Dunedin Inc.Growth - Half-year Report
21/09/2023 07:00
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RNS Number : 1247N Dunedin Income Growth Inv Tst PLC 21 September 2023
DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC
HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 31 JULY 2023
Legal Entity Identifier (LEI): 549300PPXLZPR5JTL763
HIGHLIGHTS FOR THE PERIOD
- NAV total return of 5.5%, outperforming the total return of 0.8%
from the FTSE All-Share Index.
- Against a flat market return, investment performance has been
positive, aided by the Company's focus on higher quality areas of the market,
coupled with good stock selection.
- Dividend yield of 4.6% at the period end.
INVESTMENT OBJECTIVE
The objective of Dunedin Income Growth Investment Trust PLC is to achieve
growth of income and capital from a portfolio invested mainly in companies
listed or quoted in the United Kingdom that meet the Company's sustainable and
responsible investing criteria as set by the Board.
BENCHMARK
The Company's benchmark is the FTSE All-Share Index (total return).
Performance is measured on a net asset value total return basis over the
long-term.
Performance Highlights
Net asset value total return per Ordinary share(AB) Share price total return per Ordinary share(A)
Six months ended 31 July 2023 Six months ended 31 July 2023
+5.5% (0.4)%
Year ended 31 January 2023 +2.4% Year ended 31 January 2023 (0.9)%
Revenue return per Ordinary share FTSE All-Share Index total return
Six months ended 31 July 2023 Six months ended 31 July 2023
8.25p +0.8%
Six months ended 31 July 2022 8.54p Year ended 31 January 2023 +5.2%
Dividend yield(A) Discount to net asset value(AB)
As at 31 July 2023 As at 31 July 2023
4.6% (8.4)%
As at 31 January 2023 4.5% As at 31 January 2023 (2.9)%
(A) Considered to be an Alternative Performance Measure.
(B) With debt at fair value (including income).
Financial Calendar
Expected payment dates of quarterly dividends 24 November 2023
23 February 2024
31 May 2024
30 August 2024
Financial year end 31 January 2024
Expected announcement of results March 2024
for year ended 31 January 2024
Annual General Meeting (London) May 2024
Financial Highlights
31 July 2023 31 January 2023 % change
Total assets (£'000)(A) 500,934 492,105 +1.8
Equity shareholders' funds (£'000) 456,610 448,605 +1.8
Market capitalisation (£'000) 423,974 435,898 (2.7)
Net asset value per Ordinary share 308.02p 302.57p +1.8
Net asset value per Ordinary share with debt at fair value(B) 312.17p 302.80p +3.1
Share price per Ordinary share (mid) 286.00p 294.00p (2.7)
Discount to net asset value with debt at fair value(B) (8.4%) (2.9%)
Revenue return per Ordinary share(C) 8.25p 8.54p (3.4)
Gearing - net(B) 9.7% 7.1%
(A) Defined as total assets per the Statement of Financial Position less
current liabilities (before deduction of bank loans and Loan Notes).
(B) Considered to be an Alternative Performance Measure.
(C) Figure for 31 July 2023 is for six months to that date. Figure for 31
January 2023 is for the six months to 31 July 2022.
For further information, please contact:
Stephanie Hocking
William Hemmings
abrdn Fund Managers Limited
0131 372 2200
Chairman's Statement
Review of the Period
Looking back over past the few years, our Half Yearly Report has often
corresponded with significant geopolitical events such as the global pandemic
in 2020 and the invasion of Ukraine in 2022. In contrast, the first six months
of this financial year saw a return to more conventional points of focus: a UK
economy struggling for growth amidst the steepest inflation in 40 years,
trying to assess the extent of central bank interest rate increases, concerns
over growth in China and speculation on the potential of new developments in
Artificial Intelligence. Against that backdrop, the Company delivered a
positive absolute return for the six month period ended 31 July 2023. The net
asset value ("NAV") increased by 5.5% on a total return basis, exceeding that
of its benchmark, the FTSE All-Share Index, which produced a total return of
0.8%. The share price total return for the period was -0.4%, reflecting a
widening of the discount at which the Company's shares trade relative to the
NAV. At the end of the period the shares traded on a discount of 8.4% (on a
cum-income basis with borrowings stated at fair value), compared to a discount
of 2.9% at the beginning of the financial year.
Your Investment Manager has continued to execute our strategy of investing in
businesses of higher quality that meet our sustainable and responsible
investment criteria and balancing attention between both income and capital
growth potential. The portfolio continues to exhibit strong quality
characteristics, while retaining a premium yield to, and superior dividend
growth to, the FTSE All-Share Index. At the same time, it exhibits a high
level of active share and stock specific risk reflecting a very differentiated
approach to the wider index and many investment trusts in the peer group with
similar objectives.
