Annual Financial Report
05/12/2024 07:00
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20241205:nRSE8726Oa&default-theme=true
RNS Number : 8726O Lowland Investment Co PLC 05 December 2024
LOWLAND INVESTMENT COMPANY PLC
ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2024
This announcement contains regulated information.
INVESTMENT OBJECTIVE
The Company aims to give shareholders a higher than average return with growth
of both capital and income over the medium to long-term, by investing in a
broad spread of predominantly UK Companies. The Company measures its
performance against the FTSE All-Share Index Total Return.
INVESTMENT POLICY
Asset Allocation
The Company invests in a combination of large, medium and smaller companies
listed in the UK. We are not constrained by the weightings of any index; we
limit risk by running a diversified portfolio, which is constructed on a
bottom-up, stock-picking basis. In normal circumstances up to half the
portfolio is invested in FTSE 100 companies; the remainder is divided between
small and medium-sized companies. The Manager may also invest a maximum of
15% in other listed trusts.
Dividend
The Company aims to pay a progressive dividend, with each quarterly dividend
equal to or greater than its previous equivalent.
Gearing
The Board believes that debt in a closed-end fund is a valuable source of
long-term outperformance, and therefore the Company will usually be geared.
At the point of drawing down debt, gearing will not exceed 20% of the
portfolio valuation but generally will be around half that level. Borrowing
will be a mixture of short and long-dated debt, depending on relative
attractiveness of rates.
Key Data as at 30 September 2024
· Net Asset Value ('NAV') Total Return(1,8) of 16.3%
· Benchmark Total Return(2) of 13.4%
· Dividend growth of 2.8%
· Dividend for the Year(3) of 6.425p
Year ended Year ended
30 September 30 September
2024 2023
NAV per share at year end (debt at par)(4) 144.2p 129.3p
NAV per share at year end (debt at fair value)(4,8) 146.1p 131.7p
Share price at year end(5) 127.0p 113.0p
Market capitalisation £343m £305m
Dividend per share 6.425p(3) 6.25p
Ongoing charge(8) 0.66% 0.64%
Dividend yield(6,8) 5.1% 5.5%
Gearing at year end(8) 11.0% 12.3%
Discount at year end(7,8) 13.1% 14.2%
AIC UK Equity Income Sector Average Discount 5.0% 5.5%
(1) NAV per share total return (including dividends reinvested) with debt at fair
value
(2) FTSE All-Share Index (including dividends reinvested)
(3) Includes the final dividend of 1.6425p per ordinary share for the year ended
30 September 2024 that will be put to shareholders for approval at the Annual
General Meeting on Tuesday 28 January 2025
(4) NAV per share for both figures is before deduction of the third interim
dividend paid in October of each year
(5) Mid-market closing price
(6) Based on dividends paid and payable in respect of the financial year and the
share price at the year end
(7) Calculated using year end fair value NAVs including current year revenue
(8) Alternative Performance Measure ('APMs')
Sources: Morningstar Direct, Janus Henderson, Factset
Historical Performance (%)
1 year 3 years 5 years 10 years 25 years
Net asset value(3) 16.3 16.1 31.7 62.4 636.7
Share price(3) 18.3 12.7 30.3 46.1 696.6
FTSE All-Share 13.4 23.9 32.2 83.6 275.5
Year ended Dividend per ordinary share (pence)(1) Total return/(loss) per ordinary share (pence)(1) Net revenue return per ordinary share (pence)(1) Total net assets (£'000) Net asset value per ordinary share (pence)(1) Share price per ordinary share (pence)(1)
30 September
2014 3.700 7.33 3.94 361,856 134.6 135.5
2015 4.100 1.18 4.64 354,563 131.8 128.7
2016 4.500 15.64 4.77 386,910 143.2 133.7
2017 4.900 24.32 4.91 439,896 162.8 150.4
2018 5.400 4.74 5.86 438,934 162.5 151.5
2019 5.950 (13.87) 6.80 385,904 142.8 128.0
2020 6.000 (33.69) 3.38 278,653 103.1 91.4
2021 6.025 48.79 4.27 394,285 145.9 131.5
2022 6.100 (24.00) 6.10 313,036 115.9 104.5
2023 6.250 19.54 6.71 349,345 129.3 113.0
2024 6.425(2) 21.30 6.29 389,633 144.2 127.0
(1) Comparative numbers for 2014 to 2021 have been restated to reflect the ten for
one share split which took place on 7 February 2022
(2) Includes the final dividend of 1.6425p per ordinary share for the year ended
30 September 2024 that will be put to shareholders for approval at the Annual
General Meeting on Tuesday 28 January 2024
(3) Alternative Performance Measures.
CHAIRMAN'S STATEMENT
Lowland Chairmans Statement FY24
Performance
I am pleased to report that, for the second successive year, Lowland achieved
a strong return, both in absolute terms and compared with its benchmark. Net
Asset Value per share ('NAV') rose 16.3% compared with a 13.4% increase in the
FTSE All-Share index, very much in line with the numbers achieved in 2023. The
share price increased by 18.3%. (All figures on a total return basis).
Last year I commented on the fact that the UK market was undervalued, most
especially the mid/small cap space where Lowland is more invested than its
benchmark. While there has been some improvement in UK valuations, this has
not really affected the smaller sector or, to a major extent, those with a
particular UK focus. The market continues to bear a substantial discount to
international peers. The outperformance during the year is predominantly
attributable to stock picking. Take-over activity was helpful, in itself
emphasising the humble valuations prevailing in UK markets, and the Company
also benefitted from gearing, one of the opportunities open to investment
trusts. The Fund Managers explain the attribution of performance in more
detail in their report.
The performance of the revenue account, which reflects the dividend income,
was more muted. Earnings per share declined 6.3% to 6.29p, reflecting a
number of factors. Lowland has chosen to prioritise longer term gains in
growing capital which will facilitate income growth in due course, and
steadfastly declined to chase earnings. During this year a number of highly
rewarding investments, such as Marks and Spencer and Rolls-Royce, had zero or
lower dividend yields but were in this category. Timing was an issue with some
major dividends being paid just after the year-end, and foreign exchange,
interest rates and a trend to replace special dividends by share buy-backs
were also factors.
Dividends
The Company is proposing a final dividend of 1.625p per share. If approved at
the AGM, this will result in total dividends for the year of 6.425p, a 2.8%
increase year-on-year. This dividend is not quite fully covered, but your
Board has confidence that earnings will resume their upward trajectory, and is
committed to maintaining its quarterly progressive dividend.
Gearing
Lowland has £30m of long-term debt notes, at a fixed 3.15% rate, due in 2037,
as well as a £40m variable rate revolving credit facility. The benefit of
having an element of fixed long-term debt has been evident during the year, as
has been the overall gearing employed. Lowland does not tend to vary levels of
gearing dramatically; it was little changed during the year, ending at 11.0%
compared to 12.3% a year earlier.
Ongoing Charges
Ongoing Charges are in line with the prior year at 0.66%.
After the year end, the government and the FCA announced that the cost
disclosures for the Key Information Document ('KID') would be changed and will
now reflect Ongoing Charges, calculated in line with AIC methodology, rather
than the potentially misleading disclosures which previously applied. This is
an important win for common sense. Investment Trusts were at a significant
disadvantage compared to open-ended funds in this regard. The management
charge for Investment Trusts are generally lower than for their counterpart
products in the open-ended space. It will be helpful if this is clearly shown
when like-for-like comparisons are made.
Discount
During the year the discount varied between 8% and 15%, with an average of
12%. The
Board believes that a discount control mechanism would not be in shareholders'
interests, for the reasons set out in the annual report.
