REG - F&C Investment Trust - Half-year Report
01/08/2024 07:00
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RNS Number : 6608Y F&C Investment Trust PLC 01 August 2024
F&C INVESTMENT TRUST PLC
Unaudited Results for the half-year ended 30 June 2024
Legal Entity Identifier: 213800W6B18ZHTNG7371
Information disclosed in accordance with Disclosure Guidance and Transparency
Rule 4.2.2
1 August 2024
F&C Investment Trust PLC (the 'Company' or 'F&C') today announces its
results for the six months ended 30 June 2024.
· The net asset value ('NAV') total return was +13.2%. This was ahead
of the return from the benchmark, the FTSE All-World Index' which returned
+12.0%.
The NAV rose to 1,145.47p from 1,022.07p at 31 December 2023.
· The share price total return was +6.4%.
The share price increased to 1,012.0p from 962.0p at 31 December 2023.
· The Board aims to increase the total dividend again this year. The
first interim dividend of 3.6 pence for 2024 to be paid today, 1 August.
The Chairman, Beatrice Hollond, said:
"Equity markets delivered strong returns in the first half, led by technology
stocks which were driven by robust earnings growth and ongoing enthusiasm
relating to Artificial Intelligence ('AI'). I am pleased to report that the
Company produced a net asset value ('NAV') total return of +13.2%,
outperforming the return of +12.0% from our benchmark."
Commenting on the markets, Paul Niven, Fund Manager of F&C, said:
"Equity markets have had an excellent start to 2024, building upon their
strong returns delivered in late 2023. A number of the 'Magnificent Seven',
all of which we hold in our portfolio, were again stand out performers despite
rich valuations, still high interest rates and signs of fading US economic
exceptionalism.
"Concentration of stocks within the S&P 500 has surged to the highest
level since the turn of the century, with the Magnificent Seven now accounting
for over 30% of the index. However, recently, performance within the group has
been more mixed, with those geared to the AI theme leading.
"F&C remains underweight to the Magnificent Seven, gaining more
diversified exposure to the AI theme from holdings in Broadcom, Vertiv
Holdings, and Qualcomm. We delivered relative outperformance on our listed
holdings despite underweight positions in many of the US stocks which drove
the first half rally.
"Outside of the US, key market indices in Japan, Europe and the UK climbed to
new record highs as the rally broadened and global economic activity
recovered. Emerging Markets were the notable laggard as the Chinese economic
recovery continued to disappoint.
"Looking forward, while we remain uncertain of the unfolding economic
environment, we do expect that
performance within equities will broaden and that relative value will be an
important consideration for prospective returns.
"We have a relatively balanced approach within our portfolio between the
cheaper, but more cyclically exposed areas of the market, and the higher
growth, more expensive segments which have exciting prospects but appear fully
priced.
"A narrow market presents both opportunities and risks and we believe that a
diversified approach will, in due course, provide better returns, with lower
risk, for shareholders."
The full results statement is attached.
Past performance should not be seen as an indication of future performance.
The value of investments and income derived from them can go down as well as
up as a result of market or currency movements and investors may not get back
the original amount invested.
Contacts
Paul Niven - Fund Manager
020 3530 6396
Campbell Hood
campbell.hood@columbiathreadneedle.com
(mailto:campbell.hood@columbiathreadneedle.com)
07860 911 622
FTI Consulting
columbiathreadneedleuk@fticonsulting.com
(mailto:columbiathreadneedleuk@fticonsulting.com)
020 3727 1888
About FCIT:
· Founded in 1868 - the oldest collective investment trust
· A diversified portfolio provides exposure to most of the world's
stock markets, with exposure to over 400 individual companies across the globe
· Its aim is to generate long-term growth in capital and income by
investing primarily in an international portfolio of listed equities
CHAIRMAN'S STATEMENT
Equity markets delivered strong returns in the first half, led by technology
stocks which were driven by robust earnings growth and ongoing enthusiasm
relating to Artificial Intelligence ('AI'). I am pleased to report that the
Company produced a net asset value ('NAV') total return of +13.2%,
outperforming the return of +12.0% from our benchmark, the FTSE All-World
Index. There was a general widening in the discount level of investment trust
companies across the sector and the Company's discount moved out from 5.9% to
11.7%. Consequently, the return to shareholders of +6.4% lagged the NAV
return.
Our NAV per share ended the period at 1,145.47 pence compared with 1,022.07
pence at the end of 2023. The return from our investment portfolio, i.e.
before fees and other effects, of +12.2% exceeded the benchmark return, while
higher market interest rates reduced the fair value of our outstanding debt,
adding 0.4% to our NAV return. The Company's gearing (with debt at fair value)
fell from 6.3% at the start of the year to 4.9% at the end of the period.
In response to a widening in our discount we increased the scale of share
buybacks and bought back 10.2m of shares over the first half of the year. This
added approximately 0.2% to our NAV. The Board believes that the relatively
wide discount at which we ended the first half does not reflect the strength
of our investment proposition for shareholders and remains firmly committed to
the use of share buybacks where we see value. We note that our discount has
narrowed since the end of June. In addition to the use of share buybacks to
aid the management of our discount, we continue to pursue an active marketing
programme with the aim of broadening our current shareholder base.