Against a flat market return, investment performance has been positive, aided
by the Company's focus on higher quality areas of the market, coupled with
good stock selection. In particular, we have seen strong performance from a
number of the portfolio's holdings alongside continued merger and acquisition
activity.
A detailed review of portfolio activity during the period is contained in the
Investment Manager's Review.
Earnings and Dividends
Revenue earnings per share fell by 3.4% during the period to 8.25p (2022:
8.54p) per share. Importantly, underlying dividend income increased by 1.5%
reflecting good trading from a number of our holdings, although the level of
option income generated was lower than the equivalent period last year.
A first interim dividend in respect of the year ending 31 January 2024, of
3.2p (2023: 3.0p) per share, was paid on 25 August 2023 and the Board has
declared a second interim dividend of 3.2p (2023: 3.0p) per share, which will
be paid on 24 November 2023 to shareholders on the register on 3 November
2023. The rate of interim dividend was last increased in August 2018. The
Board had been mindful that the increases in the overall annual rate of
dividend since 2018 had caused the final dividend to become a growing
percentage of the total annual payment. The Board therefore decided, and
announced on declaring the first interim dividend, to increase the rate of
each of the three interim dividends from 3.0p to 3.2p per share so as to
create a more even balance between the rates of the interim and final
dividends. The 6.7% increase in the rate of interim dividends therefore
represents a rebalancing of dividend payments.
Based on last year's annual dividend of 13.1p per share, the dividend yield on
the Company's shares was 4.6% at the end of the period. This is one of the
higher yields available from the AIC's UK Equity Sector and is approximately
20% higher than the yield available from the UK equity market as measured by
the FTSE All-Share Index.
In the year ahead, the Board's intention is to maintain a progressive
dividend, substantially covered by earnings, although given the high level of
inflation it is unlikely to increase in real terms, so as to allow the Company
to continue to appropriately balance its focus on both capital and income
generation. Our distribution policy, though, remains to grow the dividend
faster than inflation over the medium term and, with the Company's robust
revenue reserves, modest level of gearing and the healthy underlying dividend
growth of the companies within the portfolio, that policy remains well
supported.
Sustainability
Your Company continues to exhibit strong evidence of its sustainable
positioning, elements that we believe will enhance the portfolio's long-term
risk adjusted returns. Its carbon footprint is significantly lower than the
benchmark. MSCI has assigned the Company an AA ESG rating and it is considered
top decile out of all investment funds globally. The Investment Manager has
continued to actively engage with the companies invested in, having addressed
ESG specific issues with management teams at companies representing 28 of the
holdings in the portfolio. Voting policy also forms an important part of the
corporate engagement approach and the Investment Manager voted against
management recommendations at least once in 21% of company general meetings
held during the period.
Gearing
The Company currently employs two sources of gearing. The £30 million loan
notes maturing in 2045, and a recently renewed one year £30 million
multi-currency revolving credit facility with Bank of Nova Scotia that matures
in July 2024. Under the terms of the facility the Company has the option to
increase the level of the commitment from £30 million to £40 million at any
time, subject to the lender's credit approval. A sterling equivalent of £13.4
million was drawn down under the facility at the end of the period.
With debt valued at par, the Company's net gearing increased from 7.1% to 9.7%
during the period, reflecting lower cash balances at the period end, despite
an increase in net assets due to capital appreciation. The Board believes this
remains a relatively conservative level of gearing and, with the option to
increase the revolving credit facility, provides the Company with financial
flexibility should further opportunities to deploy capital arise.
Discount
As stated above, at the end of the period your Company's shares traded at a
discount of 8.4% (on a cum-income basis with borrowings stated at fair value),
compared to a discount of 2.9% at the beginning of the financial year.
Widening discounts were evident across the investment trust sector during the
period. As a result of this, and in order to address the imbalance of supply
and demand for the Company's shares, we bought back 22,055 shares to be held
in treasury. With the higher level of discount persisting, we have bought back
a further 400,863 shares since the period end. The Board believes that this
action, together with continued delivery of investment performance, our
commitment to grow the dividend faster than inflation over the medium-term and
clear communication of the investment strategy should all help to improve the
Company's current rating. The Board will continue to monitor the rating of
your Company's shares carefully and make further use of both the Company's
share buyback and issuance powers to address any imbalance of supply and
demand in the Company's shares.
abrdn Investment Trust Savings Plans
The Board is aware that over 20% of the Company's shares are held through the
abrdn Investment Trust Savings Plans (the "Plans"). These types of share
schemes were the original and only means by which the shares of investment
trusts could be made available to private investors. The development of whole
of market platform offerings means other options are now available. abrdn has
written to their clients in the Plans explaining that they will be closing in
December 2023 and that the Plans will be transferring to the interactive
investor platform. The Board continues to monitor this change. We would stress
this has no impact on those holders' ability to receive communications from
the Company, to vote and attend general meetings in person or to re-invest
dividends.