Investment Trust discounts were volatile over the year, in response to which a
number of trusts undertook programmes to buy-back their own shares. Nothing we
have seen has encouraged us to change our view.
The Board
We welcomed Mark Lam to the Board during the year. Originally from Singapore,
Mark brings a welcome diversity of experience from his career in technology
and telecommunications.
Mark stands for election at the January AGM for the first time, and the Board
will revert to its normal complement of five, with my retirement.
Helena Vinnicombe stands for election as Chair at the AGM. I am delighted to
have such a talented successor.
I will have served as Chair for eight years when I retire. This has been a
privilege. My chairmanship has coincided with events, not least Brexit, Covid
and chaotic British politics, which have not been helpful to the performance
of a company with our investment policy. I am confident that sticking to our
investment policy has been the right thing to do, and will reward shareholders
in the long term. I am grateful to a capable Board in helping steer this
course, while providing robust challenge to the Fund Managers, who have
embraced the opportunity for debate and consistently and diligently pursued
shareholder interests. Finally, I am grateful to shareholders for their
support and loyalty.
Contact with Shareholders
I and the Board are always pleased to hear from shareholders. Please contact
me or my successor with comments or questions via
ITSecretariat@janushenderson.com (mailto:ITSecretariat@janushenderson.com) or
sign up for updates on Lowland by using the QR code on the inside front cover
of the annual report.
AGM
The AGM will be held at the Janus Henderson office on 28 January 2025. Full
details of the business to be conducted at the meeting are set out in the
Notice which this year is included at the end of the annual report. Our Fund
Managers, James Henderson and Laura Foll, will be making a presentation to
shareholders. The Board and Fund Managers always welcome the opportunity to
hear from shareholders, and we encourage as many as possible to attend.
Outlook
A meaningful re-rating of the UK market, and smaller companies in particular,
has not really happened. Lowland's portfolio is on a Price Earnings ratio of
10.2 times, or 8.9 on a 'look-though' basis, taking our discount into account.
Reflecting the UK focus of our investee companies this is substantially below
the UK market as a whole, and, even more so, international
markets. Thankfully our shareholders' patience has been rewarded this year
with an attractive growth in capital and a dividend yield of around 5%.
We had hoped that a decisive UK election result would remove the uncertainty
inherent in a Conservative Government with a propensity to self-destruct but
the new Labour Government seems pre-occupied with painting an Armageddon-like
picture of the economy it inherited. Ours is a bottom-up approach to
investing, but the economic landscape in which our companies are operating is
disappointing given initial optimism after the UK election. The long
build-up to the budget, and its eventual content, were not helpful, with many
facing substantial cost increases as a result of the increase in the minimum
wage and National Insurance costs. The prospects for inflation and
interest rates are less benign than they had appeared. Confidence, optimism
and economic growth have suffered, and the uncertainties implicit in the
result of the US election have not helped.
Despite this backdrop, we believe good, well managed UK companies will
continue to prosper. A revaluation of the UK market, and particularly a
portfolio such as ours, may be further deferred, but should come in time with
a material capital uplift when the fundamentals of UK equities are more widely
appreciated.
Robert Robertson
Chairman
4 December 2024
FUND MANAGER'S REPORT
1 year (%) 3 years (%) 5 years (%) 10 years (%) 25 years (%)
Lowland NAV 16.3 16.1 31.7 62.4 636.7
Lowland Share Price 18.3 12.7 30.3 46.1 696.6
FTSE All-Share 13.4 23.9 32.2 83.6 275.5
Source: Janus Henderson, Morningstar Direct, all performance figures shown on
total return basis.
Overview
We are pleased to report on a second successive year of outperformance
relative to the Company's FTSE All-Share benchmark, as well as a good absolute
return. The UK economy returned to growth in the second quarter of the
financial year, inflation fell, interest rates started to come down and
company directors began to feel more confident as shown by the high level of
corporate takeover activity. The background was therefore helpful for
Lowland's portfolio which has more of the earnings from the underlying
companies coming from the UK economy than is the case with the benchmark
index.
A new government with a large majority was elected during the summer and this
has led to the hope that, after several years of policy turmoil, economic
policy might be more stable. This is, as yet, unproven. A missing factor in
the improving scenario has been that there has been little pick-up in investor
confidence. The Investment Trust sector has seen substantial levels of
disinvestment. There is a general pessimism about the UK economy which has
resulted in money flowing into overseas markets and left UK stocks generally
at a significant valuation discount to overseas ones:
http://www.rns-pdf.londonstockexchange.com/rns/8726O_1-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8726O_1-2024-12-4.pdf)
The companies in the Lowland portfolio are not a proxy for the UK economy but
they are a collection of well managed businesses that we believe provide
excellent products and services. The results they have generally reported this
year are evidence of their strength.
Performance Attribution
The Company's return during the financial year was driven predominantly by its
FTSE 100 and FTSE 250 holdings, with positive stock selection in both indices
(comparing the third and fifth columns in the table below). There was also
positive stock selection within AIM portfolio holdings, although the
underperformance of AIM more broadly compared to the main market meant that
despite positive stock selection, our holdings in this area remained an
overall detractor from relative returns. Within the FTSE SmallCap Index (which
is now a relatively small index, outside of investment companies) stock
selection was negative, driven by the holdings in Vanquis Banking Group and TT
Electronics, on which we go into more detail later in this report.
Lowland weighting (%) Lowland total return (%) FTSE All-Share weighting (%) Index total return (%)
FTSE 100 44.9 21.6 84.5 12.4
FTSE 250 21.2 22.3 13.5 19.1
FTSE SmallCap 13.4 1.4 2.0 18.2
FTSE AIM All-Share 13.4 7.9 - 3.9
Weights for Lowland and for FTSE All-Share are shown as at the year end.
Note the weights for Lowland do not add up to 100 as there is a small % of the
portfolio held overseas and in the FTSE Fledgling Index. Lowland portfolio
returns are calculated excluding cash.
When viewed through a different lens, what can be seen is that size allocation
of the portfolio (in other words the Company holding more than its benchmark
in small and medium sized companies) was not a big driver of relative
performance this year, and instead it was stock selection and to a lesser
extent the use of gearing that drove the relative return. Note that in the
below chart, the Company returns are shown with debt at par, and gross of
management fees (this is why the return differs from the 16.3% NAV total
return reported).
http://www.rns-pdf.londonstockexchange.com/rns/8726O_2-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8726O_2-2024-12-4.pdf)
Within the FTSE 100, the good performance was driven predominantly by the
holdings in Rolls-Royce and Marks & Spencer, as well as banks NatWest and
Barclays. Rolls-Royce benefitted from a combination of favourable end markets
and ongoing 'self-help' (such as cost cutting and a more commercial focus on
pricing). The position was sold during the financial year as the valuation had
recovered a long way at the same time as market expectations had become more
realistic. The holding was a good reminder that non-dividend payers can serve
a role within an income portfolio, as the capital growth from Rolls-Royce can
now be reinvested. M&S continued its recent outperformance as a result of
higher than forecast earnings as well as a higher valuation, as both sides of
its business (food and clothing) performed well under the new team. We have
recently reduced the holding as its turnaround is now better understood and
reflected in valuations. The banks performed well in an environment of more
'normal' interest rates, where they can earn a healthier margin between what
they charge for lending and what they pay out for deposits.
http://www.rns-pdf.londonstockexchange.com/rns/8726O_3-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8726O_3-2024-12-4.pdf)
Turning to the FTSE 250, the best performers included pork and poultry
processor Cranswick, contractor Balfour Beatty, ship broker Clarkson and
building products company Marshalls. While there would be no end market
commonality to these businesses, each would be among the market leaders in
their area with a path to further earnings growth. For example, in the case of
Cranswick, they are already the market leader in pork and are now investing in
chicken, while in the case of Marshalls there is a need to build more housing
and with this will come greater demand for its products.
