We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for streaming realtime charts, analysis tools, and prices.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Value And Indexed Property Income Trust Plc | LSE:VIN | London | Ordinary Share | GB0008484718 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 221.00 | 221.00 | 224.00 | 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
TIDMVIN
RNS Number : 2908G
Value and Income Trust plc
25 May 2017
VALUE AND INCOME TRUST PLC
Annual financial report
FOR THE YEARED 31 MARCH 2017
SUMMARY
Hot Features
Premium
31 March
2017
Net asset value per share valuing debt at
book value (including income) (pence) 345.5
Net asset value per share valuing debt at
market value (including income) (pence) 318.1
Ordinary share price (pence) 255.0
Discount of ordinary share price to net
asset value per share valuing debt at market
value (including revenue) (%) 19.8
Total interim dividend and proposed final
dividend per share (pence) 11.00
Total assets less current liabilities (GBPm) 207.3
THE YEAR
-- Net Asset Value total return (with debt at par) of 12.5% over one year and 17.6% over three years.
-- Share price total return of 21.7% over one year and 8.2% over three years. -- FTSE All-Share Index total return of 21.5% over one year and 24.4% over three years. -- Dividends for year up 4.8% - increased for the 30th consecutive year.
STRATEGIC REPORT
Chairman's Statement
Last year we recommended a substantial increase in the final dividend and we also made a change so that dividends were paid quarterly. I am pleased to report that this year we are proposing a final dividend of 3.2p per share, making 11.0p per share for the year, an increase of 4.8%. This is the 30th annual increase since the Trust's objectives were changed in 1986. You will see from our Managers' reports that the outlook for continuing income growth is encouraging. The prospects for both portfolios are reasonably good: our equities are yielding 4.2% and the property portfolio is yielding 6.7% with no voids and 52% of the income coming from index-related leases and a weighted average unexpired length of lease of 13 1/2 years.
Over the year to 31 March 2017, Value and Income Trust's net asset value total return per share (that is taking the growth in net asset value and dividend together) was 12.5%. Our property portfolio had a good year and produced a total return of 13%. The performance of our equity portfolio was behind the FTSE All-Share Index which increased by 17.5%, but this should be seen in the context of its longer term performance. No performance fee, which is based on share price total return over 3 years, was payable. Details of the investment management fee are shown in the Directors' Report.
VIT has two debentures and one bank loan which, in the Group's Financial Statements, are valued at cost, adjusted annually over their lives to write off the issue premium and issue expenses. These numbers are used to calculate the year end net asset value (NAV) of 345.51p. We also show in Note 17 to the Financial Statements, a NAV of 318.09p which is adjusted for borrowings at fair value, being amounts greater than their respective nominal values. This restatement is calculated by reference to the market.
The first of our debentures is repayable for GBP15,000,000 in 2021 and has a fair value of GBP19,010,000 whilst the second debenture is repayable for GBP20,000,000 in 2026 and has a fair value of GBP27,939,000. The bank loan of GBP15,000,000 is repayable in 2026 and has a fair value of GBP15,539,000. All of these figures are shown in Note 20 to the Financial Statements. The differences between the two values of each of our debentures and loan will reduce until each instrument is repaid at its nominal value, thus increasing the NAV with borrowings at fair value over the period.
Our two debentures have covenants attached to them. Information about these is included in Note 12 to the Financial Statements; there is plenty of headroom in terms of both capital and income. In addition, in May 2016, we borrowed GBP15,000,000 for 10 years at a rate of 4.4% per annum including all costs which has been invested in the present property portfolio on attractive terms.
I wrote in 2016 that 'both of the portfolios provide good value when compared to the remarkably low yields available from UK gilts'. This is still the case and we remain fully invested.
I hope that we shall see as many Shareholders as possible at the Annual General Meeting on 7 July 2017, which is to be held in London this year. Our Managers will give a brief presentation on the outlook.
James Ferguson
25 May 2017
INVESTMENT MANAGERS' REPORTS
UK Equities
Market Background
In a year of unexpected events on the global landscape, UK equities nevertheless rose strongly and recorded the highest returns of the last five years. The FTSE All-Share Index rose by 17.5% over the year to end March 2017 and recorded a total return of 21.5%. Ahead of the EU Referendum, the market was steady, trading in a narrow range, but after the result of the Referendum, it rose strongly after an initial sharp downward shock. The most significant effect of the Referendum result was the immediate fall in the value of sterling against the other main currencies, which improved the competitive position of UK companies operating overseas and enhanced the translational values of dollar and euro related earnings.
Predictions of an immediate recession if Brexit should be the Referendum outcome were proved wrong and our economy was steadily upgraded from June onwards. The Bank of England halved the base rate to 0.25% in August and announced a further programme of Quantitative Easing and ten year gilt yields fell to less than 1% during the autumn. Consumers were motivated to keep spending, with the cost of borrowings reducing even further. With falling borrowing rates and a growing economy, the market was set to rise.
Within the UK market the largest quoted companies benefitted most in the aftermath of the Referendum result and the fall in our currency. Oil, mining, pharmaceutical and global banks led the rise in the second half of 2016. The FTSE 100 Index rose by 18.6% over our year, whereas the more domestically focused FTSE 250 Index of mid-sized companies rose by 12.1%. Industrial sectors of our market outperformed the overall trend, encouraged by reports of higher industrial production figures and growing demand for exports.
Overseas markets also performed strongly. The FTSE World Index rose by 12.7%. American equities rose by 14.7%, the German Index rose by 23.6% and Emerging Markets also had a good year, with a rise of 14.8%. In fixed interest markets, UK Gilt yields fell over the year as a whole and the All Stocks Gilt Index gave a total return of 6.6%. Overseas bond yields rose and the US Treasury ten year bond yield ended our year at 2.3% compared with 1.8% a year earlier. US Federal Funds rate was raised in December by 0.25% to 0.75%.
The pound fell from $1.44 at the start of our year to $1.26 (-12.5%) and from EUR1.26 to EUR1.18 (-6.3%). In the oil and commodity markets, oil rose by 33.4% over the year and copper by 14.2%. Both prices had been severely depressed in the early months of 2016 by fears of slowing growth in China and the developing world.
Performance
With VIT's policy of focusing on mid and small sized companies it was a disappointing year for performance relative to the FTSE All-Share Index. The capital value of equities, adjusted for changes to the portfolio, rose by 8.3% and the total return, including income, was 12.9%. In the Travel and Leisure sector, the price of Go Ahead was affected by problems with industrial relations in Southern Rail and a slowdown in bus passengers in the North East. Restaurant Group continued to suffer from changing trends in consumer spending and increased competition. In Support Services, Babcock suffered fears of downgrades, following reports from other companies in that sector. Our underweight position in the Mining sector had an adverse effect on relative performance this year, though it has been a major contributor to outperformance in past years. These negative factors were counteracted somewhat by the positive effect of our overweight holdings in the Industrial Engineering and Electronics sectors. A further beneficial factor to performance was the absence of any companies in the Property sector, for almost all of the year. Over the last five years, the equity portfolio has recorded a total return of 68.3%, compared with the FTSE All-Share Index total return of 57.2%.
Portfolio
Sales and purchases of equities over the year totalled GBP10.02m, with net sales of just GBP40,000. Our policy was to be fully invested in the equity portfolio throughout the year. We reduced our holdings in Halma and Spectris after strong performance, though they remain amongst our largest holdings. We also reduced Rotork, after recovery in its price from lower levels. We reduced the holding in Informa in order to fund the cost of the new shares issued in connection with its acquisition of Penton, a US based exhibitions' company. We increased the holdings in Carillion, Crest Nicholson, GlaxoSmithKline and Vodafone. Towards the end of our year we started a holding in British Land, which manages a high quality portfolio split evenly between retail and office properties. The share price was hit hard in the aftermath of the EU Referendum and was trading on a 30% discount to historic Net Asset Value and a yield of 5%.
Outlook
Since writing VIT's equity report a year ago, prospects for the UK economy and the global economy have improved. In this country we have the benefit of a lower sterling exchange rate, which has resulted in higher demand for our exports and improved competitiveness for UK manufacturers serving both overseas markets and those trading here but with competition from overseas. A year ago, forecasts for UK GDP growth in 2017 were considerably less than 1%, but a year later the Bank of England's forecast has risen to 2%. The other significant change resulting from the fall in sterling, is increasing inflation, now moving above the Bank of England's targeted rate of 2%. We do not expect a rise in interest rates to counter the rise in inflation. Article 50 has recently been triggered to take the UK out of the EU and it is very unlikely that any action might be taken which could upset the pace of economic activity. Rising economic growth and rising inflation are both factors which favour investment in equities rather than in bonds. Dividends have continued to rise modestly across the market and the overall yield on the FTSE All-Share Index is 3.5%, which is very attractive compared to other asset classes. We believe that our equity portfolio, which yields 4.2%, is attractively valued at its current valuation.
