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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Scottish Investment Trust Plc | LSE:SCIN | London | Ordinary Share | GB0007826091 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 895.00 | 882.00 | 889.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSCIN
RNS Number : 6118R
Scottish Investment Trust PLC
18 June 2018
The Scottish Investment Trust PLC
Results for the six months to 30 April 2018
Highlights
-- Share price total return +1.7% -- NAV total return +1.8% -- Quarterly dividends of 5.0p per share -- High conviction, global contrarian investment approach -- Award for reinvigorated investor communication
The Scottish Investment Trust PLC invests internationally and is independently managed. Its objective is to provide investors, over the longer term, with above-average returns through a diversified portfolio of international equities and to achieve dividend growth ahead of UK inflation. Today it announces its results for the six months to 30 April 2018. It is categorised as a global trust by the Association of Investment Companies.
Chairman's Statement
Performance
I am pleased to report another period of positive total returns over the six months to 30 April 2018.
The share price total return was +1.7% and the net asset value per share (NAV) total return (with borrowings at market value) was +1.8%.
The Company does not have a formal benchmark but, by way of comparison, the sterling total return of the international MSCI All Country World Index (ACWI) was -0.1% while the UK based MSCI UK All Cap Index total return was +2.2%.
Investment approach
The investment management industry is rapidly changing. Investors increasingly seek investment offerings that are either genuinely distinct and active in their approach or low cost passive offerings through which stockmarket indices can be tracked.
The high conviction, global contrarian investment approach adopted by Alasdair McKinnon and his team clearly differentiates the Company from our global investment trust peers and passive investment products.
The approach aims to profit by investing in carefully selected, but unfashionable, companies which we believe are undervalued as they are overlooked by other investors who prefer the comfort of investing with the crowd. The portfolio is constructed without reference to any benchmark or stockmarket index and we do not expect the Company's portfolio return to match any particular index return over any defined period. Our contrarian approach aims to deliver above-average returns over the longer term, by which we mean at least five years.
Change is afoot
Those who have read my previous Chairman's Statements will likely be familiar with the changes at The Scottish in recent years. The goal of those changes is to continue to provide an attractive, low cost investment vehicle for our shareholders, who are mainly, and increasingly, individuals.
Among the key changes in recent years have been the introduction of our high conviction, global contrarian investment approach and the restructuring of our operations to deliver a more efficient and cost effective structure. Alongside our annual results, we announced a significant change to our dividend policy to which I refer below. We continue to reinvigorate our approach to investor communications as this is an important expression of our differentiation and engages investors with our distinctive investment style. By communicating our key messages, we aim to stimulate additional demand for the Company's shares to help manage the discount to NAV. It was pleasing that our continuing work on investor communications was recognised by The Association of Investment Companies when we received the Best PR Campaign Award in May 2018.
As contrarian investors, the management team generates interesting and thought provoking content, which is shared on our website. We want to engage regularly with investors and are mindful of the changing way in which media is consumed in this digital age. With that in mind, we are building a presence on social media.
Dividend policy and dividend
Last year there was a step change increase in the total regular dividend to 20.0p per share (a 48% increase from the 13.5p paid in the previous financial year) as well as the announcement of a shift to quarterly dividend payments. I outlined the full rationale for these changes in my last statement but, in summary, investors now have a clearer indication of the income that they can expect to receive from their investment while gaining a more regular income stream. Following this step change increase, the Company has one of the highest stated dividend yields among its global investment trust peers.
The contrarian style does not explicitly target higher yielding investments but is expected to generate a higher than average level of income through an investment cycle. If there are occasions when the portfolio does not generate a sufficient level of income to cover the requirements of the regular dividend, the Board considers that it would be appropriate to utilise the Company's healthy revenue reserve.
