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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Scottish Investment Trust Plc | LSE:SCIN | London | Ordinary Share | GB0007826091 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 895.00 | 882.00 | 889.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
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
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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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(END) Dow Jones Newswires
June 19, 2017 02:00 ET (06:00 GMT)
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