Angela Lascelles
OLIM Limited
25 May 2017
PROPERTY PORTFOLIO
The Market
Average capital values of UK commercial property bottomed out in September 2016 after a sharp post-Referendum fall over the summer and early autumn and have since been edging higher month by month. Values are still slightly down on balance since June, with offices and retail property underperforming and the industrial and alternative property sectors up. The IPD Annual Index for 2016 as a whole showed a positive total return of 4%, with average capital losses of 1% outweighed by rental income of 5%.
Capital values of office and retail properties fell by 1 1/2 %-2%, on average, over 2016 as a whole with industrial and leisure property gaining about 3%. That divergence in sector performance has continued to widen in 2017. Rental values rose by about 2% in 2016 on average, with industrial/warehouse and office property outperforming retail over the year as a whole. But office rental growth has slowed right down since the Referendum, and has turned negative in London. Within all sectors there is an accelerating flight to safety, with property on long leases strongly outperforming shorter-let, riskier stock - in sharp contrast to the 2013-15 bull market. This trend has helped capital values of well-let supermarkets to grow again after a painful period of underperformance.
It is still too early to form a firm view on the long-term effect of the June Referendum result on the commercial property market, as on the economy as a whole.
The devaluation of sterling gave a short-term boost to domestic tourism, manufacturing and exports, but the pain is only now coming through in import price rises and cuts in real incomes. Consumers are deeply in debt with the savings ratio down to a 50 year low, and they are now starting to retrench, probably quite hard. The sharp falls in medium and long-term interest rates in the third quarter, which have only been partly reversed, gave immediate support to the safer, long-leased types of property, which were also the most saleable by property unit trusts under severe short-term redemption pressures.
Since last June there has been far more evidence of transactions for valuers to analyse in some parts of the market than others. Parts of the commercial property market are still in limbo, with a wall of potential sellers, especially the U.S. distressed debt ("vulture") funds, and buyers few and far between. So the IPD and agents' indices are painting too optimistic a picture of the market - until more properties change hands - for most shopping centres, larger secondary shops and retail warehouses, and short-leased City and South-East offices (where property companies' share prices are discounting further falls in values). Net effective rents are also coming under pressure in these sectors, with rent free periods growing and leases shortening; the evidence of this will feed through into valuations soon. But commercial auction values and volumes have been buoyant. Private investors remain hungry for yield at the smaller (typically sub GBP2 million) end of the market, and are switching out of residential buy-to-let investments into commercial property following tax and regulatory changes. Local authorities are also active buyers of all sorts of provincial property, often outside their own areas, with taxpayers' money borrowed from the Public Works Loan Board. But they have no coherent investment strategy except raising short-term income to lessen the impact of public spending cuts, so this rush to spend will end in tears and the Treasury should close the PWLB funding window soon.
There is also growing upward pressure on capital values and a keen appetite for safe long-term, especially indexed, property income, from pension funds, insurance companies, charities, and risk-averse private investors. The penny has dropped at last with investors that safe property's unprecedently high yield margins over conventional and index-linked gilts cannot last, and that the 15% sterling devaluation is now feeding through fast into consumer prices. The Consumer Price Index rose by 2.3% over the twelve months to March, with the Retail Price Index up by 3.1% and likely to hit 4% later in 2017.
These conflicting pressures on different property types are making 2017 a fascinating year. On balance, capital values may rise by about 3%, in line with inflation, with the office and retail sectors down and the industrial/warehouse and the growing alternative sectors (leisure, pubs, hotels, student housing and motor trade) well ahead. Rental values may be flat on average, with the same sectors rising and falling as for capital values. Total returns on the IPD Annual Index may therefore average around 7%-8%, but with a much wider dispersion than usual. The best single predictor of relative performance this year may be a portfolio's weighted average unexpired lease length (WAULT), currently about 7 years on the IPD Monthly Index (11 years on the Annual). A low void rate against the IPD's 8% will also help portfolios to outperform.
In an unusually uncertain investment world, with significant inter-related geopolitical risks on top of Trump and Brexit, one of the safest havens must be UK commercial property on long, preferably index-related, leases with high yield premia over conventional and index-linked gilts. Safe property will rise in value in the UK in 2017, risky and over-rented property let on short leases or to shaky tenants will fall. Long-term property investment portfolios should stay heavily weighted to the safe side of that divide for the foreseeable future.
The Portfolio
VIT's property portfolio produced a total return of 13% over the year to March against 5% for the IPD Index, the main benchmark for property performance.
We concentrate on properties with long, strong income streams to cover the fixed interest payments on our debt and deliver long-term income and capital growth. The total return on our property portfolio has averaged 12% a year over the past 3 years, 10% over 5 years, 7% over 10 years, 12% over 20 years and 13% a year over the 30 years since the start. These returns are slightly above the IPD averages over 3 and 5 years and well above them over longer periods. Real returns above the RPI from VIT's property portfolio averaged 4% a year over the past 10 years and 8-10% a year over shorter and longer periods.
We have bought eight new properties over the past year: two South-Eastern industrials for GBP8 million in Fareham and Milton Keynes, three pubs in Cheltenham, Oxted and Thornton-Cleveleys, one shop in Bedford and two small supermarkets in Caerphilly and Harrogate. The average net initial yield on purchase was 6.9% and 43% of the income was index-related. The purchase prices totalled GBP16.2 million and they were valued at GBP17.5 million at end March (8% above their purchase price excluding costs and 2% including costs). We sold seven, mainly over-rented, properties this year - shops in Ayr, Birmingham, Dundee, Elgin and Stratford-upon-Avon, a pub in Sherborne and an industrial in Rochford, for GBP8.4 million (6% above valuation) at a net initial yield of 7.9%, falling to 7.0% on their current rental values.
All properties are fully let on full repairing and insuring leases, with upward only rent reviews and an average unexpired lease length of 13 1/2 years. The portfolio has been fully let and income-producing throughout the year. 25% of rental income is reviewed annually, with 75% five yearly. 52% of the portfolio's rental income comes from index-related leases (up from 35% five years ago).
The property portfolio was funded for many years by long-term fixed rate loans - GBP20 million of VIT 93/8% Debenture Stock repayable in 2026 and GBP15 million of VIT 11% Debenture Stock repayable in 2021. Because these Debenture Stocks were issued at a premium, their effective interest cost averaged 9%, against the 13% p.a. long-term return from VIT's properties. Interest rates have now fallen so low compared to property yields that we borrowed GBP5 million in March 2015 for five years and increased and converted the loan in May 2016 to GBP15 million at a fixed interest rate of 4.4%, including all costs, until 2026 and invested the proceeds in properties at a net initial yield of 6.9% with good growth prospects.
Purchase - Milton Keynes
Industrial unit let to Adelie Food Holdings at GBP296,800 a year on a 12 year lease with 2.5% p.a. minimum rent increases. Bought for GBP4,000,000 in July 2016 at a net initial yield of 7%.
Purchase - Harrogate
Convenience store let to Co-operative Group Food at GBP65,000 a year on a 14 year lease with RPI-linked rent increases. Bought for GBP950,000 in March 2017 at a net initial yield of 6.5%.
Results of Independent Revaluation
The VIT property portfolio was subject to an independent professional revaluation at 31 March 2017 by Savills. The revaluation showed a value of GBP66,775,000. Our properties are revalued every six months, at 30 September and 31 March.
Capital values rose by 5% over the year and rental income rose by 2% on a like for like basis. Twenty-eight of the properties valued at 31 March 2017 were freehold and two are long leasehold with 41 years and 88 years to run.
Matthew Oakeshott and Louise Cleary
OLIM Property Limited
25 May 2017
Business Review
This Business Review is intended to provide an overview of the strategy and business model of the Company as well as the key measures used by the Directors in overseeing its management. The Company is an investment trust company which invests in accordance with the investment aims and investment policy below.
The Group
Value and Income Services Limited (VIS), a wholly owned subsidiary of the Company, is authorised by the Financial Conduct Authority to act as the Company's Alternative Investment Fund Manager (AIFM).
Investment Aims
The Company invests in higher yielding, less fashionable areas of the UK commercial property and quoted equity markets, particularly in medium and smaller sized companies. The Company aims to achieve long-term real growth in dividends and capital value without undue risk.
Investment Policy
The Company's policy is to invest in quoted UK equities, UK commercial property and cash or near cash securities. It is not normally the Company's policy to invest in overseas shares or in unquoted companies. UK equities usually account for between half and three-quarters of the total portfolio and property for a quarter to a half but the asset allocation may go outside these ranges if relative market levels and investment value, or a desired increase in cash or near cash securities, make it appropriate.
The Company focuses on the fundamental values and incomes of businesses in which it invests - their profitability, cash flows, balance sheets, management and products or services - and the location, tenants and leases of its property investments. The equity portfolio has generally yielded more than the FTSE All-Share Index. The Group has held between 30 and 40 individual shareholdings and between 20 and 32 individual properties in recent years. These ranges may change as market conditions or the size of each portfolio vary in future. In order to limit the risk to the equity portfolio that is derived from any particular investment, no individual shareholding will account for more than 10% of the equity portfolio at the time of purchase.