Within the FTSE SmallCap index, while there were positions (such as
free-to-air broadcaster STV) that performed well, there were two key
detractors - Vanquis Banking and TT Electronics. In the case of Vanquis (which
is predominantly a provider of credit cards), profitability is currently
minimal as the new management team work through a number of issues (such as
higher than expected claims costs and the need to move prices up in some areas
in order to generate a good return). With respect to the claim costs, higher
claims were largely driven by external claims companies, and the uphold rate
of the complaints has been low, but nevertheless there is a charge from the
financial ombudsman for any complaint (regardless of whether it is upheld).
The holding has been poor and the company has gone through several phases of
restructuring over a number of years. The valuation is currently very low
relative to the potential returns the company would earn if the new team do
succeed in turning the business round. In the case of TT Electronics the
company substantially lowered earnings guidance as a result of challenging
industrial end markets. In the period after Covid, due to supply chain outages
there was a period where customers built up stock levels to much higher than
normal levels, in order to ensure they wouldn't be caught out by not having a
particular component. What followed were several years of 'unwinding', as
stock levels were steadily moved back to normal levels. At the same time
higher interest rates have been depressing demand. For a company such as TT
Electronics, if and when demand recovers, we would expect a substantial
earnings recovery.
The performance of the AIM index overall has been disappointing and, as the
chart below shows, it has materially underperformed other areas of the UK
market. This has likely been due to a combination of outflows from the area,
weak sentiment towards domestic UK (to which AIM is more exposed) and more
recently tax uncertainty, both around the future of inheritance tax relief and
for specific sectors such as companies operating in the North Sea. Within
Lowland specifically, Serica Energy was the largest detractor from absolute
returns over the year and this was primarily due to an extension of the energy
profits levy as well as uncertainty surrounding the level of capital
expenditure deductibility (in other words the extent to which capital spend
can be used to reduce tax). This is not to say, however, that there have not
been successes on AIM, and a position such as Epwin (a manufacturer of window
and door frames) was among the best performers during the year as it delivered
against conservatively managed expectations.
http://www.rns-pdf.londonstockexchange.com/rns/8726O_4-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8726O_4-2024-12-4.pdf)
Source: Bloomberg as at 30 September 2024. Total return, GBP, rebased to 100
at start date.
The top ten absolute contributors to performance at the stock level were:
Company Name Contribution to absolute return (%) Share price total return (%)
1. Rolls-Royce 1.5 138.7
2. Marks & Spencer 0.9 59.1
3. NatWest 0.8 55.7
4. Barclays 0.8 47.7
5. Aviva 0.8 33.2
6. DS Smith 0.7 68.4
7. Epwin 0.7 58.5
8. Renold 0.7 76.3
9. Tesco 0.7 41.3
10. Kingfisher 0.6 51.6
The top ten absolute detractors from performance at the stock level were:
Company Name Contribution to absolute return (%) Share price total return (%)
1. Serica Energy -1.0 -38.3
2. Vanquis -0.9 -52.0
3. BP -0.8 -22.4
4. TT Electronics -0.5 -41.1
5. Headlam -0.4 -36.9
6. Prudential -0.2 -20.0
7. Halfords -0.2 -20.2
8. Churchill China -0.2 -26.9
9. Vertu Motors -0.2 -16.8
10. Watkin Jones -0.2 -35.9
Portfolio Activity
While we go into more detail on individual stock purchases and sales later in
the report, at a top-down level the purchases during the year have almost
entirely fallen outside of the FTSE 'top 20' (the largest 20 companies in the
UK such as Shell and AstraZeneca). The reason we make this distinction is, as
the chart in the attribution section shows, the FTSE top 20 has meaningfully
outperformed in recent years. This means that the portfolio is increasingly
'underweight' the FTSE top 20, as the next chart shows, and we are now
modestly 'overweight' the remainder of the FTSE 100, driven by purchases such
as Sainsbury and Beazley. This deliberate, but gradual, re-positioning of the
portfolio away from the largest UK companies is because, in our view, the best
valuation opportunities fall outside of that area. Smaller businesses are, on
average, more domestic and have therefore been more exposed to weaker
sentiment towards the UK economy as well as outflows from UK equities. Third
party equity investors are not the only buyers of these assets and the
companies themselves are increasingly becoming their own 'net buyer' via share
buybacks.
http://www.rns-pdf.londonstockexchange.com/rns/8726O_5-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8726O_5-2024-12-4.pdf)
Much of the selling activity during the year was driven by acquisitions, with
seven companies (Alpha Financial Markets Consulting, Finsbury Food, Wincanton,
IDS, Hipgnosis Songs Fund, Tyman and DS Smith) agreeing takeover offers from a
mixture of private equity or competing firms. In addition the largest
individual sale was the holding in Rolls-Royce, which was sold on valuation
grounds following good performance.
Turning to purchases, within the FTSE 100, new positions included Beazley,
Sainsbury and Smith & Nephew. In all cases they are among the market
leaders in what they produce, whether in global cyber security insurance in
the case of Beazley or wound care in the case of Smith & Nephew. In each
case we think there is a strength to the business that is not currently
reflected in the valuation; for example Sainsbury is now back regaining market
share following a period of price re-setting.
Within small and medium-sized companies, new positions purchased included
property owners Shaftesbury Capital and Workspace, as well as retailer Dunelm
and corporate restructuring firm FRP Advisory. There is no end market
commonality to these new holdings, but in all cases we can see a long pathway
of future earnings growth, whether that is from rental growth in prime London
property in the case of Shaftesbury or market share growth in homewares in the
case of Dunelm.
Portfolio Valuation
While the UK equity market as a whole trades on a valuation discount relative
to overseas, there remains a subset of UK shares that trade on a discount to
the broader UK market. Domestic earners in particular have underperformed
substantially since Brexit (although Brexit is not the only culprit - smaller
businesses have also been impacted more by, for example, the growing desire
for liquidity among fund managers).
As Lowland invests across the breadth of the UK market (in small, medium and
large companies) it has comparatively more exposure to these smaller, domestic
businesses that have seen their valuations penalised. This means that the
Lowland portfolio continues to trade at a valuation discount to the broad UK
market:
Lowland FTSE All-Share
12 month historic P/E 10.2x 12.5x
Source: Janus Henderson Investors as at 30 September 2024.
Dividends
The earnings were held back by the strength of sterling in the second half of
the financial year (as some dividends are paid in overseas currencies such as
the US Dollar), as well as the delay of ex dividend dates to our 2024/25
financial year. It is also notable that some of our better performing
holdings are lower yielding or are not yet back on the dividend list. An
example of this amongst the larger company holdings would be Rolls-Royce and
in the smaller, recovery stock, Renold. These holdings have provided
capital growth and when that capital is recycled into dividend paying shares
they help Lowland's income growth. It is capital growth that over time
produces sustainable income growth. There is also a growing trend for
companies to prefer share buybacks rather than special dividends if they
believe they have excess cash and the graph below shows this increase in share
buybacks reported over the past twenty years.
http://www.rns-pdf.londonstockexchange.com/rns/8726O_6-2024-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8726O_6-2024-12-4.pdf)
Outlook
Satisfactory company results have been achieved over the past year despite a
UK economy that has fluctuated between modest growth and modest recession
(with a general election and Budget uncertainty thrown in). This is because
the companies held are not a proxy for the UK economy, but rather a diverse
collection of conservatively managed, often market leading businesses that
remain on modest valuations. As we look to an equally uncertain year ahead for
the UK (and global) economy, when we return to company fundamentals,
especially at current valuation levels, we cannot help but feel optimistic.
