Half-year Report
19/11/2024 07:00
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RNS Number : 6883M Edinburgh Investment Trust PLC 19 November 2024
The Edinburgh Investment Trust plc
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS TO 30 SEPTEMBER 2024
19 November 2024 - The Directors of the Edinburgh Investment Trust plc ("the
Company") have today announced the half year results for the six-month period
ended 30 September 2024.
Highlights
· Net asset value ("NAV") per share (with debt at fair value) on a
total return basis increased by 8.3%, exceeding the 6.1% return of the FTSE
All-Share Index. The share price total return was 10.8%
· First interim dividend declared of 6.9p per share, a 3.0%
increase on the 6.7p per share dividend paid at the same stage last year
· Net gearing (debt at fair value) at 30 September 2024 of 2.1%,
compared with 3.1% at 31 March 2024 and 4.1% at this time last year
· The share price discount to NAV narrowed to 9.7% from 11.5% over
the six months.
Elisabeth Stheeman, Chair, said: "The majority of the NAV outperformance has
come from stock selection. More generally, over one, three, five and ten
years, the financial performance of your Company has been strong: both in
absolute terms and compared against the FTSE All-Share Index, and both in NAV
and share price terms.
"The Company's shares continue to trade at a discount, which has narrowed
slightly. Over the period we bought back 2% of the Company's shares to help
manage the volatility of the discount and enhance NAV for shareholders.
"In addition to the AGM, we recently hosted a popular event for retail
investors, with videos of the day's presentations available on the Company's
website. Other promotional activities are also underway.
"With Imran and Emily's feet firmly under their Edinburgh Investment Trust
desks, and with investment returns remaining among the best in the Company's
sector, we believe we are building on the Company's reputation as a 'core'
equity investment for savers in the UK and beyond. With a strong management
team and a repeatable investment process, together with the Board's other
initiatives noted above, we are confident that we can make further strides
forward in the years ahead."
Imran Sattar, Portfolio Manager, said: "As Emily and I complete our first full
year managing your Company, we would like to remind you that we take a total
return approach to meet the Company's investment objectives, identifying and
investing in businesses we expect to deliver a combination of capital and
income growth.
"The UK market performed solidly with UK consumer exposed names generally
performing strongly. The total return for the portfolio over the reporting
period was pleasingly positive, with the NAV rising by 8.3% and the share
price up 10.8% - both ahead of our benchmark FTSE All-Share Index.
"After strong performances from NatWest and Tesco, the most significant stock
contributor was Baltic Classifieds, the leading online classifieds platform in
eastern Europe.
"Stock detractors Rentokil and Spirax, have suffered, we believe, temporary
setbacks in growth and execution.
"The biggest transactions were additions to attractive long-term growth
opportunities in the portfolio, including London Stock Exchange Group,
outsourced caterer Compass and insurance sector data supplier Verisk.
"Post budget, UK consumers can plan their finances with greater certainty.
Political stability combined with lower levels of inflation should promote
higher levels of corporate investment. We are finding many opportunities to
invest in high quality businesses in the UK market at attractive valuations.
While keeping an eye on the macroeconomic outlook, we remain focused on
bottom-up stock selection and constructing a diversified portfolio."
ENDS
Enquiries
Liontrust Fund Partners LLP +44 20 3908 8822
James Mowat
james.mowat@liontrust.co.uk (mailto:james.mowat@liontrust.co.uk)
Investec Bank plc +44 20 7597 4000
Tom Skinner
Montfort Communications
Gay Collins +44 7798 626282
Shireen Farhana +44 7757 299250
EIT@montfort.london (mailto:EIT@montfort.london)
NSM Funds (UK) Limited +44 20 3697 5772
(Company Secretary)
Brian Smith
Ciara McKillop
eit@nsm.group (mailto:eit@nsm.group)
Notes to editors
About the Edinburgh Investment Trust plc
Founded over 130 years ago, the Edinburgh Investment Trust plc is listed on
the London Stock Exchange and is a member of the FTSE 250 index. It invests
primarily in a portfolio of UK listed shares and has net assets of
approximately £1.2 billion. The Company's twin investment objectives for the
long term are to outperform the FTSE All-Share index on a Net Asset Value
(NAV) basis and to produce dividend growth in excess of the rate of UK
inflation.
The Edinburgh Investment Trust plc
HALF-YEARLY FINANCIAL REPORT
SIX MONTHS TO 30 SEPTEMBER 2024
Overview / Investment Objective
£1,186m
NET ASSETS (2023: £1,122M)
750.00p
SHARE PRICE (2023: 668.00P)
(9.7)%
DISCOUNT* (2023: (8.7)%)
2.1%
GEARING (NET)* (2023: 4.1%)
*Alternative Performance Measures as defined in the interim report.
The Edinburgh Investment Trust plc ('The Company') is an investment trust
whose investment objective is to invest primarily in UK securities with the
long-term objective of achieving:
1. an increase of the Net Asset Value per share in excess of the growth in
the FTSE All-Share Index; and
2. growth in dividends per share in excess of the rate of UK inflation.
The Company will generally invest in companies quoted on a recognised stock
exchange in the UK. The Company may also invest up to 20% of the portfolio in
securities listed on stock exchanges outside the UK. The portfolio is selected
on the basis of assessment of fundamental value of individual securities and
is not structured on the basis of industry weightings.
Nature of the Company
The Company is a public listed Investment Company whose shares are traded on
the London Stock Exchange ('LSE'). The business of the Company consists of
investing the pooled funds of its shareholders, according to a specified
investment objective and policy (set out on page 15 of the Company's 2024
Annual Financial Report), with the aim of spreading investment risk and
generating a return for shareholders.
The Company uses borrowing to enhance returns to shareholders. This increases
the risk to shareholders should the value of investments fall.
