REG-Fins Growth Inc Tst: Half-year Report
12/05/2020 10:40
Legal Entity Identifier: 213800NN42KX2LG1GQ40
12 May 2020
LONDON STOCK EXCHANGE ANNOUNCEMENT
Finsbury Growth & Income Trust PLC
Unaudited Half Year Results For The Six Months Ended
31 March 2020
This Announcement is not the Company’s Half Year Report & Accounts. It is an
abridged version of the Company’s full Half Year Report & Accounts for the
six months ended 31 March 2020. The full Half Year Report & Accounts, together
with a copy of this announcement, will shortly be available on the Company’s
website at www.finsburygt.com where up to date information on the Company,
including daily NAV, share prices and fact sheets, can also be found.
The Company's Half Year Report & Accounts for the six months ended 31 March
2020 has been submitted to the UK Listing Authority, and will shortly be
available for inspection on the National Storage Mechanism (NSM):
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further information please contact: Victoria Hale, Frostrow Capital LLP
020 3170 8732
FINANCIAL HIGHLIGHTS
AS AT 31 MARCH AS AT %
30 SEPTEMBER
2020 2019 CHANGE
Share price 760.0p 942.0p -19.3
Net asset value per share 753.4p 935.6p -19.5
Premium of share price to net asset value per share^ 0.9% 0.7%
Gearing (1)^ 1.1% 0.5%
Shareholders’ funds £1,590.9m £1,878.8m -15.3
Number of shares in issue 211,146,303 200,811,712 +5.1
SIX MONTHS TO 31 MARCH ONE YEAR TO 30 SEPTEMBER
2020 2019
Share price (total return) (2)^ -18.5% +17.4%
Net asset value per share (total return) (2)^ -18.7% +17.4%
FTSE All-Share Index (total return)* (Company benchmark) (2 3) -22.0% +2.7%
Ongoing charges (1)^ 0.6% 0.7%
YEAR ENDING YEAR ENDED
30 SEPTEMBER 30 SEPTEMBER
2020 2019
First interim dividend 8.0p 8.0p
Second interim dividend Yet to be declared 8.6p
(1) See glossary
(2) Source – Morningstar
(3) Source – FTSE International Limited (“FTSE”) © FTSE 2020*
(^) Alternative Performance Measures (“APMs”)
The disclosures of performance above are considered to represent the
Company’s APMs. Definitions of these APMs together with how these measures
have been calculated can be found in the Glossary.
This report contains terminology that may be unfamiliar to some readers. The
Glossary gives definitions for frequently used terms.
CHAIRMAN’S STATEMENT
Dear Shareholder,
PERFORMANCE
Though the Company outperformed its benchmark during the first half of the
current financial year, it is disappointing for the first time in some years
to have to report a negative absolute return for the period. Given the extreme
stock market volatility recently and unprecedented times for us all personally
this is hardly surprising. The Company’s net asset value per share^ fell by
18.7% which compares to a fall of 22.0% in the Company’s benchmark, the FTSE
All Share Index, demonstrating the resilience of the companies in our
portfolio. The negative return over the period as a whole reflects growing
uncertainty in the market about the impact of the COVID-19 global health
crisis and the unfinished Brexit negotiations.
COVID-19
As we write, it appears that the centre of the onslaught has moved away from
Asia to Europe and the US, with consequent impact on asset prices globally. It
is far too early to assess the long-term economic impact on the Company’s
investment portfolio; but shareholders should be aware that we have no direct
exposure to the oil and gas sector and that we own strong consumer brands that
are competitively positioned businesses with sustainable returns. We expect
this to provide some defensive quality to the portfolio. Whilst the
Company’s overall level of income has not been materially impacted thus far,
we will continue to monitor carefully announcements from our portfolio
companies in relation to their proposed dividend payments. The Portfolio
Manager has considered the potential impact of the crisis on our portfolio
holdings in detail in his report.
AMENDMENT TO THE COMPANY’S INVESTMENT POLICY
The Board has considered the method by which our overseas investments are
classified, in particular by reference to their inclusion or otherwise in the
20% limit of the portfolio permitted to be invested in ‘non UK’ companies.
To date the location of the investee company’s share listing has been the
determining factor. However after careful consideration the Board has decided
that, as permitted by FCA guidance, the domicile and place of business of the
company concerned is a better and more realistic basis for considering where
an investment should sit in the portfolio.
Accordingly, the Board has resolved that the Company’s investment policy be
modified as follows:
“The Company’s investment policy is to invest principally in the
securities of companies either listed in the UK or otherwise incorporated,
domiciled or having significant business operations within the UK, whilst up
to a maximum of 20% of the Company’s portfolio, at the time of acquisition,
can be invested in companies not meeting this criteria. .