Amendment to Investment Policy (Overseas Exposure)
As explained in the recent Annual Report, during the previous year, the Board
and Investment Manager reviewed the guidelines governing the management of the
portfolio and determined that the part of the investment policy relating to
the limit on the exposure to investments in companies listed or quoted
overseas should be amended from its previous limit of 20% to a new limit of
25%. The change took effect on 1 May 2023 and this higher limit provides the
Investment Manager with greater flexibility to invest in overseas companies
but does not represent a change in the way that the portfolio is managed.
The change was not a material change to the investment policy that would have
required shareholder approval.
Outlook
The economic challenges to global growth continue to build, following rapid
and sustained interest rate increases from central banks across the world,
coupled with a Chinese economy facing significant headwinds. Despite some
signs of easing, inflationary pressures remain significant in most economies
and supply constraints are placing upward pressure on many commodity prices.
In the UK, inflation remains too high and growth too low, albeit there are
indications that a trough has been reached and perhaps somewhat ahead of other
major economies. For equity markets, there remain reasons to be cautious and
the next 18 months are likely to be a tough period for corporate earnings
development. It is that very unpredictability of world and economic events
that makes us concentrate on the companies within the portfolio and their
ability to navigate the environment ahead of them.
As such, the approach of the Investment Manager is to balance the portfolio to
handle a range of potential scenarios. There is an emphasis on protecting the
downside from investing in companies with enduring business models, pricing
power, robust balance sheets and strong management of their environmental,
social and governance risks. At the same time, the Investment Manager is
making sure that those businesses have the potential to participate in any
upside opportunities that emerge, particularly stemming from powerful
long-term structural drivers, dynamics likely to be less sensitive to the ups
and downs of the economic cycle.
Our objectives remain to meet investor needs for capital and income returns
over the medium and long term. We have again made good progress in this
period. Whilst the global outlook is far from propitious, we believe our
strategy of focussing on a concentrated and actively managed portfolio of high
quality companies from across the UK and European markets with leading
sustainability characteristics sets us up well to navigate conditions
ahead.
David Barron
Chairman
21 September 2023
Interim Management Statement
Directors' Responsibility Statement
The Directors are responsible for preparing the Half Yearly Financial Report
in accordance with applicable law and regulations. The Directors confirm that
to the best of their knowledge:
- The condensed set of financial statements has been prepared in
accordance with Financial Reporting Standard 104 'Interim Financial
Reporting';
- The Interim Board Report (constituting the interim management
report) includes a fair review of the information required by DTR 4.2.7R of
the Disclosure Guidance and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and 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
- The financial statements include a fair review of the
information required by DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in the first six
months of the financial year and that have materially affected the financial
position or performance of the Company during that period, and any changes in
the related party transactions described in the last Annual Report that could
do so.
Principal Risks and Uncertainties
The Board regularly reviews the principal risks and uncertainties faced by the
Company together with the mitigating actions it has established to manage the
risks. These are set out within the Strategic Report contained within the
Annual Report for the year ended 31 January 2023 and comprise the following
risk categories:
- Investment objectives
- Investment strategies
- Investment performance
- Income/dividends
- Financial/market
- Gearing
- Regulatory
- Operational
- Geo-political
The Company's principal risks and uncertainties have not changed materially
since the date of the Annual Report and are not expected to change materially
for the remaining six months of the Company's financial year.
Going Concern
The Company's assets consist mainly of equity shares in companies listed on
the London Stock Exchange and in most circumstances are considered to be
realisable within a short timescale. The Board has set limits for borrowing
and derivative contract positions and regularly reviews actual exposures, cash
flow projections and compliance with loan covenants. The Directors have
considered the fact that the Company's investments comprise readily realisable
securities which can be sold to meet funding requirements if necessary, and
have taken into account the maturity of the £30 million multi-currency
revolving credit facility in July 2024. The Directors have also performed
stress testing on the portfolio and the loan financial covenants.
Having taken these matters into account, the Directors believe that the
Company has adequate financial resources to continue in operational existence
for the foreseeable future and for at least twelve months from the date of
this Report. Accordingly, they continue to adopt the going concern basis of
accounting in preparing the financial statements.
On behalf of the Board
David Barron
Chairman
21 September 2023
Investment Manager's Review
Performance and Market Review
The UK market faced a number of headwinds in the first half of the Company's
financial year; concerns about the financial stability of the banking sector,
fears over persistent inflation and the continuing tightening of monetary
policy. Despite this backdrop, the Company's net asset value ("NAV")
appreciated during the six months to 31 July 2023 by 5.5% on a total return
basis, outperforming the FTSE All-Share Index benchmark total return of 0.8%.