The Board's previously announced target is to declare three quarterly interim dividends of 5.0p in the year to 31 October 2018 and to recommend a final dividend of at least 5.0p for approval by shareholders at the Annual General Meeting in 2019. The first quarterly dividend payment of 5.0p was made in May 2018 and the second and third quarterly dividends will be paid in August and November 2018, respectively. The final dividend will be reviewed in accordance with the Board's desire to continue the long track record of annual dividend increases and the aim of the Company to provide dividend growth ahead of UK inflation over the longer term.
Discount and share buybacks
The Company follows a policy that aims, in normal market conditions, to maintain the discount to NAV (with borrowings at market value) at or below 9%. The average discount over the first half of the year was 8.3%.
During the period, 0.9m shares were purchased for cancellation at an average discount of 9.2% and a cost of GBP7.2m. In the same period last year 12.8m shares were purchased, although this included the exit of Aviva from the share register who were generally selling investment trust holdings inherited from the takeover of other investment companies. Excluding the Aviva transaction, 1.4m shares were purchased in the same period last year.
Update to expense and interest allocation policy
The Board has reviewed the allocation of both eligible expenses and interest between capital and revenue, in large part due to the very different cost structure in place since the recent reorganisation and the adoption of the new investment approach.
It was therefore decided that with effect from the current financial year, the Company will allocate 65% of both eligible expenses and interest to capital, with the remaining 35% of each allocated to revenue. This compares with the previous 50%/50%. Expenses not eligible to be charged to capital will be wholly charged to revenue.
If this new allocation policy had been in place in the last financial year, the net effect would have resulted in a small increase to net income per share of 0.7p to 23.7p.
Gearing
Gearing ended the period largely unchanged at 5%.
Board composition
Hamish Buchan retired as a non-executive director at the AGM in February 2018. I would like to reiterate our thanks to Hamish for his outstanding contribution over the last fourteen years. As previously noted, there is no current intention to replace Hamish as the Board considers that its membership will continue to ensure that the appropriate balance of skills, experience, independence and knowledge will be achieved.
Outlook
I have previously discussed the bewilderment with which the establishment greeted the Brexit vote, the election of
Donald Trump and the unexpected result in the UK 'snap' general election. There was perhaps an element of a 'Marie Antoinette' thought process that failed to appreciate that large sections of the population felt trapped in a disadvantaged economic situation.
Politicians around the world seem to have got the message that if they wish to gain or retain a grip on power, the benefits of economic growth must fall to a greater proportion of the population. With President Trump in the vanguard, governments are dropping ambitions to balance budgets as fiscal largesse is always popular with the recipients. Much comment has been made about the jump in US 10 year bond yields to over 3%. Some are fearful that the breach of this arbitrary number represents a loss of confidence in the government's finances and the start of an inflationary cycle.
Perhaps more significant for the short term prospects of markets is the increase in the US 2 year Treasury Note yield to 2.5%, prompted by the anticipated trajectory of interest rate increases from the US Federal Reserve. Given that this rate was near zero around five years ago, it does not seem an unreasonable rate of return at which to 'park' money that would previously have been forced into other asset classes in search of a return.
As ever, there are a number of potential flashpoints that could potentially destabilise markets, or indeed boost them if satisfactorily resolved. US relations with North Korea and Iran appear to have moved in opposite directions but US relations with China are probably most important to the global economy. Closer to home, the Brexit negotiations continue to make noisy but slow progress.
The Board is pleased with the progress made to transform the investment approach, to increase the regular dividend and to improve the profile of the Company. It believes that the Company is differentiated, cost competitive and an attractive investment vehicle focused on delivering above-average returns and dividend growth over the longer term.
James Will
Chairman
15 June 2018
Manager's Review
It's déjà vu all over again
Even though the late Lawrence 'Yogi' Berra was an outstanding baseball player, he is possibly best known for his 'Yogisms' - apparently nonsensical comments attributed to him that contain a cryptic life truth. After all, who can disagree that "the future ain't what it used to be" and "you can observe a lot by watching". However, this review is titled with the Yogism that reflects the resigned inevitability of watching a re-run of a situation you've already experienced.