Both Europe and the UK saw an encouraging fall in inflation rates over the
first half of the year. UK consumer price inflation fell from 4.0% in December
to 2.0% in May while, in June, the European Central Bank cut interest rates
for the first time since 2019. US inflation, however, has proved to be
'stickier' due to more resilient economic growth, with the US Federal Reserve
now expected to cut interest rates later and by less than previously forecast.
Sterling fell modestly, by 0.7%, against the US dollar in the first half of
2024. The return from our private equity investments was +6.0%. While it was
encouraging to see progress, these returns lagged gains from listed equities.
The near-term backdrop for private equity assets remains challenging,
particularly given rises in the cost of debt and a slow pace of deal flow.
Nonetheless, we have made good returns from our investments in this area over
longer periods and there are tentative signs that the environment for private
equity is now improving.
INCOME AND DIVIDENDS
We paid a third interim dividend of 3.4 pence per share for the year ended 31
December 2023 in February 2024 and a final dividend of 4.5 pence in May. Our
full year 2023 dividend of 14.7 pence per share was fully covered by earnings
of 15.83 pence per share and represented an increase of 8.9% on the previous
year.
Our net revenue return per share over the first six months of the year rose by
10.9% to 9.64 pence, compared to 8.69 pence over the corresponding period last
year. Although sterling was little changed against both the US Dollar and the
Euro in the first six months of 2024, it was trading at a higher average level
than in the first half of 2023 and this detracted £1.9m from the return.
Special dividends totalled £1.2m, down from £2.2m in the first half of 2023.
We expect that our earnings will again cover our full year dividend in 2024.
It remains the aspiration of the Board to continue the Company's track record
of delivering rises in dividends which exceed inflation over the long term and
we retain a substantial revenue reserve to help meet this objective if
required. We have declared a first interim dividend for the current year of
3.6 pence per share to be paid on 1 August 2024. The Board plans to deliver
another rise in our total dividend for this year, which will be the 54th
consecutive annual rise. We are also continuing our marketing efforts to
increase awareness of the benefits of investing in the Company and to attract
new investors.
THE BOARD
Tom Joy retired from the Board on 31 March this year after accepting an
opportunity to take on a new executive role which precluded him from
continuing as a Director of the Company. Tom made a significant contribution
since joining the Board in 2021 and we shall miss his considerable investment
knowledge and experience in global equity markets. I am delighted that Richard
Robinson joined the Board with effect from 3 May 2024. Richard has been the
Investment Director of the Paul Hamlyn Foundation since 2009 and was
previously Head of Charities & Foundations at Schroders plc. He has held a
number of senior positions at Rothschild Asset Management and is a former
director of JPMorgan Global Emerging Markets Income Trust plc and Aurora
Investment Trust plc.
OUTLOOK
While the fundamental backdrop is constructive and US recession has been
avoided, global equity markets, dominated by the US, continue to trade at
historically elevated valuation levels. Strong growth in earnings has
propelled most of the so-called "Magnificent Seven" group of stocks to new
highs but elevated valuations and market concentration remain a concern, with
optimistic earnings expectations presenting an additional challenge if
investment in AI fails to translate to sustained growth in earnings. Politics
will remain an area of focus for investors in 2024 and, while a Labour
government with a significant majority may present a more stable backdrop for
UK assets, the US and Europe face a period of political uncertainty in the
months ahead. This, in conjunction with signs of moderating US growth after a
strong period, presents some near-term risk for equity markets.
There remain grounds for optimism, however, including for international
equities that have struggled to beat the technology-heavy US market for many
years and which potentially stand to benefit from a broadening out of the
equity rally. Improving economic prospects and earlier interest rate cuts may
provide a near-term tailwind for European and UK equities, while corporate
governance reform means that Japan continues to look attractive from a
longer-term structural perspective. In addition, there are now signs of
progress (in terms of valuation uplifts and increased pace in realisation of
investments) in the private equity sector, helped by a pickup in merger and
acquisition activity, which should provide further support. Against this
background your Manager will continue to adopt a diversified approach and
remains focused on longer-term opportunities as they emerge.
Beatrice Hollond
Chairman
31 July 2024
FUND MANAGER'S REVIEW
Equity markets have had an excellent start to 2024, building upon their strong
returns delivered in late 2023. A number of the 'Magnificent Seven'
(comprising Alphabet +31.8%, Microsoft +20.4%, Amazon +28.4%, Apple +10.7%,
Nvidia +151.9%, Meta +44.1% and Tesla -20.4%), all of which we hold in our
portfolio, were again stand out performers despite rich valuations, still high
interest rates and signs of fading US economic exceptionalism. Outside of the
US, key market indices in Japan, Europe and the UK climbed to new record highs
as the rally broadened and global economic activity recovered. Emerging
Markets were the notable laggard as the Chinese economic recovery continued to
disappoint.
The first half of the year also served to remind investors that geopolitical
events continue to present risks to the relatively benign backdrop. Globally,
more voters than ever will head to the polls this year and rising geopolitical
tensions, notably in the Middle East, led commodity prices higher over the
period. US elections are likely to be a focal point for investors later this
year.