James Henderson and Laura Foll
Fund Managers
4 December 2024
Twenty Largest Holdings as at 30 September 2024
The stocks in the portfolio are a diverse mix of businesses operating
in a wide range of end markets.
Rank Company % of Approx. market cap Valuation 2024
2024 (2023) portfolio £'000
1 (3) HSBC 2.6 £125.7bn 11,242
The global bank provides international banking and financial services. The
diversity of the countries it operates in as well as its exposure to faster
growing economies make it well placed.
2 (4) Standard Chartered 2.4 £21.3 bn 10,535
A global bank providing international banking and financial services, with a
particular focus on emerging markets. The position provides geographic
diversification for the portfolio as well as being positively exposed to
higher global interest rates.
3 (2) BP 2.2 £64.4bn 9,595
A vertically integrated oil and gas business. At the current oil price it
remains highly cash generative, much of which is being returned to
shareholders via an attractive dividend yield and ongoing share buyback.
4 (8) Aviva 2.2 £12.5bn 9,525
The company provides a wide range of insurance and financial services. Under a
new CEO there is heightened focus on simplifying the business.
5 (1) Shell 2.1 £156.0bn 9,094
A vertically integrated oil & gas company. At the current oil price the
company is capable of generating substantial amounts of free cash flow. This
cash is being allocated partly to shareholders (via a growing dividend and
share buybacks) and partly to investing in the necessary transition away from
fossil fuels.
6 (13) Barclays 2.1 £35.1bn 8,982
The company has a strong retail and corporate lending franchise combined with
an investment bank. Higher interest rates and improved returns in its
investment bank could allow a period of better returns generation that in our
view is not reflected in the current valuation.
7 (15) Marks & Spencer 2.1 £7.8bn 8,942
The company is a clothing and food retailer. Under a new management team it
has refreshed its strategy, for example resetting prices lower and closing
loss making stores. This has allowed it to gain market share on both sides of
the business and upgrade earnings expectations.
8 (5) GSK 2.0 £60.2bn 8,856
A global pharmaceutical company, which is among the market leaders in areas
such as HIV and vaccines. Shares have come under pressure in recent years
due to concerns around legal costs (now largely resolved) as well as a lack of
significant new product sales. The shares trade at a low valuation compared
to the broader sector and over time we can see a route to substantial sales
and earnings growth.
9 (10) Irish Continental 1 2.0 £783.4m 8,622
The group provides passenger transport, roll-on and roll-off freight transport
and container services between Ireland, the United Kingdom and Continental
Europe. It is a well managed business operating in a duopolistic industry.
10 (*) Tesco 2.0 £24.1bn 8,458
The company is the largest food retailer in the UK. By using scale to its
advantage and keeping prices competitive for the customer, it is successfully
growing sales and earnings. The cash generative nature of the business
allows an attractive dividend yield for shareholders as well as a share
buyback.
11 (6) M&G 1.9 £4.8bn 8,292
The company is a financial services provider that was spun out of Prudential
in 2019, providing insurance and asset management services. The capital
generation of the group allows sizeable returns to shareholders via dividends
and share buybacks.
12 (7) FBD(1) 1.9 £374.3m 7,944
The company is an Irish insurer with a focus on insurance coverage for the
agricultural sector. It is a disciplined underwriter with a history of good
returns generation and pays an attractive dividend yield.
13 (11) International Personal Finance 1.8 £294.4m 7,843
The company provides consumer lending services in countries such as Mexico and
Eastern Europe. It has successfully grown its lending in recent years while
remaining disciplined on credit quality.
14 (*) BT Group 1.6 £14.2bn 6,951
The company is a provider of fixed and mobile communication services. Its
ongoing roll-out of fibre to the home in the UK should allow substantial free
cash flow growth over the long term, which in our view is not currently
reflected in the shares.
15 (*) National Grid 1.6 £49.0bn 6,874
The company is a regulated utility providing electricity and gas distribution
in the UK and US. It is investing heavily in the UK electricity network
ahead of the energy transition, providing a route to future earnings growth as
it generates a return on these investments. The shares pay an attractive
dividend yield.
16 (19) Phoenix 1.6 £5.1bn 6,833
The company operates primarily in the UK and specialises in taking over and
managing closed life insurance and pension funds.
17 (18) Hiscox 1.6 £3.8bn 6,773
The company is a global insurance provider that is growing well in markets
such as US small business insurance.
18 (12) Rio Tinto 1.5 £63.6bn 6,623
The company is one of the world's largest mining businesses with a particular
focus on iron ore, aluminium and copper. Its mines are well positioned on the
cost curve, often at the lowest cost quartile globally, meaning that it can
continue to be highly cash generative despite volatile commodity prices. This
cash generation combined with a strong balance sheet has resulted in an
attractive dividend yield.
19 (16) Anglo American 1.5 £32.9bn 6,557
A diversified mining company with exposure to commodities including copper,
iron ore, diamonds and platinum. Its mix of commodity production means it
could be well positioned to benefit from the need to decarbonise the global
economy. For example, it is significantly exposed to copper where demand is
likely to grow driven by its use in electric vehicles as well as renewable
energy.
20 (*) Morgan Advanced Materials 1.5 £722.0m 6,555
The company is a producer of specialist materials with specific properties
(such as the ability to withstand high temperatures or high altitude), for use
across a broad range of industries including transportation, renewable energy,
healthcare and semiconductors. The company has in recent years improved its
cost competitiveness, reduced its debt and invested in new technologies.
165,096
At 30 September 2024 these investments totalled £165,096,000 or 38.2% of
portfolio.
*Not in the top 20 largest investments last year
MANAGING RISKS
The Board, with the assistance of the Manager, has carried out a robust
assessment of the principal risks and uncertainties, including emerging risks,
facing the Company including those that would threaten its business model,
future performance, solvency, liquidity and reputation. The Board regularly
considers the principal risks facing the Company and has drawn up a matrix of
risks. The Board has put in place a schedule of investment limits and
restrictions, appropriate to the Company's investment objective and policy, in
order to mitigate these risks as far as practicable. The principal risks which
have been identified and the steps taken by the Board to mitigate these are
set out in the table below. The principal financial risks are detailed in note
14 to the financial statements.
At the half year stage, the Board completed a thorough review of the principal
risks and uncertainties facing the Company. It was not considered necessary to
make changes to the principal risks and uncertainties as a result of this
review.
Principal risks Mitigating measure
Market, geopolitical, macroeconomic or environmental conditions cause a The Fund Managers maintain close oversight of the Company's portfolio, and in
material fall in market value particular its gearing levels, and the performance of investee companies.
Regular stress testing of the revenue account under different scenarios for
The wars in Ukraine and Israel and changes in the international political dividends is carried out. The Board monitors volatility, and holds a regular
landscape have heightened tensions across the world, and significantly dialogue with the Fund Managers to understand the impact on the Company's
increased volatility in equity markets. portfolio.
Macroeconomic conditions in the UK, including political uncertainty and rising
inflation have led to increased volatility in the UK equity market.
Global pandemic The Fund Managers maintain close oversight of the Company's portfolio, and in
particular its gearing levels, and the performance of investee companies.