Shareholders who have read my previous Manager's Reviews will be aware that a simple philosophy underpins our approach to investment. At the core of this philosophy is a recognition that investors are not, in aggregate, dispassionate calculating machines but instead retain human emotions.
As humans, we have many differing emotions, desires and motivations but one apparent constant, which is maintained across cultures and geographies, is a desire to be part of the group. This crowding instinct has been a great benefit to humanity and living standards are unquestionably far higher than if we operated as individuals. Working as a group allows division of labour, specialisation and economies of scale.
However, we believe that this crowding instinct does not usefully translate into financial markets as the crowd is inherently a momentum beast. Crowds naturally gravitate towards what has recently been successful and shun what has recently been unsuccessful. The crowd voice, which is always alluring, is driven by individuals who seek to align themselves with success and disavow failure.
In financial markets, chasing momentum works. Until it doesn't. By the time an investment has performed sufficiently well (or badly) for it to become an accepted wisdom, conditions are ripe for the trend to change. It is this momentum mentality which creates the business cycle and the numerous bubbles (and subsequent busts) which have bedevilled investment markets.
We do not attempt to follow investment fashions and instead seek investments in which we can foresee long term upside. We actively seek unpopular areas because this is where the balance between risk and reward can be most favourable. Rather than perpetual trends we believe in cycles, which brings us neatly back to the déjà vu referenced in the title.
Investors currently exhibit remarkably low levels of scepticism about 'hot' investment themes, particularly in the technology area, which mentally transports us back to the late 1990s when similar enthusiasm reigned (it didn't last).
The collapse of Long-Term Capital Management (LTCM) in 1998 and the subsequent Central Bank response, arguably, created the conditions for the dotcom bubble. Following the bailout of LTCM, the investment mood swiftly became feverish, with the best performing investments defined by their elevator pitch (a simple conceptual story with grand visions) and eyeballs (the gathering of unprofitable user views). Sales of IT hardware and services boomed both to salve the impending 'Millennium Bug' and due to an increased desire for personal computers. Those companies that had benefited from this trend became valued as if the good times would never end.
Things are different today, but in some ways they are the same. Once again, investors are excited by concept investments even if the most speculative of them all, the cryptocurrencies, have already disillusioned their fan club. Investors continue to reward the new 'eyeball' metric which, these days, is instead unprofitable user growth. Internet shopping, food delivery, ride hailing services, music and video streaming, to name just some, are all subsidised at the point of use by investors. Meanwhile, investors show scant concern that the premium smartphone boom has peaked and have only recently started to consider that companies operating in the 'Wild West' space of internet advertising may be about to meet the posse (courtesy of the Facebook data scandal).
The Portfolio (the interim period)
Our holdings in two 'ugly duckling' retailers produced the biggest gains over the period. Tesco (+GBP7.7m) performed strongly as the acquisition of Booker was approved and focus has returned to the company's progress in rebuilding profitability. US department store operator Macy's (+GBP7.7m) reported encouraging results which suggested that measures to reinvigorate flagging sales were gaining some traction. However, emphasising that patience is required with turnaround situations, Marks & Spencer (-GBP3.7m) declined during the period as the new turnaround-expert Chairman, Archie Norman, appeared to 'kitchen-sink' potential bad news. We continue to believe the company has a great brand which can be revived.
Our holdings in commodity companies were mostly a source of positive returns as enthusiasm returned to these areas (particularly oil) late in the period under review. The biggest gain came from BHP Billiton (+GBP3.0m) driven by recovering operations, a scope for asset sales and the presence of an activist investor. Our holding in Royal Dutch Shell (+GBP2.5m) also made a material gain as it became clearer to the wider market that the company is in a very strong position having bought BG Group at the cycle low. Australian gold miner Newcrest Mining (-GBP3.1m) was impacted by a production issue which was subsequently resolved.
Mexican cement producer Cemex (-GBP3.8m) was hampered by a combination of headwinds and we sold our holding after the period end due to the changing political climate in Mexico.