The Company has contracted an external manager, Liontrust Fund Partners LLP
('LFP' or the 'Manager'), as Alternative Investment Fund Manager ('AIFM') to
manage its investments. Other administrative functions are contracted to
external services providers. The Company has a Board of non-executive
directors who oversee and monitor the activities of the Manager and other
service providers on behalf of shareholders and ensure that the investment
objective and policy are adhered to. The Company has no employees.
The Company's ordinary shares qualify as mainstream investment products
suitable for promotion to retail investors. The Company's ordinary shares are
eligible for investment in an ISA.
Strategic Report / Financial Information and Performance Statistics
Six months to
30 September
2024
Total Return((1)(3)(4)) (all with dividends reinvested) % Change
Net asset value((1)) (NAV) - debt at fair value +8.3
Share price((2)) +10.8
FTSE All-Share Index((2)) +6.1
The Company's benchmark is the FTSE All-Share Index.
At 30 September At 31 March
Capital Return((1)(4)) 2024 2024 % Change
Net asset value - debt at fair value 830.39p 779.97p +6.5
Share price((2)) 750.00p 690.00p +8.7
FTSE All-Share Index((2)) 4,511.00 4,338.05 +4.0
Discount((1)(3)(4)) - debt at fair value (9.7)% (11.5)%
Gearing (debt at fair value)((1)(3)(4)) - gross gearing 5.9% 6.2%
- net gearing 2.1% 3.1%
Six months to Six months to
30 September 30 September
Revenue Return and Dividends((3)) 2024 2023 % Change
Revenue return per ordinary share 13.08p 11.54p +13.3
First interim dividend((5)) 6.90p 6.70p +3.0
Consumer Price Index((2)(4)) - annual change 1.7% 6.7%
Notes:
(1) These terms are defined in the Glossary of Terms and Alternative
Performance Measures. NAV with debt at fair value is widely used by the
investment company sector for the reporting of performance, premium or
discount, gearing and ongoing charges. Further details are provided in the
Alternative Performance Measures on pages 84 to 87 of the Company's 2024
Annual Financial Report.
(2) Source: LSEG Data & Analytics.
(3) Key Performance Indicator.
(4) Alternative Performance Measures.
(5) Dividends declared in respect of the financial year.
Strategic Report / Chair's Statement
ELISABETH STHEEMAN / CHAIR
PERFORMANCE
Your Company has delivered a Net Asset Value ("NAV") total return of 8.3% over
the period and a share price return of 10.8%. These compare with 6.1% for the
comparator FTSE All-Share Index. The share price return was higher than the
NAV return, as the discount narrowed. I discuss the discount, and how we are
addressing it, below. The Board declared a first interim dividend of 6.90p per
share in October this year, up 3.0% from 6.70p at the equivalent point last
year and exceeding CPI inflation of 1.7%.
The majority of the NAV outperformance has come, as we would expect, from
stock selection. The most significant contributions came from NatWest, Tesco,
Baltic Classifieds and Auto Trader, all of which produced returns in excess of
20% over the period. The latter two are particularly welcome as they were
bought as part of the portfolio changes that Imran Sattar made upon becoming
your Portfolio Manager in February. Imran and the Deputy Portfolio Manager,
Emily Barnard, expand on the market backdrop and performance in their section
of this report.
Longer-term performance should be assessed since March 2020, the point at
which Liontrust's Global Fundamental team (led by Imran, and before him his
colleague James de Uphaugh) began managing the Company. Over these four and a
half years, the cumulative NAV total return is 103.8%, versus a rise in the
FTSE All-Share Index of 69.5%. The share price total return is 111.7%, ahead
of the NAV return as the discount has narrowed since March 2020. More
generally, over one, three, five and ten years, the financial performance of
your Company has been strong: both in absolute terms and compared against the
FTSE All-Share Index, and both in NAV and share price terms.
DIVIDEND
As outlined above, the Board declared a first interim dividend of 6.90p per
share in October this year, up 3.0% from 6.70p at the equivalent point last
year. Underlying this, these interim accounts record six-month income
comprising dividends and interest of £21.5m. This compares with £20.9m over
the same period last year. After deducting an allocation for expenses (mainly
investment management fees, interest on debt and other costs), net income for
this period is £19.6m (2023: £18.9m). As was the case last year, we expect
the level of dividends to shareholders to modestly exceed this level of income
- and we expect a similar outcome for the financial year as a whole. As a
Board we are comfortable with this position which will result in a small
reduction to our very substantial balance sheet reserves.
BORROWINGS
There have not been any changes to the debt profile of the Company. We
continue to operate with £120m of debt in nominal terms which is c.10% of
NAV. Net gearing measured at fair value is a more modest 2.1% of NAV - this is
a function of the fair value of the debt being lower than the par value, and
of the portfolio's cash balance. The Company's debt has an average of 23 years
to run and a blended cost of a fixed 2.4% per annum. This debt remains a
source of long-term competitive advantage, and helped boost NAV returns in
this period as the value of the portfolio rose.
SHARE PRICE DISCOUNT TO NAV
The Company's shares continue to trade at a discount. This narrowed slightly
over the period, moving from 11.5% to 9.7%. At the time of writing, it is
10.9%. In addition to the absolute level of the discount, we also monitor the
discount relative to peers, as well as against the Company's own history. Over
the period we bought back 2% of the Company's shares, buybacks should help
manage the volatility of the discount, and will enhance NAV for remaining
shareholders. In addition to share buybacks, we have other tools to help us
"crack the discount nut". These include further raising the profile of the
management team and their investment results and promotion of the Company
through a range of marketing initiatives.
MARKETING
We have recently hosted two important shareholder events: the Annual General
Meeting in Edinburgh in July and a popular presentation to retail investors in
central London in October. Thank you to all of our shareholders who took the
trouble to attend one or both of these events. Videos of these presentations
have since been posted to the Company's website. We will flag other events and
presentations on the website and via other media such as LinkedIn.
Shareholders can also subscribe to updates via the website, which is a quick
and easy way to ensure that you are up to date on all the Company's different
activities.