The potential impact of further global health crises on the Company's Regular stress testing of the revenue account under different scenarios for
investments and its direct and indirect effects, including the effect on the dividends is carried out. The Board monitors the operations of the Company and
global economy. its service providers to ensure that they continue to be appropriate,
effective and properly resourced.
Investment activity and strategy risk The Board manages these risks by ensuring a diversification of investments and
a regular review of the extent of borrowings. Janus Henderson operates in
An inappropriate investment strategy, failure to take account of climate risk accordance with investment limits and restrictions and policy determined by
impacts on the portfolio, or poor execution, for example, in terms of asset the Board, which includes limits on the extent to which borrowings may be
allocation or level of gearing, employed.
may result in underperformance against the Company's benchmark index and the
companies in its peer group, and also in the Company's shares trading on a
wider discount to the net asset value per share. The Board reviews the investment limits and restrictions on a regular basis
and the Manager confirms adherence to them every month. Janus Henderson
provides the Board with management information, including performance data and
reports and shareholder analyses.
The Board monitors the implementation and results of the investment process
with the Fund Managers at each Board meeting and monitors risk factors
including ESG factors in relation to climate risk, in respect of the
portfolio. Investment strategy is reviewed at each meeting.
Portfolio and market price The Board reviews the portfolio at the five Board meetings held each year and
receives regular reports from the Company's brokers. A detailed liquidity
Although the Company invests almost entirely in securities that are listed on report is considered on a regular basis.
recognised markets, share prices may move rapidly. The companies in which
investments are made may operate unsuccessfully, or fail entirely. A fall in The Fund Managers closely monitor the portfolio between meetings and mitigate
the market value of the Company's portfolio would have an adverse effect on this risk through diversification of investments. The Fund Managers
equity shareholders' funds. periodically present the Company's investment strategy in respect of current
market conditions. Performance relative to the FTSE All-Share Index, and other
UK equity income trusts is also monitored.
Dividend income The Board reviews income forecasts at each meeting.
A reduction in dividend income could adversely affect the Company's dividend
record.
The Company has revenue reserves of £9.6 million (before payment of the third
interim and final dividend) and distributable capital reserves of £292.1
million.
Financial risk The Company minimises the risk of a counterparty failing to deliver securities
or cash by dealing through organisations that have undergone rigorous due
The financial risks faced by the Company include market price risk, interest diligence by Janus Henderson. The Company holds its liquid funds almost
rate risk, liquidity risk, currency risk and credit and counterparty risk. entirely in interest bearing bank accounts in the UK or on short-term deposit.
This, together with a diversified portfolio which comprises mainly investments
in large and medium sized listed companies mitigates the Company's exposure to
liquidity risk. Currency risk is mitigated by the low exposure to overseas
stocks. Please also see note 14 to the accounts.
Gearing risk At the point of drawing down debt, gearing will not exceed 20% of the
portfolio valuation.
In the event of a significant or prolonged fall in equity markets gearing
would exacerbate the effect of the falling market on the Company's NAV per The Company minimises the risk by the regular monitoring of the levels of the
share and, consequently, its Company's borrowings in accordance with the agreed limits. The Company
confirms adherence to the covenants of the loan facilities on a monthly basis.
share price.
Tax and regulatory The Manager provides its services, inter alia, through suitably qualified
professionals and the Board receives internal control reports produced by the
Changes in the tax and regulatory environment could adversely affect the Manager on a quarterly basis, which confirm legal and regulatory compliance.
Company's financial performance, including the return on equity. The Fund Managers also consider tax and regulatory change in their monitoring
of the Company's underlying investments.
A breach of s.1158/9 could lead to a loss of investment trust status,
resulting in capital gains realised within the portfolio being subject to
corporation tax. A breach of the Listing Rules
could result in suspension of the Company's shares, while a breach of the
Companies Act 2006 could lead to criminal proceedings, or financial or
reputational damage.
Operational The Board monitors the services provided by the Manager and its other
suppliers and receives reports on the key elements in place to provide
Disruption to, or failure of, the Manager's or its administrator's (BNP effective internal control.
Paribas) accounting, dealing or payment systems or the Depositary's records
could prevent the accurate reporting and monitoring of the Company's financial
position. Cyber crime could lead to loss of confidential data. The Company is
also exposed to the operational risk that one or more of its suppliers may not Cyber security is closely monitored and the Audit Committee receives an annual
provide the required level of service. presentation from Janus Henderson's
Head of Information Security.
Details of how the Board monitors the services provided by Janus Henderson and
its other suppliers and the key elements designed to provide effective
internal control are explained further in the Internal Controls section of the
Corporate Governance Statement in the annual report.
EMERGING RISKS
In addition to the principal risks facing the Company, the Board also
regularly considers potential emerging risks, which are defined as potential
trends, sudden events or changing risks which are characterised by a high
degree of uncertainty in terms of the probability of them happening and the
possible effects on the Company. Should an emerging risk become sufficiently
clear, it may be moved to a principal risk.
VIABILITY STATEMENT
The Company is a long-term investor; the Board believes it is appropriate to
assess the Company's viability over a five-year period in recognition of our
long-term horizon and what we believe to be investors' horizons, taking
account of the Company's current position and the potential impact of the
principal and emerging risks and uncertainties as documented above in the
annual report.
The assessment has considered the impact of the likelihood of the principal
and emerging risks and uncertainties facing the Company, in particular
investment strategy and performance against benchmark, whether from asset
allocation or the level of gearing, and market risk, including
climate risk, in severe but plausible scenarios, and the effectiveness of any
mitigating controls in place.
The Board has reviewed three additional model scenarios which evaluate the
impact on the revenue forecast and reserves. These range from a worst case
scenario which includes a 10% reduction in income and net assets, through to a
scenario where there is no income growth and no reduction in income or net
assets. Increasing dividends to shareholders could continue under all three
scenarios,
although the Company would need to use its capital reserves in some cases.
None of the results of the scenarios used would therefore threaten the
viability of the Company.
The Board has taken into account the liquidity of the portfolio and the
gearing in place when considering the viability of the Company over the next
five years and its ability to meet liabilities as they fall due. This included
consideration of the duration of the Company's loan facilities and how a
breach of the loan facility covenants could impact on the Company's liquidity,
net asset value and share price.
The Board does not expect there to be any significant change in the current
principal risks and adequacy of the mitigating controls in place. Also the
Directors do not envisage any change in strategy or objectives or any events
that would prevent the Company from continuing to operate over that period as
the Company's assets are liquid, its commitments are limited and the Company
intends to continue to operate as an investment trust. Only a substantial
financial crisis affecting the global economy could have an impact on this
assessment.
In coming to this conclusion, the Directors have considered the ongoing impact
of the wars in Ukraine and Israel and changes in the international political
landscape, in particular the impact on income and the Company's ability to
meet its investment objective. The Board does not believe that these will have
a long-term impact on the viability of the Company and its ability to continue
in operation, notwithstanding the short-term uncertainty it has caused in the
markets.
Based on this assessment, the Directors have a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they
fall due over the next five-year period. The Directors have also concluded
that the Company has adequate resources to continue in operational existence
for at least twelve months from the date of approval of these financial
statements being 31 December 2025, and it is therefore appropriate to prepare
these financial statements on a going concern basis.
RELATED PARTY TRANSACTIONS
The Company's current related parties are its Directors and Janus Henderson.
There have been no material transactions between the Company and its Directors
during the year. The fees and expenses paid to Directors are set out in the
annual report. There were no outstanding amounts payable at the year end.