Contributors to total returns in first half of 2024 %
Portfolio return 12.2
Management fees (0.2)
Interest and other expenses (0.2)
Buybacks 0.2
Change in value of debt 0.4
Gearing/other 0.8
Net asset value total return* 13.2
Change in share price discount (6.8)
Share price total return 6.4
FTSE All-World total return 12.0
*Debt at market value
Source: Columbia Threadneedle/State Street
Concerns around inflation resurfaced and pushed government bond yields higher
during the first half of 2024. Indeed, market expectations for interest rate
cuts have been pushed out significantly since the end of last year, reflecting
a view that rates will need to be kept higher for longer following a series of
upside surprises to US inflation this year. Outside of the US, powerful
disinflationary forces continue to supress prices, prompting the first
interest rate cut from the European Central Bank in early June. However, the
more hawkish outlook for US monetary policy has done little to dampen positive
equity market sentiment, with developed markets rising strongly in the first
six months of the year.
With higher US yields over the period, sterling weakened modestly versus the
US dollar from 1.27 to 1.26, while the yen dropped to lows last seen in 1986,
having depreciated by 12.3% versus the US Dollar year-to-date despite market
intervention by the Japanese authorities.
Concentration of stocks within the S&P 500 has surged to the highest level
since the turn of the century, with the Magnificent Seven now accounting for
over 30% of the index. However, recently, performance within the group has
been more mixed. Those most geared towards the AI theme, including Nvidia and
Meta, have enjoyed the strongest performance year-to-date, whilst those most
exposed to China, namely Apple and Tesla, have suffered due to burgeoning
local competition and weak domestic demand resulting from China's sluggish
economic recovery and ongoing property crisis.
The Company maintains significant exposure to the AI theme via positions in
stocks such as Broadcom (+46.1%), Vertiv Holdings (+81.9%) and Qualcomm
(+40.2%) and we delivered relative outperformance on our listed holdings
despite underweight positions in many of the US stocks which drove the first
half rally.
Our US large cap growth strategy produced excellent performance over the
period, delivering a return of +25.7% versus the Russell 1000 Growth Index
return of +21.9%. Eli Lilly (+57.2%) contributed strongly to relative returns
as weight loss drugs Mounjaro and Zepbound continued to boost revenue and
profits. The strategy's sizable underweight to Apple was also additive, given
strong US market performance, following growing scrutiny from European
competition authorities and intensifying competition from local rivals in
China. Meta was another strong contributor, as the company delivered better
than expected results for the first quarter.
Within our US holdings the backdrop remained more challenging for lowly rated
value stocks over the period. While Barrow Hanley (+10.9%) and Columbia
Threadneedle (+9.8%) each generated returns which exceeded value indices, they
lagged the broader market. Our long-standing US value manager Barrow Hanley
generated good outperformance versus the value index (with the Russell 1000
Value Index gaining 7.6%), with positions in Vertiv Holdings and Broadcom each
benefitting from continued bullish sentiment surrounding AI stocks and
positive financial results. Vertiv - a leading supplier of cooling equipment,
power solutions and technology to data centers - has gained by over 250% in
the past year in response to a surge in spending on the digital infrastructure
necessary to support AI applications. The Company's US value mandate managed
by Columbia Threadneedle Investments also delivered outperformance against the
value index, with Qualcomm - a global leader in the development of
semiconductors and wireless chips - performing strongly. It gained 40.3% over
the first half.
Performance across our global strategies was mixed versus global comparators.
Global Focus (+18.6%) outperformed market indices, with Nvidia being a strong
contributor to relative performance. Indeed, Nvidia's revenues were up by 262%
year-on year in May, driven by huge growth in the demand for chips
manufactured specifically for the AI industry. The strategy also benefitted
from lesser known companies geared towards the AI theme, with potentially more
attractive valuations, such as Applied Materials (+54.6%), the largest US
maker of chip-making machinery. Global Income (+10.3%) and Global Enhanced
(+10.8%), both of which have a focus on companies with an attractive dividend
yield, performed broadly in-line with the global benchmark, while Global
Value, managed by Pyrford (+7.2%), disappointed. Here, under-exposure to the
Magnificent Seven group of stocks, notably Nvidia, Meta and Microsoft, and the
US market more broadly, detracted significantly. This negative impact more
than offset the positive effects on holdings in stocks such as KLA Corp
(+43.6%) and American Express (+25.4%).
Our European (including the UK) exposure (+10.4%) was ahead of benchmark
(which returned +6.5%). Novo Nordisk (+41.9%) - our largest European holding
in the strategy - emerged as one of the standout performers among European
mega cap stocks in the first half of this year, with excess returns attributed
to triple digit revenue growth from its weight-loss drug Wegovy in 2023. Our
position in Ryanair (-15.4%) detracted, as stocks in European airlines slumped
after ticket fare prices rose less than previously forecast. Despite reporting
a 34% rise in full-year profit after tax, delayed Boeing aeroplane deliveries
sent Ryanair's shares lower. Elsewhere, our Japanese holdings (+5.6%) produced
returns in-line with the local benchmark but behind the global index. In local
currency terms, this region was amongst the strongest performing areas
globally during the first half, with the Nikkei up 19.3% year-to-date.