This amendment is not considered to be material and will give greater
flexibility in the management of the investment portfolio, but it does affect
the classification of Manchester United, a Company whose listing is on the New
York stock exchange, but whose domicile and place of business is within the
UK. This investment makes up 1.7% of the portfolio.
SHARE CAPITAL
Consistent demand for the Company’s shares has led to the issue of a total
of 10,334,591 new shares in this half year, raising £87.3 million. As at 31
March 2020 the Company had 211,146,303 shares of 25p each in issue (31 March
2019:188,126,712). In addition, the Company also bought back 505,409 shares
into Treasury during the six month period (2019: nil). These shares were
subsequently reissued by the end of the period to satisfy on going demand.
Since the end of the half-year, to the date of this report, a further
4,135,000 new shares have been issued raising £31.5 million. As at 11 May
2020, the Company had 215,281,303 shares in issue.
DIVIDEND
Despite volatile markets the Board declared an unchanged first interim
dividend of 8.0p per share with respect to the year ending 30 September 2020.
That dividend will be paid on Thursday, 15 May 2020 to shareholders who were
on the register on Friday, 3 April 2020. The associated ex-dividend date was
Thursday, 2 April 2020.
The Board expects to declare the second dividend for the year ending 30
September 2020 in late September 2020 and for it to be paid to shareholders in
November 2020. The Board highlights that in setting the level of the second
interim dividend, it will take into account the Company’s retained revenue
reserves as well as the actual dividend income received for the full financial
year.
GEARING^
As at the half year end the Company had a three-year secured fixed term
revolving credit facility (the “Facility”) of £50 million (with an
additional £50 million facility available if required) with Scotiabank Europe
PLC. The amount currently drawn under the Facility of £36.7 million
represents gearing of 1.1%. The facility’s term expires in October 2022.
BOARD COMPOSITION
You will recall that in last year’s Annual Report I advised that three
members of the Board, I being one of them, had served on the Board for more
than nine years and that in accordance with the requirements of the revised
Corporate Governance Codes we were required to implement a Board refreshment
programme. It would have clearly been unnecessarily disruptive for all three
of us to have departed at the same time, so we adopted a rolling programme of
retirement.
Neil Collins retired from the Board at the conclusion of the February 2020
Annual General Meeting. David Hunt will be the next to retire and will do so
following the release of these half year accounts. David has made a huge
contribution during his time on the Board and as Chairman of the Audit
Committee and he will be greatly missed by his fellow Directors. We thank him
for his invaluable and wise counsel over many years and we wish him well for
the future.
David will hand over his responsibilities as Chairman of the Audit Committee
to Sandra Kelly, who joined the Board in October 2019. I will then retire at
our 2021 Annual General Meeting, when Simon Hayes will succeed me as Chairman
of the Board.
OUTLOOK
As we look forward in these troubled and uncertain times, our Portfolio
Manager continues to remain cautiously optimistic about the outlook and
opportunities for the companies in our portfolio. Your Board continues to
believe that his strategy of investing for the long-term in durable, cash
generative franchises capable of sustained dividend growth will continue to
deliver sustainable investment returns to shareholders, albeit that we may
have to endure turbulence for some time yet.
Anthony Townsend
Chairman
12 May 2020
(^) Alternative Performance Measure (see glossary)
PORTFOLIO MANAGER’S REVIEW
The six months on which I report have been amongst the most turbulent and
certainly the most distressing of my career – 39 years, for what that is
worth. And in fact those 39 years of experience are not worth much I fear.
Younger colleagues have looked to Mike Lindsell and me for guidance and
reassurance during the first quarter of 2020. But we have had to shrug our
shoulders and say – we have never seen anything like it. This certainty of
being in uncharted territory makes us reluctant to engage in speculation about
the duration of the crisis or in grandiose theorising about trends in the
global economy that will emerge in its aftermath. We know enough to know that
we don’t know. Instead, at this stage, we are focussed on the day-to-day
demands of guarding shareholders’ capital and, in particular, we are
focussed on the financial health of the companies we have invested your
capital into.
Your Company remains fully invested, but with very modest gearing, currently
less than 1.5%. We have no appetite to take extra risk with the balance sheet.
But being fully invested means the portfolio will participate in any eventual
rally and recovery. A lesson from previous episodes of stock market panic is
that it is impossible to identify the bottom and almost as difficult to get
money invested after the market has turned – because prices rally so
quickly.