The Company has, since 1986, had a longstanding policy of increasing its exposure to equities and to property through the judicious use of borrowings. Until recently, all borrowings have been long-term debentures to provide secure long-term funding, avoiding the risks associated with short-term funding of having to sell illiquid assets at a low point in markets if loans have to be repaid. On 26 February 2015, a five year secured term loan facility of GBP5m was arranged with Santander UK plc at a five year fixed interest rate of 4% p.a. including all costs. This loan was refinanced on 13 May 2016 and a new ten year secured term loan facility of GBP15m was arranged with Santander UK plc at a ten year interest rate of 4.4% p.a including all costs to replace the original GBP5m loan arranged in February 2015.
Gearing has varied between 25% and 40% of the total portfolio. The Company will not raise new borrowings if total net borrowings would then represent more than 50% of the total assets.
No material changes may be made to the Company's investment policy described above without the prior approval of Shareholders by the passing of an Ordinary Resolution. In the year to 31 March 2017, no material changes were made to the Company's investment policy.
Performance, Results and Dividend
The Company announced on 24 August 2016 that it intended to pay quarterly dividends in the future. The first quarterly dividend of 2.6p per share was paid on 28 October 2016; the second quarterly dividend of 2.6p per share was paid on 27 January 2017 and the third quarterly dividend of 2.6p per share was paid on 28 April 2017.
A review of the performance of the equity and property portfolios is detailed in the Chairman's Statement and in the Investment Managers' Reports. The Directors recommend that a final dividend of 3.2p per Ordinary Share (2016: 6.0p) is paid on 28 July 2017 to Shareholders on the register on 30 June 2017. The ex-dividend date is 29 June 2017.
Principal Risks and Uncertainties
The Board carries out a regular review and robust assessment of the principal risks facing the Group including those that would threaten its business model, future performance, solvency or liquidity. The principal risks and uncertainties which affect the Group's business are:
Market Risk
The fair value of, or future cash flows from, a financial instrument held by the Group may fluctuate because of changes in market prices. This market risk comprises three elements - price risk, interest rate risk and currency risk.
Price Risk
Changes in market prices (other than those arising from interest rate or currency risk) may affect the value of the Group's investments.
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. For equities, asset allocation and stock selection, as set out in the Investment Policy, both act to reduce market risk. VIS delegates its portfolio management responsibilities to the Investment Managers, OLIM Limited (OLIM) and OLIM Property Limited (OLIM Property) (collectively, the Investment Managers) who actively monitor market prices throughout the year and report to VIS and to the Board, which meets regularly in order to review investment strategy. The equity investments held by the Group are listed on the UK Stock Exchange. All investment properties held by the Group are commercial properties located in the UK with long, strong income streams.
Interest Rate Risk
Interest rate movements may affect:
- the fair value of the investments in property; and - the level of income receivable on cash deposits.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
The Board imposes borrowing limits to ensure that gearing levels are appropriate to market conditions and reviews these on a regular basis. Current borrowings comprise debenture stock and the ten year secured term loan, providing secure long-term funding. It is the Board's policy to maintain a gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of between 25% and 40%.
Currency Risk
A small proportion of the Group's investment portfolio is invested in securities whose fair value and dividend stream are affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk.
Liquidity Risk
This is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities. The Group's assets comprise readily realisable securities which can be sold to meet commitments, if required, and investment properties which, by their nature, are less readily realisable. The maturity of the Company's existing borrowings is set out in the interest rate risk profile section of Note 20 of the Financial Statements.
Credit Risk
This is the failure of a counterparty to a transaction to discharge its obligations under that transaction that could result in the Group suffering a loss.
The risk is not significant and is managed as follows:
- investment transactions are carried out with a large number of brokers, whose credit standing is reviewed periodically by OLIM (who report to VIS) and limits are set on the amount that may be due from any one broker.
- the risk of counterparty exposure due to failed trades causing a loss to the Group is mitigated by the review of failed trade reports on a daily basis. In addition, a stock reconciliation to third party administrators' records is performed on a daily basis to ensure that discrepancies are picked up on a timely basis. VIS carries out periodic reviews of the Depositary's operations and reports its findings to the Company. This review also includes checks on the maintenance and security of investments held.
- cash is held only with reputable banks with high quality external credit ratings which are monitored on a regular basis.
None of the Group's equity investments is secured by collateral or other credit enhancements.
Property Risk
The Group's commercial property portfolio is subject to both market and specific property risk. Since the UK commercial property market has been markedly cyclical for many years, it is prudent to expect that to continue. The price and availability of credit, real economic growth and the constraints on the development of new property are the main influences on the property investment market.
Against that background, the specific risks to the income from the portfolio are tenants being unable to pay their rents and other charges, or leaving their properties at the end of their leases. All leases are on full repairing and insuring terms, with upward only rent reviews and the average unexpired lease length is 13 1/2 years (2016: 13 years). Details of the tenant and geographical spread of the portfolio and the long-term record of performance through the varying property cycles since 1987 is set out in the property section of the Investment Manager's Report. OLIM Property is responsible for property investment management, with surveyors, solicitors and managing agents acting on the portfolio under OLIM Property's supervision.
Political Risk
In a referendum held on 23 June 2016, the UK voted to leave the European Union (informally known as "Brexit"). The formal process of implementing this decision exists in Article 50 of the Lisbon Treaty. The political, economic and legal consequences of the referendum vote are not yet known.
Additional risks and uncertainties include:
- Discount volatility: The Company's shares may trade at a price which represents a discount to its underlying net asset value;
- Regulatory risk: The Group operates in a complex regulatory environment and therefore faces a number of regulatory risks. A breach of Section 1158 of the Corporation Tax Act 2010 would result in the Company being subject to capital gains tax on portfolio investments. Breaches of other regulations, including but not limited to, the Companies Act 2006, the FCA Listing Rules or the FCA Disclosure and Transparency Rules, could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers to the Company could also lead to reputational damage or loss. The Audit and Management Engagement Committee monitors compliance with regulations by reviewing internal control reports from the Administrator and the Investment Managers.
The Alternative Investment Fund Managers Directive (AIFMD) introduced a new authorisation and supervisory regime for all managers of authorised investment funds in the European Union.
In accordance with the requirements of the AIFMD, the Company appointed VIS as its AIFM and BNP Paribas Securities Services as its Depositary. The Board has controls in place in the form of regular reporting from the AIFM and the Depositary to ensure that both are meeting their regulatory responsibilities in relation to the Company.
Key Performance Indicators
The Directors have identified the three key performance indicators below to determine the performance of the Company:
- Share price total return relative to the FTSE All-Share Index (total return); - Net asset value total return relative to the FTSE All-Share Index (total return); and - Dividend growth relative to the Retail Prices Index.
At each Board Meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives.
A historical record of these measures, with comparatives is shown in the Financial Highlights and Long-Term Record.
Statement of Compliance with Investment Policy
The Company is adhering to its stated investment policy and managing the risks arising from it. This can be seen in various tables and charts throughout the Annual Report, and from the information provided in the Chairman's Statement, and the Investment Managers' Reports.
Employee, Environmental and Human Rights Policy
As an investment trust company, the Company has no direct employee or environmental responsibilities, nor is it responsible for the emission of greenhouse gases. Its principal responsibility to Shareholders is to ensure that the investment portfolio is properly managed and invested. The Company has no employees and accordingly, has no requirement to report separately on employment matters. Management of the investment portfolio is undertaken by the Investment Managers through members of their portfolio management teams. In light of the nature of the Company's business, there are no relevant human rights issues and, therefore, the Company does not have a human rights policy.
Future Strategy
The Board and the Investment Managers intend to maintain the strategic policies set out above for the year ending 31 March 2018 as it is believed that these are in the best interests of Shareholders.
Approval
The Business Review, and the Strategic Report as a whole, was approved by the Board of Directors and signed on its behalf by:
James Ferguson
Chairman
25 May 2017
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law, the Directors are required to prepare the Group Financial Statements in accordance with IFRS as adopted by the EU and Article 4 of the EU IAS Regulation and have also chosen to prepare the parent company financial statements under IFRS as adopted by the EU. The Financial Statements are required by law to give a true and fair view of the state of affairs of the Company and of the net return of the Company for that period. In preparing these Financial Statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently; - make judgements and estimates that are reasonable and prudent;
- state whether applicable IFRS have been followed, subject to any material departures disclosed and explained in the Financial Statements; and
- prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with adequate accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's websites hosted by the Investment Managers. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
The Directors are also responsible for ensuring that the Annual Report and Financial Statements, taken as a whole is fair, balanced and understandable and provides the information necessary to assess the Company's position and performance, business model and strategy.
Directors' Responsibility Statement
Each Director confirms, to the best of his or her knowledge, that:
- the Financial Statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and its undertakings as at 31 March 2017 and for the year to that date; and that
- the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that it faces.
The Directors confirm that the Annual Report and Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary to assess the Company's position and performance, business model and strategy.