However, weakness in the yen, which declined by 11.7% relative to sterling,
detracted from returns here. Disco Corp (+54.9%), the Japanese precision tools
maker for the semiconductor industry, was one of the strongest performing
holdings, while holdings in Tokio Marine (+52.4%) and NGK Spark Plug (+25.3%)
also performed strongly. Nonetheless, several holdings such as PAL Group
(-33.5%) and Matsumotokiyoshi Holdings (-22.0%) disappointed over the six
month period.
Our emerging markets strategy (+4.6%) performed poorly over the period,
lagging the emerging markets index due to weak performance delivery across a
small number of holdings. While there were strong returns from Indian holdings
such as Biocon (+41.5%), India's largest biopharmaceutical company, and Max
Healthcare (+37.9%), the private hospital chain, gains were offset against
weak performance from larger positions in AIA Group (-19.9%) and Jeronimo
Martins (-19.9%).
Our private equity exposure (+6.0%) lagged listed markets but showed positive
incremental progress despite persistently higher borrowing costs and a weak,
albeit improving, environment for exits. This modest performance from our
unlisted portfolio detracted from our returns relative to our benchmark over
the period, with the Company's listed portfolio, in aggregate, delivering
solid outperformance versus the broad market benchmark for the year thus far.
As noted previously, our private equity investments are long-term in nature
and we have, historically, enjoyed robust returns from our private equity
holdings compared to listed market equivalents. Furthermore, our holdings in
this area are, as with the rest of our portfolio, highly diversified across a
range of regions and sectors.
Our recent private equity commitments with Columbia Threadneedle Investments,
where we hold 7.7% of the total portfolio assets, rose in value by 3.6%, while
our older holdings overseen by Pantheon and HarbourVest rose by 7.1% following
a pick-up in distributions. The two Pantheon Future Growth programmes, with a
combined $360m of commitments, also rose in value, by 10.4%.
A further rise in market interest rates led to another reduction in the fair
value of our debt over the period. The ten-year gilt yield rose from just more
than 3.5% at the start of the year to just under 4.2% by the end of June. The
rise in market yields added 0.4% to our NAV return over the six months.
Furthermore, strong market performance meant gearing was additive,
contributing 0.8%.
CURRENT MARKET PERSPECTIVE
Recent equity market performance has been robust - inflation is trending
lower, cuts in interest rates are on the horizon, growth has been more
resilient than expected and earnings have surpassed expectations. Market
pricing now assigns a low probability to a recession and the industry
consensus expects a healthy growth in earnings for the S&P 500 in 2024.
However, with the ten largest stocks in the S&P 500 now accounting for
more than 35% of the market's total capitalisation, and almost 30% of its net
income, equity markets are vulnerable to slowing momentum in this segment of
the market. It is notable that the major winners of the broader AI theme, at
least so far, are the infrastructure vendors, or 'enablers.' This includes
cloud platform providers like Google, Microsoft and Amazon and graphics
processing unit (GPU) producers like Nvidia and others. AI is still at an
early stage of adoption overall and, while in the longer term there are likely
to be significant benefits, most companies today lack the foundational
building blocks that enable AI to generate value and productivity gains at
scale. Moreover, signs of a weaker US consumer, including a sharp drop in home
sales and an uptick in consumer delinquencies, and a potentially highly
consequential US presidential election in November, present additional
near-term risks for equity markets. Furthermore, if a 'soft' landing has been
achieved with interest rates at current levels, then markets will need to
reassess what constitutes a 'normal' policy rate going forward, which may well
be significantly higher than the pre-Covid period.
Looking forward, while a significant amount of positive news is already
priced-in for equities, the Company is well positioned to benefit from a
broadening of the rally driven by improving economic momentum outside of the
US. Our balanced approach within our portfolio across recognised styles,
including value, growth/quality and momentum, provides our shareholders with a
well-diversified, global equity investment portfolio that places the Company
in an excellent position to deliver on our performance objectives in the
future.
Paul Niven
Fund Manager
31 July 2024
Weightings, stock selection and performance in each investment portfolio
strategy and underlying geographic exposure versus index as at 30 June 2024
Investment portfolio strategy Our portfolio strategy weighting Underlying geographic exposure((1)) Benchmark weighting Our strategy performance in sterling Index performance in sterling
% % % six months to 30 June 2024 six months to 30 June 2024
% %
41.2 63.2 65.3 17.1 15.1
North America
8.4 19.2 15.0 10.4 6.5
Europe inc. UK
5.1 6.2 5.9 5.6 6.2
Japan
5.4 7.9 9.9 4.6 9.1
Emerging Markets
- 3.5 3.9 - 1.1
Developed Pacific
29.3 - - 11.7 12.0
Global Strategies((2))
10.6 - - 6.0 -
Private Equity((3))
Source: Columbia Threadneedle/State Street
((1)) Represents the geographic exposure of the portfolio, including
underlying exposures in private equity and fund holdings
((2)) The Global Strategies allocation consists of Global Income, Global
Value, Global Sustainable Opportunities and latterly Global Focus.