We note the relative resilience of the NAV performance through to the end of
March 2020. I can assure you we take little pleasure from this and are in no
way complacent about likely future challenges for the companies that make up
your portfolio. There will be unexpected challenges for sure. One of our stock
brokers entitled a research note I read in February 2020 – “Robust But Not
Impervious”. And robust but not impervious sums up how I see your portfolio.
Lindsell Train Limited’s investment approach is based on the identification
of excellent companies. That approach has certainly helped our relative
performance through these first weeks of the crisis. And, in truth, we are
hopeful that the portfolio in aggregate really does comprise the sorts of
company that will get through to the other side of all this. We have always
thought that other investors underestimate the value of “survivability” in
a company. For us it is the start point in our investment process. Is this
business still going to be around in 10 years’ time? A surprising number
won’t be – even in “normal” economic conditions.
So, it is not an accident that c27% of your portfolio by value comprises
companies with net cash on their balance sheets, including all three asset
management franchises – Hargreaves Lansdown, Rathbones and Schroders.
We have always been attracted to companies with conservative balance sheets
and even better those with positive cash balances.
We have big holdings in companies with regular, subscription-type revenues;
including the asset managers. RELX, Sage and important parts of the LSE all
benefit from being able to charge their customers at regular intervals for
continuing services that by and large those customers need to stay in
business. This is also true for parts of Daily Mail and Euromoney – and this
pair also both have net cash balance sheets. Nearly 50% of the portfolio is
today invested in companies of this type.
Contrast such business models with those whose sales have effectively been
suspended in the current crisis - like shops on empty high streets or
airlines. Your portfolio has little exposure to companies facing disruption of
this magnitude. However, I must point to the holdings we have in two football
clubs, tiny (0.2%) in Celtic, but a c1.7% holding in Manchester United. Of
course competitions have been suspended. Who knows for how long? We also have
two holdings in those London pub companies, Fullers and Youngs – comprising
together just 0.8% of the portfolio. Their pubs are empty this evening.
Then the rest of your portfolio is made up of companies that own beloved or
essential consumer brands. AG Barr (IRN-BRU), Burberry, Diageo, Fever-Tree,
Heineken, Mondelez (Cadbury, Oreos), PZ Cussons (Carex), Remy Cointreau and
Unilever. These amount to another 47.0% of the portfolio. Some of these proved
to be very resilient share prices through to the end of March. And this is not
surprising. Pubs and bars may be shut, but as the world hunkers down to
isolation beer and gin offer solace (always only in moderation). And it is
said that consumption of chocolate actually increases during economic
downturns, as people turn to comfort treats. At the same time we feel it is
important to maintain the size of the holdings in the luxury product
companies, like Burberry or Remy, where current sales are declining and share
prices have been weak. This is in part because we believe these companies have
“survivability” – Burberry has net cash (if one excludes lease
liabilities) and Remy low debt. More important, though, we expect a burst of
hedonism on the other side of the virus, as the world and especially the young
celebrate deliverance. That will be some party. I look forward to downing
several bottles of Louis XIII with you all. And I might even buy myself a
Burberry trench.
To repeat: there will be unexpected challenges for all the companies we have
invested in. The boards of the companies facing these challenges must be
encouraged and supported by shareholders to do the right thing. And that means
promptly taking action to ensure the survival and future prosperity of the
company. If the result is suspension of dividend payments, for instance, then
so be it. Several portfolio companies have already announced such suspensions
as I write this report – namely AG Barr, Euromoney, Fullers, Heineken and
Youngs. They have done the right thing and I will be amazed if they are not
joined by other holdings.
I will conclude by sharing a quotation that was forwarded to me in February.
These are the words of 19th century philosopher John Stuart Mill:
“What has so often excited wonder is the great rapidity with which countries
recover from a state of devastation, the disappearance in a short time of all
traces of mischief done by earthquakes, floods, hurricanes and the ravages of
war. An enemy lays waste to a country by fire and sword and destroys or
carries away nearly all moveable wealth existing in it: all the inhabitants
are ruined, and yet in a few years after, everything is much as it was
before.”
Let us hope that Mill’s observation has universal application.