Other promotional activities are also underway. For example, some may have
seen our stand at an Association of Investment Companies ("AIC") showcase
event in London in October, seen one of several national press articles, or
heard me speaking about your Company on the Money Makers podcast this month.
OUTLOOK
With Imran and Emily's feet firmly under their Edinburgh Investment Trust
desks, and with investment returns remaining among the best in the Company's
sector, we believe we are building on the Company's reputation as a 'core'
equity investment for savers in the UK and beyond. Stock markets and
investment performance have been helpful of late, and the future will not
always be as rosy as the current environment. Despite the pattern of recent
years, strong long-term investment returns are not typically associated with
the fairly straight 'bottom left to top right' lines on the Company's current
performance charts. Nonetheless, with a strong management team and a
repeatable investment process, together with the Board's other initiatives
noted above, we are confident that we can make further strides forward in the
years ahead.
ELISABETH STHEEMAN / Chair / 18 NOVEMBER 2024
Strategic Report / Portfolio Manager's Report
For the period ended 30 September 2024
IMRAN SATTAR /
PORTFOLIO MANAGER
MEETING THE COMPANY'S OBJECTIVES
As Emily and I complete our first full year as portfolio managers of your
Company, we would like to write a brief reminder of the process that remains
in place to meet the Company's investment objectives. In short, we take a
total return approach. To do this, we identify and invest in businesses that
we expect to deliver a combination of capital and income growth. We apply a
flexible investment process, with an open-minded approach to the 'type' of
investments held - for example, 'growth', 'value' and 'recovery' stocks.
Within the Company's investment portfolio, we aim to deliver a
well-diversified portfolio, both economically and thematically.
PERFORMANCE REVIEW
The UK market performed solidly over the period, with UK consumer exposed
names generally performing strongly. Behind these moves, UK consumers are in
much better shape than a few years ago and with the Budget out of the way can
plan their finances accordingly. The trajectory of interest rates also helps
the UK economy: there was a cut of a quarter point back in July, to which we
can now add another cut earlier this month. Perhaps even more importantly, the
inflation genie appears back in the bottle and businesses can plan for
investment and spending with greater certainty. This is critical.
The total return for the portfolio over the six-month reporting period was
pleasingly positive, with the NAV rising by 8.3% and the share price up 10.8%
- both ahead of our benchmark FTSE All-Share Index.
After strong performances from stalwart holdings NatWest and Tesco - both
benefitting from the improved consumer and interest rate positions noted above
- the most significant stock contributor to relative performance was the
position in Baltic Classifieds, the leading online classifieds platform in
eastern Europe. It delivered a strong set of results for the past year and
reported a strong growth outlook for the next.
The most significant stock detractor from relative performance was in
Rentokil, the pest control company, followed by Spirax, a steam and fluids
engineering company. Both are high quality businesses with strong long-term
growth potential and both have suffered, we believe, temporary setbacks in
growth and execution.
Rentokil is in the midst of integrating its largest acquisition to date - the
leading US termite company Terminix. This is a complex task. With Rentokil's
focus on the integration, this has enabled competitor Rollins to gain market
share. The highly experienced Rentokil management team are implementing an
improvement strategy, and we viewed the recent share price weakness as a good
opportunity to increase the position in a company with attractive long-term
growth potential, after being hampered by some short-term execution issues.
PORTFOLIO ACTIVITY
The biggest transactions over the period were additions to some of the most
attractive long-term growth opportunities in the portfolio, including London
Stock Exchange Group, Compass (outsourced catering) and Verisk (data and
analytics supplier to the insurance sector). We also added to Rentokil as
noted above.
Elsewhere, notable transactions included new positions in Sage - a global
leader in accounting software - and Grainger, a UK leader in the growing build
to rent property sector. Sage has experienced a recent dip in organic revenue
growth. This 'miss' in growth has resulted in a much more reasonable valuation
multiple at which we have initiated a position. For Grainger, with
consistently strong demand for rental properties, alongside new energy
efficiency regulations coming into force, we think private rental landlords
will struggle and operators like Grainger stand to benefit.
Funding for these purchases has come mainly from reductions in stocks that
have performed well over extended periods, including Marks & Spencer,
Centrica and BAE Systems.
OUTLOOK
Across global markets, risks remain high. Multiple volatile geopolitical
situations exist, with one of the biggest uncertainties being whether the
recently announced stimulus measures in China will be sufficient to reignite
growth. The re-election of Donald Trump also increases the risk of global
trade wars. Closer to home things appear more sanguine. With Chancellor
Reeves' inaugural budget now in the past, UK consumers can plan their finances
with greater certainty and, in any event, they are in better shape compared
with a few years ago. We are also considering the increase in employer
National Insurance rates, which are a modest headwind for the more
domestically orientated holdings in the portfolio. That said, political
stability combined with lower levels of inflation should promote higher levels
of corporate investment. We are finding many opportunities to invest in high
quality businesses in the UK market at attractive valuations - both more UK
focused companies like Dunelm and Rightmove, and more global UK listed
companies such as Haleon and Compass. While keeping an eye on the
macroeconomic outlook, we remain focused on bottom-up stock selection and
constructing a diversified portfolio.
IMRAN SATTAR / Portfolio Manager
EMILY BARNARD / Deputy Portfolio Manager
18 NOVEMBER 2024
Strategic Report / Interim Management Report
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Directors consider that the Chair's
Statement and the Portfolio Manager's Report in this Half-Yearly Financial
Report provide details of the important events which have occurred during the
six months ended 30 September 2024 (the 'Period') and their impact on the
financial statements.
The following statements on principal and emerging risks and uncertainties,
related party transactions, going concern and the Directors' Statement of
Responsibility, together constitute the Interim Management Report of the
Company for the six months ended 30 September 2024. The outlook for the
Company for the remaining six months of the year to 31 March 2025 is discussed
in the Chair's Statement and the Portfolio Manager's Report.