Dutch bank ING (-GBP2.8m) produced a loss over the period but remains well placed to benefit from restructuring efforts, a more stable regulatory environment and a potential increase in interest rates.
Pharmaceutical company GlaxoSmithKline (+GBP2.6m) reassured investors about the sustainability of the dividend after opting to buy Novartis's share of their consumer healthcare joint venture rather than pursuing a more ambitious acquisition. The new CEO is determined to better commercialise the company's gargantuan R&D efforts.
Conversely, our holding in Rentokil Initial (-GBP3.8m) was a loser from a stronger pound following optimism regarding a workable Brexit. Other investors fretted about the translation of predominantly overseas revenues into a resurgent sterling. That said, the loss was more of a timing issue as the share price has performed very strongly since our initial purchase as the business has transformed from being an unloved and underperforming conglomerate.
An honourable mention must also be made for Australian-based global wine producer, Treasury Wine Estates (+GBP1.8m), which was for a long time our largest investment, as we sold the balance of our holding during the period. This has been an exceptional investment, providing a total return of +GBP39m over the period we held the shares. The company has transformed in the three years since we invested and that progress is now more widely recognised. While we continue to believe that the company's prospects remain promising, this is now reflected in the share price and we consider that the balance of risk and reward is no longer as favourable.
Outlook
In my last review, I noted that there were signs of complacency with regard to investor attitude to risk, with symptoms of excess in cryptocurrency get-rich-quick schemes and the investor infatuation with technology stocks which were considered to have bullet-proof prospects. The cryptocurrencies, such as Bitcoin, boomed further (it was the topic of conversation over Christmas) but unravelled spectacularly in January. A cryptocurrency may seem irrelevant to an equity investor but they represent a proxy for the ease of financial conditions and a willingness to suspend disbelief in search of a speculative return.
The data scandal involving Facebook and Cambridge Analytica shook the entire technology matrix. Expectations remain too high in this area and the threats from politicians, regulators and disrupted incumbents continue to be brushed off. We have minimal exposure to this area.
Oil stocks have been generally unpopular since the oil price crash of 2014. Expectations remain low but have increased recently as the oil price has risen. We continue to think that the balance between risk and reward in this area remains favourable.
If one of the main contributing factors to the financial crisis of 2008/9 was excessive debt, 10 years of cheap money has not aided this situation as debts have increased. The time-tested solution to an excessive debt burden has been either default or currency debasement (inflation), with the latter infinitely more palatable. It's unlikely that the recent rise in bond yields represents a tipping point but we continue to monitor this.
Generally speaking, the spread of valuations across the market is wide and we continue to identify opportunities that we believe will generate good long-term returns for shareholders.
As I have previously noted, as contrarian investors we actively seek unfashionable and unpopular investments that we believe can recover. This is where we find the best balance between risk (expectations are low) and reward (things can get better). Our investment approach is designed to anticipate and benefit from change and we will continue to seek out opportunities with potential to profit the long-term investor.
Alasdair McKinnon
Manager
15 June 2018
For further information, please contact: 0131 225 7781
Our Approach
To apply our approach, we divide the stocks in which we invest into three categories.
First, we have those that we describe as ugly ducklings - unloved shares that most investors shun. These companies have endured an extended period of poor operating performance and, for the majority, the near-term outlook continues to appear uninspiring. However, we see their out-of-favour status as an opportunity and can foresee the circumstances in which these investments will surprise on the upside.
The second category consists of companies where change is afoot. These companies have also endured a long period of poor operating performance but have recently demonstrated that their prospects have significantly improved. However, other investors continue to overlook this change for historical reasons.
In our third category, more to come, we have investments that are more generally recognised as good businesses with decent prospects. However, we see an opportunity as we believe there is scope for further improvement that is not yet fully recognised.