In relation to the provision of services by Janus Henderson, other than fees
payable by the Company in the ordinary course of business and the provision of
sales and marketing services, there have been no material transactions with
Janus Henderson affecting the financial position of the Company during the
year under review. More details on transactions with Janus Henderson,
including amounts outstanding at the year end, are given in note 20 in the
annual report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
In accordance with Disclosure Guidance and Transparency Rule 4.1.12, each of
the Directors confirms that, to the best of his or her knowledge:
· the Company's financial statements, which have been prepared in
accordance with UK Accounting Standards and applicable law give a true and
fair view of the assets, liabilities, financial position and return of the
Company; and
· the Strategic Report, Report of the Directors and financial
statements include a fair review of the development and performance of the
business and the position of the Company, together with a description of the
principal risks and uncertainties that it faces.
On behalf of the Board
Robert Robertson
Chairman
4 December 2024
INCOME STATEMENT
Year ended Year ended
30 September 2024 30 September 2023
Revenue return £'000 Capital return £'000 Revenue return £'000 Capital return £'000
Total Total
£'000 £'000
Gains on investments held at fair value through profit or loss (note 2) - 42,550 42,550 - 36,546 36,546
Income from investments (note 3) 19,666 - 19,666 20,669 - 20,669
Other interest receivable and similar income (note 4) 160 - 160 107 - 107
---------- ---------- --------- ---------- ---------- ----------
Gross revenue and capital gains 19,826 42,550 62,376 20,776 36,546 57,322
Management fee (867) (868) (1,735) (856) (857) (1,713)
Administrative expenses (802) - (802) (686) - (686)
---------- ---------- ---------- ---------- ---------- ----------
Net return before finance costs and taxation 18,157 41,682 59,839 19,324 35,689 54,923
Finance costs (1,115) (1,115) (2,230) (1,027) (1,027) (2,054)
---------- ---------- ---------- ---------- ---------- ----------
Net return before taxation 17,042 40,567 57,609 18,207 34,662 52,869
Taxation on net return (37) - (37) (80) - (80)
---------- ---------- ---------- ---------- ---------- ----------
Net return after taxation 17,005 40,567 57,572 18,127 34,662 52,789
---------- ---------- ---------- ---------- ---------- ----------
Return per ordinary share - basic and diluted 6.29p 15.01p 21.30p 6.71p 12.83p 19.54p
===== ===== ===== ===== ===== =====
The total columns of this statement represent the Profit and Loss Account of
the Company. The revenue return and capital return columns are supplementary
to this and are prepared under guidance published by the Association of
Investment Companies. All revenue and capital items in the above statement
derive from continuing operations. The Company had no other comprehensive
income other than those disclosed in the Income Statement. The net return is
both the profit for the year and the total comprehensive income.
STATEMENT OF CHANGES IN EQUITY
Called up share capital £'000 Share premium account £'000 Capital redemption reserve Other capital reserves £'000
£'000 Revenue reserve £'000
Total
Year ended £'000
30 September 2024
6,755 61,619 1,007 270,051 9,913 349,345
At 1 October 2023
Net return after taxation - - - 40,567 17,005 57,572
Third interim dividend (1.6p) for the year ended 30 September 2023 paid 31 - - - - (4,323) (4,323)
October 2023
Final dividend (1.6p) for the year ended 30 September 2023 paid 31 January - - - - (4,323) (4,323)
2024
First interim dividend (1.6p) for the year ended 30 September 2024 paid 30 - - - - (4,323) (4,323)
April 2024
Second interim dividend (1.6p) for the year ended 30 September 2024 paid 31 - - - - (4,323) (4,323)
July 2024
Return of unclaimed dividends 8 8
6,755 61,619 1,007 310,618 9,634 389,633
At 30 September 2024
====== ====== ====== ====== ====== ======
Called up share capital £'000 Share premium account £'000 Capital redemption reserve Other capital reserves £'000
£'000 Revenue reserve £'000
Total
Year ended £'000
30 September 2023
6,755 61,619 1,007 235,389 8,266 313,036
At 1 October 2022
Net return after taxation - - - 34,662 18,127 52,789
- - - - (4,120)
Third interim dividend (1.525p) for the year ended 30 September 2022 paid 31
October 2022
(4,120)
Final dividend (1.525p) for the year ended 30 September 2022 paid 31 January - - - - (4,120)
2023
(4,120)
First interim dividend (1.525p) for the year ended 30 September 2023 paid 28 - - - - (4,120) (4,120)
April 2023
Second interim dividend (1.525p) for the year ended 30 September 2023 paid 31 - - - - (4,120) (4,120)
July 2023
--------- ---------- ---------- ----------- ---------- ----------
6,755 61,619 1,007 270,051 9,913 349,345
At 30 September 2023
====== ====== ====== ====== ====== ======
STATEMENT OF FINANCIAL POSITION
As at As at
30 September 2024 30 September
£'000 2023
£'000
Fixed assets
Investments held at fair value through profit or loss:
Listed at market value on the main market 318,802 294,983
Listed at market value on AIM 55,176 52,186
Listed at market value overseas 19,969 15,484
Unlisted 2,277 2,368
Investments on loan 36,393 27,408
----------- -----------
432,617 392,429
----------- -----------
Current assets
Debtors 2,428 2,805
Cash at bank 5,161 2,926
----------- -----------
7,589 5,731
----------- -----------
Creditors: amounts falling due within one year (20,749) (19,003)
----------- -----------
Net current liabilities (13,160) (13,272)
----------- -----------
Total assets less current liabilities 419,457 379,157
Creditors: amounts falling due after one year (29,824) (29,812)
----------- -----------
Net assets 389,633 349,345
======= =======
Capital and reserves
Called up share capital 6,755 6,755
Share premium account 61,619 61,619
Capital redemption reserve 1,007 1,007
Other capital reserves 310,618 270,051
Revenue reserve 9,634 9,913
----------- -----------
Total shareholders' funds 389,633 349,345
======= =======
Net asset value per ordinary share - basic and diluted 144.2p 129.3p
======= =======
STATEMENT OF CASH FLOWS
Year ended Year ended
30 September 2024 30 September 2023
£'000 £'000
Cash flows from operating activities
Net return before taxation 57,609 52,869
Add back: finance costs 2,230 2,054
Add: gains on investments held at fair value through profit or loss (42,550) (36,546)
Withholding tax on dividends reclaimed 16 41
Decrease/(increase) in other debtors 324 (1,697)
Increase/(decrease) in other creditors 541 (496)
----------- -----------
Net cash inflow from operating activities 18,170 16,225
Cash flows from investing activities
Purchase of investments (78,497) (56,075)
Sale of investments 80,668 52,572
----------- -----------
Net cash inflow/(outflow) from investing activities 2,171 (3,503)
Cash flows from financing activities
Equity dividends paid (net of refund of unclaimed distributions and reclaimed (16,480)
distributions)
(17,284)
Loans drawn down 37,736 55,092
Loans repaid (36,378) (55,796)
Interest paid (2,177) (1,996)
----------- -----------
Net cash outflow from financing activities (18,103) (19,180)
----------- -----------
Net increase/(decrease) in cash and cash equivalents 2,238 (6,458)
Cash and cash equivalents at start of year 2,926 9,395
Effect of foreign exchange rates (3) (11)
----------- -----------
Cash and cash equivalents at end of year 5,161 2,926
======= =======
Comprising:
Cash at bank 5,161 2,926
----------- -----------
5,161 2,926
======= =======
Cash inflow from dividends net of taxation was £19,961,000 (2023:
£18,934,000) and interest received was £75,000 (2023: £62,000)
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting Policies
a) Basis of preparation
The company is a registered investment company as defined in section 833 of
the Companies Act 2006 and is
incorporated in the United Kingdom. It operates in the United Kingdom and is
registered at 201 Bishopsgate, London EC2M 3AE.