((3)) Includes the holdings in Schiehallion and Syncona.
UNAUDITED CONDENSED INCOME STATEMENT
Half year ended 30 June 2024 Half year ended 30 June 2023
Notes Revenue Capital Total Revenue Capital Total
£'000s £'000s £'000s £'000s £'000s £'000s
Gains on investments and derivatives - 611,228 611,228 - 176,352 176,352
Exchange (losses)/gains (322) 1,174 852 (506) (4,797) (5,303)
3 Income 64,061 - 64,061 58,420 - 58,420
4 Fees and other expenses (5,682) (6,768) (12,450) (5,086) (6,287) (11,373)
Net return before finance costs and taxation 58,057 605,634 663,691 52,828 165,268 218,096
4 Interest payable and similar charges (1,710) (5,131) (6,841) (1,702) (5,106) (6,808)
Net return on ordinary activities before taxation 56,347 600,503 656,850 51,126 160,162 211,288
5 Taxation on ordinary activities (7,704) (460) (8,164) (6,116) (543) (6,659)
6 Net return attributable to shareholders 48,643 600,043 648,686 45,010 159,619 204,629
6 Net return per share - basic (pence) 9.64 118.85 128.49 8.69 30.80 39.49
The total column is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
Capital Total
Share redemption Capital Revenue shareholders'
capital reserve reserves reserve funds
Notes Half year ended 30 June 2024 £'000s £'000s £'000s £'000s £'000s
Balance brought forward 140,455 122,307 4,664,438 107,287 5,034,487
31 December 2023
Movements during the half year ended 30 June 2024
11 Shares repurchased by the Company and held in treasury
- - (101,160) - (101,160)
7 Dividends paid - - - (58,010) (58,010)
Return attributable to shareholders - - 600,043 48,643 648,686
Balance carried forward 140,455 122,307 5,136,321 97,920 5,524,003
30 June 2024
Capital Total
Share redemption Capital Revenue shareholders'
capital reserve reserves reserve funds
Notes Half year ended 30 June 2023 £'000s £'000s £'000s £'000s £'000s
Balance brought forward
31 December 2022 140,455 122,307 4,289,599 97,464 4,649,825
Movements during the half year ended 30 June 2023
Shares repurchased by the Company and held in treasury
- - (13,213) - (13,213)
7 Dividends paid - - - (54,382) (54,382)
Return attributable to shareholders - - 159,619 45,010 204,629
Balance carried forward 140,455 122,307 4,436,005 88,092 4,786,859
30 June 2023
Capital redemption reserve £'000s Total shareholders' funds
Share capital Capital reserves Revenue reserve £'000s
£'000s £'000s £'000s
Notes Year ended 31 December 2023
Balance brought forward
31 December 2022 140,455 122,307 4,289,599 97,464 4,649,825
Movements during the year ended 31 December 2023
Shares repurchased by the Company and held in treasury - - (76,345) - (76,345)
7 Dividends paid - - - (71,837) (71,837)
Return attributable to shareholders - - 451,184 81,660 532,844
Balance carried forward 140,455 122,307 4,664,438 107,287 5,034,487
31 December 2023
UNAUDITED CONDENSED BALANCE SHEET
31 December 2023
Notes
30 June 2023 £'000s
30 June 2024
£'000s
£'000s
Fixed assets
8 Investments 5,995,998 5,092,930 5,451,521
Current assets
8 Investments - 98,332 79,357
Debtors 58,643 22,246 11,244
14 Cash and cash equivalents 109,274 208,493 87,170
Total current assets 167,917 329,071 177,771
Creditors: amounts falling due within one year
10 Other (59,728) (54,525) (13,836)
Total current liabilities (59,728) (54,525) (13,836)
Net current assets 108,189 274,546 163,935
Total assets less current liabilities 6,104,187 5,367,476 5,615,456
Creditors: amounts falling due after more than one year
9, 14 Loans (579,609) (580,042) (580,394)
9, 14 Debenture (575) (575) (575)
(580,184) (580,617) (580,969)
Net assets 5,524,003 4,786,859 5,034,487
Capital and reserves
11 Share capital 140,455 140,455 140,455
Capital redemption reserve 122,307 122,307 122,307
Capital reserves 5,163,321 4,436,005 4,664,438
Revenue reserve 97,920 88,092 107,287
12 Total shareholders' funds 5,524,003 4,786,859 5,034,487
12 Net asset value per ordinary share 1,105.66 926.04 987.56
- prior charges at nominal value (pence)
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
Half year ended Half year ended
30 June 30 June Year ended
2024 2023 31 December
2023
Notes £'000s £'000s £'000s
13 Cash flows from operating activities before dividends received and interest (17,350) (15,031) (25,774)
paid
Dividends received 59,825 54,895 98,937
Interest paid (6,866) (6,832) (13,842)
Cash flows from operating activities 35,609 33,032 59,321
Investing activities
Purchases of Investments (1,541,642) (2,226,716) (4,224,563)
Sales of Investments 1,666,308 2,212,566 4,155,297
Other capital charges and credits (41) (21) (63)
Cash flows from investing activities 124,625 (14,171) (69,329)
Cash flows before financing activities 160,234 18,861 (10,008)
Financing activities
Equity dividends paid (40,007) (36,807) (71,837)
Cash flows from share buybacks for treasury shares (98,190) (11,280) (73,645)
Cash flows from financing activities (138,197) (48,087) (145,482)
14 Net increase/(decrease) in cash and cash equivalents 22,037 (29,226) (155,490)
Cash and cash equivalents at the beginning of the period 87,170 243,836 243,836
14 Effect of movement in foreign exchange 67 (6,117) (1,176)
Cash and cash equivalents at the end of the 109,274 208,493 87,170
period
Represented by:
Cash at bank 86,095 108,453 39,827
Short term deposits 23,179 100,040 47,343
Cash and cash equivalents at the end of the 109,274 208,493 87,170
period
UNAUDITED NOTES ON THE CONDENSED ACCOUNTS
1 RESULTS
The results for the six months to 30 June 2024 and 30 June 2023 constitute
non-statutory accounts within the meaning of Section 434 of the Companies Act
2006. The latest published accounts which have been delivered to the Registrar
of Companies are for the year ended 31 December 2023; the report of the
Auditors thereon was unqualified and did not contain a statement under Section
498 of the Companies Act 2006. The condensed financial statements shown for
the year ended 31 December 2023 are an extract from those accounts.