Reassuringly, the rate of UK inflation looks to have passed its peak and is
decelerating, driven by falling energy and food prices with positive
implications for expected monetary policy. Overall, global economic data
continues to be mixed, although ahead of where many expected going into the
year. The exception is China, where activity levels have failed to rebound as
much as anticipated following the post-Covid re-opening and there remain some
worrying signs in both the shadow banking system and the real estate market.
Outperformance in the portfolio was primarily driven by stock selection,
consistent with our bottom up approach to portfolio construction. A number of
the portfolio holdings reported positive results during the period. Games
Workshop, the company behind the Warhammer game, delivered results ahead of
expectations, alongside important new digital content developments. The
European bottler Coca-Cola Hellenic Bottling Company continued to upgrade
earnings expectations driven by strong demand and an attractive pricing
environment. The accounting software provider Sage delivered an encouraging
update that pointed to accelerating growth, driven by its US cloud native
product Intacct. The portfolio also benefitted from its European holdings in
Volvo, Edenred and Novo-Nordisk which continued to deliver good growth and
solid results in the period. On the negative side, the holding in Asian
insurer Prudential underperformed on concerns around the pace of China's
recovery. In July, construction materials manufacturer Marshalls cut its
guidance for the year on weaker end market demand, particularly from
discretionary home improvements and new residential construction. However, the
share price reaction was fairly muted suggesting that expectations had already
adjusted and investors were starting to look through to end market recovery.
We added to the position during the period given our assessment of the
opportunity for attractive prospective returns when the cycle turns.
Pleasingly, dividend income delivery was ahead of our expectations over the
period. Highlights included Games Workshop which nearly doubled its dividend
from the prior year, Weir lifted its dividend by 37%, Sirius Real Estate
increased its dividend by 30% and Nordea Bank grew its distribution by 16%. In
contrast, only Marshalls announced a reduction in its dividend for the year.
Given the timing of dividend declarations, our visibility over the income
out-turn for this financial year is high. However, given the challenging
outlook, we will continue to be watchful. It is worth noting that the
Company's future dividend prospects are tied into businesses with exposure to
structural as opposed to cyclical growth, stronger pricing power and,
consequently, greater control over their own destiny. Ultimately, this will
prove supportive if we enter into more economically challenging times.
We continued to generate income from option writing, though at a slower pace
than the year before. We wrote puts over London Stock Exchange, Croda and
Diageo where we were happy to add to the holdings and wrote calls over Nordea
Bank, Coca Cola Hellenic Bottling Company and Pets at Home where we were
comfortable to trim the holdings following strong performance. We anticipate
that the second half of the year will yield more opportunities to generate
additional option writing revenue.
During the period, we engaged with a number of companies in the portfolio in
order to understand the key environmental, social and governance risks and
opportunities facing them and share best practice. For example, we have been
engaging with SSE as part of our Top 20 Financed Emitters project under our
Net Zero framework. The company published a Net Zero Strategy earlier in the
year in which it updated its targets and aligned to a 1.5 degrees Paris
scenario certified by SBTi (Science Based Target Initiative). We are
comfortable with the targets set given the nature of the utilities sector,
although we continue to engage with the company on the potential to set
short-team emissions targets and provide greater disclosure on Paris aligned
capital expenditure. Weir is an ESG Improver held in the portfolio and as such
we have set out a range of milestones for the company to monitor progress
against. For example we have provided recommendations in relation to
environmental impact disclosure, sustainable supply chain management and
improving gender diversity. Being aware of these potential risks to companies'
long-term strategies and looking to drive mitigation and create opportunities
is a key part of our investment approach.
Portfolio Activity
We initiated a new position in Telecom Plus, a retailer of utility, telecom
and insurance products, which operates in the UK under the Utility Warehouse
brand. It has a capital-light business model that benefits from its low fixed
cost base, network of sales agents and breadth of product offering. Its
competitive positioning in the market has continued to improve and we see
attractive opportunities for long term growth in customers, revenues and
shareholder distributions alongside a strong balance sheet. We also introduced
the UK's largest IT value added reseller Softcat to the portfolio. We believe
Softcat has significant potential for long-term growth, coupled with a strong
balance sheet and the optionality for enhanced shareholder cash returns.
Alongside these purchases we also acquired a new position in German automotive
manufacturer Mercedes-Benz which is repositioning its strategy towards the
luxury end of the market and is well positioned from a technology perspective
to meet the challenges of the electric vehicle transition and the gradual move
to autonomous driving.
To fund these new ideas, we exited small holdings in lower conviction names
Direct Line Insurance, Ashmore and Ubisoft. We also took the opportunity to
exit Dechra Pharmaceuticals after it received an all-cash offer from private
equity company EQT and the private equities investment department of Abu Dhabi
Investment Authority.