Nick Train
Director
Lindsell Train Limited
Portfolio Manager
12 May 2020
INVESTMENT PORTFOLIO
as at 31 March 2020
INVESTMENTS SECTOR MARKET VALUE £’000 % OF PORTFOLIO
London Stock Exchange Financials 197,071 12.3
RELX Consumer Services 171,852 10.7
Diageo Consumer Goods 163,915 10.2
Unilever Consumer Goods 163,431 10.1
Mondelez International (1) Consumer Goods 152,350 9.5
Schroders * Financials 117,318 7.3
Hargreaves Lansdown Financials 101,258 6.3
Burberry Group Consumer Goods 99,263 6.2
Sage Group Technology 96,464 6.0
Heineken (2) Consumer Goods 79,557 4.9
Top 10 Investments 1,342,479 83.5
Remy Cointreau (3) Consumer Goods 58,991 3.7
Daily Mail & General Trust (non-voting) Consumer Services 38,579 2.4
Manchester United (1) Consumer Services 26,834 1.7
Pearson Consumer Services 25,863 1.6
Euromoney Institutional Investor Consumer Services 22,486 1.4
A.G. Barr Consumer Goods 21,504 1.3
Rathbone Brothers Financials 20,732 1.3
Fever-Tree Drinks Consumer Goods 13,816 0.9
Lindsell Train Investment Trust Financials 10,600 0.6
Young & Co Brewery (non voting) Consumer Services 7,875 0.5
Top 20 Investments 1,589,759 98.9
PZ Cussons Consumer Goods 5,983 0.4
Fuller Smith & Turner Consumer Services 4,648 0.3
Frostrow Capital (4)*** Financials 3,900 0.2
Celtic ** Consumer Services 3,325 0.2
Total Investments 1,607,615 100.0
All of the above investments are equities listed in the UK, unless otherwise
stated.
(1) Listed in the United States.
(2) Listed in the Netherlands.
(3) Listed in France.
(4) Unquoted.
* Includes Schroder (non-voting) shares, fair value £9,519,000.
*
Includes Celtic 6% cumulative convertible preference shares, fair value
£242,000.
*** Includes Frostrow Capital AIFM Investment, fair value £700,000.
COMPARISON OF SECTOR WEIGHTINGS WITH THE FTSE ALL-SHARE INDEX
as at 31 March 2020
SECTOR FINSBURY GROWTH & INCOME % FTSE ALL-SHARE* % FINSBURY GROWTH &?INCOME (UNDER)/ OVERWEIGHT%
Consumer Goods 47.2 15.6 31.6
Financials 28.0 26.0 2.0
Consumer Services 18.8 11.3 7.5
Technology 6.0 1.0 5.0
Oil & Gas – 10.3 (10.3)
Basic Materials – 7.4 (7.4)
Industrials – 11.1 (11.1)
Telecommunications – 2.4 (2.4)
Utilities – 3.7 (3.7)
Health Care – 11.2 (11.2)
Total 100.0 100.0 0.0
* Source: FTSE International Limited (“FTSE”) © FTSE 2020
INCOME STATEMENT
for the six months ended 31 March 2020
(UNAUDITED) (UNAUDITED)
SIX MONTHS ENDED SIX MONTHS ENDED
31 MARCH 2020 31 MARCH 2019
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
£’000 £’000 £’000 £’000 £’000 £’000
(Losses)/gains on investments at fair value through profit or loss – (367,580) (367,580) – 38,642 38,642
Currency translations – (40) (40) – (60) (60)
Income (note 2) 16,035 – 16,035 13,145 – 13,145
AIFM and Portfolio Management fees (note 3) (1,697) (3,446) (5,143) (1,354) (2,748) (4,102)
Other expenses (650) (20) (670) (583) – (583)
Return/(loss) on ordinary activities before finance charges and taxation 13,688 (371,086) (357,398) 11,208 35,834 47,042
Finance charges (111) (226) (337) (137) (279) (416)
Return/(loss) on ordinary activities before taxation 13,577 (371,312) (357,735) 11,071 35,555 46,626
Taxation on ordinary activities (252) – (252) (209) – (209)
Return/(loss) on ordinary activities after taxation 13,325 (371,312) (357,987) 10,862 35,555 46,417
Return/(loss) per share – basic and diluted (note 4) 6.5p (180.9)p (174.4)p 6.0p 19.8p 25.8p
The “Total” column of this statement represents the Company’s profit and
loss account. The “Revenue” and “Capital” columns are supplementary to
this and are prepared under guidance published by The Association of
Investment Companies (“AIC”).
All items in the above statement derive from continuing operations. The
Company had no recognised gains or losses other than those declared in the
Income Statement.
There is no material difference between the net return/(loss) on ordinary
activities before taxation and the net return/(loss) on ordinary activities
after taxation stated above and their historical cost equivalents.
STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2020
(Unaudited) Six months ended CALLED UP SHARE CAPITAL SHARE PREMIUM ACCOUNT CAPITAL REDEMPTION RESERVE CAPITAL RESERVE REVENUE RESERVE TOTAL SHAREHOLDERS FUNDS
31 March 2020
£’000 £’000 £’000 £’000 £’000 £’000
At 30 September 2019 50,203 904,320 3,453 875,981 44,803 1,878,760
Net return from ordinary activities – – – (371,312) 13,325 (357,987)
Second interim dividend (8.6p per share) for the year ended 30 September 2019 – – – – (17,297) (17,297)
Issue of shares 2,584 84,744 – – – 87,328
Repurchase of shares into treasury – – – (3,394) – (3,394)
Sale of shares from treasury – 90 – 3,368 – 3,458
At 31 March 2020 52,787 989,154 3,453 504,643 40,831 1,590,868
(Unaudited) CALLED UP SHARE CAPITAL SHARE PREMIUM ACCOUNT CAPITAL REDEMPTION RESERVE CAPITAL RESERVE REVENUE RESERVE TOTAL SHAREHOLDERS FUNDS
Six months ended
31 March 2019
£’000 £’000 £’000 £’000 £’000 £’000
At 30 September 2018 43,423 684,726 3,453 643,037 37,151 1,411,790
Net return from ordinary activities – – – 35,555 10,862 46,417
Reclassification of the special dividend received from Dr. Pepper Snapple* – – – (2,499) 2,499 –
Second interim dividend (8.1p per share) for the year ended 30 September 2018 – – – – (14,077) (14,077)
Issue of shares 3,609 109,214 – – – 112,823
At 31 March 2019 47,032 793,940 3,453 676,093 36,435 1,556,953
* Dr Pepper Snapple paid a special dividend in July 2018. At that time it was
treated as being capital in nature. During the six month period ended 31 March
2019, Dr Pepper Snapple clarified that 28.4% of this dividend should be
regarded as revenue. Accordingly £2,499,000 of the special dividend was
transferred from the Company’s capital reserve to the revenue reserve.
STATEMENT OF FINANCIAL POSITION
as at 31 March 2020
(UNAUDITED) (AUDITED)
31 MARCH 30 SEPTEMBER
2020 2019
£’000 £’000
Fixed assets
Investments designated at fair value through profit or loss (note 1) 1,607,615 1,888,834
Current assets
Debtors 10,353 10,243
Cash and cash equivalents 13,961 22,379
24,314 32,622
Current liabilities
Creditors: amounts falling due within one year (4,361) (5,996)
Bank loan – (36,700)
(4,361) (42,696)
Net current assets/(liabilities) 19,953 (10,074)
Total assets less current liabilities 1,627,568 1,878,760
Creditors: amounts falling due after one year
Bank loan (36,700) –
Net assets 1,590,868 1,878,760
Capital and reserves
Called up share capital 52,787 50,203
Share premium account 989,154 904,320
Capital redemption reserve 3,453 3,453
Capital reserve 504,643 875,981
Revenue reserve 40,831 44,803
Total shareholders’ funds 1,590,868 1,878,760
Net asset value per share – (note 5) 753.4p 935.6p
STATEMENT OF CASH FLOWS
for the six months ended 31 March 2020
(UNAUDITED) 31 MARCH 2020 (UNAUDITED) 31 MARCH 2019
£’000 £’000
Net cash inflow from operating activities before interest (note 7) 8,468 7,610
Interest paid (507) (400)
Net cash inflow from operating activities 7,961 7,210
Investing activities
Purchase of investments (88,771) (111,378)
Sale of investments 1,132 5,584
Net cash outflow from investing activities (87,639) (105,794)
Financing activities
Equity dividends paid (17,297) (14,077)
Shares issued 88,533 111,791
Repurchase of shares into Treasury (3,394) –
Sale of shares from Treasury 3,458 –
Net cash inflow from financing activities 71,300 97,714
Decrease in cash and cash equivalents (8,378) (870)
Currency translations (40) (60)
Cash and cash equivalents at 1 October 22,379 13,175
Cash and cash equivalents at 31 March 13,961 12,245
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The condensed Financial Statements for the six months to 31 March 2020 have
been prepared under the historical cost convention, modified to include the
revaluation of investments and in accordance with FRS 104 ‘Interim Financial
Reporting’ and with the AIC’s Statement of Recommended Practice (“the
SORP”) for Investment Trust Companies and Venture Capital Trusts dated
October 2019 and the Companies Act 2006.
The accounting policies used for the year ended 30 September 2019 have been
applied.
Fair Value
Under FRS 102 and FRS 104 investments have been classified using the following
fair value hierarchy:
Level 1 – quoted prices in active markets
Level 2 – prices of recent transactions for identical instruments
Level 3 – valuation techniques using observable and unobservable market
data.