For and on behalf of the Board of Value and Income Trust PLC
James Ferguson
Chairman
25 May 2017
VALUE AND INCOME TRUST PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 March 2017 31 March 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income Note
Investment income 5,912 - 5,912 5,898 - 5,898
Rental income 4,233 - 4,233 3,937 - 3,937
Other income 1 - 1 1 - 1
2 10,146 - 10,146 9,836 - 9,836
Gains and losses
on investments
Realised gains
on
held-at-fair-value
investments and
investment
properties 9 - 4,170 4,170 - 1,759 1,759
Unrealised
gains/(losses)
on
held-at-fair-value
investments and
investment
properties 9 - 8,848 8,848 - (5,295) (5,295)
Total income 10,146 13,018 23,164 9,836 (3,536) 6,300
-------------- -------------- ------------- -------------- -------------- --------------
Expenses
Investment
management
fees 3 (401) (935) (1,336) (361) (843) (1,204)
Other operating
expenses 4 (573) - (573) (777) - (777)
Finance costs 5 (4,083) - (4,083) (3,702) - (3,702)
Total expenses (5,057) (935) (5,992) (4,840) (843) (5,683)
-------------- -------------- ------------- -------------- -------------- --------------
Profit before tax 5,089 12,083 17,172 4,996 (4,379) 617
Taxation 6 - - - - - -
Total Comprehensive
Income for the
Year 5,089 12,083 17,172 4,996 (4,379) 617
============== ============== ============= ============== ============== ==============
Earnings per
ordinary
share (pence) 7 11.17 26.53 37.70 10.97 (9.61) 1.36
The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with IFRS. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of Value and Income Trust PLC, the parent company. There are no minority interests.
The Board is proposing a final dividend of 3.20p per share, making a total dividend of 11.00p per share for the year ended 31 March 2017 (2016: 10.50p per share) which, if approved, will be payable
on 28 July 2017 (see note 8).
The accompanying notes form part of these Financial Statements.
VALUE AND INCOME TRUST PLC
COMPANY STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 March 2017 31 March 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income Note
Investment income 5,912 - 5,912 5,898 - 5,898
Rental income 4,233 - 4,233 3,937 - 3,937
Other income 1 - 1 1 - 1
2 10,146 - 10,146 9,836 - 9,836
Gains and losses
on investments
Realised gains
on
held-at-fair-value
investments and
investment
properties 9 - 4,170 4,170 - 1,759 1,759
Unrealised
gains/(losses)
on
held-at-fair-value
investments and
investment
properties 9 - 9,478 9,478 - (4,663) (4,663)
Total income 10,146 13,648 23,794 9,836 (2,904) 6,932
---------------- ------------- ------------- ---------------- -------------- --------------
Expenses
Investment
management
fees 3 (401) (935) (1,336) (361) (843) (1,204)
Other operating
expenses 4 (573) - (573) (777) - (777)
Finance costs 5 (4,083) - (4,083) (3,702) - (3,702)
Total expenses (5,057) (935) (5,992) (4,840) (843) (5,683)
---------------- ------------- ------------- ---------------- -------------- --------------
Profit before
tax 5,089 12,713 17,802 4,996 (3,747) 1,249
Taxation 6 - - - - - -
Total Comprehensive
Income for the
Year 5,089 12,713 17,802 4,996 (3,747) 1,249
================ ============= ============= ================ ============== ==============
Earnings per
ordinary
share (pence) 7 11.17 27.92 39.09 10.97 (8.23) 2.74
The total column of this statement represents the Statement of Comprehensive Income of the Company prepared in accordance with IFRS. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of Value and Income Trust PLC, the parent company. There are no minority interests.
The accompanying notes form part of these Financial Statements.
VALUE AND INCOME TRUST PLC
STATEMENT OF FINANCIAL POSITION
Group Company
As at As at As at As at
31 March 31 March 31 March 31 March
2017 2016 2017 2016
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ASSETS
Non current
assets
Investments
held at fair
value through
profit or loss 9 137,573 127,266 137,773 127,466
Investment
properties 9 66,775 55,125 66,775 55,125
204,348 182,391 204,548 182,591
Current assets
Cash and cash
equivalents 4,292 3,481 4,092 3,281
Other
receivables 10 744 755 744 755
-------- -------- -------- --------
5,036 4,236 4,836 4,036
TOTAL ASSETS 209,384 186,627 209,384 186,627
Current
liabilities
Other payables 11 (2,122) (1,152) (2,122) (1,152)
TOTAL ASSETS
LESS CURRENT
LIABILITIES 207,262 185,475 207,262 185,475
Non-current
liabilities
Borrowings 12 (49,883) (40,167) (52,407) (43,321)
NET ASSETS 157,379 145,308 154,855 142,154
========= ========= ========= =========
EQUITY
ATTRIBUTABLE
TO EQUITY
SHAREHOLDERS
Called up share
capital 14 4,555 4,555 4,555 4,555
Share premium 15 18,446 18,446 18,446 18,446
Retained
earnings 16 134,378 122,307 131,854 119,153
TOTAL EQUITY 157,379 145,308 154,855 142,154
========= ========= ========= =========
Net Asset Value
per ordinary
share (pence) 17 345.51 319.01 339.97 312.08
These financial statements were approved by the Board on 25 May 2017 and were signed on its behalf by:-
James Ferguson, Chairman
Matthew Oakeshott, Director
The accompanying notes form part of these Financial Statements.
VALUE AND INCOME TRUST PLC
STATEMENTS OF CHANGES IN EQUITY
Group Year ended 31 March
2017
Share Share Retained
capital premium earnings Total
Note GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March
2016 4,555 18,446 122,307 145,308
Total comprehensive
income for the
year - - 17,172 17,172
Dividends
paid 8 - - (5,101) (5,101)
Net assets at 31 March
2017 4,555 18,446 134,378 157,379
======== ======== ========= =========
Company
Year ended 31 March
2017
Share Share Retained
capital premium Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March
2016 4,555 18,446 119,153 142,154
Total comprehensive
income for the
year - - 17,802 17,802
Dividends
paid 8 - - (5,101) (5,101)
-------- -------- --------- ---------
Net assets at 31 March
2017 4,555 18,446 131,854 154,855
======== ======== ========= =========
Group Year ended 31 March
2016
Share Share Retained
capital premium earnings Total
Note GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March
2015 4,555 18,446 125,881 148,882
Total comprehensive
income for the
year - - 617 617
Dividends
paid 8 - - (4,191) (4,191)
Net assets at 31 March
2016 4,555 18,446 122,307 145,308
======== ======== ========= ========
Company
Year ended 31 March
2016
Share Share Retained
capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March
2015 4,555 18,446 122,095 145,096
Total comprehensive
income for the
year - - 1,249 1,249
Dividends
paid 8 - - (4,191) (4,191)
Net assets at 31 March
2016 4,555 18,446 119,153 142,154
======== ======== ========= ========
The accompanying notes form part of these Financial Statements.
VALUE AND INCOME TRUST PLC
GROUP STATEMENT OF CASHFLOWS
For the year ended 2017 2016
31 March
Notes GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Dividend income
received 5,847 5,608
Rental income
received 4,976 3,374
Interest
received 1 1
Operating expenses
paid (1,692) (1,830)
NET CASH FROM OPERATING
ACTIVITIES 18 9,132 7,153
Cash flows from investing
activities
Purchase of investments (21,767) (8,935)
Sale of investments 12,828 8,462
NET CASH OUTFLOW
FROM
--------- --------
INVESTING ACTIVITIES (8,939) (473)
Cash flow from financing
activities
Loans drawn 9,702 -
down
Interest
paid (3,983) (3,701)
Dividends
paid 8 (5,101) (4,191)
NET CASH INFLOW/ (OUTFLOW)
FROM FINANCING
ACTIVITIES 618 (7,892)
NET INCREASE/ (DECREASE) IN CASH
AND
CASH EQUIVALENTS 811 (1,212)
Cash and cash equivalents
at 1 April 2016 3,481 4,693
Cash and cash equivalents
at 31 March 2017 4,292 3,481
======== ========
The accompanying notes form part of these Financial Statements.
VALUE AND INCOME TRUST PLC
COMPANY STATEMENT OF CASHFLOWS
For the year ended 2017 2016
31 March
Notes GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Dividend income received 5,847 5,608
Rental income received 4,976 3,374
Interest received 1 1
Operating expenses
paid (1,692) (1,830)
NET CASH FROM OPERATING
ACTIVITIES 18 9,132 7,153
Cash flows from investing
activities
Purchase of investments (21,767) (8,935)
Sale of investments 12,828 8,462
NET CASH OUTFLOW FROM
--------- --------
FROM INVESTING ACTIVITIES (8,939) (473)
Cash flow from financing
activities
Loans drawn down 9,702 -
Interest paid (3,983) (3,701)
Dividends paid 8 (5,101) (4,191)
NET CASH INFLOW/ (OUTFLOW)
FROM FINANCING
ACTIVITIES 618 (7,892)
NET INCREASE/ (DECREASE) IN CASH
AND
CASH EQUIVALENTS 811 (1,212)
Cash and cash equivalents
at 1 April 2016 3,281 4,493
Cash and cash equivalents
at 31 March 2017 4,092 3,281
======== ========
The accompanying notes form part of these Financial Statements.
VALUE AND INCOME TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
The Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee (IASC) that remain in effect, and to the extent that they have been adopted by the European Union.
