted average number
of shares in issue 92,338,349 104,096,827 101,606,378
---------------------------- ------------------ -------- ------------------ -------- ------------------ --------
GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Dividends payable 4,596 5,276 21,931
Income comprises:
Dividends 11,418 13,666 28,347
Interest 56 53 93
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
11,474 13,719 28,440
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Balance Sheet
As at As at As at
30 April 31 October 30 April 2016
2017 2016
(unaudited) (audited) (unaudited)
GBP'000 GBP'000 GBP'000
-------------------------------- ------------- ------------ ---------------
Fixed Assets
Equity investments 793,139 893,432 761,147
-------------------------------- ------------- ------------ ---------------
Current Assets
Debtors 2,788 2,260 3,974
Cash 20,118 11,694 21,585
Cash equivalents 20,425 29,210 30,479
-------------------------------- ------------- ------------ ---------------
43,331 43,164 56,038
Creditors: liabilities
falling due within one
year (343) (662) (9,375)
Net current assets 42,988 42,502 46,663
Total assets less Current
Liabilities 836,127 935,934 807,810
-------------------------------- ------------- ------------ ---------------
Creditors: liabilities falling
due after more than one year
Long-term borrowings
at par (83,690) (83,645) (83,598)
Pension liability (3,272) (3,272) (2,550)
-------------------------------- ------------- ------------ ---------------
Net Assets 749,165 849,017 721,662
-------------------------------- ------------- ------------ ---------------
Capital and Reserves
Called-up share capital 20,893 24,086 25,375
Share premium account 39,922 39,922 39,922
Other reserves
Capital redemption
reserve 49,968 46,775 45,486
Capital reserve 590,335 682,209 560,415
Revenue reserve 48,047 56,025 50,464
-------------------------------- ------------- ------------ ---------------
Shareholders' funds 749,165 849,017 721,662
-------------------------------- ------------- ------------ ---------------
NAV per share with borrowings
at par 896.4p 881.2p 711.0p
-------------------------------- ------------- ------------ ---------------
Number of shares in
issue at period end 83,571,793 96,342,683 101,501,426
-------------------------------- ------------- ------------ ---------------
Statement of Comprehensive Income
Six months Six months Year to
to to
30 April 2017 30 April 2016 31 October 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Total comprehensive
income for the
period 17,732 24,792 192,715
--------------------- --------------- --------------- -----------------
Total comprehensive
income per share 19.20p 23.82p 189.67p
--------------------- --------------- --------------- -----------------
Statement of Changes in Equity
Six months Six months Year to
to to
30 April 2017 30 April 2016 31 October 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP,'000 GBP'000
Opening shareholders'
funds 849,017 733,056 733,056
Total comprehensive
income 17,732 24,792 192,715
Dividend payments (16,552) (11,534) (16,810)
Aviva share buyback (90,246) - -
Regular share
buybacks (10,786) (24,652) (59,944)
----------------------- --------------- --------------- -----------------
Closing shareholders'
funds 749,165 721,662 849,017
----------------------- --------------- --------------- -----------------
Cash Flow Statement
Six months Six months Year to
to to
30 April 30 April 31 October
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Operating activities
Net revenue before finance
costs and taxation 10,515 12,590 26,033
Expenses charged to capital (666) (784) (1,673)
Increase in accrued income (399) (2,232) (287)
Decrease in other payables (186) (3,875) (403)
(Increase)/decrease in other
receivables (20) 3,424 81
Adjustment for pension funding - - (288)
Tax on investment income (813) (939) (1,919)
Net cash inflow from operating
activities 8,431 8,184 21,544
-------------------------------- ------------- ------------- ------------
Investing activities
Purchases of investments (53,911) (69,258) (162,884)
Disposals of investments 165,302 104,566 218,530
Cash flows from investing
activities 111,391 35,308 55,646
-------------------------------- ------------- ------------- ------------
Cash flows before financing
activities 119,822 43,492 77,190
-------------------------------- ------------- ------------- ------------
Financing activities
Dividends paid (16,552) (11,534) (16,810)
Repayment of secured bond - (28,241) (28,241)
Share buybacks (101,203) (23,005) (60,158)
Interest paid (2,428) (2,601) (5,030)
-------------------------------- ------------- ------------- ------------
Cash flows from financing
activities (120,183) (65,381) (110,239)
-------------------------------- ------------- ------------- ------------
Net movement in cash and
cash equivalents (361) (21,889) (33,049)
-------------------------------- ------------- ------------- ------------
Cash and cash equivalents
at the beginning of period 40,904 73,953 73,953
-------------------------------- ------------- ------------- ------------
Cash and cash equivalents
at the end of period 40,543 52,064 40,904
-------------------------------- ------------- ------------- ------------
Notes
The condensed set of Financial Statements for the six months to
30 April 2017 has been prepared in accordance with FRS 104 'Interim
Financial Reporting' and the AIC's Statement of Recommended
Practice issued in November 2014 and has not been audited or
reviewed by the Auditor pursuant to the Auditing Practices Board
Guidance on 'Review of Interim Financial Information'. The
condensed set of Financial Statements for the six months to 30
April 2017 has been prepared on the basis of the same accounting
policies as set out in the Company's Annual Report and Accounts for
the year ended 31 October 2016.