The financial assets and liabilities measured at fair value in the Statement
of Financial Position are grouped into the fair value hierarchy at the
reporting date as follows:
(UNAUDITED) AS AT 31 MARCH 2020
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
AS AT 31 MARCH 2020 £’000 £’000 £’000 £’000
Equity investments 1,603,473 – – 1,603,473
Limited liability partnership interest (Frostrow Capital) – – 3,200 3,200
AIFM Capital contribution (Frostrow Capital) – – 700 700
Preference shares investment 242 – – 242
1,603,715 – 3,900 1,607,615
(AUDITED) AS AT 30 SEPTEMBER 2019
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
AS AT 30 SEPTEMBER 2019 £’000 £’000 £’000 £’000
Equity investments 1,886,404 – – 1,886,404
Limited liability partnership interest (Frostrow Capital) – – 1,540 1,540
AIFM Capital contribution (Frostrow Capital) – – 600 600
Preference shares investment 290 – – 290
1,886,694 – 2,140 1,888,834
2. INCOME
(UNAUDITED) (UNAUDITED)
SIX MONTHS SIX MONTHS
ENDED ENDED
31 MARCH 2020 31 MARCH 2019
£’000 £’000
Income from investments
Franked investment income
– dividends 14,177 11,593
Unfranked investment income
– overseas dividends 1,828 1,527
Limited liability partnership – priority profit-share on AIFM capital contribution 30 25
Total income 16,035 13,145
3. AIFM AND PORTFOLIO MANAGEMENT FEES
(UNAUDITED) SIX MONTHS TO (UNAUDITED) SIX MONTHS TO
31 MARCH 31 MARCH
REVENUE CAPITAL 2020 REVENUE CAPITAL 2019
TOTAL TOTAL
£’000 £’000 £’000 £’000 £’000 £’000
AIFM fee 424 862 1,286 339 687 1,026
Portfolio management fee 1,273 2,584 3,857 1,015 2,061 3,076
Total fees 1,697 3,446 5,143 1,354 2,748 4,102
4. RETURN PER SHARE – BASIC AND DILUTED
(UNAUDITED) (UNAUDITED)
SIX MONTHS SIX MONTHS
TO 31 MARCH TO 31 MARCH
2020 2019
£’000 £’000
The return per share is based on the following figures:
Revenue return 13,325 10,862
Capital return (371,312) 35,555
Total return (357,987) 46,417
Weighted average number of shares in issue for the period 205,307,145 179,928,909
Revenue return per share 6.5p 6.0p
Capital return per share (180.9)p 19.8p
Total return per share (174.4)p 25.8p
The calculation of the total, revenue and capital returns per ordinary share
is carried out in accordance with IAS 33, “Earnings per Share (as adopted in
the EU)”.
During the period there were no dilutive instruments held, therefore the basic
and diluted return per share are the same.
5. NET ASSET VALUE PER SHARE
(UNAUDITED) (AUDITED)
AS AT AS AT
31 MARCH 30 SEPTEMBER
2020 2019
£’000 £’000
Net Assets (£’000) 1,590,868 1,878,760
Number of shares in issue 211,146,303 200,811,712
Net asset value per share 753.4p 935.6p
6. TRANSACTION COSTS
Purchase transaction costs for the six months ended 31 March 2020 were
£351,000 (six months ended 31 March 2019: £548,000). These comprise of stamp
duty costs of £314,000 (31 March 2019: £498,000) and commission of £37,000
(31 March 2019: £50,000).
Sales transaction costs for the six months ended 31 March 2020 were £nil (six
months ended 31 March 2019: £1,000). These comprise solely of commission.
These transaction costs are included within the gains and losses on
investments within the Income Statement.
7. RECONCILIATION OF TOTAL RETURN/(LOSS) BEFORE FINANCE COSTS AND TAXATION TO
NET CASH INFLOW FROM OPERATING ACTIVITIES
(UNAUDITED) (UNAUDITED)
SIX MONTHS SIX MONTHS
ENDED ENDED
31 MARCH 31 MARCH
2020 2019
£’000 £’000
Total (loss)/return before finance charges and taxation (357,398) 47,042
Less: capital loss/(return) before finance charges and taxation 371,086 (35,834)
Net revenue before finance costs and taxation 13,688 11,208
Increase in accrued income and prepayments (1,317) (687)
(Decrease)/increase in creditors (187) 33
Taxation – irrecoverable overseas tax paid (250) (196)
AIFM and Portfolio management fees charged to capital (3,446) (2,748)
Other expenses charged to capital (20) –
Net cash inflow from operating activities 8,468 7,610
8. 2019 ACCOUNTS
The figures and financial information for the year to 30 September 2019 are
extracted from the latest published accounts of the Company and do not
constitute statutory accounts for the year.