Outlook
We retain the relatively cautious market outlook that we have had for some
time. That said, we remain very positive on the potential long-term returns
available from the portfolio. We also see selected value in a number of
domestically focussed cyclical stocks. In addition, the Company benefits from
diversification and the opportunity to invest a portion of assets outside the
UK. Currently we have more opportunities to deploy capital than has been the
case for a considerable period. Overall, we will continue to seek to keep a
balance to our positioning, giving ourselves the potential to perform in a
range of market environments. Our primary attention remains on seeking to
protect capital, but we will continue to look to participate in opportunities
where share prices in good companies with attractive long term prospects have
been oversold and, at the same time, focus on those that meet our sustainable
and responsible investing criteria.
Ben Ritchie and Rebecca Maclean
abrdn Investments Limited
21 September 2023
Investment Portfolio
At 31 July 2023
Market value Total assets
Company Sector £'000 %
AstraZeneca Pharmaceuticals and Biotechnology 45,174 9.0
Unilever Personal Care, Drug and Grocery Stores 35,877 7.2
RELX Media 27,055 5.4
TotalEnergies Oil, Gas and Coal 25,998 5.2
Diageo Beverages 24,465 4.9
London Stock Exchange Finance and Credit Services 22,424 4.5
SSE Electricity 20,786 4.1
Coca-Cola Hellenic Bottling Company Beverages 17,358 3.5
Chesnara Life Insurance 16,014 3.2
Games Workshop Leisure Goods 15,858 3.1
Ten largest equity investments 251,009 50.1
Prudential Life Insurance 14,524 2.9
Intermediate Capital Investment Banking and Brokerage Services 12,604 2.5
Sage Software and Computer Services 12,126 2.4
Weir Industrial Engineering 11,999 2.4
Taylor Wimpey Household Goods and Home Construction 11,636 2.3
Croda Chemicals 11,251 2.3
M&G Investment Banking and Brokerage Services 11,107 2.2
Edenred Industrial Support Services 10,752 2.2
ASML Technology Hardware and Equipment 10,724 2.1
Pets At Home Retailers 10,612 2.1
Twenty largest equity investments 368,344 73.5
Close Brothers Banks 10,433 2.1
Hiscox Non-life Insurance 10,419 2.1
Volvo Industrial Transportation 10,374 2.1
Mercedes-Benz Automobiles and Parts 10,334 2.0
Nordea Bank Banks 9,960 2.0
Sirius Real Estate Real Estate Investment Trusts 9,428 1.9
Telecom Plus Telecommunications Service Providers 9,414 1.9
Morgan Sindall Construction and Materials 9,386 1.9
Assura Real Estate Investment Trusts 9,329 1.8
Marshalls Construction and Materials 8,539 1.7
Thirty largest equity investments 465,960 93.0
Novo-Nordisk Pharmaceuticals and Biotechnology 8,244 1.7
Oxford Instruments Electronic and Electrical Equipment 6,632 1.3
Softcat Software and Computer Services 6,594 1.3
Moonpig Retailers 5,303 1.1
Genus Pharmaceuticals and Biotechnology 5,109 1.0
Total equity investments 497,842 99.4
Net current assets(A) 3,092 0.6
Total assets less current liabilities (excluding borrowings) 500,934 100.0
(A) Excluding bank loan of £13,368,000 and bank overdraft of £1,214,000.
Condensed Statement of Comprehensive Income (unaudited)
Six months ended Six months ended
31 July 2023 31 July 2022
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments - 7,192 7,192 - (16,343) (16,343)
Income 2 13,776 - 13,776 13,989 - 13,989
Investment management fees (352) (527) (879) (348) (522) (870)
Administrative expenses (541) - (541) (462) - (462)
Currency gains/(losses) - 227 227 - (15) (15)
Net return before finance costs and tax 12,883 6,892 19,775 13,179 (16,880) (3,701)
Finance costs (353) (523) (876) (287) (415) (702)
Return before taxation 12,530 6,369 18,899 12,892 (17,295) (4,403)
Taxation 3 (305) - (305) (225) - (225)
Return after taxation 12,225 6,369 18,594 12,667 (17,295) (4,628)
Return per Ordinary share (pence) 5 8.25 4.29 12.54 8.54 (11.66) (3.12)
The total column of the Condensed Statement of Comprehensive Income is the
profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations.
The accompanying notes are an integral part of the financial statements.