2 ACCOUNTING POLICIES
(a) Basis of preparation
These condensed financial statements have been prepared on a going concern
basis in accordance with the Companies Act 2006, Interim Financial Reporting
(FRS 104) and the Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' (SORP), issued in July
2022.
The accounting policies applied for the condensed set of financial statements
are set out in the Company's annual report for the year ended 31 December
2023.
(b) Use of judgements, estimates and assumptions
The presentation of the financial statements in accordance with accounting
standards requires the Board to make judgements, estimates and assumptions
that affect the accounting policies and reported amounts of assets,
liabilities, income and expenses. Estimates and judgements are continually
evaluated and are based on perceived risks, historical experience,
expectations of plausible future events and other factors. Actual results may
differ from these estimates.
The area requiring the most significant judgement and estimation in the
preparation of the financial statements is accounting for the value of
unquoted investments.
The policy for valuation of unquoted securities is set out in note 8 and
further information on Board procedures is contained in the Report of the
Audit Committee and note 25(d) of the Report and Accounts as at 31 December
2023. The choice to use the March quarter end valuations and apply a roll
forward process to incorporate any known transactions and material events is a
judgement made each year for the indirect investments. The valuations as at 30
June are not generally available before approval of the half year report.
Material judgements were applied to the valuation of the Company's direct
investment, Inflexion Strategic Partners. This investment was valued using an
earnings method multiplied by an average of European listed comparable
companies multiple (where the judgement of which comparable companies to
select and what discounts to apply are subjective). The fair value of unquoted
(Level 3) investments, as disclosed in note 8, represented 10.1% of total
investments at 30 June 2024. Under foreseeable market conditions the
collective value of such investments may rise or fall in the short term by
more than 10%, in the opinion of the Directors. A fall of 10% in the value of
the unlisted (Level 3) portfolio at the half year would equate to £60m or
1.1% of net assets and a similar percentage rise would equate to a similar
increase in net assets.
3 INCOME
Half year ended Half year ended
30 June 2024 30 June 2023
£'000s £'000s
Income comprises:
UK dividends 4,340 3,992
UK bond income 1,205 566
Overseas dividends 57,673 51,066
Interest on short-term deposits and other income 843 2,796
Income 64,061 58,420
Included within income is £1.2m (30 June 2023: £2.2m; 31 December 2023:
£4.4m) of special dividends classified as revenue in nature.
The value of special dividends treated as capital in nature is £0.2m (30 June
2023: £0.0m; 31 December 2023: £0.1m).
4 FEES AND OTHER EXPENSES AND INTEREST PAYABLE
Half year ended Half year ended
30 June 2024 30 June 2023
£'000s £'000s
Fees and other expenses 12,450 11,373
Interest payable and similar charges 6,841 6,808
Total 19,291 18,181
Fees and other expenses comprise:
Allocated to Revenue Account
- Management fees payable directly to the Manager* 2,242 2,085
- Other expenses 3,440 3,001
5,682 5,086
Allocated to Capital Account
- Management fees payable directly to the Manager* 6,725 6,256
- Other expenses 43 31
6,768 6,287
Interest payable and similar charges comprise:
Allocated to Revenue Account 1,710 1,702
Allocated to Capital Account 5,131 5,106
* Including reimbursement in respect of services provided by sub-managers
The Manager's remuneration is based on a fee of 0.30% per annum of the market
capitalisation of the Company up to £4.0 billion and 0.25% above £4.0
billion calculated at each month end date on a pro-rata basis. The fee is
adjusted for fees earned by the Manager in respect of investment holdings
managed or advised by the Manager. Variable fees payable in respect of third
party sub-managers are also reimbursed. The services provided by the Manager
remain unchanged from those disclosed within the accounts for the year ended
31 December 2023. The level of variable fees payable in respect of third party
sub-managers and private equity managers remain unchanged since the year end.