It is the opinion of the Directors that, as most of the
Company's assets are readily realisable and exceed its liabilities,
it is expected that the Company will continue in operational
existence for the foreseeable future.
The information contained in this Interim Report does not
constitute statutory accounts as defined in sections 434-436 of the
Companies Act 2006. Where applicable, the figures have been
extracted from the Annual Report and Accounts for the year ended 31
October 2016 which has been filed with the Registrar of Companies
and which contains an unqualified report from the Auditor. The
financial information for the six months ended 30 April 2017 and 30
April 2016 has not been audited.
Based on the number of shares in issue at 30 April 2017, the
interim dividend will cost GBP4,596,000 (2016: GBP5,329,000) and is
payable on 28 July 2017 to shareholders registered at 30 June 2017.
The shares will be traded 'ex' the interim dividend from 29 June
2017 and investors purchasing on or after that date will not be
entitled to the interim dividend for 2016/17.
Equity investments include the unlisted portfolio of GBP1.4m (31
October 2016: GBP1.9m).
The weighted average number of shares in issue during the
half-year was 92,338,349 (2016: 104,096,827) and this figure has
been used in calculating the return per share shown in the income
statement. The net asset value per share at 30 April 2017 has been
calculated using the number of shares in issue on that date which
was 83,571,793 (31 October 2016: 96,342,683).
Analysis of Changes in Net Debt
31 October Non-cash 30 April
2016 Cash flows Movements 2017
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ----------- ------------- ----------- ---------
Cash 11,694 8,424 - 20,118
Short-term deposits 29,210 (8,785) - 20,425
Long-term borrowings
at par (83,645) - (45) (83,690)
---------------------- ----------- ------------- ----------- ---------
(42,741) (361) (45) (43,147)
---------------------- ----------- ------------- ----------- ---------
Principal risks and uncertainties
The principal risks and uncertainties facing the business are
investment and market price risk, interest rate risk, liquidity
risk, foreign currency risk, credit risk, discount volatility,
custody and depositary risk and operational risk. These are listed
on page 13 of the 2016 Annual Report and Accounts and they are
unchanged from that year. An explanation of these risks and how
they are managed is set out in Note 17 on pages 53 to 58 of the
Annual Report and Accounts.
Responsibility statement
The Board of Directors confirms that to the best of its
knowledge:
a) the condensed set of Financial Statements has been prepared
on a going concern basis and in accordance with the Interim
Financial Reporting Standard 104 applicable in the UK and Republic
of Ireland ("FRS 104") and the AIC's Statement of Recommended
Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" issued in 2014 and gives a true and fair
view of the assets, liabilities, financial position and return of
the Company;
b) the Interim 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, their
impact on the condensed set of Financial Statements and a
description of the principal risks and uncertainties for the
remaining six months of the year);
c) the Interim Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.8R
(disclosure of related party transactions and changes therein);
and
d) the Interim Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company's performance, business model
and strategy.
For and on behalf of the board,
James Will
Chairman
16 June 2017
Glossary
Borrowings at par is the nominal value of the Company's
borrowings less any unamortised issue expenses.
Borrowings at market value is the Company's estimate of the
'fair value' of its borrowings. The current estimated fair value of
the Company's borrowings is based on the redemption yield of the
relevant existing reference gilt plus a margin derived from the
spread of BBB UK corporate bond yields (15 years+) over UK gilt
yields (15 years+). The reference gilt for the secured bonds is the
6% UK Treasury Stock 2028 and the reference gilt for the perpetual
debenture stocks is the longest-dated UK Treasury stock listed in
the Financial Times.
NAV is net asset value per share after deducting borrowings at
par or market value, as stated.
Ex-income NAV is the NAV excluding current year revenue.
Discount is the difference between the market price of a share
and the NAV, expressed as a percentage of the NAV.
Gross gearing is the geared position if all the borrowings were
invested in equities: borrowings expressed as a percentage of
shareholders' funds.
Gearing is the true geared position of the Company: borrowings
less cash and equivalents expressed as a percentage of
shareholders' funds.
Total assets means total assets less current liabilities.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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