Condensed Statement of Financial Position (unaudited)
As at As at
31 July 2023 31 January 2023
Note £'000 £'000
Non-current assets
Investments at fair value through profit or loss 9 497,842 478,895
Current assets
Debtors 4,165 2,452
Cash and short-term deposits - 12,267
4,165 14,719
Creditors: amounts falling due within one year
Bank loan (13,368) (13,762)
Bank overdraft (1,214) -
Other creditors (1,073) (1,509)
(15,655) (15,271)
Net current liabilities (11,490) (552)
Total assets less current liabilities 486,352 478,343
Creditors: amounts falling due after more than one year
Loan Notes 2045 (29,742) (29,738)
Net assets 456,610 448,605
Capital and reserves
Called-up share capital 38,419 38,419
Share premium account 4,908 4,908
Capital redemption reserve 1,606 1,606
Capital reserve 6 386,146 379,839
Revenue reserve 25,531 23,833
Equity shareholders' funds 456,610 448,605
Net asset value per Ordinary share (pence) 7 308.02 302.57
The accompanying notes are an integral part of the financial statements.
Condensed Statement of Changes in Equity (unaudited)
Six months ended 31 July 2023
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2023 38,419 4,908 1,606 379,839 23,833 448,605
Return after taxation - - - 6,369 12,225 18,594
Purchase of own shares for treasury - - - (62) - (62)
Dividends paid 4 - - - - (10,527) (10,527)
Balance at 31 July 2023 38,419 4,908 1,606 386,146 25,531 456,610
Six months ended 31 July 2022
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2022 38,419 4,619 1,606 396,303 23,632 464,579
Return after taxation - - - (17,295) 12,667 (4,628)
Issue of shares from treasury - 289 - - - 289
Dividends paid 4 - - - - (10,227) (10,227)
Balance at 31 July 2022 38,419 4,908 1,606 379,008 26,072 450,013
The accompanying notes are an integral part of the financial statements.
Condensed Statement of Cash Flows (unaudited)
Six months ended Six months ended
31 July 2023 31 July 2022
£'000 £'000
Operating activities
Net return/ (loss) before finance costs and taxation 19,775 (3,701)
Adjustments for:
(Gains)/losses on investments (7,192) 16,343
Currency (gains)/losses (227) 15
Increase in accrued dividend income (623) (1,377)
Stock dividends included in dividend income (432) -
Decrease/(increase) in other debtors excluding tax 144 (626)
Increase in other creditors 111 435
Net tax paid (944) (225)
Net cash inflow from operating activities 10,612 10,864
Investing activities
Purchases of investments (57,296) (36,244)
Sales of investments 44,824 40,939
Net cash (used in)/from investing activities (12,472) 4,695
Financing activities
Interest paid (921) (686)
Dividends paid (10,527) (10,227)
Purchase of own shares for treasury (6) -
Share issue proceeds - 289
Loan repayment (394) -
Net cash used in financing activities (11,848) (10,624)
(Decrease)/increase in cash and cash equivalents (13,708) 4,935
Analysis of changes in cash and cash equivalents during the period
Opening balance 12,267 2,855
Effect of exchange rate fluctuations on cash held 227 22
(Decrease)/increase in cash as above (13,708) 4,935
Closing balance (1,214) 7,812
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements (unaudited)
1. Accounting policies
Basis of preparation. The condensed financial statements have been prepared in
accordance with Financial Reporting Standard 104 'Interim Financial Reporting'
and with the Statement of Recommended Practice for 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts', issued in July 2022.
They have also been prepared on a going concern basis and on the assumption
that status as an investment trust will be maintained.
The half yearly financial statements have been prepared using the same
accounting policies and methods of computation as the preceding annual
financial statements (year ended 31 January 2023), which were prepared in
accordance with Financial Reporting Standard 102.
2. Income
Six months ended Six months ended
31 July 2023 31 July 2022
£'000 £'000
Income from investments
UK dividend income 6,983 8,348
Overseas dividends 5,642 4,512
Stock dividends 432 -
13,057 12,860
Other income
Income on derivatives 684 1,127
Interest income 35 2
719 1,129
Total income 13,776 13,989
3. Taxation
The taxation charge for the period, and the comparative period, represents
withholding tax suffered on overseas dividend income.
4. Ordinary dividends on equity shares
Six months ended Six months ended
31 July 2023 31 July 2022
£'000 £'000
Third interim dividend 2023 of 3.00p (2022 - 3.00p) 4,448 4,445
Final dividend 2023 of 4.10p (2022 - 3.90p) 6,079 5,782
10,527 10,227
A first interim dividend in respect of the year ending 31 January 2024 of
3.20p per Ordinary share (2023 - 3.00p) was paid on 25 August 2023 to
shareholders on the register on 4 August 2023. The ex-dividend date was 3
August 2023.