Those accounts have been delivered to the Registrar of Companies and included
the Report of the Auditor which was unqualified and did not contain a
reference to any matters to which the Auditor drew attention by way of
emphasis without qualifying the report, and did not contain a statement under
section 498 of the Companies Act 2006.
INTERIM MANAGEMENT REPORT
GOING CONCERN
The Directors have carried a detailed review of the Company’s ability to
meet its liabilities as they fall due, taking into account the current state
of equity markets. They consider it is appropriate to adopt the going concern
basis in preparing the financial statements as the Company has adequate
resources to continue in operational existence for the foreseeable future. In
reviewing the position as at the date of this report, the Board has considered
the guidance on this matter issued by the Financial Reporting Council.
RELATED PARTY TRANSACTIONS
During the first six months of the current financial year no material
transactions with related parties have taken place which have affected the
financial position or the performance of the Company.
PRINCIPAL RISKS AND UNCERTAINTIES
Equity markets experienced substantial falls during the period associated with
uncertainties linked to the COVID-19 pandemic and continue to be volatile. The
Directors have considered the impact of the continued uncertainty on the
Company’s financial position and, based on the information available to them
at the date of this report, have concluded that no adjustments are required to
the accounts as at 31 March 2020.
A review of the half year, including reference, in addition to the COVID-19
risk mentioned above, to the risks and uncertainties that existed during the
period and the outlook for the Company can be found in the Chairman’s
Statement and in the Portfolio Manager’s Review. The principal risks faced
by the Company fall into the following broad categories: Corporate Strategy,
Investment Strategy and Activity, Key Person Risk, Shareholder Relations and
Corporate Governance, Operational, Financial and Accounting, Legal and
Regulatory. Information on each of these areas is given in the Strategic
Report/Business Review within the Annual Report and Accounts for the year
ended 30 September 2019. In the view of the Board these principal risks and
uncertainties are as applicable to the remaining six months of the financial
year as they were to the six months under review.
The Board is aware that the UK’s exit from the EU could introduce an element
of political and economic uncertainty for the sector in which the company
operates and developments continue to be monitored by the Board.
ALTERNATIVE PERFORMANCE MEASURES
The Financial Statements set out the required statutory reporting measures of
the Company’s financial performance. In addition, the Board assesses the
Company’s performance against a range of criteria which are viewed as
particularly relevant for investment trusts, further details of these are
included within the latest Annual Report.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors confirm that these condensed interim financial statements have
been prepared in accordance with Applicable Accounting Standards and that the
interim management report includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8, namely:
(i) an indication of important events that have occurred during the first
six months and their impact on the financial statements, and a description of
the principal risks and uncertainties for the remaining six months of the
financial year; and
(ii) material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report.
The Half Year Report has not been audited or reviewed by the Company’s
auditors.
The Half Year Report was approved by the Board on 12 May 2020 and the above
responsibility statement was signed on its behalf by:
Anthony Townsend
Chairman
GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES (‘APM’)
AIC
The Association of Investment Companies.
ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (AIFMD)
The Alternative Investment Fund Manager Directive (the “Directive”) is a
European Union Directive that entered into force on 22 July 2013. The
Directive regulates EU fund managers that manage alternative investment funds
(this includes investment trusts).
ALTERNATIVE PERFORMANCE MEASURE (APM)
An APM is a numerical measure of the Company’s current, historical or future
financial performance, financial position or cash flows, other than a
financial measure defined or specified in the applicable financial framework.
In selecting these Alternative Performance Measures, the Directors considered
the key objectives and expectations of typical investors in an investment
trust such as the Company.
BENCHMARK RETURN
Total return on the benchmark, on a closing -market-value to closing-market
basis, assuming that all dividends received were re-invested, without
transaction costs, into the shares of the underlying companies at the time the
shares were quoted ex-dividend.
BREXIT
The advisory public referendum which was held on 23 June 2016 in the United
Kingdom to indicate whether voters wanted to remain or withdraw from
membership of the European Union (EU). The referendum vote was cast in favour
of leaving the EU. The process of actually leaving is termed Brexit.
DISCOUNT OR PREMIUM (APM)
A description of the difference between the share price and the net asset
value per share. The size of the discount or premium is calculated by
subtracting the share price from the net asset value per share and is usually
expressed as a percentage (%) of the net asset value per share. If the share
price is higher than the net asset value per share the result is a premium. If
the share price is lower than the net asset value per share, the shares are
trading at a discount.
31 MARCH 30 SEPTEMBER
2020 2019
Share Price (p) 760.0 942.0
Net Asset value per share (p) 753.4 935.6
Premium of share price to net asset value per share 0.9% 0.7%
FTSE DISCLAIMER
“FTSE©” is a trade mark of the London Stock Exchange Group companies and
is used by FTSE International Limited under licence. All rights in the FTSE
indices and/or FTSE ratings vest in FTSE and/ or its licensors. Neither FTSE
nor its licensors accept any liability for any errors or omissions in the FTSE
indices and/or FTSE ratings or underlying data. No further distributions of
FTSE Data is permitted without FTSE’s express written consent.
GEARING (APM)
Gearing represents prior charges, adjusted for net current assets expressed as
a percentage of net assets. Prior charges includes all loans and bank
overdrafts for investment purposes.
31 MARCH 30 SEPTEMBER
2020 2019
£’000 £’000
Prior Charges (36,700) (36,700)
Net Current Assets (excluding bank loan) 19,953 26,626
Net Debt (16,747) (10,074)
Net Assets 1,590,868 1,878,760
Gearing 1.1% 0.5%
NET ASSET VALUE (NAV)
The value of the Company’s assets, principally investments made in other
companies and cash being held, less any liabilities. The NAV is also described
as ‘shareholders’ funds’ per share. The NAV is often expressed in pence
per share after being divided by the number of shares which have been issued.
The NAV per share is unlikely to be the same as the share price which is the
price at which the Company’s shares can be bought or sold by an investor.
The share price is determined by the relationship between the demand and
supply of the shares.
NET ASSET VALUE TOTAL RETURN (APM)
The total return on an investment over a specified period assuming dividends
paid to shareholders were reinvested at net asset value per share at the time
the shares were quoted ex-dividend. This is a way of measuring investment
management performance of investment trusts which is not affected by movements
in discounts or premiums.
31 MARCH 30 SEPTEMBER
NAV TOTAL RETURN 2020 2019
Opening NAV per share (p) 935.6 812.8
(Decrease)/increase in NAV per share (p) -182.2 122.8
Closing NAV per share (p) 753.4 935.6
% (Decrease)/increase in NAV -19.5% +15.1%
% Impact of dividends re-invested* +0.8% +2.3%
NAV per share total return (p) -18.7% +17.4%
* Total dividends paid during the period of 8.6p (8.1p paid during the 2019
financial year) were re-invested at the cum dividend NAV price during the
period. Where the dividend is invested and NAV price falls, this will further
reduce the return, if it rises, any increase would be greater. The source is
Morningstar who have calculated the return on an industry comparative basis.
ONGOING CHARGES (APM)
Ongoing charges are calculated by taking the Company’s annualised operating
expenses expressed as a proportion of the average daily net asset value of the
Company over the year. The costs of buying and selling investments are
excluded, as are interest costs, taxation, cost of buying back or issuing
ordinary shares and other non-recurring costs.
31 MARCH 30 SEPTEMBER
2020 2019
£’000 £’000
Operating Expenses 10,904* 10,425
Average Net Assets during the period/year 1,786,973 1,577,172
Ongoing Charges 0.61% 0.66%
* Estimated expenses for the year ending 30 September 2020, based on the asset
size as at 31 March 2020.
REVENUE RETURN PER SHARE
The revenue return per share is calculated by taking the Return on ordinary
activities after taxation and dividing by the weighted average number of
shares in issue during the period/year.
SHARE PRICE TOTAL RETURN (APM)
The change in capital value of a company’s shares over a given period, plus
dividends paid to shareholders, expressed as a percentage of the opening
value. The assumption is that dividends paid to shareholders are re-invested
in the shares at the time the shares are quoted ex dividend.
31 MARCH 30 SEPTEMBER
SHARE PRICE TOTAL RETURN 2020 2019
Opening share price (p) 942.0 818.0
(Decrease)/increase in share price (p) -182.0 124.0
Closing share price (p) 760.0 942.0
% (increase)/decrease in share price -19.3% 15.2%
% Impact of dividends re-invested* +0.8% 2.2%
Share price total return (p) -18.5% 17.4%
* Total dividends paid during the period of 8.6p (16.1p paid during the 2019
financial year) were re-invested at the cum dividend NAV/share price during
the period. Where the dividend is invested and NAV/share price falls, this
will further reduce the return, if it rises, any increase would be greater.
The source is Morningstar who have calculated the return 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 being voted and carry no rights to
dividends.
- END-
Victoria Hale
Frostrow Capital LLP
Company Secretary – 0203 170 8732
12 May 2019
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