5 TAXATION
The taxation charge of £8,164,000 (30 June 2023: £6,659,000) relates to
irrecoverable overseas taxation and Indian tax on capital gains.
6 NET RETURN PER SHARE
Net return per ordinary share attributable to ordinary shareholders reflects
the overall performance of the Company in the period. Net revenue recognised
in the first six months is not indicative of the total likely to be received
in the full accounting year.
Half year ended Half year ended Half year ended Half year ended
30 June 2024 30 June 2024 30 June 30 June
pence £'000s 2023 2023
pence £'000s
Revenue return 9.64 48,643 8.69 45,010
Capital return 118.85 600,043 30.80 159,619
Total return 128.49 648,686 39.49 204,629
Weighted average ordinary shares in issue excluding treasury shares (see note 504,853,464 518,236,585
11)
7 DIVIDENDS
Half year ended 30 June 2024 Half year ended 30 June 2023 Year ended 31 December 2023
£'000s £'000s £'000s
Dividends paid and payable on ordinary shares
Register date Payment date
2022 Third interim of 3.20p 6-Jan-2023 1-Feb-2023 - 16,589 16,589
2022 Final of 3.90p 11-Apr-2023 11-May-2023 - 20,218 20,214
2023 First interim of 3.40p 30-Jun-2023 1-Aug-2023 - 17,575 17,581
2023 Second interim of 3.40p 6-Oct-2023 1-Nov-2023 - - 17,453
2023 Third interim of 3.40p 4-Jan-2024 1-Feb-2024 17,325 - -
2023 Final of 4.50p 12-Apr-2024 9-May-2024 22,682 - -
2024 First interim of 3.60p 28-Jun-2024 1-Aug-2024 18,003 - -
58,010 54,382 68,983
The Directors have declared a first interim dividend in respect of the year
ending 31 December 2024 of 3.60p per share, payable on 1 August 2024 to all
shareholders on the register at close of business on 28 June 2024. The amount
of this dividend will be £18,003,000 based on 500,098,015 shares in issue at
27 June 2024. This amount has been accrued in the results for the half-year
ended 30 June 2024 as the ex-dividend date was 27 June 2024.
8 INVESTMENTS
Fair value hierarchy
The Company's Investments as disclosed in the balance sheet are valued at fair
value.
The fair value as at the reporting date has been estimated using the following
fair value hierarchy:
Level 1 includes investments and derivatives listed on any recognised stock
exchange or quoted on the AIM market in the UK and quoted open-ended funds.
These also include gilts of £nil as at 30 June 2024 (30 June 2023: £98m and
31 December 2023: £80m).
Level 2 includes investments for which the quoted price has been suspended,
forward exchange contracts and other derivative instruments.
Level 3 includes investments in private companies or securities, whether
invested in directly or through pooled Private Equity vehicles, for which
observable market data is not specifically available.
The analysis of the valuation basis for financial instruments based on the
hierarchy is as follows:
30 June 2024 30 June 2023 31 December 2023
£'000s £'000s £'000s
Level 1 5,392,972 4,600,698 4,936,568
Level 3 603,026 590,564 594,310
Total valuation of investments 5,995,998 5,191,262
5,530,878
With respect specifically to investments in Private Equity, whether through
funds or partnerships, the Directors rely on the latest available unaudited
quarterly valuations of the underlying unlisted investments as supplied by the
investment advisers or managers of those funds or partnerships. The Directors
regularly review the principles applied by the managers to those valuations to
ensure they are in compliance with the principal accounting policies as stated
in the year end report and accounts.
No investments held at 30 June 2024, 30 June 2023 or 31 December 2023 were
valued in accordance with level 2.
9 LOANS AND DEBENTURE
31 December 2023
30 June 2024 30 June 2023 £'000s
£'000s £'000s
Loans falling due after more than one year 579,609 580,042 580,394
Debenture falling due after more than one year 575 575 575
Comprising:
£544m £544m £544m
Sterling denominated loan, falling due after more one year
Euro denominated loan, falling due after more than one year €42m €42m €42m
4.25% perpetual debenture stock £0.575m £0.575m £0.575m
10 OTHER CREDITORS FALLING DUE WITHIN ONE YEAR
30 June 2024 30 June 2023 31 December 2023
£'000s £'000s £'000s
Cost of ordinary shares repurchased 5,670 1,933 2,700
Investment creditors 27,665 30,766 3,670
Management fee payable to the Manager 3,748 1,958 2,625
Provision for Capital Gains Taxation on Indian Investments
1,933 - 2,258
Dividend payable 18,003 17,575 -
Other accrued expenses 2,709 2,293 2,583
59,728 54,525 13,836
11 SHARE CAPITAL
Nominal value of shares in issue
Number Number of shares entitled to dividend Total £'000s
of shares number of shares in issue
held in
Equity share capital treasury
Ordinary shares of 25p each
Balance at 31 December 2023 52,025,962 509,793,054 561,819,016 140,455
Shares repurchased by the Company and held in treasury 10,180,039 (10,180,039) - -
Balance at 30 June 2024 62,206,001 499,613,015 561,819,016 140,455
10,180,039 shares were repurchased during the period at a cost of
£101,160,000. Shares held in treasury have no voting rights and no right to
dividend distributions and are excluded from the calculations of earnings per
share and net asset value per share.