5. Returns per share
Six months ended Six months ended
31 July 2023 31 July 2022
p p
Revenue return 8.25 8.54
Capital return 4.29 (11.66)
Total return 12.54 (3.12)
The returns per share are based on the following:
Six months ended Six months ended
31 July 2023 31 July 2022
£'000 £'000
Revenue return 12,225 12,667
Capital return 6,369 (17,295)
Total return 18,594 (4,628)
Weighted average number of Ordinary shares 148,264,249 148,248,095
6. Capital reserves
The capital reserve reflected in the Condensed Statement of Financial Position
at 31 July 2023 includes gains of £75,872,000 (31 January 2023 - gains of
£54,080,000) which relate to the revaluation of investments held at the
reporting date.
7. Net asset value
Equity shareholders' funds have been calculated in accordance with the
provisions of Financial Reporting Standard 102. The analysis of equity
shareholders' funds on the face of the Condensed Statement of Financial
Position does not reflect the rights under the Articles of Association of the
Ordinary shareholders on a return of assets. These rights are reflected in the
net asset value and the net asset value per share attributable to Ordinary
shareholders at the period end, adjusted to reflect the deduction of the Loan
Notes at par. A reconciliation between the two sets of figures is as follows:
31 July 2023 31 January 2023
Net assets attributable (£'000) 456,610 448,605
Number of Ordinary shares in issue at the period end(A) 148,242,615 148,264,670
Net asset value per Ordinary share 308.02p 302.57p
(A) Excluding shares held in treasury
31 July 2023 31 January 2023
Adjusted net assets £'000 £'000
Net assets attributable (as above) 456,610 448,605
Unamortised Loan Notes issue expenses (258) (262)
Adjusted net assets attributable 456,352 448,343
Number of Ordinary shares in issue at the period end(A) 148,242,615 148,264,670
Adjusted net asset value per Ordinary share 307.84p 302.39p
(A) Excluding shares held in treasury.
31 July 2023 31 January 2023
Net assets - debt at fair value £'000 £'000
Net assets attributable 456,610 448,605
Amortised cost Loan Notes 29,742 29,738
Market value Loan Notes (23,577) (29,393)
Net assets attributable 462,775 448,950
Number of Ordinary shares in issue at the period end(A) 148,242,615 148,264,670
Net asset value per Ordinary share - debt at fair value 312.17p 302.80p
(A) Excluding shares held in treasury.
8. Transaction costs
During the period expenses were incurred in acquiring or disposing of
investments classified as fair value through profit or loss. These have been
expensed through capital and are included within gains/(losses) on investments
in the Condensed Statement of Comprehensive Income. The total costs were as
follows:
Six months ended Six months ended
31 July 2023 31 July 2022
£'000 £'000
Purchases 151 146
Sales 25 23
176 169
9. Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following classifications:
Level 1: unadjusted quoted prices in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are
observable (ie developed using market data) for the asset or liability, either
directly or indirectly.
Level 3: inputs are unobservable (ie for which market data is unavailable) for
the asset or liability.
The financial assets and liabilities measured at fair value in the Condensed
Statement of Financial Position are grouped into the fair value hierarchy at
the reporting date as follows:
Level 1 Level 2 Level 3 Total
As at 31 July 2023 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 497,842 - - 497,842
Total 497,842 - - 497,842
Level 1 Level 2 Level 3 Total
As at 31 January 2023 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 478,895 - - 478,895
Total 478,895 - - 478,895
a) Quoted equities. The fair value of the Company's investments in quoted
equities has been determined by reference to their quoted bid prices at the
reporting date. Quoted equities included in Fair Value Level 1 are actively
traded on recognised stock exchanges.
10. Analysis of changes in net debt
At Currency Non-cash At
31 January 2023 differences Cash flows movements 31 July 2023
£'000 £'000 £'000 £'000 £'000
Cash and cash equivalents/(bank overdraft) 12,267 227 (13,708) - (1,214)
Debt due within one year (13,762) 43 351 - (13,368)
Debt due after more than one year (29,738) - - (4) (29,742)
(31,233) 270 (13,357) (4) (44,324)
At Currency Non-cash At
31 January 2022 differences Cash flows movements 31 July 2022
Analysis of changes in net debt £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 2,855 22 4,935 - 7,812
Debt due within one year (13,034) (37) - - (13,071)
Debt due after more than one year (29,731) - - (3) (29,734)
(39,910) (15) 4,935 (3) (34,993)
A statement reconciling the movement in net funds to the net cash flow has not
been presented as there are no differences from the above analysis.
11. Transactions with the Manager
The Company has an agreement with the abrdn Fund Managers Limited (the
"Manager") for the provision of investment management, secretarial, accounting
and administration and promotional activity services.
The management fee is calculated and charged, on a monthly basis, at 0.45% per
annum on the first £225 million, 0.35% per annum on the next £200 million
and 0.25% per annum on amounts over £425 million of the net assets of the
Company, with debt at par and excluding commonly managed funds. The management
fee is chargeable 40% to revenue and 60% to capital. During the period
£879,000 (31 July 2022 - £870,000) of investment management fees were
payable to the Manager, with a balance of £291,000 (31 July 2022 - £430,000)
being due at the period end. There were no commonly managed funds held in the
portfolio during the six months to 31 July 2023 (2022 - none).