Strategic Report / Principal and Emerging Risks and Uncertainties
The Board is responsible for the management of risks faced by the Company and
delegates this role to the Audit Committee (the "Committee"). The Committee,
with the assistance from the Manager, carries out, at least annually, a robust
assessment of principal and emerging risks and uncertainties and monitors the
risks on an ongoing basis.
The Company has a dynamic risk control summary in place, which includes a
description of each identified risk, the mitigating action taken, reporting
and disclosure to the Committee and an impact and risk likelihood rating. The
rating is given both pre and post mitigation. The information is then
displayed in matrix form which allows identification of key risks and
oversight of the effectiveness of internal processes and controls. A detailed
explanation of the principal and emerging risks and uncertainties facing the
Company can be found in the Company's most recent Annual Financial Report for
the year ended 31 March 2024, which is available on the Company's website at
www.edinburgh-investment-trust.co.uk
Since the publication of the 2024 Annual Financial Report on 28 May 2024,
there continues to be increased risk levels within the global economy as a
result of emerging geopolitical factors that may translate into greater stock
market risk, as well as heightened macro-economic changes in inflation and
interest rates, the ever-evolving global regulatory and trade environments and
a risk of re-emergence of a global pandemic. Geopolitical factors include the
continuing war in Ukraine, the conflict in Israel and Gaza, political
elections in many countries and global supply chain issues.
The Board continues to monitor these situations closely and has been in
regular contact with the Manager and the Company's other service providers to
assess and mitigate the impact on the Company's investment objectives,
investment portfolio and shareholders.
Otherwise, in the view of the Board, the Company's principal risks and
uncertainties are substantially unchanged from the previous year end and are
as much applicable to the remaining six months of the financial year, as they
were to the six months under review.
Strategic Report / Investments in Order of Valuation
AS AT 30 SEPTEMBER 2024
UK LISTED ORDINARY SHARES UNLESS STATED OTHERWISE
Value % of
Investment Sector £'000 Portfolio
Shell Oil, Gas and Coal 86,746 6.9
Unilever Personal Care, Drug and Grocery Stores 71,097 5.7
Compass Consumer Services 61,801 4.9
Tesco Personal Care, Drug and Grocery Stores 56,467 4.5
Dunelm Retailers 52,449 4.2
GSK Pharmaceuticals and Biotechnology 49,185 3.9
AstraZeneca Pharmaceuticals and Biotechnology 45,959 3.7
NatWest Banks 45,679 3.6
Haleon Pharmaceuticals and Biotechnology 45,544 3.6
Whitbread Travel and Leisure 45,089 3.6
TOP TEN HOLDINGS 560,016 44.6
London Stock Exchange Group Finance and Credit Services 44,023 3.5
Verisk - US Listed Industrial Support Services 40,501 3.2
Auto Trader Software and Computer Services 40,333 3.2
Anglo American Industrial Metals and Mining 34,517 2.8
Spirax Industrial Engineering 33,756 2.7
Rentokil Industrial Support Services 33,076 2.6
Greggs Personal Care, Drug and Grocery Stores 32,606 2.6
Admiral Non-Life Insurance 30,862 2.5
Baltic Classifieds Software and Computer Services 26,119 2.1
HSBC Banks 25,707 2.0
TOP TWENTY HOLDINGS 901,516 71.8
Rotork Electronic and Electrical Equipment 24,352 1.9
ConvaTec Medical Equipment and Services 20,953 1.7
BAE Systems Aerospace and Defence 20,800 1.7
Lloyds Bank Banks 19,984 1.6
Ashtead Industrial Transportation 19,969 1.6
Diploma Industrial Support Services 19,885 1.6
Centrica Gas, Water and Multi-Utilities 19,854 1.6
Halma Electronic and Electrical Equipment 18,878 1.5
BP Oil, Gas and Coal 17,686 1.4
RELX Media 16,180 1.3
TOP THIRTY HOLDINGS 1,100,057 87.7
Howden Joinery Retailers 15,890 1.3
AJ Bell Investment Banking and Brokerage Services 15,539 1.2
Rightmove Real Estate Investment and Services 14,964 1.2
KONE - Finnish Listed Industrial Engineering 14,823 1.2
Sainsbury's Personal Care, Drug and Grocery Stores 14,240 1.1
3i Investment Banking and Brokerage Services 13,759 1.1
Serco Industrial Support Services 11,238 0.9
QinetiQ Aerospace and Defence 10,079 0.8
easyJet Travel and Leisure 9,580 0.8
Thermo Fisher Scientific - US Listed Medical Equipment and Services 7,218 0.6
TOP FORTY HOLDINGS 1,227,387 97.9
Sage Software and Computer Services 6,848 0.5
SSE Electricity 6,253 0.5
LondonMetric Property Real Estate Investment Trusts 5,673 0.5
Grainger Real Estate Investment and Services 3,914 0.3
Intel - US Listed Technology Hardware and Equipment 3,242 0.3
Eurovestech (UQ) Investment Banking and Brokerage Services - -
Raven Property (S) - Preference shares Real Estate Investment and Services - -
TOTAL HOLDINGS 47 (31 March 2024: 52) 1,253,317 100.0
UQ - Unquoted Investment
S - Delisted
Governance / Going Concern, Related Party Transactions and Statement of
Directors' Responsibilities
IN RESPECT OF THE PREPARATION OF THE HALF-YEARLY FINANCIAL REPORT
GOING CONCERN
This Half-Yearly Financial Report has been prepared on a going concern basis.
The Directors consider that this is the appropriate basis as the Company has
adequate resources to continue in operational existence for the foreseeable
future being at least twelve months from the date of this report. In
considering this, the Directors have reviewed the Company's investment
objective and capital structure. The Directors considered the diversified
portfolio of readily realisable securities which can be used to meet funding
commitments, the long-term nature and obligations of the Unsecured Senior Loan
Notes, and the ability of the Company to meet all its liabilities and ongoing
expenses from its assets and revenue. The Directors also considered revenue
forecasts for the forthcoming year and future dividend payments and
accumulated revenue reserves in concluding that the going concern basis is
appropriate.