Hot Features
Premium
Financial Summary
30 April 31 October Change Total return
2018 2017 % %
NAV with borrowings at market value 916.1p 924.4p (0.9) +1.8
NAV with borrowings at amortised cost 944.4p 956.8p (1.3) +1.3
Ex-income NAV with borrowings at market
value 910.2p 904.8p +0.6
Ex-income NAV with borrowings at amortised
cost 938.4p 937.2p +0.1
Share price 833.0p 843.0p (1.2) +1.7
Discount to NAV with borrowings at
market value 9.1% 8.8%
MSCI ACWI (1.0) (0.1)
MSCI UK All Cap Index +0.3 +2.2
-------------------------------------------- ----------- ------------- --------- -------------
GBP'000 GBP'000
-------------------------------------------- ----------- ------------- --------- -------------
Equity investments 778,120 801,302
Net current assets 49,186 43,897
-------------------------------------------- ----------- ------------- --------- -------------
Total assets 827,306 845,199
-------------------------------------------- ----------- ------------- --------- -------------
Long-term borrowings at amortised
cost (83,783) (83,737)
Pension liability (1,091) (1,091)
-------------------------------------------- ----------- ------------- --------- -------------
Shareholders' funds 742,432 760,371
-------------------------------------------- ----------- ------------- --------- -------------
Six months Six months
to 30 April to 30
2018 April Change
GBP'000 2017 %
GBP'000
----------------------------------- ------------- ----------- ---------
Earnings per share 10.89p 9.28p +17.4
Dividends per share * 10.00p 5.50p
UK Consumer Prices Index - annual
inflation +2.4
* The current period includes two quarterly interim dividends compared to one semi-annual interim dividend in the same period last year.
List of Investments
As at 30 April 2018
Listed equities
Market Cumulative Market Cumulative
value weight value weight
Holding Country GBP'000 % Holding Country GBP'000 %
------------------- ------------- -------- ----------- ------------------- -------------- --------- -----------
Royal Bank of
Tesco UK 35,614 Scotland UK 8,103
Rentokil Initial UK 30,352 Adecco Switzerland 7,615
Standard Chartered UK 28,398 BT UK 7,186
GlaxoSmithKline UK 28,132 IBM US 6,946
Royal Dutch Shell UK 26,270 Bank of Ireland Ireland 6,669
ING Netherlands 26,102 Baker Hughes US 6,659
TGS NOPEC
Newcrest Mining Australia 26,080 Geophysical Norway 6,555
Suncor Energy Canada 25,562 General Electric US 5,853
Diamond Offshore
Gap US 24,914 Drilling US 5,742
Sumitomo Mitsui
Financial Japan 22,053 35.1 BorgWarner US 4,156 99.0
------------------- ------------- -------- ----------- ------------------- -------------- --------- -----------
Pfizer US 21,556 Tourmaline Oil Canada 3,058
Marks & Spencer UK 21,298 Freehold Royalties Canada 2,397
Macy's US 21,129 Greggs UK 1,171
------------------- -------------- --------- -----------
Total listed
BHP Billiton UK 21,006 equities 776,720 99.8
------------------- ------------------------- -----------
SAP Germany 19,763
Newmont Mining US 19,021
BNP Paribas France 18,021
Exxon Mobil US 17,837
Target US 17,444
RSA Insurance UK 15,911 59.9
------------------- ------------- -------- -----------
Total France 15,512 Unlisted
Citigroup US 14,845
Market Cumulative
Chevron US 14,533 value weight
Pepsico US 14,435 Holding GBP'000 %
------------------- -------------- --------- -----------
Hong Heritable property and
China Mobile Kong 14,307 subsidiary 1,400
British Land UK 14,194 Total unlisted 1,400 0.2
------------------- -------------- --------- -----------
United Utilities UK 14,154
Roche Switzerland 13,715
National Oilwell
Varco US 12,659
------------------- ------------------------- -----------
