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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Costar Group, Inc. | TG:RLG | Tradegate | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.19 | -0.27% | 70.55 | 70.02 | 71.08 | 70.00 | 70.00 | 70.00 | 15 | 22:50:15 |
RNS Number:0060T Royal London Growth & Inc Trust PLC 08 December 2003 ROYAL LONDON GROWTH & INCOME TRUST PLC Preliminary Announcement for the year ended 30 September 2003 (unaudited) Chairman's Statement This Annual Report and Accounts covers your Company's financial year to 30 September 2003. It is encouraging to report that there has been some recovery in the net asset value of the Company, helped by a stock market that has been rising since March 2003, and a relatively stable corporate bond market. Nevertheless, the value of the Company remains well below where it stood at the time of its launch, over three years ago. While it would be premature to suggest that all the gloom of the last three years has been dispelled completely, there are encouraging signs that the international economies are in better shape. The United Kingdom is no exception to this trend, and indeed is demonstrating considerably more resilience than many parts of Europe, which remain depressed. The stronger economy is helping Companies to grow their profits, and, as often happens after a period of slower economic growth, the recovery can be quite significant. Improving profitability in the corporate sector can combine with low interest rates to create a potent mixture for shares. However, there remain grounds for caution. The recovery, both here and in the United States is being led by the consumer. While it is heartening to see people regain their nerve after a period of anxiety, we should be aware that part of this increased spending is based on higher levels of personal debt. Some of this depends on higher house prices being used to support second or even third mortgages. Personal indebtedness relative to incomes in both Britain and the United States is at record levels. Thus we should continue to be aware that the foundations of this economy may not be as secure as one would like. The recent increase in interest rates may have brought this home. Dividends We reported at the interim period having reviewed the expected future returns of the Company, about a change in the way investment management fee expenses and finance costs are allocated, this is in accordance with the Statement of Recommended Accounting Practise for investment trust companies. Previously 60% of the major costs were set against the capital, rather than the income account. In June 2003, this was lowered to 40%, meaning that the surplus of the Company's revenues after expenses will be significantly reduced. The offset to this is that the levels of capital reserve depletion will be considerably lower, which ought to act to the long term benefit of the Company. While this may seem like a technicality, the result is that we will be paying a sharply lower dividend on the geared ordinary shares. We are declaring a final dividend of 0.35p payable on 30 January 2004 to all shareholders on the register of members as at the close of business on 19 December 2003. Our objective is to manage the Company in such a way that its longer term future is sustainable. If we had sustained the relatively high dividend on the geared ordinary shares, the Company's capital would eventually have been depleted. To offset this, the share portfolio would have to appreciate at a faster pace than might be expected today from long term market performance. To achieve this, it might have been necessary to take higher risks with the portfolio than would have been desirable. This situation is magnified by the need to pay 9% per annum to the holders of the Company's Convertible Unsecured Loan Stock ('CULS') and the 6.835% interest payable on the bank loan. Although this is not so in every case, a large number of our geared ordinary shareholders are also holders of the CULS and enjoy the benefit of an interest coupon that is higher than that on many similar investments. Nevertheless, shareholders need to be aware of the balancing act that is required to pay this level of coupon, as well as to maintain a level of good return on the geared ordinary shares. Your Board has spent much time in the last year dealing with the issues that are raised by the capital structure of your Company. Portfolio The Company's investment portfolio contains a mix of 62% equities and 38% corporate bonds. Your Board has maintained these proportions since the beginning of the financial year we are reporting on. There have been moments during the recent equity market recovery when