RELATED PARTY TRANSACTIONS
Under UK Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law) and in accordance with the definition provided by Listing Rule
11.1.4, the Company has identified the Directors as related parties. No other
related parties have been identified. No transactions with related parties
have taken place which have materially affected the financial position or the
performance of the Company.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Half-Yearly Financial Report
using accounting policies consistent with applicable law and UK Accounting
Standards.
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements has been prepared in
accordance with the FRS 104 Interim Financial Reporting; and
- the Interim Management Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rules (DTR):
(a) DTR 4.2.7R, 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
(b) DTR 4.2.8R, being related party transactions that have taken place in
the first six months of the current 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.
This Half-Yearly Financial Report has not been audited or reviewed by the
Company's auditor.
Signed on behalf of the Board of Directors
ELISABETH STHEEMAN
CHAIR
18 NOVEMBER 2024
Financial Review / Condensed Income Statement
Six Months to 30 September 2024 Six Months to 30 September 2023
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at fair value - 75,896 75,896 - 21,802 21,802
Gains/(losses) on foreign exchange - 33 33 - (48) (48)
Income - note 2 21,481 702 22,183 20,883 - 20,883
21,481 76,631 98,112 20,883 21,754 42,637
Investment management fee - note 3 (701) (1,636) (2,337) (759) (1,772) (2,531)
Other expenses (637) (10) (647) (611) (5) (616)
Net return before finance costs and taxation 20,143 74,985 95,128 19,513 19,977 39,490
Finance costs - note 3 (454) (1,030) (1,484) (472) (1,006) (1,478)
Return on ordinary activities before taxation 19,689 73,955 93,644 19,041 18,971 38,012
Taxation - note 4 (56) - (56) (144) - (144)
Return on ordinary activities after taxation for the financial period 19,633 73,955 93,588 18,897 18,971 37,868
Return per ordinary share:
Basic 13.08p 49.25p 62.33p 11.54p 11.58p 23.12p
Weighted average number of ordinary shares in issue during the period 150,146,579 163,782,164
The total column of this statement represents the Company's profit and loss
account, prepared in accordance with UK Accounting Standards. The return after
taxation is the total comprehensive income and therefore no additional
statement of comprehensive income is presented. The supplementary revenue and
capital columns are presented for information purposes in accordance with the
Statement of Recommended Practice issued by the Association of Investment
Companies. All items in the above statement derive from continuing operations
of the Company. No operations were acquired or discontinued in the period.
Financial Review / Condensed Statement of Changes in Equity
Capital
Share Share Redemption Capital Revenue
Capital Premium Reserve Reserve(1) Reserve(1) Total
£'000 £'000 £'000 £'000 £'000 £'000
For the six months ended 30 September 2024 (Unaudited)
At 31 March 2024 48,917 10,394 24,676 1,004,498 46,562 1,135,047
Return on ordinary activities - - - 73,955 19,633 93,588
Dividends paid - note 5 - - - - (20,817) (20,817)
Shares bought back and held in treasury - - - (22,192) - (22,192)
At 30 September 2024 48,917 10,394 24,676 1,056,261 45,378 1,185,626
For the six months ended 30 September
2023 (Unaudited)
At 31 March 2023 48,917 10,394 24,676 1,003,989 51,368 1,139,344
Return on ordinary activities - - - 18,971 18,897 37,868
Dividends paid - note 5 - - - - (22,086) (22,086)
Shares bought back and held in treasury - - - (33,177) - (33,177)
At 30 September 2023 48,917 10,394 24,676 989,783 48,179 1,121,949
1 The revenue reserve and certain amounts of the capital reserve are
distributable by way of dividend.
Financial Review / Condensed Balance Sheet
30 September 31 March
2024 2024
(Unaudited) (Audited)
£'000 £'000
Non current assets
Investments held at fair value through profit or loss - note 7 1,253,317 1,206,563
Current assets
Debtors 6,768 19,878
Cash and cash equivalents 47,222 36,314
Total assets 1,307,307 1,262,755
Non current liabilities
Unsecured Senior Loan Notes (120,000) (120,000)
Current liabilities
Other payables (1,681) (7,708)
Total liabilities (121,681) (127,708)
Net assets 1,185,626 1,135,047
Equity
Called up share capital - note 6 48,917 48,917
Share premium account 10,394 10,394
Capital redemption reserve 24,676 24,676
Capital reserve 1,056,261 1,004,498
Revenue reserve 45,378 46,562
Total equity 1,185,626 1,135,047
Net asset value per ordinary share - note 8
Basic and diluted - debt at par value 798.41p 749.25p
Basic and diluted - debt at fair value 830.39p 779.97p
Number of 25p ordinary shares (excluding treasury) in issue at the period end 148,499,025 151,491,525
- note 6
ELISABETH STHEEMAN
CHAIR
18 NOVEMBER 2024
Signed on behalf of the Board of Directors
Company Number SC001836
The accompanying notes are an integral part of these financial statements.