The functional and presentational currency of the Group and Company is pounds sterling because that is the currency of the primary economic environment in which the Group and Company operate. The financial statements and the accompanying notes are presented in pounds sterling and rounded to the nearest thousand pounds except where otherwise indicated.
(a) Basis of preparation
The Financial Statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial assets. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts (the SORP) issued by the Association of Investment Companies (AIC) in November 2014 and updated in January 2017 with consequential amendments is consistent with the requirements of IFRSs, the Directors have sought to prepare the Financial Statements on a basis compliant with the recommendations of the SORP, except for the allocation of finance costs to revenue as explained in note 1(f).
The Board has considered the requirements of IFRS 8, 'Operating Segments'. The Board is charged with setting the Group's investment strategy. The Board has delegated the day to day implementation of this strategy to the Investment Managers but the Board retains responsibility to ensure that adequate resources of the Group are directed in accordance with its decisions. The Board is of the view that the Group is engaged in a single segment of business, being investments in quoted UK equities and UK commercial properties. The view that the Group is engaged in a single segment of business is based on the fact that one of the key financial indicators received and reviewed by the Board is the total return from the investment portfolio taken as a whole. A review of the investment portfolio is included in the Investment Managers' Reports.
(b) Going concern
The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Strategic Report. The financial position of the Group as at 31 March 2017 is shown in the Statement of Financial Position. The cash flows of the Group for the year ended 31 March 2017, which are not untypical, are set out in the Statement of Cashflows. The Group had fixed debt totalling GBP49,883,000 as at 31 March 2017, as set out in Note 12; none of the borrowings is repayable before 2021. The Group had no short-term borrowings. Note 20 sets out the Group's risk management policies and procedures, including those covering market price risk, liquidity risk and credit risk. As at 31 March 2017, the Group's total assets less current liabilities exceeded its total non current liabilities by a factor of over four. The assets of the Group consist mainly of securities and investment properties that are held in accordance with the Group's investment policy. Most of these securities are readily realisable, even in volatile markets. The Directors, who have reviewed carefully the Group's
forecasts for the coming year, consider that the Group has adequate financial resources to enable it to continue in operational existence for the foreseeable future. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements.
(c) Basis of consolidation
The consolidated Financial Statements incorporate the Financial Statements of the Company and the entity controlled by the Company (its subsidiary). An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has ability to affect those returns through its power over the investee. The Company consolidates the investee that it controls. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The investment in the subsidiary is recognised at fair value in the Financial Statements of the Company. This is considered to be the net asset value of the Shareholders' funds, as shown in its Statement of Financial Position.
Value and Income Services Limited is a private limited company incorporated in Scotland under company number SC467598. It is a wholly owned subsidiary of the Company and has been appointed to act as Alternative Investment Fund Manager of the Company.
(d) Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company's Articles, net capital returns may be distributed by way of dividend however the Board has no intention of exercising this authority at present.
Additionally the net revenue is the measure that the Directors believe to be appropriate in assessing the Company's compliance with certain requirements set out in sections 1158-1160 of the Corporation Tax Act 2010.
(e) Income
Dividend income from investments is recognised as revenue for the period on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the period end are treated as revenue for the period.
Where the Group has elected to receive dividend income in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised as income. Any excess in the value of shares received over the amount of cash dividend foregone is recognised as a gain in the income statement.
Interest receivable from cash and short-term deposits and interest payable is accrued to the end of the period.
Rental receivable and lease incentives, where material, from investment properties under operating leases are recognised in the Statement of Comprehensive Income over the term of the lease on a straight line basis. Other income is recognised on an accruals basis.
(f) Expenses and Finance Costs
All expenses and finance costs are accounted for on an accruals basis. Expenses are presented as capital where a connection with the maintenance or enhancement of the value of investments can be demonstrated. In this respect and in accordance with the SORP, the investment management fees are allocated 30% to revenue and 70% to capital to reflect the Board's expectations of long-term investment returns. Any performance fees payable are allocated to capital, reflecting the fact that, although they are calculated on a total return basis, they are expected to be attributable largely to capital performance.
It is normal practice and in accordance with the SORP for investment trust companies to allocate finance costs to capital on the same basis as the investment management fee allocation. However as the Company has a significant exposure to property, and property companies allocate finance costs to revenue to match rental income, the Directors consider that, contrary to the SORP, it is inappropriate to allocate finance costs to capital.
(g) Other Receivables and Payables
Other receivables do not carry any interest and are stated at their nominal value, as reduced by appropriate allowances for any estimated irrecoverable amounts. Other payables are not interest bearing and are stated at their nominal value.
(h) Taxation
The Company's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the date of the Statement of Financial Position.
Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the date of the Statement of Financial Position, where transactions or events that result in an obligation to pay more tax in the future or the right to pay less tax in the future have occurred at the date of the Statement of Financial Position.
This is subject to deferred tax assets only being recognised if it is considered more probable than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted.
Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to maintain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
(i) Dividends payable
Interim dividends are recognised as a liability in the period in which they are paid as no further approval is required in respect of such dividends. Final dividends are recognised as a liability only after they have been approved by Shareholders in general meeting.
(j) Investments
Equity investments
All investments have been designated upon initial recognition as held at fair value through profit or loss. Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value.
Subsequent to initial recognition, investments are recognised at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all FTSE 100 constituents and most liquid FTSE 250 constituents along with some other securities. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the retained earnings.
Investment property
Investment properties are initially recognised at cost, being the fair value of consideration given, including transaction costs associated with the investment property. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period incurred and included within the book cost of the property.
After initial recognition, investment properties are measured at fair value, with gains and losses recognised in the Statement of Comprehensive Income.
As disclosed in Note 20, the Group leases out all of its properties on operating leases. A property held under an operating lease is classified and accounted for as an investment property where the Group holds it to earn rental, capital appreciation or both. Any such property leased under an operating lease is carried at fair value. Fair value is established by half-yearly professional valuation on an open market basis by Savills (UK) Limited, Chartered Surveyors and Valuers, and in accordance with the RICS Valuation - Professional Standards January 2014 (the 'RICS Red Book') and revised in April 2015. The determination of fair value by Savills is supported by market evidence. It is not more heavily based on other factors because of the nature of the properties and the availability of comparable market data. These valuations are disclosed in Note 9.
The Company accounts for its investment in its subsidiary at fair value. All fair value adjustments in relation to the subsidiary are eliminated on consolidation.
(k) Cash and cash equivalents
Cash and cash equivalents comprises deposits held with banks.
(l) Non - current liabilities
All new loans and borrowings are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement. The costs of arranging any interest-bearing loans are capitalised and amortised over the life of the loan.
(m) Critical accounting judgements and key estimations of uncertainty
The preparation of the financial statements requires the Directors to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The critical accounting area involving a higher degree of judgement or uncertainty comprises the determination of fair value of the investment properties. The Group engages independent professional qualified valuers to perform the valuation. Information about the valuation techniques and inputs used in determining fair value as at 31 March 2017 is disclosed in Note 9 to the Financial Statements.
(n) Adoption of new and revised Accounting Standards
New and revised standards and interpretations that became effective during the year had no significant impact on the amounts reported in these Financial Statements but may impact accounting for future transactions and arrangements.
At the date of authorisation of these Financial Statements, the following Standards and interpretations, which have not been applied to these Financial Statements, were in issue but were not yet effective (and in some cases, had not yet been adopted by the EU).
- IFRS 9: Financial Instruments (2014) (effective 1 January 2018) - IFRS 16: Leases (effective 1 January 2019)
- Amendments to IAS 7: Disclosure initiative - Statement of Cash Flows (effective 1 January 2017)
- Amendments to IAS 12: Income Taxes - Recognition of deferred tax assets for unrealised losses (effective 1 January 2017)
The Directors do not expect the adoption of these Standards and interpretations (or any other Standards and interpretations which are in issue but not effective) will have a material impact on the Financial Statements of the Group in future periods.
2017 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
2 Income
Investment income
Dividends from listed
investments in UK 5,912 5,912 5,898 5,898
Other operating income
Rental income 4,233 4,233 3,937 3,937
Interest receivable
on short-term deposits 1 1 1 1
Total income 10,146 10,146 9,836 9,836
---------- ------------ ---------- ------------
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
3 Investment management
fee
Group
Investment management
fee 401 935 1,336 361 843 1,204
Performance fee - - - - - -
401 935 1,336 361 843 1,204
---------- --------- --------- ---------- --------- ---------
Company
Investment management
fee 401 935 1,336 361 843 1,204
Performance fee - - - - - -
401 935 1,336 361 843 1,204
---------- --------- --------- ---------- --------- ---------
A summary of the terms of the management agreement is given in the Directors' Report.
2017 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
4 Other operating expenses
Fees payable to the
Group's/Company's
auditor for:
* the audit of the Company's annual accounts 29 29 30 30
- other assurance
services 7 7 7 7
- taxation compliance
services - - 6 6
Directors' fees 61 61 54 54
NIC on Directors'
fees 5 5 4 4
Fees for company secretarial
services 179 179 176 176
Direct property costs (16) (16) 11 11
Other expenses 308 308 489 489
573 573 777 777
============= ============= ============= =============
Other assurance services provided by the Auditor comprise review of compliance with covenants.