The management agreement may be terminated by either party on not less than
six months' written notice. On termination by the Company on less than the
agreed notice period the Manager would be entitled to receive fees which would
otherwise have been due up to that date.
The Manager also receives a separate promotional activities fee which is based
on a current annual amount of £250,000 plus VAT payable quarterly in arrears.
During the period £125,000 plus VAT (31 July 2022 - £121,000 plus VAT) of
fees were payable to the Manager, with a balance of £83,000 plus VAT (31 July
2022 - £81,000 plus VAT) being due at the period end.
12. Segmental information
The Company is engaged in a single segment of business, which is to invest
mainly in equity securities. All of the Company's activities are interrelated,
and each activity is dependent on the others. Accordingly, all significant
operating decisions are based on the Company as one segment.
13. Half Yearly Financial Report
The financial information contained in this Half Yearly Financial Report does
not constitute statutory accounts as defined in Sections 434 - 436 of the
Companies Act 2006. The financial information for the six months ended 31 July
2023 and 31 July 2022 has not been audited.
The information for the year ended 31 January 2023 has been extracted from the
latest published audited financial statements which have been filed with the
Registrar of Companies. The report of the auditor on those accounts contained
no qualification or statement under Section 498 of the Companies Act 2006.
14. Approval
This Half Yearly Financial Report was approved by the Board on 21 September
2023.
Alternative Performance Measures ("APMs")
Alternative performance measures are numerical measures of the Company's
current, historical or future performance, financial position or cash flows,
other than financial measures defined or specified in the applicable financial
framework. The Company's applicable financial framework includes FRS 102 and
the AIC SORP. The Directors assess the Company's performance against a range
of criteria which are viewed as particularly relevant for closed-end
investment companies.
Discount to net asset value per share with debt at fair value
The (discount)/premium is the amount by which the share price is lower than
the net asset value per share with debt at fair value, expressed as a
percentage of the net asset value with debt at fair value.
31 July 2023 31 January 2023
Share price (p) a 286.00p 294.00p
NAV per Ordinary share (p) b 312.17p 302.80p
Discount (a-b)/a 8.4% 2.9%
Dividend yield
Dividend yield is calculated using the Company's historic annual dividend per
Ordinary share divided by the share price, expressed as a percentage.
31 July 2023 31 January 2023
Annual dividend per Ordinary share (p) a 13.10p 13.10p
Share price (p) b 286.00p 294.00p
Dividend yield a/b 4.6% 4.5%
Net gearing
Net gearing measures total borrowings less cash and cash equivalents divided
by shareholders' funds, expressed as a percentage. Under AIC reporting
guidance cash and cash equivalents includes net amounts due to and from
brokers at the period end as well as cash and short term deposits.
31 July 2023 31 January 2023
Borrowings (£'000) a 44,324 43,500
Cash (£'000) b - 12,267
Amounts due to brokers (£'000) c 57 649
Amounts due from brokers (£'000) d - -
Shareholders' funds (£'000) e 456,610 448,605
Net gearing (a-b+c-d)/e 9.7% 7.1%
Total return
NAV and share price total returns show how the NAV and share price has
performed over a period of time in percentage terms, taking into account both
capital returns and dividends paid to shareholders. Share price and NAV total
returns are monitored against open-ended and closed-ended competitors, and the
Reference Index, respectively.
Share
Six months ended 31 July 2023 NAV Price
Opening at 1 February 2023 a 302.8p 294.0p
Closing at 31 July 2023 b 312.2p 286.0p
Price movements c=(b/a)-1 +3.1% (2.7)%
Dividend re-investment(A) d +2.4% +2.3%
Total return c+d +5.5% (0.4)%
Share
Year ended 31 January 2023 NAV Price
Opening at 1 February 2022 a 309.0p 310.0p
Closing at 31 January 2023 b 302.8p 294.0p
Price movements c=(b/a)-1 (2.0)% (5.2)%
Dividend re-investment(A) d +4.4% +4.3%
Total return c+d +2.4% (0.9)%
(A) NAV total return involves investing the net dividend in the NAV of the
Company with debt at fair value on the date on which that dividend goes
ex-dividend. Share price total return involves reinvesting the net dividend in
the share price of the Company on the date on which that dividend goes
ex-dividend.
By order of the Board
abrdn Holdings Limited
Company Secretary
21 September 2023
Please note that past performance is not necessarily a guide to the future and
the value of investments and the income from them may fall as well as rise.
Investors may not get back the amount they originally invested
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