this might have looked rather cautious. However, we are still inclined to maintain the relative protection that less volatile bonds provide to the overall mix of assets in the Company. The political worries that concerned markets earlier in the year have not disappeared, and as we have pointed out, we still have some concerns about the sustainability of the economic recovery. Another influential factor here is the bank loan that the Company has taken out from the time of its inception. The effect of this gearing is to act as a ratchet, exaggerating the performance of the portfolio in either a rising or a falling market. In the case of the recent upward move in the stock market, this has helped to secure better performance. The bond portfolio helps to act as a counterweight to this bank debt, and assists in controlling the overall risk of the portfolio, while enabling the Company to participate in any market recovery. We keep under review the levels of gearing, and recognise that there may be a time when it is appropriate to reduce this further. Set against this are the steep penalties for early redemption of all or part of a fixed term loan that has a little under four years to run. In accordance with the AITC Review of Corporate Governance, we have included an analysis in the Report and Accounts showing the impact of different market return scenarios over the next five years on the Company's performance. Share buy backs The Company has continued to be active in the market in buying back its own shares. By buying these shares at a discount to net asset value, the Company can actually enhance the value of the shares held by those shareholders who remain. As in previous years, at the Annual General Meeting we shall be asking our shareholders to vote in favour of us continuing to carry out this activity. The liquidity of the geared ordinary shares is still extremely limited, and we recognise that the Company should play a role in providing an opportunity for those who may wish to reduce their holdings in the stock, to sell. While it has been disappointing that there have not been more natural new buyers attracted to the stock, this appears to mirror the experiences of much of the investment trust industry. Our Investment Managers, Royal London Asset Management Limited ('RLAM'), maintain a budget for marketing and raising general awareness of the Company. By contrast the CULS, with their attractive 9% coupon, have been sought after in the marketplace, and the price has risen to a premium to net asset value. The Company has also bought back for cancellation #2,513,677 of CULS. By doing this, the cost of paying the interest on the CULS will be reduced, as the amount of outstanding stock diminishes. Performance of the Investment Manager RLAM has been the Investment Manager since the inception of the Company in 2000. Through most of this period their investment performance relative to the equity and bond benchmarks that we use, has been satisfactory. However, your Board has noted a period of underperformance in the equity portfolio during the second half of the latest financial year, which has resulted in a shortfall against the benchmark. This has caused us to review the investment style that RLAM employ on the equity portfolio, in order to reduce the risk of under performance in the future. The Board takes most seriously its responsibility for the conduct of the affairs of the Company, in particular the performance of the Investment Manager. Changes to the UK Listing Rules The Financial Services Authority, with its responsibility for regulating the activity of participants in the financial markets, recently published a new set of directives for the investment trust sector, after a period of intensive discussion with the representatives of the industry. Much of this involves more complete disclosure by investment trusts, particularly where they have holdings in other investment trusts. This was in response to the problems in the split-capital sector where in falling markets myriad cross holdings created a downward spiral for many companies. We welcome this move towards greater transparency and improved corporate governance, in the belief that it will lift confidence throughout the whole sector. Board composition Chris Phillips a member of your Board, resigned in September 2003 from RLAM where he held the position of Chief Executive Officer. The independent members of your Board have reviewed the succession at RLAM following Chris' departure, and are satisfied that under the direction of Andy Carter, Chris' successor, that there will be continuity of the required service standards. Chris, with his considerable knowledge of the history, the