Directors' fees comprise the Chairman's fees of GBP25,000 (2016 - GBP22,000) and fees of GBP18,000 (2016 - GBP16,000) per annum paid to each other Director. The Directors' fees of GBP18,000 each (2016 - GBP16,000) in respect of the qualifying services provided by Matthew Oakeshott and Angela Lascelles are included in the investment management fees payable to OLIM Limited and OLIM Property Limited as detailed below.
Angela Lascelles is a director of OLIM Limited which received an investment management fee of GBP935,000 (2016 - GBP873,000) and a performance fee of GBPnil (2016 - GBPnil), the basis of calculation of which is given in the Directors' Report.
Matthew Oakeshott is a director of OLIM Property Limited which received an investment management fee of GBP401,000 (2016 - GBP331,000) and a performance fee of GBPnil (2016 - GBPnil), the basis of calculation of which is given in the Directors' Report.
Additional information on Directors' fees is given in the Directors' Remuneration Report.
2017 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
5 Finance costs
Interest payable on:
11% First Mortgage Debenture
Stock 2021 1,650 1,650 1,650 1,650
9.375% Debenture Stock
2026 1,875 1,875 1,875 1,875
Less amortisation of
issue premium (24) (24) (24) (24)
Loan interest payable 545 545 179 179
Amortisation of loan
expenses 37 37 22 22
4,083 4,083 3,702 3,702
------------ ---------------- ------------ ------------
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6 Taxation
a) Analysis of the tax
charge for the year:
Group
Corporation tax payable - - - - - -
------------ --------- ------------- ---------- ---------- ----------
- - - - - -
------------ --------- ------------- ---------- ---------- ----------
Factors affecting
the current tax charge
for year:
Revenue / capital return
on ordinary activities before
tax 17,172 617
------------- ----------
Tax thereon at 20%
(2016 - 20%) 3,434 123
Effects of:
Non taxable dividends (1,182) (1,180)
(Gains)/losses on
investments not taxable (2,604) 707
Excess expenses not
utilised 352 350
------------- ----------
- -
------------- ----------
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Company
Corporation tax payable - - - - - -
- - - - - -
------------ --------- ------------- ---------- ---------- ----------
Factors affecting
the current tax charge
for year:
Revenue / capital return
on ordinary activities
before tax 17,802 1,249
------------- ----------
Tax thereon at 20%
(2016 - 20%) 3,560 250
Effects of:
Non taxable dividends (1,182) (1,180)
(Gains)/losses on
investments not taxable (2,730) 581
Excess expenses not
utilised 352 349
------------- ----------
- -
------------- ----------
b) Factors affecting the tax charge for the year
The Company and Group have losses for tax purposes arising in the year of GBP1,758,000 (2016 - GBP1,838,000). Under current legislation, it is unlikely that these losses will be capable of offset against the Group's future taxable profits.
c) Factors affecting future tax charges
The Company and Group have deferred tax assets of GBP4,823,000 (2016 - GBP4,791,000) at 31 March 2017 relating to total accumulated unrelieved tax losses carried forward of GBP28,373,000 (2016 - GBP26,616,000). These have not been recognised in the Financial Statements as it is unlikely that they will be capable of offset against the Group's future taxable profits.
2017 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
7 Return per ordinary
share
The return per ordinary
share is based on
the following figures:
Revenue return 5,089 5,089 4,996 4,996
Capital return 12,083 12,713 (4,379) (3,747)
Weighted average ordinary
shares in issue 45,549,975 45,549,975 45,549,975 45,549,975
Return per share -
revenue 11.17p 11.17p 10.97p 10.97p
Return per share -
capital 26.53p 27.92p (9.61p) (8.23p)
Total return per share 37.70p 39.09p 1.36p 2.74p
------------ ----------- ------------ ------------
2017 2016
GBP'000 GBP'000
8 Dividends
Dividends on ordinary shares:
Final dividend of 6.00p per share
(2016- 4.70p) paid 15 July 2016 2,733 2,141
First quarterly dividend of 2.60p 1,184 -
per share (2016- nil)
paid 28 October 2016
Second quarterly dividend of 2.60p 1,184 -
per share (2016- nil)
paid 27 January 2017
Interim dividend of nil per share
(2016- 4.50p) - 2,050
Dividends paid in the period 5,101 4,191
-------- --------
The third interim dividend of 2.60p (2016 - nil), being payable on 28 April 2017, has not been included as a liability in these Financial Statements.
The proposed final dividend is subject to approval by Shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements.
Set out below is the total dividend paid and proposed in respect of the financial year, which is the basis upon which the requirements of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered. The current year's revenue available for distribution by way of dividend is GBP5,089,000 (2016 - GBP4,996,000).
2017 2016
GBP'000 GBP'000
First quarterly dividend of 2.60p 1,184 -
per share (2016- nil)
paid 28 October 2016
Second quarterly dividend of 2.60p 1,184 -
per share (2016- nil)
paid 27 January 2017
Third quarterly dividend of 2.60p 1,184 -
per share (2016- nil)
payable 28 April 2017
Interim dividend of nil per share
(2016 - 4.50p) - 2,050
Proposed Final dividend for the year
ended 31 March 2017 of
3.20p (2016 - 6.00p) payable 28 July
2017 1,458 2,733
-------- --------
5,010 4,783
-------- --------
Investment
Equities properties Total
GBP'000 GBP'000 GBP'000
9 Investments
Group
Cost at 31 March 2016 86,488 38,233 124,721
Unrealised appreciation 40,778 16,892 57,670
Valuation at 31 March
2016 127,266 55,125 182,391
Purchases 4,989 16,778 21,767
Sales proceeds (5,029) (7,799) (12,828)
Realised gains on sales 3,812 358 4,170
Movement in unrealised
appreciation in year 6,535 2,313 8,848
Valuation at 31 March
2017 137,573 66,775 204,348
------------------ ---------------- -----------
Investment Investment
in
Equities Subsidiary properties Total
GBP'000 GBP'000 GBP'000 GBP'000
Company
Cost at 31 March 2016 86,488 200 46,562 133,250
Unrealised appreciation 40,778 - 8,563 49,341
Valuation at 31 March
2016 127,266 200 55,125 182,591
Purchases 4,989 - 16,778 21,767
Sales proceeds (5,029) - (7,799) (12,828)
Realised gains on sales 3,812 - 358 4,170
Movement in unrealised
appreciation in year 6,535 - 2,313 8,848
Valuation at 31 March
2017 137,573 200 66,775 204,548
-------------- ------------------ ---------------- -----------
Transaction costs
During the year expenses were incurred in acquiring and disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains and losses on investments in the Statement of Comprehensive Income. The total costs were as follows:-
2017 2016
GBP'000 GBP'000
Purchases 31 32
Sales 10 4
41 36
======== ========
The fair values of the investment properties were established by professional valuation on an open market basis for existing use by Savills (UK) Limited, Chartered Surveyors. These valuations were carried out in accordance with the RICS Valuation - Professional Standards January 2014 (the 'RICS Red Book') and revised in April 2015 by reference to the Investment Method whereby the net annual income derived from a property is capitalised by an appropriate capitalisation rate or Years' Purchase figure to arrive at the present Capital Value of the property after an allowance for the purchaser's costs. The relevant capitalisation rate is chosen, based on the investment rate of return expected (as derived from comparisons of other similar property investments) for the type of property concerned and taking into consideration such factors as risk, capital appreciation, security of income, ease of sale and management of the property.
Investment in subsidiary
Name Country Date of % ownership Principal
of incorporation acquisition activity
Value and Income UK 16 January 100 AIFM
Services Limited 2014
2017 2016
Group Company Group Company
GBP'000 GBP000 GBP'000 GBP'000
10 Other receivables
Amounts falling due
within one year:
Dividends receivable 709 709 644 644
Prepayments and accrued
income 35 35 111 111
744 744 755 755
-------- -------- -------- --------
2017 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
11 Other payables
Amounts due to OLIM
Limited 77 77 72 72
Amounts due to OLIM
Property Limited 33 33 27 27
Accruals and other
creditors 1,624 1,624 870 870
Value Added Tax payable 388 388 183 183
---------- ---------- -----------
2,122 2,122 1,152 1,152
---------- ---------- ---------- -----------
The amounts due to OLIM Limited and OLIM Property Limited comprise the monthly management fee for March 2017, subsequently paid in April 2017.