12 NET ASSET VALUE PER ORDINARY SHARE 30 June 2024 30 June 2023 31 December 2023
Net asset value per share -pence 1,105.66 926.04 987.56
Net assets attributable at end of period - £'000s 5,524,003 4,786,859 5,034,487
Ordinary shares of 25p in issue at end of period excluding shares held in 499,613,015 516,919,027
treasury - number
509,793,054
Net asset value per share (with the debenture stock and long-term loans at
market value) at 30 June 2024 was 1,145.47p (30 June 2023: 964.73p and
31 December 2023: 1,022.07p). The market value of debenture stocks at 30 June
2024 was £429,000 (30 June 2023 and 31 December 2023: £429,000). The market
value of the long-term loans at 30 June 2024 was £380,845,000 (30 June 2023:
£380,170,000 and 31 December 2023: £404,572,000) based on the equivalent
benchmark gilts or relevant commercially available current debt.
13 RECONCILIATION OF NET RETURN BEFORE TAXATION TO CASH FLOWS FROM OPERATING
ACTIVITIES
Half year ended Half year ended
30 June 2024 30 June 2023 Year ended
£'000s £'000s 31 December 2023
£'000s
Net return on ordinary activities before taxation 656,850 211,288 547,029
Adjust for non-cash flow items, dividend income and interest expense:
Gains on investments (611,228) (176,352) (477,671)
Exchange (gains)/losses (852) 5,303 1,043
Non-operating expense of a capital nature 43 31 68
Decrease in other debtors 129 24 81
Increase in creditors 1,268 28 964
Dividends receivable (62,013) (55,058) (98,524)
Interest payable 6,841 6,808 13,841
Tax on overseas income and Indian Capital Gains Tax (8,388) (7,103) (12,605)
(674,200) (226,319) (572,603)
Cash flows from operating activities (before dividends received and interest
paid)
(17,350) (15,031) (25,774)
14 ANALYSIS OF CHANGES IN NET DEBT
Cash Long term loans Debenture Total
£'000s £'000s £'000s £'000s
87,170 (575) (493,799)
Opening net debt as at 31 December 2023 (580,394)
Cash-flows:
Net movement in cash and cash equivalents
22,037 - - 22,037
Non-cash:
Effect of foreign exchange movements 67 785 - 852
Closing net debt as at 30 June 2024 109,274 (579,609) (575) (470,910)
15 GOING CONCERN
In assessing the going concern basis of accounting the Directors have had
regard to the guidance issued by the Financial Reporting Council. They have
also considered the Company's objective, strategy and policy; current cash
position; the availability of loan finance; compliance with all financial loan
and private placement covenants; and the operational resilience of the Company
and its service providers. It is recognised that the Company is mainly
invested in readily realisable, globally listed securities that can be sold,
if necessary, to repay indebtedness.
Based on this information and their knowledge and experience of the Company's
portfolio and stockmarkets, the Directors believe that the Company has the
ability to meet its financial obligations as they fall due for a period of at
least twelve months from the date of approval of these financial statements.
Accordingly, these financial statements have been prepared on a going concern
basis.
STATEMENT OF PRINCIPAL AND EMERGING RISKS
The Company's principal and emerging risks are described in detail under the
heading 'Principal and Emerging Risks' within the Strategic Report in the
Company's annual report for the year ended 31 December 2023. They have been
identified as: Investment Performance; Effectiveness of Appointed Manager;
Cyber Threats and Data Protections; Loss of Key Person; and Transition to Net
Zero.
In the view of the Board, there have not been any material changes to the
fundamental nature of these risks and they are applicable to the remainder of
the financial year.
DIRECTORS' STATEMENT OF RESPONSIBILITIES IN RESPECT OF THE HALF YEAR FINANCIAL
REPORT
In accordance with Chapter 4 of the Disclosure Guidance and Transparency
Rules, the Directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with applicable UK Accounting Standards on a going concern basis
and gives a true and fair view of the assets, liabilities, financial position
and net return of the Company;
· the half year report includes a fair review of the important
events that have occurred during the first six months of the financial year
and their impact on the financial statements;
· the Statement of Principal and Emerging Risks shown above is a
fair review of the principal and emerging risks for the remainder of the
financial year; and
· the half year report includes a fair review of the related party
transactions that have taken place in the first six months of the financial
year.
On behalf of the Board
Beatrice Hollond
Chairman
31 July 2024
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
Columbia Threadneedle Investment Business Limited,
Company Secretary
ENDS
A copy of the half report will shortly be submitted to the National Storage
Mechanism and will be available for inspection at www.fca.org.uk
The half year report will be posted to shareholders and made available on the
internet at www.fandc.com (http://www.fandc.com) shortly. Copies may be
obtained during normal business hours from the Company's Registered Office,
Cannon Place, 78 Cannon Street, London EC4N 6AG.
Columbia Threadneedle Investment Business Limited
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