shareholders, and the structure of the Company, remains on the Board. George Kershaw, another of your Directors, was appointed a deputy chairman of the Association of Investment Trust Companies, which is the national body that represents the investment trust industry. We are delighted to have one of our Directors holding this prestigious position, and the valuable input that he brings to your Board as a result. We are conducting a review of your Board and the balance of skills and experience that each Director has, to ensure that we can collectively serve the Company with the utmost professionalism. It is possible that out of this review, an additional Director will be appointed. Annual General Meeting Your Board has had another year of challenge in ensuring that the Company is structured to fulfil our shareholders' needs over the long term. We have had to take some difficult decisions with this end in mind. We have sought to establish a rapport with shareholders, and to this effect the strong attendance at our Annual General Meeting is enormously welcome. After we have diligently fulfilled all the requirements of corporate governance and control, it is extremely important for us as Directors to meet shareholders at first hand, and have the opportunity of explaining to them what is taking place. We therefore greatly appreciate the opportunity to meet shareholders at the Annual General Meeting which will be held on Wednesday, 28 January 2004. James Williams Chairman 8 December 2003 STATEMENT OF TOTAL RETURN (incorporating the revenue account) for the year ended 30 September 2003 (Unaudited) (Audited) Year ended Year ended 30 September 2003 30 September 2002 Revenue Capital Total Revenue Capital Total #'000 #'000 #'000 #'000 #'000 #'000 Notes Total capital - 7,576 7,576 - (21,877) (21,877) gains/(losses) from investments Income from 6,673 - 6,673 6,689 - 6,689 fixed asset investments Other interest 77 - 77 89 - 89 receivable and ----------- ---------- ---------- ----------- ---------- ---------- similar income Gross revenue 6,750 7,576 14,326 6,778 (21,877) (15,099) and capital gains/(losses) Management fee (529) (625) (1,154) (539) (809) (1,348) Other (449) - (449) (366) - (366) administrative ------------ ---------- ---------- ------------ ---------- ---------- expenses Net 5,772 6,951 12,723 5,873 (22,686) (16,813) return/(loss) on ordinary activities before interest payable and taxation Interest payable (3,551) (4,218) (7,769) (3,193) (4,788) (7,981) Breakage costs - - - (248) (372) (620) on early repayment of loan Capital return attributable to - (63) (63) - (76) (76) 9% Convertible ------------ ---------- ---------- ------------ ---------- ---------- Unsecured Loan Stock 2020 Net 2,221 2,670 4,891 2,432 (27,922) (25,490) return/(loss) on ordinary activities before taxation Taxation on net - - - - - - return on ------------ ---------- ---------- ------------ ---------- ---------- ordinary activities Available for 2,221 2,670 4,891 2,432 (27,922) (25,490) geared ordinary shareholders Dividends - geared ordinary shares Dividends 2003: (1,535) - (1,535) (2,480) - (2,480) 1.45p (2002: ------------ ---------- ---------- ------------ ---------- ---------- 2.20p) Transfer 686 2,670 3,356 (48) (27,922) (27,970) to/(from) ======= ====== ====== ======= ====== ====== reserves Return/(loss) 1 2.03p 2.44p 4.47p 2.15p (24.68p) (22.53p) per geared ordinary share The revenue columns of this statement represent the revenue account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. BALANCE SHEET At 30 September 2003 (Unaudited) (Audited) At 30 September 2003 At 30 September 2002 #000 #000 Notes Fixed asset investments Listed in United Kingdom 131,199 132,072 ----------- ----------- Current assets Debtors 1,866 2,598 Cash at bank 1,064 1,562 ----------- ----------- 2,930 4,160 Creditors: amounts falling due within one year (1,159) (2,551) ----------- ----------- Net current assets 1,771 1,609 ----------- ----------- Total assets less current liabilities 132,970 133,681 Creditors: amounts falling due after more than one year Bank loan (40,955) (40,944) 9% Convertible Unsecured Loan Stock 2020 (53,952) (56,401) ----------- ----------- (94,907) (97,345) ----------- ----------- Total net assets 38,063 36,336 ======= ======= Share capital and reserves Called-up share capital 1,062 1,122 Special reserve 109,401 111,022 Other reserves: Capital redemption reserve 71 11 Capital reserve - realised (52,027) (30,284) Capital reserve - unrealised (21,790) (46,195) Revenue reserve 1,346 660 ----------- ----------- Total shareholders' funds (All equity) 38,063 36,336 ----------- ----------- Net asset value per geared ordinary share 2 35.8p 32.4p Net asset