Financial Review / Condensed Cash Flow Statement
Six months to 30 September
2024 2023
£'000 £'000
Cash flow from operating activities
Net return before finance costs and taxation 95,128 39,490
Tax on overseas income - note 4 (56) (144)
Adjustments for:
Purchase of investments (303,842) (89,511)
Sale of investments 335,020 119,464
31,178 29,953
Gains on investments held at fair value (75,896) (21,802)
Decrease in debtors 5,503 7,529
Decrease in creditors (30) (1,255)
Net cash inflow from operating activities 55,827 53,771
Cash flow from financing activities
Interest and commitment fees paid on bank facility (7) (3)
Interest paid on Unsecured Senior Loan Notes (1,477) (1,494)
Shares bought back and held in treasury (22,618) (32,243)
Dividends paid - note 5 (20,817) (22,086)
Net cash outflow from financing activities (44,919) (55,826)
Net increase/(decrease) in cash and cash equivalents 10,908 (2,055)
Cash and cash equivalents at start of the period 36,314 22,362
Cash and cash equivalents at the end of the period 47,222 20,307
Reconciliation of cash and cash equivalents to the Balance Sheet is as
follows:
Cash held at custodian 1,272 1,131
Goldman Sachs Sterling Liquid Reserves Fund 45,950 19,176
Cash and cash equivalents 47,222 20,307
Cash flow from operating activities includes:
Dividends received 26,617 27,237
Interest received 6 7
At 1 April Cash flows Non-cash At
2024 £'000 movement 30 September
£'000 £'000 2024
£'000
Reconciliation of net debt:
Cash and cash equivalents 36,314 10,908 - 47,222
Unsecured Senior Loan Notes (120,000) - - (120,000)
Total (83,686) 10,908 - (72,778)
Financial Review / Notes to the Condensed Financial Statements
1. ACCOUNTING POLICIES
The condensed financial statements have been prepared in accordance with
applicable United Kingdom Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS 102 The Financial
Reporting Standard applicable in the UK and Republic of Ireland, FRS 104
Interim Financial Reporting and the Statement of Recommended Practice
Financial Statements of Investment Trust Companies and Venture Capital Trusts,
issued by the Association of Investment Companies in July 2022. The financial
statements are issued on a going concern basis.
The accounting policies applied to these condensed financial statements are
consistent with those applied in the financial statements for the year ended
31 March 2024.
2. INCOME
Six Months to 30 September
2024 2023
(Unaudited) (Unaudited)
£'000 £'000
Income from investments:
UK dividends - ordinary 19,360 18,299
- special 732 147
Overseas dividends - ordinary 351 1,570
- special - 318
Interest from money market funds 1,032 542
21,475 20,876
Other income:
Deposit interest 6 7
Total income 21,481 20,883
Special dividends of £702,000 were recognised in capital during the period
(2023: £nil)
3. MANAGEMENT FEE AND FINANCE COSTS
The management fee arrangements are as reported in the Company's 2024 Annual
Financial Report, being 0.03750% per month on the first £500 million, falling
to 0.03333% on the next £500 million and 0.02917% on the remainder of the
market capitalisation of the Company's ordinary shares at each month end and
paid monthly in arrears (equivalent to an annualised fee of 0.45% on the first
£500m, 0.40% on the next £500m and 0.35% on the remainder).
The management fee and finance costs are allocated 30% to revenue and 70% to
capital.
4. TAXATION
Owing to the Company's status as an investment company no tax liability arises
on capital gains. The tax charge represents withholding tax suffered on
overseas income. A deferred tax asset is not recognised in respect of surplus
management expenses since the Directors believe that there will be no taxable
profits in the future against which these can be offset.
5. DIVIDENDS PAID ON ORDINARY SHARES
Six Months to 30 September
2024 2023
(Unaudited) (Unaudited)
Pence £'000 Pence £'000
Third interim 6.90 10,429 6.70 11,050
Final 6.90 10,388 6.70 11,036
Total paid 13.80 20,817 13.40 22,086
The first interim dividend of 6.90p per ordinary share for the year ending 31
March 2025 (2024: 6.70p) will be paid on 22 November 2024 to shareholders on
the register on 1 November 2024.
6. SHARE CAPITAL, INCLUDING MOVEMENTS
Share capital represents the total number of shares in issue, including
treasury shares.
Six Months to Year to
30 September 31 March
2024 2024
(Unaudited) (Audited)
Share capital £'000 £'000
Ordinary shares of 25p each 37,125 37,873
Treasury shares of 25p each 11,792 11,044
Total called up share capital 48,917 48,917
Six Months to Year to
30 September 31 March
2024 2024
Share capital (Unaudited) (Audited)
Number of ordinary shares in issue (excluding treasury):
Brought forward 151,491,525 165,476,525
Shares bought back into treasury (2,992,500) (13,985,000)
Carried forward 148,499,025 151,491,525
Number of shares held in treasury:
Brought forward 44,175,209 30,190,209
Shares bought back into treasury 2,992,500 13,985,000
Carried forward 47,167,709 44,175,209
Total ordinary shares 195,666,734 195,666,734
Subsequent to the period end, and as at 14 November 2024 (the latest
practicable date before publication of this Half-Yearly Financial Report),
1,750,000 ordinary shares were bought back at an average price of 737.12p.
7. CLASSIFICATION UNDER FAIR VALUE HIERARCHY
All except two of the Company's portfolio of investments are in the Level 1
category as defined in FRS 102 as amended for fair value hierarchy disclosures
(March 16). The three levels set out in this follow.
Level 1 - The unadjusted quoted price 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 (i.e. developed using market data) for the asset or liability,
either directly or indirectly.
Level 3 - Inputs are unobservable (i.e. for which market data is unavailable)
for the asset or liability.
Categorisation within the hierarchy is determined on the basis of the lowest
level input that is significant to the fair value measurement of each relevant
asset/liability. The valuation techniques used by the Company are explained in
the accounting policies note.
The fair value hierarchy analysis for investments and related forward currency
contracts held at fair value at the period end is as follows:
30 September 31 March
2024 2024
(Unaudited) (Audited)
£'000 £'000
Financial assets designated at fair value through profit or loss:
Level 1 1,253,317 1,206,563
Level 3 - -
Total for financial assets 1,253,317 1,206,563
There were two investments in Level 3 at the period end (31 March 2024: two
investments) totalling £nil (31 March 2024: £nil).
Eurovestech is an unquoted investment. The holding in Eurovestech did not
change during the period and the fair value was unchanged at £nil (31 March
2024: £nil).
Raven Property is a delisted investment. The issued preference shares were
suspended in March 2022 due to the sanctions on the company's Russian
businesses. At the period end, the shares remain delisted and recorded a fair
value of £nil (31 March 2024: £nil).
There was no change to the position size or fair value for either of the Level
3 holdings.
8. NET ASSET VALUE PER ORDINARY SHARE
Refer to Alternative Performance Measures for definitions of 'NAV - debt at
par' and 'NAV - debt at fair value'.
NAV - debt at par
The shareholders' funds and NAV per share in the Condensed Balance Sheet are
accounted for in accordance with accounting standards. The Unsecured Senior
Loan Notes were issued at and being recorded at their par value of £120m. A
reconciliation showing the NAV per share and Shareholders' funds using debt at
fair value is shown in the Alternative Performance Measures.
9. INVESTMENT TRUST STATUS
It is the intention of the Directors to conduct the affairs of the Company so
that it satisfies the conditions for approval as an investment trust company
within the meaning of section 1159 of the Corporation Tax Act 2010.
10. STATUS OF HALF-YEARLY FINANCIAL REPORT
The financial information contained within the financial statements in this
Half-Yearly Financial Report does not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006. The financial information
for the half years ended 30 September 2024 and 30 September 2023 has not been
audited. The figures and financial information for the year ended 31 March
2024 are extracted and abridged from the latest audited accounts and do not
constitute the statutory accounts for that year. Those accounts have been
delivered to the Registrar of Companies and included the Independent Auditor's
Report which was unqualified and did not contain a statement under section 498
of the Companies Act 2006. The Half-Yearly Financial Report was approved by
the Board of Directors on 18 November 2024.
By order of the Board
NSM Funds (UK) Limited
Company Secretary
18 November 2024
Other Information for Shareholders / Directors, Advisors and Principal Service
Providers
DIRECTORS
Elisabeth Stheeman, Chair
Aidan Lisser, Senior Independent Director
Steve Baldwin, Audit Committee Chair
Patrick Edwardson, Management Engagement Committee Chair
Annabel Tagoe-Bannerman
REGISTERED OFFICE
First Floor
9 Haymarket Square
Edinburgh EH3 8RY
COMPANY NUMBER
Registered in Scotland.
Number: SC1836
ALTERNATIVE INVESTMENT FUND MANAGER (MANAGER)
Liontrust Fund Partners LLP
2 Savoy Court
London WC2R 0EZ
020 7412 1700
COMPANY SECRETARY
NSM Funds (UK) Limited
4(th) Floor 46-48 James Street
London W1U 1EZ
020 3697 5772
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
DEPOSITARY AND CUSTODIAN
The Bank of New York Mellon (International) Limited
160 Queen Victoria Street
London EC4V 4LA
BANKER
The Bank of New York Mellon
160 Queen Victoria Street
London EC4V 4LA
CORPORATE BROKER
Investec Bank plc
30 Gresham Street
London EC2V 7QP
LEGAL ADVISOR
Dentons UK and Middle East LLP
First Floor
9 Haymarket Square
Edinburgh EH3 8RY
REGISTRAR
Link Group
10(th) Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
THE ASSOCIATION OF INVESTMENT COMPANIES
The Company is a member of the Association of Investment Companies. Contact
details are as follows:
020 7282 5555
Email: enquiries@theaic.co.uk
Website: www.theaic.co.uk
If you hold your shares directly and not through a Savings Scheme or ISA, and
have queries relating to your shareholding, you should contact the Registrars
on:
0371 664 0300.
Calls are charged at the standard geographic rate and will vary by provider.
From outside the UK: +44 371 664 0300. Calls from outside the United Kingdom
will be charged at the applicable international rate. Lines are open from
9.00am to 5.30pm, Monday to Friday (excluding UK Public Holidays).
Shareholders can also access their holding details via Link's website:
www.signalshares.com.
Link Group provide an on-line and telephone share dealing service to existing
shareholders who are not seeking advice on buying or selling. This service is
available at www.linksharedeal.com or
0371 664 0445.
Calls are charged at the standard geographic rate and will vary by provider.
From outside the UK: +44 371 664 0445. Calls from outside the UK will be
charged at the applicable international rate. Lines are open from 8.00am to
5.30pm, Monday to Friday (excluding UK Public Holidays).
Link Group is the business name of Link Market Services Limited.
Other Information for Shareholders / Glossary of Terms and Alternative
Performance Measures
ALTERNATIVE PERFORMANCE MEASURE (APM)
An APM is a measure of performance or financial position that is not defined
in applicable accounting standards and cannot be directly derived from the
financial statements. The calculations shown in the corresponding tables are
for the interim period ended 30 September 2024 and the year ended 31 March
2024. The APMs listed here are widely used in reporting within the investment
company sector and consequently aid comparability, providing useful additional
information.
BENCHMARK (OR BENCHMARK INDEX)
A standard against which performance can be measured, usually an index that
averages the performance of companies in a stock market or a segment of the
market. The benchmark most often referred to in this Half-Yearly Financial
Report is the FTSE All-Share Index.
BENCHMARK RETURN
Total return on the benchmark is on a mid-market value basis, assuming all
dividends received were reinvested, without transaction costs, into the shares
of the underlying companies at the time the shares were quoted ex-dividend.
DISCOUNT OR PREMIUM (APM)
Discount is a measure of the amount by which the mid-market price of an
investment company share is lower than the underlying net asset value of that
share. Conversely, Premium is a measure of the amount by which the mid-market
price of an investment company share is higher than the underlying net asset
value of that share. In this Half-Yearly Financial Report, the discount is
expressed as a percentage of the NAV per share with debt at fair value (see
reconciliation of NAV per share with debt at fair value below) and is
calculated according to the formula set out below. If the shares are trading
at a premium the result of the below calculation will be positive and if they
are trading at a discount, it will be negative.
30 September 31 March
2024 2024
Share price a 750.00p 690.00p
Net asset value per share - debt at market value b 830.39p 779.97p
Discount c = (a-b)/b (9.7)% (11.5)%
GEARING
The gearing percentage reflects the amount of borrowings that a company has
invested. This figure indicates the extra amount by which net assets, or
shareholders' funds, would move if the value of a company's investments were
to rise or fall. A positive percentage indicates the extent to which net
assets are geared; a nil gearing percentage, or 'nil', shows a company is
ungeared. A negative percentage indicates that a company is not fully invested
and is holding net cash as described below.
There are several methods of calculating gearing and the following has been
used in this report:
GROSS GEARING (APM)
This reflects the amount of gross borrowings in use by a company and takes no
account of any cash balances. It is based on gross borrowings as a percentage
of net assets.
30 September 31 March
2024 2024
£'000 £'000
Unsecured Senior Loan Notes - debt at fair value a 72,502 73,461
Gross borrowings 72,502 73,461
Net asset value - debt at fair value b 1,233,124 1,181,091
Gross gearing c = a/b 5.9% 6.2%
NET GEARING OR NET CASH (APM)
Net gearing reflects the amount of net borrowings invested, i.e. borrowings
less cash and cash equivalents (incl. investments in money market funds). It
is based on net borrowings as a percentage of net assets. Net cash reflects
the net exposure to cash and cash equivalents, as a percentage of net assets,
after any offset against total borrowings.
30 September 2024 31 March 2024
£'000 £'000
Unsecured Senior Loan Notes - debt at fair value 72,502 73,461
Less: cash and cash equivalents (47,222) (36,314)
Net borrowings a 25,280 37,147
Net asset value - debt at fair value b 1,233,124 1,181,586
Net gearing c = a/b 2.1% 3.1%
LEVERAGE
Leverage, for the purposes of the Alternative Investment Fund Managers
Directive (AIFMD), is not synonymous with gearing as defined above. In
addition to borrowings, it encompasses anything that increases the Company's
exposure, including foreign currency and exposure gained through derivatives.
Leverage expresses the Company's exposure as a ratio of the Company's net
asset value. Accordingly, if a Company's exposure was equal to its net assets
it would have leverage of 100%. Two methods of calculating such exposure are
set out in the AIFMD, gross and commitment. Under the gross method, exposure
represents the aggregate of all the Company's exposures other than cash
balances held in base currency and without any offsetting. The commitment
method takes into account hedging and other netting arrangements designed to
limit risk, offsetting them against the underlying exposure.
NET ASSET VALUE (NAV)
Also described as shareholders' funds, the NAV is the aggregate value of all
assets less all liabilities. Liabilities for this purpose include debt,
deducted at either par value or fair value as described in more detail below.
The NAV per share is calculated by dividing the net asset value by the number
of ordinary shares in issue (excluding shares held in treasury).
NET ASSET VALUE (NAV) - DEBT AT PAR
The NAV with debt at par recognises the value of the debt liability as the
nominal amount that will be repaid at maturity. For the £120m Unsecured
Senior Loan Notes, this recognises a liability of £120m. This is the basis
used in the preparation of the Condensed Balance Sheet.
NET ASSET VALUE (NAV) - DEBT AT FAIR VALUE
The fair value of each tranche of the £120m Unsecured Senior Loan Notes is
ascertained by the administrator by aggregating the discounted value of future
cashflows, being the contractual interest payments and the repayment of
capital at maturity as each falls due. The discount factor used for each
tranche is based on the market yield of UK Treasuries with similar maturity
dates adjusted to incorporate a credit spread.
The net asset value per share adjusted to include the Unsecured Senior Loan
Notes at fair value rather than at par is as follows:
30 September 2024 31 March 2024
(Unaudited) (Audited)
Shareholders' Shareholders'
NAV per share funds NAV per share funds
pence £'000 pence £'000
NAV - debt at par 798.41p 1,185,626 749.25p 1,135,047
Unsecured Senior Loan Notes - at par 80.81p 120,000 79.21p 120,000
Unsecured Senior Loan Notes - at fair value (48.83p) (72,502) (48.49p) (73,461)
NAV- debt at fair value 830.39p 1,233,124 779.97p 1,181,586
RETURN
The return generated in a period from the investments.
CAPITAL RETURN
Reflects the return on NAV, excluding any dividends reinvested.
TOTAL RETURN
Total return is the theoretical return to shareholders that measures the
combined effect of any dividends paid together with the rise or fall in the
share price or NAV. In this Half-Yearly Financial Report these return figures
have been sourced from Refinitiv who calculate returns on an industry
comparative basis.
TREASURY SHARES
Shares previously issued by a Company that have been bought back from
shareholders to be held by the Company for potential sale or cancellation at a
later date. Such shares are not capable of voting and carry no rights to
dividends.
NET ASSET VALUE TOTAL RETURN (APM)
Total return on net asset value per share, with debt at fair value, assuming
dividends paid by the Company were reinvested into the shares of the Company
at the NAV per share at the time the shares were quoted ex-dividend.
SHARE PRICE TOTAL RETURN (APM)
Total return to shareholders, on a mid-market price basis, assuming all
dividends received were reinvested, without transaction costs, into the shares
of the Company at the time the shares were quoted ex-dividend.
Net Asset Share
Six Months Ended 30 September 2024 Value Price
As at 30 September 2024 830.39p 750.00p
As at 31 March 2024 779.97p 690.00p
Change in period a 6.5% 8.7%
Impact of dividend reinvestments((1)) b 1.8% 2.1%
Total return for the period c = a+b 8.3% 10.8%
Net Asset Share
Year Ended 31 March 2024 Value Price
As at 31 March 2024 779.97p 690.00p
As at 31 Mar 2023 713.75p 660.00p
Change in year a 9.3% 4.5%
Impact of dividend reinvestments((1)) b 4.1% 4.4%
Total return for the year c = a+b 13.4% 8.9%
(1) Total dividends paid during the period of 13.80p (31 March 2024:
26.80p) reinvested at the NAV or share price on the ex-dividend date. NAV or
share price falls subsequent to the reinvestment date consequently further
reduce the returns, vice versa if the NAV or share price rises.
By order of the Board
NSM Funds (UK) Limited
Company Secretary
19 November 2024
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