2017 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
12 Non-current liabilities
Bank loan 15,000 15,000 5,000 5,000
Balance of costs incurred (384) (384) (109) (109)
Add : Debit to income
for the year 37 37 22 22
------------ ------------ ------------ ------------
14,653 14,653 4,913 4,913
11% First Mortgage
Debenture Stock 2021 15,000 15,000 15,000 15,000
Fair value adjustment - 2,524 - 3,154
------------ ------------ ------------ ------------
15,000 17,524 15,000 18,154
9.375% Debenture Stock
2026 20,000 20,000 20,000 20,000
Add:- Balance of premium
less issue expenses 254 254 278 278
Less : Credit to income
for the year (24) (24) (24) (24)
------------ ------------ ------------ ------------
20,230 20,230 20,254 20,254
49,883 52,407 40,167 43,321
============ ============ ============ ============
The Company has an agreement with Santander UK plc to provide a fixed term loan facility for up to GBP15,000,000 for a period of up to ten years to 31 March 2026 (2016 - GBP5,000,000). At 31 March 2017, GBP11,893,750 was drawn down at a rate of 4.344% and GBP3,106,250 was drawn down at a rate of 3.60%. The terms of the loan facility contain financial covenants that require VIT to ensure that:-
- in respect of each 3 month period ending on 31 March and 30 September (the Half Year dates), net rental income shall be at least 200% of interest costs;
- in respect of each 12 month period beginning immediately after 31 March and 30 September, net rental income shall be at least 200% of interest costs; and
- at all times, the loan shall not exceed 60 per cent of the value of the properties that have been charged to Santander UK plc.
The 11% First Mortgage Debenture Stock 2021, previously issued by Audax Properties plc, was, on 28 March 2014, transferred to Value and Income Trust PLC (VIT) following the approval of the substitution of VIT as issuer of the Debentures by the holders on 11 March 2014. Applications were made to the UK Listing Authority and the London Stock Exchange for the Debentures to be admitted in the name of VIT to the Official List and to trading on the main market of the London Stock Exchange from 28 March 2014.
The 11% First Mortgage Debenture Stock 2021, now issued by VIT, is repayable at par on 31 March 2021 and is secured over specific assets of the Company. Under IAS 39, this debenture required to be recorded initially at fair value of GBP19,417,000, rather than its nominal value of GBP15,000,000 in the Company's financial statements. The amortised cost of the debenture as at 31 March 2017 was GBP17,524,000 (2016 - GBP18,154,000). The amortisation of the fair value adjustment is presented as a capital item within gains/losses on investments as it relates to the reversal of a previously recognised loss on the Company's investment in its subsidiary. In the Group Financial Statements, the fair value adjustment is eliminated on consolidation.
The Trust Deed of the 11% Debenture Stock contains four covenants with which the Company has complied.
Firstly, the value of the assets should not be less than one and one-half times the amount of the Debenture Stock; secondly, the rental income from the assets should not be less than one and one-half times the annual interest of the Debenture Stock (GBP1.65 million); thirdly, not more than 20% of the total value of the assets should be attributable to a single property; and finally, not more than 10% of the assets should be attributable to leaseholds having an unexpired term of less than 50 years.
The 9.375% Debenture Stock 2026 issued by VIT is repayable at par on 30 November 2026 and is secured by a floating charge over the property and assets of the Company.
The Trust Deed of the 9.375% Debenture Stock contains restrictions and events of default. The restrictions require that the aggregate Group borrowings, GBP50 million, must not at any time exceed the total Group capital and reserves (equivalent to net assets of GBP157.38 million as at 31 March 2017).
The fair values of the loan and the debentures are disclosed in Note 20 and the net asset value per share, calculated with the debentures at fair value, is disclosed in Note 17.
13 Deferred tax
Under IAS 12, provision must be made for any potential tax liability on revaluation surpluses. As an investment trust, the Company does not incur capital gains tax and no provision for deferred tax is therefore required.
2017 2016
GBP'000 GBP'000
14 Share capital
Authorised:
56,000,000 ordinary shares of 10p
each (2016 - 56,000,000) 5,600 5,600
======== ========
Called up, issued and fully paid:
45,549,975 ordinary shares of 10p
each (2016 - 45,549,975) 4,555 4,555
-------- --------
2017 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
15 Share premium
Opening balance 18,446 18,446 18,446 18,446
-------- -------- -------- --------
2017 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
16 Retained earnings
Opening balance
at 31 March 2016 122,307 119,153 125,881 122,095
Profit for the year 17,172 17,802 617 1,249
Dividends paid (see
note 8) (5,101) (5,101) (4,191) (4,191)
Closing balance
at 31 March 2017 134,378 131,854 122,307 119,153
---------- ----------- ----------- ----------
The table below shows the movement in retained earnings analysed between revenue and capital items.
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Group
Opening balance
at 31 March 2016 4,892 117,415 122,307 4,087 121,794 125,881
Profit for the year 5,089 12,083 17,172 4,996 (4,379) 617
Dividends paid (see
note 8) (5,101) - (5,101) (4,191) - (4,191)
Closing balance
at 31 March 2017 4,880 129,498 134,378 4,892 117,415 122,307
-------- -------- -------- -------- -------- --------
Company
Opening balance
at 31 March 2016 3,706 115,447 119,153 2,901 119,194 122,095
Profit for the year 5,089 12,713 17,802 4,996 (3,747) 1,249
Dividends paid (see
note 8) (5,101) - (5,101) (4,191) - (4,191)
Closing balance
at 31 March 2017 3,694 128,160 131,854 3,706 115,447 119,153
-------- -------- -------- -------- -------- --------
17 Net asset value per equity share
The net asset value per ordinary share is based on the Group's net assets attributable of GBP157,379,000 (2016 - GBP145,308,000) and on 45,549,975 (2016 - 45,549,975) ordinary shares in issue at the year end.
The net asset value per ordinary share, based on the net assets of the Group adjusted for borrowings at fair value (see Note 20) is 318.09p (2016 - 299.17p).
The net asset value per ordinary share is based on the Company's net assets attributable of GBP154,855,000 (2016 - GBP142,154,000) and on 45,549,975 (2016 - 45,549,975) ordinary shares in issue at the year end.
2017 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
18 Reconciliation of income
from operations before
tax to net cash inflow
from operating activities
Income from operations
before tax 23,164 23,794 6,300 6,932
Gains and losses on investments (13,018) (13,648) 3,536 2,904
Investment management
fee (1,336) (1,336) (1,204) (1,204)
Other operating expenses (573) (573) (777) (777)
Decrease/(increase) in
receivables 11 11 (130) (130)
Increase/(decrease) in
other payables 884 884 (572) (572)
Net cash from operating
activities 9,132 9,132 7,153 7,153
--------- --------- -------- ---------
19 Relationship with the Investment Manager and other Related Parties
Angela Lascelles is a director of OLIM Limited which has an agreement with the Company to provide investment management services, the terms of which are outlined in the Directors' Report and in Notes 3 and 11.
Matthew Oakeshott is a director of OLIM Property Limited which has an agreement with the Company to provide investment property management services, the terms of which are outlined in the Directors' Report and in Notes 3 and 11.
Value and Income Services Limited is a wholly owned subsidiary of Value and Income Trust PLC and all costs and expenses are borne by Value and Income Trust PLC. Value and Income Services Limited has not traded during the year.
Directors' fees are disclosed in the Directors' Remuneration Report.
20 Financial instruments and investment property risks
Risk management
The Group's and the Company's financial instruments and investment property comprise securities, property and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement or debtors for accrued income.
The Managers have dedicated investment management processes which ensures that the Investment Policy is achieved. For equities, stock selection procedures are in place based on active portfolio management and the identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and also by OLIM's Investment Committee.
Additionally, the Managers' Compliance Officers continually monitor the Group's investment and borrowing powers and report to their respective Managers.
The main risks that the Group faces from its financial instruments are:
(i) market risk (comprising price risk, interest rate risk and currency risk) (ii) liquidity risk (iii) credit risk
The Board regularly reviews and agrees policies for managing each of these risks. The Managers' policies for managing these risks are summarised below and have been applied throughout the year.
(i) Market risk
The fair value of, or future cash flows from, a financial instrument held by the Group may fluctuate because of changes in market prices. This market risk comprises three elements - price risk, interest rate risk and currency risk.
Price risk
Price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the Group's investments.
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. For equities, asset allocation and stock selection, as set out in the Investment Policy in the Business Review, both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on the UK Stock Exchange.
All investment properties held by the Group are commercial properties located in the UK with long, strong income streams.
Price risk sensitivity
If market prices at the date of the Statement of Financial Position had been 10% higher or lower, while all other variables remained constant, the return attributable to ordinary Shareholders for the year ended 31 March 2017 would have increased/decreased by GBP20,435,000 (2016 - increase/decrease of GBP18,239,000) and equity reserves would have increased/decreased by the same amount.
Interest rate risk
Interest rate movements may affect:
- the fair value of the investments in property; and - the level of income receivable on cash deposits
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.
The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise debenture stock and ten year bank loans, providing secure long-term funding. It is the Board's policy to maintain a gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of between 25% and 40%. Details of borrowings at 31 March 2017 are shown in Note 12.