Vinci France 12,163 78.0 Total equities 778,120 100.0
------------------- ------------- -------- ----------- ------------------- ------------------------- -----------
Sony Japan 11,391
BASF Germany 11,246
KDDI Japan 10,628
Verizon
Communications US 10,229
Nintendo Japan 9,617
Bank of Kyoto Japan 9,547
Intesa SanPaolo Italy 9,249
East Japan Railway Japan 9,044
Citizens Financial US 8,404
Hess US 8,275 90.6
------------------- ------------- -------- -----------
Distribution of Assets
Distribution of Total Assets
30 April 2018 31 October 2017
By Sector % %
---------------------------- -------------- ----------------
Energy 17.5 15.2
Materials 9.4 8.4
Industrials 7.9 10.0
Consumer Discretionary 12.3 8.6
Consumer Staples 6.0 11.8
Health Care 7.7 8.5
Financials 20.4 19.2
Information Technology 4.4 4.5
Telecommunication Services 5.1 5.2
Utilities 1.7 1.9
Real Estate 1.7 1.5
Net current assets 5.9 5.2
---------------------------- -------------- ----------------
Total assets 100.0 100.0
---------------------------- -------------- ----------------
30 April 2018 31 October 2017
By Region % %
------------------------- -------------- ---------------- UK 30.6 28.6 Europe (ex UK) 17.7 17.9 North America 32.1 26.5 Latin America - 3.0 Japan 8.8 8.2 Asia Pacific (ex Japan) 4.9 10.6 Net current assets 5.9 5.2 ------------------------- -------------- ---------------- Total assets 100.0 100.0 ------------------------- -------------- ----------------
Allocation of Shareholders' Funds
30 April
2018
%
------------------------------ ---------
Total equities 104.8
------------------------------ ---------
Net current assets 6.6
Borrowings at amortised cost (11.3)
------------------------------ ---------
Pension liability (0.1)
------------------------------ ---------
Shareholders' funds 100.0
------------------------------ ---------
Income Statement
Six months to 30 April Six months to 30 April Year to 31 October 2017
2018 2017
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net gains on investments
held at
fair value
through profit and loss - 2,644 2,644 - 11,592 11,592 - 50,816 50,816
Net losses on currencies - (883) (883) - (531) (531) - (1,185) (1,185)
Income 11,246 - 11,246 11,474 - 11,474 25,898 - 25,898
Expenses (1,042) (198)* (1,240) (959) (666) (1,625) (2,075) (1,442) (3,517)
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Return before Finance
Costs
and Taxation 10,204 1,563 11,767 10,515 10,395 20,910 23,823 48,189 72,012
Interest payable (866) (1,608) (2,474) (1,237) (1,237) (2,474) (2,474) (2,475) (4,949)
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Return on Ordinary
Activities before
Tax 9,338 (45) 9,293 9,278 9,158 18,436 21,349 45,714 67,063
Tax on ordinary activities (763) - (763) (704) - (704) (1,252) - (1,252)
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Return attributable to
Shareholders 8,575 (45) 8,530 8,574 9,158 17,732 20,097 45,714 65,811
Return per share (basic and
fully
diluted) 10.89p (0.05)p 10.84p 9.28p 9.92p 19.20p 23.06p 52.46p 75.52p
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Weighted average number of
shares
in issue 78,725,835 92,338,349 87,144,760
---------------------------- ------------------ -------- ------------------ -------- ------------------ --------
GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Dividends payable 7,853 4,543 19,873
Income comprises:
Dividends 11,095 11,418 25,705
Interest 151 56 193
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
11,246 11,474 25,898
---------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
* Includes a refund of previously paid expenses.
Balance Sheet
As at As at As at
30 April 31 October 30 April 2017
2018 2017
(unaudited) (audited) (unaudited)
GBP'000 GBP'000 GBP'000
------------------------------------------ ------------- ------------ ----------------
Fixed Assets
Investments 778,120 801,302 793,139
------------------------------------------ ------------- ------------ ----------------
Current Assets
Debtors 10,327 2,113 2,788
Cash 15,071 5,240 20,118
Cash equivalents 42,061 37,696 20,425
------------------------------------------ ------------- ------------ ----------------
67,459 45,049 43,331
Creditors: liabilities falling
due within one year (18,273) (1,152) (343)
Net Current Assets 49,186 43,897 42,988
Total Assets less Current Liabilities 827,306 845,199 836,127
------------------------------------------ ------------- ------------ ----------------
Creditors: liabilities falling due after
more than one year
Long-term borrowings at amortised
cost (83,783) (83,737) (83,690)
Provisions for Liabilities
Pension liability (1,091) (1,091) (3,272)
------------------------------------------ ------------- ------------ ----------------
Net Assets 742,432 760,371 749,165
------------------------------------------ ------------- ------------ ----------------
Capital and Reserves
Called-up share capital 19,655 19,867 20,893
Share premium account 39,922 39,922 39,922
Capital redemption reserve 51,206 50,994 49,968
Capital reserve 586,231 593,484 590,335
Revenue reserve 45,418 56,104 48,047
------------------------------------------ ------------- ------------ ----------------
Shareholders' Funds 742,432 760,371 749,165
------------------------------------------ ------------- ------------ ----------------
Net Asset Value per share with
borrowings at amortised cost 944.4p 956.8p 896.4p
------------------------------------------ ------------- ------------ ----------------
Number of shares in issue at
period end 78,619,069 79,468,458 83,571,793
------------------------------------------ ------------- ------------ ----------------
Statement of Comprehensive Income
Six months to Six months to Year to
30 April 2018 30 April 2017 31 October 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Total comprehensive
income for the period 8,530 17,732 67,637
------------------------ --------------- --------------- -----------------
Total comprehensive
income per share 10.84p 19.20p 77.61p
------------------------ --------------- --------------- -----------------
Statement of Changes in Equity
Six months to Six months to Year to
30 April 2018 30 April 2017 31 October 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP,'000 GBP'000
Opening shareholders'
funds 760,371 849,017 849,017
Total comprehensive
income 8,530 17,732 67,637
Dividend payments (19,261) (16,552) (21,095)
Aviva share buyback - (90,255) (90,255)
Regular share buybacks (7,208) (10,777) (44,933)
------------------------ --------------- --------------- -----------------
Closing shareholders'
funds 742,432 749,165 760,371
------------------------ --------------- --------------- -----------------
Cash Flow Statement
Six months Six months Year to
to to
30 April 30 April 31 October
2018 2017 2017
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Operating activities
Net revenue before finance costs and
taxation 10,204 10,515 23,823
Expenses charged to capital (198) (666) (1,442)
(Increase)/decrease in accrued income (1,731) (399) 226
(Decrease)/increase in other payables (354) (186) 47
Decrease/(increase) in other receivables 89 (20) (3)
Adjustment for pension funding - - (355)
Tax on investment income (801) (813) (1,327)
Cash flows from operating activities 7,209 8,431 20,969
-------------------------------------------- ------------- ------------- ------------
Investing activities
Purchases of investments (58,513) (53,911) (131,714)
Disposals of investments 95,010 165,302 273,474
Cash flows from investing activities 36,497 111,391 141,760
-------------------------------------------- ------------- ------------- ------------
Cash flows before financing activities 43,706 119,822 162,729
-------------------------------------------- ------------- ------------- ------------
Financing activities
Dividends paid (19,261) (16,552) (21,095)
Aviva share buyback - (90,255) (90,255)
Regular share buybacks (7,821) (10,948) (44,490)
Interest paid (2,428) (2,428) (4,857)
-------------------------------------------- ------------- ------------- ------------
Cash flows from financing activities (29,510) (120,183) (160,697)
-------------------------------------------- ------------- ------------- ------------
Net movement in cash and cash equivalents 14,196 (361) 2,032
-------------------------------------------- ------------- ------------- ------------
Cash and cash equivalents at the beginning
of period 42,936 40,904 40,904
-------------------------------------------- ------------- ------------- ------------
Cash and cash equivalents at the end
of period 57,132 40,543 42,936
-------------------------------------------- ------------- ------------- ------------
Notes
The condensed set of Financial Statements for the six months to 30 April 2018 has been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and updated in January 2017 and March 2018, and has not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The condensed set of Financial Statements for the six months to 30 April 2018 has been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Accounts for the year ended 31 October 2017.