value per unit of 9% Convertible Unsecured Loan 2 99.8p 99.7p Stock 2020 Net asset value per geared unit 2 171.4p 164.5p CASH FLOW STATEMENT for the year ended 30 September 2003 (Unaudited) (Audited) 2003 2003 2002 2002 #000 #000 #000 #000 Net cash inflow from operating 5,202 5,329 activities Servicing of finance Interest paid (7,777) (8,690) ----------- ----------- Net cash outflow from servicing of (7,777) (8,690) finance Taxation UK tax recovered 62 - Income tax recovered - 10 ----------- ----------- Net tax recovered 62 10 Financial investment Purchases of investments (27,037) (27,219) Sales of investments 35,545 40,011 ----------- ----------- Net cash inflow from financial 8,508 12,792 investment Equity dividends paid (2,402) (2,377) ----------- ----------- Net cash inflow before financing 3,593 7,064 Financing Repayment of loan - (10,000) Expenses paid in respect of share issue (12) (77) Cost of geared ordinary share buy backs (1,621) (300) Buyback of 9% Convertible Unsecured Loan (2,458) (18) Stock 2020 ----------- ----------- Net cash outflow from financing (4,091) (10,395) ----------- ----------- Decrease in cash (498) (3,331) ======= ======= Reconciliation of net cash flow to movements in net debt Decrease in cash as above (498) (3,331) Cash outflow from repayment of loan - 10,000 Cash outflow from buyback of 9% 2,458 18 Convertible Unsecured Loan Stock 2020 ----------- ----------- Change in net debt resulting from cash 1,960 6,687 flows Increase in debt due to non-cash (20) (88) movements ----------- ----------- Movement in net debt in the year 1,940 6,599 Net debt at 1 October (95,783) (102,382) ----------- ----------- Net debt at 30 September (93,843) (95,783) ======= ======= NOTES TO THE ACCOUNTS 1. Return/(loss) per geared ordinary share Revenue return per geared ordinary share is based on earnings attributable to geared ordinary shares of #2,221,000 (year ended 30 September 2002: #2,432,000) and on the weighted average number of geared ordinary shares in issue during the year of 109,342,136 (year ended 30 September 2002: 113,158,786). Capital gain/(loss) per geared ordinary share is based on the net capital gains for the year of #2,670,000 (year ended 30 September 2002: loss: #27,922,000) and on the weighted average number of geared ordinary shares in issue of 109,342,136 (year ended 30 September 2002: 113,158,786). 2. Net asset value per geared ordinary share The net asset value per geared ordinary share is based on net assets attributable to geared ordinary shares of #38,063,000 (2002: #36,336,000) and on the 106,195,033 (2002: 112,220,127) geared ordinary shares in issue at 30 September 2003. There is no dilution at present. Net asset value per unit of Convertible Unsecured Loan Stock 2020 ('CULS') The net asset value per unit of CULS is based on net assets attributable to CULS of #53,952,000 (2002: #56,401,000) and on the 54,078,660 (2002: 56,592,337) CULS in issue at 30 September 2003. The net asset value per geared unit comprises two geared ordinary shares and one unit of CULS. 3. Purchase of Own Securities During the year the Company repurchased for cancellation 6,025,094 of its own issued geared ordinary shares of one penny each at a cost of #1,621,000, leaving a balance of 106,195,033 geared ordinary shares for the purposes of the calculation of the net asset value per geared ordinary share. In addition, the Company has also repurchased for cancellation #2,513,677 of its CULS at a cost of #2,458,000, leaving a balance of 54,078,660 for the purposes of the calculation of the net asset value per unit of CULS. 4. 2003 Accounts The preliminary figures for the year ended 30 September 2003 are compiled from an extract of the latest accounts and do not constitute statutory accounts as defined by Section 240 of the Companies Act 1985. These accounts have not been delivered to the Registrar of Companies, nor have the auditors yet reported on them. 5. 2002 Accounts The figures and financial information for the year ended 30 September 2002 are compiled from an extract of the latest published accounts and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985. 6. Annual Report The Annual Report will be issued to shareholders in December 2003 and further copies will be available from the Company's registered office. The Company's Annual General Meeting will be held on Wednesday, 28 January 2004 at 12.00 pm at Founders' Hall, No. 1 Cloth Fair, London EC1A 7HT. For further information, please contact: Royal London Asset Management Limited Tel: 020 7506 6500 This information is provided by RNS The company news service from the London Stock Exchange END FR UWUNROWRURAA
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