Interest risk profile
The interest rate risk profile of the portfolio of financial assets and liabilities at the balance sheet date was as follows:
Weighted
average
period
for which Weighted
rate is average Floating
fixed interest Fixed rate
At 31 March 2017 Years rate % rate GBP'000 GBP'000
Assets
Sterling - - - 4,292
Total assets - - - 4,292
------------- ---------- -------------- --------------
Weighted
average
period Weighted
for which average Floating
rate is interest Fixed rate
At 31 March 2017 fixed Years rate % rate GBP'000 GBP'000
Liabilities
Sterling 7.8 8.31 50,000 -
Total liabilities 7.8 8.31 50,000 -
------------- ---------- -------------- --------------
Weighted
average
period Weighted
for which average Floating
rate is interest Fixed rate
At 31 March 2016 fixed Years rate % rate GBP'000 GBP'000
Assets
Sterling - - - 3,481
Total assets - - - 3,481
------------- ---------- -------------- --------------
Weighted
average
period Weighted
for which average
rate is interest Fixed Floating
At 31 March 2016 fixed Years rate % rate GBP'000 rate GBP'000
Liabilities
Sterling 7.7 9.26 40,000 -
Total liabilities 7.7 9.26 40,000 -
------------- ---------- -------------- --------------
The weighted average interest rate on borrowings is based on the interest rate payable, weighted by the total value of the loans. The maturity dates of the Group's loans are shown in Note 12.
The floating rate assets consist of cash deposits on call earning interest at prevailing market rates. The Group's equity and property portfolios and short-term receivables and payables are non-interest bearing and have been excluded from the above tables. All financial liabilities are measured at amortised cost.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.
If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Group's:
- profit for the year ended 31 March 2017 would increase/decrease by GBP35,000 (2016 - increase / decrease by GBP47,000). This is mainly attributable the Group's exposure to interest rates on its floating rate cash balances.
- the Group holds no financial instruments that will have an equity reserve impact.
In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Group's objectives.
Currency risk
A small proportion of the Group's investment portfolio is invested in securities whose fair value and dividend stream are affected by movements in foreign exchange rates. It is not the Group's policy to hedge this risk.
Currency sensitivity
There is no sensitivity analysis included as the Group has no outstanding foreign currency denominated monetary items. Where the Group's equity investments (which are non-monetary items) are affected, they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.
(ii) Liquidity risk
This is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities.
The Group's assets comprise of readily realisable securities which can be sold to meet commitments if required and investment properties which, by their nature, are less readily realisable. The maturity of the Group's existing borrowings is set out in the interest risk profile section of this note.
The tables below detail the Group's remaining contractual maturity for its financial liabilities, based on the undiscounted cash outflows, including both interest and principal cash flows, and on the earliest date upon which the Group can be required to make payment.
Due between
3 months Due
As at 31 March Carrying Expected Due within and 1 after
2017 value cashflows 3 months year 1 year
Borrowings 50,727 84,868 1,191 3,367 80,310
Other payables 652 652 652 - -
Total 51,379 85,520 1,843 3,367 80,310
========= =========== =========== ============ ========
Due between
3 months Due
As at 31 March Carrying Expected Due within and 1 after
2016 value cashflows 3 months year 1 year
Borrowings 40,640 69,587 980 2,722 65,885
Other payables 432 432 432 - -
Total 41,072 70,019 1,412 2,722 65,885
========= =========== =========== ============ ========
(iii) Credit risk
This is the failure of a counterparty to a transaction to discharge its obligations under that transaction that could result in the Group suffering a loss.
The risk is not significant and is managed as follows:
- investment transactions are carried out with a large number of brokers, whose credit standing is reviewed periodically by OLIM and limits are set on the amount that may be due from any one broker.
- the risk of counterparty exposure due to failed trades causing a loss to the Group is mitigated by the review of failed trade reports on a daily basis. In addition, a stock reconciliation to third party administrators' records is performed on a daily basis to ensure that discrepancies are picked up on a timely basis.
- cash is held only with reputable banks with high quality external credit ratings which are monitored on a regular basis.
None of the Group's assets is secured by collateral or other credit enhancements.
Credit risk exposure
In summary, compared to the amounts on the Group Statement of Financial Position, the maximum exposure to credit risk at 31 March was as follows:
2017 2016
Balance Maximum Balance Maximum
Sheet exposure Sheet exposure
GBP'000 GBP'000 GBP'000 GBP'000
Current assets
Cash and cash
equivalents 4,292 11,375 3,481 6,428
Other receivables 744 1,237 755 1,191
5,036 12,612 4,236 7,619
--------- ---------- --------- ----------
(iv) Property risk
The Group's commercial property portfolio is subject to both market and specific property risk. Since the UK commercial property market has been markedly cyclical for many years, it is prudent to expect that to continue. The price and availability of credit, real economic growth and the constraints on the development of new property are the main influences on the property investment market.
Against that background, the specific risks to the income from the portfolio are tenants being unable to pay their rents and other charges, or leaving their properties at the end of their leases. All leases are on full repairing and insuring terms, with upward only rent reviews and the average unexpired lease length is 13 1/2 years (2016 - 13 years). Details of the tenant and geographical spread of the portfolio and the long-term record of performance through the varying property cycles since 1987 are set out in the property section of the Investment Manager's Reports. OLIM Property is responsible for property investment management, with surveyors, solicitors and managing agents acting on the portfolio under OLIM Property's supervision.
The Group leases out its investment property to its tenants under operating leases. At 31 March, the future minimum lease receipts under non-cancellable leases are as follows:-
2017 2016
GBP'000 GBP'000
Due within 1 year 4,336 3,933
Due between 2
and 5 years 16,273 13,830
Due after more
than 5 years 39,039 33,093
59,648 50,856
======== ========
This amount comprises the total contracted rent receivable as at 31 March 2017.
None of the Group's financial assets is past due or impaired.
Fair values of financial assets and financial liabilities
All assets and liabilities of the Group other than receivables and payables and the borrowings are included in the balance sheet at fair value.
(i) Fair value hierarchy disclosures
The table below sets out fair value measurements using the IFRS 13 Fair Value hierarchy:-
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2017
Equity investments 137,573 - - 137,573
Investment properties - - 66,775 66,775
137,573 - 66,775 204,348
======== ======== ======== ========
At 31 March 2016
Equity investments 127,266 - - 127,266
Investment properties - - 55,125 55,125
127,266 - 55,125 182,391
======== ======== ======== ========
Company and Group numbers per the above fair value disclosures are the same except for GBP200,000 investment the Company has in its subsidiary.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:-
Level 1 - valued using quoted prices in an active market for identical assets
Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices
Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data
There were no transfers between levels during the year.
(ii) Borrowings
The fair value of borrowings for the Company and Group has been calculated at GBP62,488,000 as at 31 March 2017 (2016 - GBP52,190,000) compared to a balance sheet value in the Financial Statements of GBP49,883,000 (2016 - GBP40,167,000) per Note 12.
The fair values of the debentures are determined by comparison with the fair values of equivalent gilt edged securities, discounted to reflect the differing levels of credit worthiness of the borrowers. The fair value of the loans are determined by a discounted cash flow calculation based on the appropriate inter-bank rate plus the margin per the loan agreement. These instruments are therefore considered to be Level 2 as defined above. There were no transfers between Levels during the year.
All other assets and liabilities of the Group are included in the balance sheet at fair value.
Fair Value Balance Sheet
Value
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
11% First Mortgage
Debenture Stock 2021 19,010 19,463 15,000 15,000
9.375% Debenture
Stock 2026 27,939 27,567 20,230 20,254
46,949 47,030 35,230 35,254
Bank Loan 15,539 5,160 14,653 4,913
62,488 52,190 49,883 40,167
-------- -------- -------- --------
21 Capital management policies and procedures
The Group's capital management objectives are:
- to ensure that the Group will be able to continue as a going concern;
- to maximise the return to its equity Shareholders in the form of long-term real growth in dividends and capital value without undue risk through the optimisation of the debt and equity balance.
The capital of the Group consists of equity, comprising issued capital, reserves, borrowings and retained earnings.
The Board monitors and reviews the broad structure of the Group's capital. This review includes:
- the planned level of gearing which takes into account the Managers' views on the market and the extent to
which revenue in excess of that which requires to be distributed should be retained.
The Group's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
Details of the Group's gearing and financial covenants are disclosed in Note 12.
22 Events after the Balance Sheet Date
There are no significant subsequent events for the Company to disclose.
Additional Information
In accordance with section 435 of the Companies Act 2006, the Directors advise that the financial information set out in this announcement does not constitute the Group's statutory Financial Statements for the period ended 31 March 2017, but is derived from these Financial Statements. The statutory Financial Statements for the year ended 31 March 2016 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under S498(2) or S498(3) of the Companies Act 2006.
The Financial Statements for the period ended 31 March 2017 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The Financial Statements for the period ended 31 March 2017 will be forwarded to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on these Financial Statements; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.
The Group and Company Statement of Financial Position at 31 March 2017 and the Group and Company Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended have been extracted from the Group's Financial Statements. Those Financial Statements have not yet been delivered to the Registrar.
The 2017 Annual Report and Financial Statements will be posted to Shareholders shortly and will contain the Notice of the Annual General Meeting of the Company to be held on Friday, 7 July 2017 at 12.30pm at the offices of Shepherd & Wedderburn LLP, Condor House, 10 St. Paul's Churchyard, London EC4M 8AL.
For Value and Income Trust PLC
Maven Capital Partners UK LLP
Company Secretary
25 May 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSOKPDBABKDBPB
(END) Dow Jones Newswires
May 25, 2017 12:26 ET (16:26 GMT)
1 Year Value And Indexed Proper... Chart |
1 Month Value And Indexed Proper... Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