It is the opinion of the Directors that, as most of the Company's assets are readily realisable and exceed its liabilities, it is expected that the Company will continue in operational existence for the foreseeable future.
The information contained in the Interim Report does not constitute statutory accounts as defined in sections
434-436 of the Companies Act 2006. Where applicable, the figures have been extracted from the Annual Report and Accounts for the year ended 31 October 2017 which has been filed with the Registrar of Companies and which contains an unqualified report from the Auditor. The financial information for the six months ended 30 April 2018 and 30 April 2017 has not been audited.
The second quarterly interim dividend will be paid on 3 August 2018 to shareholders registered at 6 July 2018, with an ex dividend date of 5 July 2018.
The first quarterly interim dividend of GBP3,931,000 was paid on 11 May 2018.
Equity investments include the unlisted portfolio of GBP1.4m (31 October 2017: GBP1.4m).
The weighted average number of shares in issue during the half-year was 78,725,835 (2017: 92,338,349) and this figure has been used in calculating the return per share shown in the income statement. The net asset value per share at 30 April 2018 has been calculated using the number of shares in issue on that date which was 78,619,069
(31 October 2017: 83,571,793).
Analysis of Changes in Net Debt
31 October Non-cash 30 April
2017 Cash flows Movements 2018
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----------- ------------- ----------- ---------
Cash 5,240 9,831 - 15,071
Short-term deposits 37,696 4,365 - 42,061
Long-term borrowings at
par (83,737) - (46) (83,783)
------------------------- ----------- ------------- ----------- ---------
(40,801) 14,196 (46) (26,651)
------------------------- ----------- ------------- ----------- ---------
Principal risks and uncertainties
The principal risks and uncertainties facing the business are strategic, investment portfolio and performance, financial, operational and tax, legal and regulatory. These are listed on page 15 of the 2017 Annual Report and Accounts and they are unchanged from that year. An explanation of these risks and how they are managed is set out in Note 17 on pages 59 to 64 of the 2017 Annual Report and Accounts.
Responsibility statement
The Board of Directors confirms that to the best of its knowledge:
a) the condensed set of Financial Statements has been prepared on a going concern basis and in accordance with Financial Reporting Standard 104 and gives a true and fair view of the assets, liabilities, financial position and return of the Company;
b) the Interim Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months, their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the year); and
c) the Interim Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein);
For and on behalf of the board,
James Will
Chairman
15 June 2018
Glossary
Borrowings at amortised cost is the nominal value of the Company's borrowings less any unamortised issue expenses.
Borrowings at market value is the Company's estimate of the 'fair value' of its borrowings. The current estimated fair value of the Company's borrowings is based on the redemption yield of the relevant existing reference gilt plus a margin derived from the spread of BBB UK corporate bond yields (15 years+) over UK gilt yields (15 years+). The reference gilt for the secured bonds is the 6% UK Treasury Stock 2028 and the reference gilt for the perpetual debenture stocks is the longest-dated UK Treasury stock listed in the Financial Times.
Discount is the difference between the market price of a share and the NAV, expressed as a percentage of the NAV.
Ex-income NAV is the NAV excluding current year revenue.
Gearing is the true geared position of the Company: borrowings less cash and equivalents expressed as a percentage of shareholders' funds.
Gross gearing is the geared position if all the borrowings were invested in equities: borrowings expressed as a percentage of shareholders' funds.
NAV is net asset value per share after deducting borrowings at par or market value, as stated.
NAV total return is the measure of how the Company's NAV has performed over a period of time, taking into account both capital returns and entitlement to dividends declared by the Company.
Share price total return is the measure of how the Company's share price has performed over a period of time, taking into account both capital returns and entitlement to dividends declared by the Company.
Total assets means total assets less current liabilities.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR LLFESRRIELIT
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