The financial statements have been prepared in accordance with the Companies
Act 2006, FRS 102 - The Financial Reporting Standard applicable in the UK and
Republic of Ireland and with the Statement of Recommended Practice: Financial
Statements of Investment Trust Companies and Venture Capital Trusts ('the
SORP') issued in July 2022 by the Association of Investment Companies.
The principal accounting policies applied in the presentation of these
financial statements are set out below. These policies have been consistently
applied to all the years presented.
The Financial Statements have been prepared under the historical cost basis
except for the measurement of fair value of investments. In applying FRS102,
financial instruments have been accounted for in accordance with Section 11
and 12 of the standard. All of the Company's operations are of a continuing
nature.
b) Going Concern
The Directors have considered the liquidity of the portfolio and concluded
that the assets of the Company consist of securities that are readily
realisable. They have also considered the impact of the war in Ukraine and
Israel and changes in the international political landscape, including revenue
forecasting, and a review of covenant compliance including the headroom above
the most restrictive covenants. They have concluded that they are able to meet
their financial obligations as they fall due for at least twelve months from
the date of approval of these financial statements. Having assessed these
factors, the principal risks and other matters discussed in connection with
the viability statement, the Directors considered it appropriate to adopt the
going concern basis of accounting in preparing the financial statements.
c) Investments held at Fair Value through Profit or Loss
Listed investments, including AIM stocks are held at fair value through profit
or loss and accordingly are valued at fair value, deemed to be the quoted bid
price or the last trade price depending on the convention of the exchange on
which the investment is quoted.
Unlisted investments have also been classified as held at fair value through
profit or loss and are valued by the Directors using primary valuation
techniques such as recent transactions and net assets.
Changes in the fair value of investments held at fair value through profit or
loss and gains and losses on disposal are recognised in the Income Statement
as 'gains or losses on investments held at fair value through profit or
loss'. Also included in this are transaction costs incurred on the purchase
and disposal of investments. All purchases and sales are accounted for on a
trade date basis.
d) Foreign Currency
The results and financial position of the Company are expressed in pounds
sterling, which is the functional and
presentational currency of the Company. Sterling is the functional currency
because it is the currency of the primary economic environment in which the
Company operates.
Transactions recorded in overseas currencies during the year are translated
into sterling at the appropriate daily exchange rates. Monetary assets and
liabilities and equity investments held at fair value through profit or loss
which are denominated in foreign currencies at the Statement of Financial
Position date are translated into sterling at the exchange rates ruling at
that date.
Any gains or losses on the translation of foreign currency balances, whether
realised or unrealised, are taken to the capital or to the revenue return of
the Income Statement, depending on whether the gain or loss is of a capital or
revenue nature.
e) Income
Dividends receivable on equity shares are taken to the revenue return on an
ex-dividend basis except where, in the opinion of Directors, the dividend is
capital in nature in which case it is taken to the 'gains/(losses) on
investments' in the capital return column. The ordinary element of scrip
dividends received in lieu of cash dividends is recognised as revenue. Any
enhancement above the cash dividend is treated as capital. Income
distributions from UK Real Estate Investment Trusts will be split into two
parts: a Property Income Distribution ('PID') made up of rental revenue; and a
non-PID element, consisting of non-rental revenue. The PID element is subject
to corporation tax as schedule A revenue, while the non-PID element will be
treated as franked revenue.
Bank interest is accounted for monthly on an accruals basis and shown in the
revenue return based on amounts to which the Company is entitled.
Fees earned from stock lending are accounted for monthly on an accruals basis
and shown in the revenue return after deduction of amounts withheld by the
counterparty arranging the stock lending facility.
f) Management Fees, Administrative Expenses and Finance Costs
All expenses and finance costs are accounted for on an accruals basis. All
administrative expenses except the management fee and finance costs are
charged to the revenue return of the Income Statement. The management fee and
finance costs are charged 50% to the capital return of the Income Statement
and 50% to the revenue return of the Income Statement.
g) Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on the taxable profit for the year. Taxable
profit differs from return before taxation as reported in the Income Statement
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Company's liability for current tax is calculated using the
applicable rate of corporation tax for the accounting period.
In line with the recommendations of the AIC SORP, the allocation method used
to calculate tax relief on expenses presented against capital returns in the
supplementary information in the Income Statement is the 'marginal basis'.
Under this basis, if taxable income is capable of being offset entirely by
expenses presented in the revenue return column of the Income Statement, then
no tax relief is transferred to the capital return column.
Deferred taxation is provided on all timing differences that have originated
but not reversed by the Statement of Financial Position date. This is subject
to deferred tax assets only being recognised if it is considered more likely
than not that there will be suitable profits from which the future reversal of
timing differences can be deducted. Any liability to deferred tax is provided
at the average rate of tax expected to apply based on tax rates and laws that
have been enacted or substantively enacted at the Statement of Financial
Position date. Deferred tax assets and liabilities are not discounted to
reflect the time value of money.
h) Borrowings
Interest bearing bank loans and overdrafts are recorded initially at fair
value, being the proceeds received, less direct issue costs. They are
subsequently re-measured at amortised cost. Finance costs including interest
payable, premiums on settlement or redemption and direct issue costs, are
accounted for on an accruals basis in the Income Statement using the effective
interest rate method and are added to the carrying amount of the instrument to
the extent that they are not settled in the period in which they arise.
Senior unsecured notes are recorded initially at proceeds received, less
direct issue costs. They are subsequently re-measured at amortised cost. The
issue costs will be amortised over the life of the loan notes. Finance costs,
including interest payable, are accounted for on an accruals basis in the
Income Statement using the effective interest rate method.
i) Dividends Payable to Shareholders
Dividends payable to shareholders are recognised in the financial statements
when they are paid, or in the case of final dividends, when they are approved
by shareholders. Dividends are dealt with in the Statement of Changes in
Equity.
j) Capital and Reserves
Called up share capital represents the nominal value of ordinary shares
issued.
The share premium account represents the premium above nominal value received
by the Company on issuing shares net of issue costs.
The revenue reserve represents accumulated revenue profits retained by the
Company that have not currently been distributed to shareholders as a
dividend.
The capital redemption reserve represents the nominal value of ordinary shares
that have been repurchased and cancelled.
Other capital reserves are split into two components, the capital reserve
arising on investments sold and the capital reserve arising on investments
held. The following analyses what is accounted for in each of these
components.
Capital reserve arising on investments sold
The following are accounted for in this reserve:
· gains and losses on the disposals of investments;
· realised foreign exchange differences of a capital nature;
· cost of repurchasing ordinary share capital; and
· expenses and finance costs allocated to capital net of tax
relief.
Capital reserve arising on revaluation of investments held
The following are accounted for in this reserve:
· increases and decreases in the valuation of investments held at
the year end; and
· unrealised foreign exchange differences of a capital nature.
k) Distributable Reserves
The Company's capital reserve arising on investments sold (which may be
restricted by unrealised losses) and revenue reserve may be distributed by way
of a dividend.
l) Significant Accounting Judgements and Estimates
The preparation of the Company's financial statements on occasion requires the
Directors to make judgements, estimates and assumptions that affect the
reported amounts in the primary financial statements and the accompanying
disclosures.
These assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities affected
in the next financial year.
The Directors do not believe that any accounting judgements or estimates have
been applied to this set of financial statements that have a significant risk
of causing a material adjustment to the carrying amount of assets and
liabilities. Nor do they believe that there are any estimates that have a
significant risk of causing a material adjustment to the carrying amount of
assets and liabilities within the next financial year. In line with UK GAAP
investments are valued at fair value which are predominantly quoted prices for
the investments in active markets and therefore reflect participants' views of
climate change risk.
2. 2024 2023
Gains on investments held at fair value through profit or loss £'000 £'000
Gains on the sale of investments based on historical cost 8,158 7,085
Less: revaluation (losses)/gains recognised in previous years (5,289) 3,499
----------- -----------
Gains on investments sold in the year based on carrying value at previous 2,869 (10,584)
Statement of Financial Position date
Revaluation gains on investments held at 30 September 39,684 25,973
Exchange losses (3) (11)
---------- ----------
42,550 36,546
====== ======
3. 2024 2023
Income from Investments £'000 £'000
UK dividends:
Listed investments 16,441 17,210
Unlisted - 13
Property income dividends 731 615
--------- ---------
17,172 17,838
--------- ---------
Non UK dividends:
Overseas dividend income 2,494 2,831
--------- ---------
2,494 2,831
--------- ---------
19,666 20,669
===== =====
2024 2023
4.
£'000 £'000
Other Interest Receivable and Similar Income
Stock lending commission 74 42
8 -
Income from underwriting
Bank interest 78 65
--------- ---------
160 107
===== =====
Stock lending commission has been shown net of brokerage fees of £19,000
(2023: £11,000)
5. Return per Ordinary Share - Basic and Diluted
The return per ordinary share is based on the net return attributable to the
ordinary shares of £57,572,000 (2023: net return of £52,789,000) and on
270,185,650 ordinary shares (2023: 270,185,650) being the weighted average
number of ordinary shares in issue during the year. The return per ordinary
share can be further analysed between revenue and capital, as
below.
2024 2023
£'000 £'000
Net revenue return 17,005 18,127
Net capital return 40,567 34,662
--------- ---------
Net total return 57,572 52,789
===== =====
Weighted average number of ordinary shares in issue during the year 270,185,650 270,185,650
2024 2023
Pence Pence
Revenue return per ordinary share 6.29 6.71
Capital return per ordinary share 15.01 12.83
---------- ----------
Total return per ordinary share 21.30 19.54
====== ======
The Company does not have any dilutive securities, therefore the basic and
diluted returns per share are the same.
6.
Dividends Paid and Payable on the Ordinary Shares
Dividends on ordinary shares 2024 2023
Record date Payment date £'000 £'000
Third interim dividend (1.525p) for the year ended 30 September 2022 30 September 2022 31 October 2022 - 4,120
Final dividend (1.525p) for the year ended 30 September 2022 30 December 2022 31 January 2023 - 4,120
First interim dividend (1.525p) for the year ended 30 September 2023 31 March 2023 28 April 2023 - 4,120
Second interim dividend (1.525p) for the year ended 30 September 2023 30 June 2023 31 July 2023 - 4,120
Third interim dividend (1.6p) for the year ended 30 September 2023 28 September 2023 31 October 2023 4,323 -
Final dividend (1.6p) for the year ended 30 September 2023 28 December 2023 31 January 2024 4,323 -
First interim dividend (1.6p) for the year ended 30 September 2024 11 April 2024 30 April 2024 4,323 -
Second interim dividend (1.6p) for the year ended 30 September 2024 27 June 2024 31 July 2024 4,323 -
Return of unclaimed dividends (8) -
--------- ---------
17,284 16,480
===== =====
The third interim dividend and the final dividend for the year ended 30
September 2024 have not been included as a liability in these financial
statements. The total dividends payable in respect of the financial year,
which form the basis of the retention test under Section 1158 of the
Corporation Tax Act 2010, are set out below.
2024
£'000
17,005
Revenue available for distribution by way of dividend for the year
First interim dividend (1.6p) for the year ended 30 September 2024 (4,323)
Second interim dividend (1.6p) for the year ended 30 September 2024 (4,323)
Third interim dividend (1.6p) for the year ended 30 September 2024 (4,323)
Final dividend (1.625p) for the year ended 30 September 2024 (based on (4,391)
270,185,650 ordinary shares in issue at 3 December 2023)
---------
Transfer from reserves (355(1))
=====
(1) The residual will be transferred from the revenue reserve (2023:
£1,241,000 transferred to the revenue reserve)
7. Called up Share Capital
Number of shares entitled to dividend Total number of shares Nominal value of shares
£'000
At 30 September 2024 and 2023 270,185,650 270,185,650 6,755
----------- ----------- -----------
No shares were allotted or bought back during the year (2023: nil)
8. Net Asset Value per Ordinary Share
The net asset value per ordinary share of 144.2p (2023: 129.3p) is based on
the net assets attributable to the ordinary shares of £389,633,000 (2023:
£349,345,000) and on 270,185,650 (2023: 270,185,650) shares in issue on 30
September
2024.
The movements during the year of the assets attributable to the ordinary
shares were as follows:
2024 2023
£'000 £'000
Total net assets at start of year 349,345 313,036
Total net return after taxation 57,572 52,789
Net dividends paid in the year:
Ordinary shares (17,284) (16,480)
----------- -----------
Net assets attributable to the ordinary shares at 30 September 389,633 349,345
====== ======
9. 2024 Financial Information
The figures and financial information for the year ended 30 September 2024 are
extracted from the Company's annual financial statements for that period and
do not constitute statutory accounts. The Company's annual financial
statements for the year to 30 September 2024 have been audited but have not
yet been delivered to the Registrar of Companies. The Independent Auditor's
Report on the 2024 annual financial statements was unqualified, did not
include reference to any matter to which the Auditor drew attention without
qualifying the report, and did not contain any statements under sections
498(2) or 498(3) of the Companies Act 2006.
10. 2023 Financial Information
The figures and financial information for the year ended 30 September 2023 are
extracted from the Company's annual financial statements for that period and
do not constitute statutory accounts. The Company's annual financial
statements for the year to 30 September 2023 have been audited and filed with
the Registrar of Companies. The Independent Auditor's Report on the 2023
annual financial statements was unqualified, did not include reference to any
matter to which the Auditor drew attention without qualifying the report, and
did not contain any statements under sections 498(2) or 498(3) of the
Companies Act 2006.
11. Dividend
The final dividend, if approved by the shareholders at the Annual General
Meeting, of 1.625p per ordinary share will be paid on 31 January 2025 to
shareholders on the register of members at the close of business on 27
December 2023. This will take the total dividends for the year to 6.425p
(2023: 6.25p). The Company's shares will be traded ex-dividend on 24 December
2024.
12. Annual Report
The Annual Report will be posted to shareholders in December 2024 and will be
available on the Company's website (www.lowlandinvestment.com
(http://www.lowlandinvestment.com) ).
13. Annual General Meeting
The Annual General Meeting will be held on 28 January 2025 at 12.30pm at 201
Bishopsgate, London EC2M 3AE. The Notice of Meeting is included in the Annual
Report.
For further information please contact:
James Henderson Laura Foll
Fund Manager Fund Manager
Lowland Investment Company plc Lowland Investment Company plc
Telephone: 020 7818 4370 Telephone: 020 7818 6364
Dan Howe
Head of Investment Trusts
Janus Henderson Investors
Telephone: 020 7818 4458
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) are
incorporated into, or form part of, this announcement.
1 Overseas listed stock (Ireland)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAPALEAXLFFA