REG - Lowland Inv. Co. - Annual Financial Report
05/12/2023 07:00
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RNS Number : 6268V Lowland Investment Co PLC 05 December 2023
LOWLAND INVESTMENT COMPANY PLC
ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2023
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 never exceed 29.99% 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 2023
· Net Asset Value ('NAV') Total Return(1,8) of 17.2%
· Benchmark Total Return(2) of 13.8%
· Dividend growth of 2.5%
· Dividend for the Year(3) of 6.25p
Year ended Year ended
30 September 30 September
2023 2022
NAV per share at year end (debt at par)(4) 129.3p 115.9p
NAV per share at year end (debt at fair value)(4,8) 131.7p 118.1p
Share price at year end(5) 113.0p 104.5p
Market capitalisation £305m £282m
Dividend per share 6.25p(3) 6.10p
Ongoing charge(8) 0.6% 0.6%
Dividend yield(6,8) 5.5% 5.8%
Gearing at year end(8) 12.3% 12.5%
Discount at year end(7,8) 14.2% 11.5%
AIC UK Equity Income Sector Average Discount 5.5% 3.9%
(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 1.600p per ordinary share for the year ended 30
September 2023 that will be put to shareholders for approval at the Annual
General Meeting on Wednesday 24 January 2023
(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 17.2 50.8 2.5 47.6 706.1
Share price 13.9 46.0 -3.0 29.5 826.4
FTSE All-Share 13.8 39.8 19.7 71.8 309.1
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
2013 3.400 33.01 3.67 347,202 130.7 132.5
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 (2) 19.54 6.71 349,345 129.3 113.0
(1) Comparative numbers for 2013 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 1.60p per ordinary share for the year ended 30
September 2023 that will be put to shareholders for approval at the Annual
General Meeting on Wednesday 24 January 2024
CHAIRMAN'S STATEMENT
Performance
I am pleased to report that your Company made sound progress during its
sixtieth year in meeting its twin objectives of growth in capital and income.
Net Asset Value ('NAV') increased by 17.2%, outstripping the FTSE All-Share
benchmark return of 13.8%. In addition, Earnings per Share ('EPS') grew by 10%
to 6.7p, fully covering the recommended total dividend of 6.25p. It is a
source of some satisfaction that the Company has maintained or increased its
annual dividend each year since its first dividend in 1963.
I will cover capital growth first. In previous years we have referred to the
Company's weighting in small and medium-sized companies, much greater than
that of the Company's benchmark, as having held back capital growth. The
long-term trend for such companies to outperform larger companies was
interrupted by Brexit and then COVID. We are confident that the trend will
reverse, but it has not happened yet. In the year ended 30 September 2023, the
FTSE 100 returned 14.7%, a better return than the indices for medium and
smaller companies, and most especially AIM, which registered a negative 8.3%.
Lowland's portfolio was invested 47.2% in the FTSE 100, against the
benchmark's 84.4%. However, the portion of Lowland's portfolio invested in
each segment of the market outperformed each of the relevant indices, as
indicated below. This enabled Lowland to beat the benchmark, an achievement
given its bias to the smaller end of the market.
Total Returns (%)
Lowland Index
FTSE 100 19.7 14.7
FTSE 250 16.5 10.0
FTSE SmallCap 17.6 7.5
FTSE AIM All-Share 4.1 -8.3
Overall 17.2 13.8*
*Benchmark - FTSE All-Share
I mentioned last year that the Board also monitors performance against a
composite index, being 50% FTSE All-Share/50% Numis Smaller Companies ex
Investment Trusts, which is more representative of the universe in which we
invest. Lowland substantially outperformed this composite index which returned
8.4%. We aim to beat the FTSE All-Share, but use the composite index as a
check - if we are not beating the All-Share, is it because we are consciously
biased to out-of-fashion segments of the market, or are we getting it wrong.
In this case the health check is, thankfully, doubly reassuring.
The Fund Managers go into more detail as to the weighting of the portfolio,
and indeed the reasons why it performed very satisfactorily. It is worth
highlighting that a significant factor underlying performance has been the
number of take-overs at values which, while at a premium to pre-bid prices,
are not necessarily reflective of the true value of the company. I refer
further to this in the outlook section below.
Turning to the revenue account, your Board is highly cognisant of the
importance to shareholders of a regular, dependable and growing level of
dividend. Despite moments of concern resulting from the hiatus in normal
economic activity which accompanied COVID, the Board stuck by its progressive
quarterly dividend policy. It did this mindful of the availability of
reserves, and with confidence that the Company's income would recover.
Happily, that confidence has been rewarded and the EPS increased by 10% in the
year.
Dividends
Having maintained the first and second dividends at 1.525p, your Board had
sufficient confidence to increase the third and now recommend an increase in
the final dividend, to 1.60p. These last two dividends represent an increase
of 4.9%, resulting in a 2.5% increase in the year's total dividend.
Total dividends for the year have risen each year since 2009 and have been at
least maintained since the Company's launch in 1963. In 2012, prompted by
feedback from shareholders at an AGM, the Company adopted a quarterly dividend
policy.
It is fair to say that when we began paying quarterly dividends, we did not
necessarily envisage that each quarterly dividend would be equal to or greater
than its previous equivalent. We have nurtured this practice since 2012 and
feel that it has been suitably tested under fire, to be promoted from an
aspiration to a firm Board policy, which we will strive hard to follow.
Research tells us that a regular and growing dividend is especially valued by
private investors; we believe we will be able to meet their requirement.
It flows from the above that shareholders should expect to receive quarterly
dividends of no less than 1.60p in respect of the 2024 financial year.
Gearing
The Company has a medium-term borrowing facility of £40m, and £30m of
long-term debt at a fixed rate of 3.15%, maturing in 2037. We see the ability
to gear the portfolio as a key benefit of an investment trust. We do not tend
to move gearing levels dramatically. Gearing amounted to 12.3% at the year-end
compared with 12.5% a year earlier.
Ongoing charges
Ongoing charges remained around 0.6%. We reviewed the fee arrangements with
Janus Henderson during the year and believe them to be competitive.
Discount
During the financial year the discount varied from 5.2% to 14.9%, ending the
year at 14.2%. The Board has a clear policy with regard to discount, which is
set out in the annual report.
The Board
As previously indicated, an external recruitment process is underway for the
appointment of a new Director. We expect to announce the appointment shortly.
The process involved a diverse range of individuals, and the successful
candidate will be the one we believe will contribute most to the success of
the Company.
I intend to step down at the 2025 AGM. My replacement as Chairman is expected
to be one of the serving Directors, and will be announced before then.
The changes set out here are part of the orderly planned process of Board
renewal, and are consistent with the policy on tenure and diversity set out in
the annual report.
Contact
I and the Board are always pleased to hear from shareholders. Please contact
me with comments or questions via ITSecretariat@janushenderson.com
(mailto:ITSecretariat@janushenderson.com)
AGM
The AGM will be held at the Janus Henderson office on 24 January 2024. Full
details of the business to be conducted at the meeting are set out in the
Notice accompanying this 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
Chairmen, and other commentators, are apt to open by remarking on 'uncertain
times'. No-one would dispute that we are in such times now. In reality,
however, we always are, and what varies is the depth of uncertainty.
I think it more constructive to comment on some more measurable
considerations, and one in particular, which is value. The Fund Managers refer
to the miserly valuation of the UK market in general, the discount then
applied to the smaller end of the market, and finally to the extraordinarily
low valuation of our own portfolio, chosen as it is to grow value and income.
This amounts to 8.5 times historic earnings, which reduces to 7.3 times on a
'look-through' basis after taking the Lowland share price discount into
account. The attractiveness of valuations is underlined by two other
considerations; firstly the level of take-over activity, and secondly the
dividend yield, which amounts to 5.5% on your Company's shares.
There can have been few times when valuation considerations have been more
persuasive.
Robert Robertson
Chairman
December 2023
FUND MANAGER'S REPORT
Overview
It is pleasing to report on a year of positive absolute NAV growth, modest
outperformance versus the Company's FTSE All-Share benchmark and further
income recovery. On a longer term basis the Company's NAV performance remains
volatile. The three year NAV return captures the post pandemic economic
recovery, while the five year returns remain disappointing, reflecting poor
performance in the years following the Brexit referendum.
1 year (%) 3 years (%) 5 years (%) 10 years (%)
Lowland NAV 17.2 50.8 2.5 47.6
Lowland Share Price 13.9 46.0 -3.0 29.5
FTSE All Share 13.8 40.0 19.7 71.8
It is always worth remembering that our portfolio is invested in a blend of
small, medium and large UK companies, which results in greater exposure to the
UK economy than the highly international FTSE All-Share benchmark. This is for
the simple reason that smaller businesses tend to focus first on their
domestic market before expanding overseas. This means that when the UK economy
performs better than expected (as the ONS data now shows that it did in the
post-pandemic recovery), Lowland has a tendency to outperform. Performance in
the 2023 financial year reflects this. In the autumn of 2022 the consensus
among economists was that 2023 would be a recession year, whereas the
consensus is now for modest real GDP growth of 0.4%.
While it is gratifying to be reporting on a period of better NAV growth and a
modestly better than expected UK economy, arguably the Company's performance
this year has come about due to a continuation of a concerning trend in the UK
equity market, namely de-equitisation.
We have long written about the valuation discount of UK equity markets
relative to developed overseas markets. This valuation gap has shown no signs
of
narrowing http://www.rns-pdf.londonstockexchange.com/rns/6268V_1-2023-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/6268V_1-2023-12-4.pdf)
.
There are a variety of ways this valuation discount could theoretically close:
· Positive UK net fund flows, raising valuation levels (a 'rising tide lifts all
boats' scenario). This has (so far) not been the case, with UK fund flows
disappointingly showing no signs of
improving http://www.rns-pdf.londonstockexchange.com/rns/6268V_2-2023-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/6268V_2-2023-12-4.pdf)
· Falling overseas valuations. This has also not been the case with the US
cyclically adjusted P/E, for example, reaching 31.7x.
· Takeover activity, whether from private equity or peers. This is what we have
seen this year, where we have had six companies bid for (namely DWF, Devro,
Numis, K3 Capital, Finsbury Food and Appreciate Group).
Our frustration is that while we have seen a short-term performance benefit
from these takeovers, many are at valuation levels that do not reflect the
long-term prospects of the business. Therefore a short-term boost to
performance means these companies are lost to the UK stock market, with very
little replacing them via Initial Public Offerings ('IPOs'). In order to
counteract this trend, smaller company boards (often feeling vulnerable to
acquisition) are announcing increasing share buyback activity (please see
chart below). While this is boosting valuation levels across certain
companies, and is arguably attractive from a capital allocation perspective
given where UK valuation levels are, it further contributes to the
de-equitisation of the market. We are hopeful that in writing next year's
report we will be able to demonstrate better underlying health of the UK
equity market, whether through more buoyant economic conditions and/or from
government initiatives focused on the area (such as the Mansion House
Compact).
2.5% of the FTSE 350 market capitalisation disappeared in buybacks in 2022
alone, a trend which has accelerated in 2023.
http://www.rns-pdf.londonstockexchange.com/rns/6268V_3-2023-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/6268V_3-2023-12-4.pdf)
Performance attribution
This financial year saw a repeat of trends in the previous year, in that small
and medium sized UK companies underperformed larger ones (see the fifth
column, 'index total return' in the table below). It is therefore pleasing to
note that Lowland outperformed its FTSE All-Share benchmark despite this
'company size' headwind to performance. If we break down the portfolio returns
by index, it can be seen that in each size allocation, the Company
outperformed (comparing the third and fifth columns in the table). We go into
more details of the stock-specific drivers of this later in this section.
Lowland weighting (%) Lowland total return (%) FTSE All-Share weighting (%) Index total return (%)
FTSE 100 47.2 19.7 84.4 14.7
FTSE 250 18.3 16.5 13.4 10.0
FTSE Small Cap 12.9 17.6 2.3 7.5
FTSE AIM All-Share 13.6 4.1 - -8.3
Overall 92.0 17.2 100.0 13.8
Weights for Lowland and the FTSE All-Share are shown as at financial year end.
Note the weights for Lowland do not add up to 100, as there is a small % of
the portfolio held overseas and held in the FTSE Fledgling Index. Lowland
portfolio returns are calculated excluding cash.
Illustrated in a different way, while there was a 'size allocation' headwind
to performance this year, this was more than offset by stock selection (and
gearing), resulting in NAV growth ahead of the
benchmark: http://www.rns-pdf.londonstockexchange.com/rns/6268V_4-2023-12-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/6268V_4-2023-12-4.pdf)
While in the previous financial year there was a clearly identifiable reason
for the FTSE 100 outperformance, which was driven by the war in Ukraine
(causing fossil fuel prices to increase materially, boosting large index
positions such as Shell and BP), this year the reasons for the FTSE 100
outperformance were less clear cut.
Smaller companies are, on average, both more domestic in their exposure and
also more cyclical. There was therefore an element this year of smaller
company shares de-rating in the face of perceived earnings risk, as interest
rates rose and consumers saw real wages under pressure. There were clear
pockets of weakness in the economy and this can be seen in the stock
detractors table (the second table below). Advertising revenue, for example,
has been under pressure as corporates looked to curtail spending - this caused
earnings pressure in companies such as free-to-air broadcaster STV. There were
also, however, pockets of strength - infrastructure spending, for example,
particularly in the US, has continued to see good growth and this benefitted
industrial conglomerate Hill & Smith (see the contributors table below).
As always, a top down view of the economy will only take you so far and it is
important to remember we are investing in individual companies with the
ability to steer their own ship, not proxies for the broader economy.
Turning to stock specifics, the top ten contributors to relative return during
the year were:
Company Name Contribution to relative return (%) Share price total return (%)
1. Diageo (not held) +1.3 -18.2
2. British American Tobacco (not held) +0.9 -13.4
3. Marks & Spencer +0.8 +139.8
4. K3 Capital* +0.6 +51.5
5. International Personal Finance +0.6 +67.0
6. Hill & Smith +0.5 +94.0
7. FBD Holdings +0.5 +41.9
8. Vertu Motors +0.5 +82.9
9. Numis +0.4 +56.0
10. Devro* +0.4 +100.1
*Share price performance up until the point of acquisition
Source: Share price total return sourced from Bloomberg. Attribution sourced
from Factset.
Looking in more detail at the drivers of these best performers, they tend to
fall into distinct categories:
- Takeovers. Three of the top ten best performers were taken over (K3 Capital,
Numis and Devro). Two of these were taken over by overseas peers, while K3
Capital was purchased by private equity.
- Shareholder returns via special dividends and buybacks. Vertu Motors, for
example, was consistently buying back shares during the year while FBD
Holdings paid a large special dividend.
- Earnings recovery, from a low starting valuation. Marks & Spencer and
International Personal Finance have both positively surprised on earnings in
the face of high levels of scepticism and low starting valuations.
- Structurally growing markets. Hill & Smith earns the majority of its
profits in the US, where it is benefitting from growing infrastructure spend.
The largest ten detractors from relative return were:
Company Name Contribution to relative return (%) Share price total return (%)
1. Vanquis Banking -0.9 -17.6
2. HSBC (underweight) -0.8 +46.0
3. Serica Energy -0.7 -27.4
4. Somero Enterprises -0.5 -25.2
5. STV -0.4 -29.8
6. 3i (not held) -0.4 +96.0
7. CRH (not held) -0.4 +59.4
8. Direct Line -0.4 -7.2
9. Ilika -0.4 -42.2
10. Strix Group -0.4 -54.7
Source: Share price total return sourced from Bloomberg. Attribution sourced
from Factset.
Looking in more detail at the detractors they broadly fall into two categories
(focusing on companies where we are overweight relative to the benchmark):
- Challenging end markets. Serica Energy, for example, saw falling fossil fuel
prices (as well as a windfall tax in the North Sea), Somero Enterprises saw a
challenging US construction market and falling advertising revenue impacted
STV. In these cases we think long term fundamentals are sound and valuation
levels are attractive, but they have been set back by external factors
- Poor execution. These holdings have had operational issues which cannot be
attributed to end market weakness. For example Vanquis Banking disappointed on
cost overruns (the CEO has since left and we have been engaging with his
replacement) and Direct Line reported weak underwriting results on mispricing
their policies (the CEO has been replaced, and we have reduced the holding).
Portfolio valuation
While the first chart in this Managers' Report demonstrates the degree of UK
equity valuation discount relative to overseas peers, what is less widely
discussed is that there is a subset of UK equities that trades on an even
larger valuation discount. Domestic earners within the UK have meaningfully
underperformed in the years following the Brexit referendum. Lowland, because
of its investment in a blend of small, medium and large companies, is
structurally more exposed to 'domestic UK'. If, for example, we look at
underlying portfolio sales, Lowland's portfolio revenues are 49% in the UK
compared to only 23% in the FTSE All-Share benchmark (both figures as at end
September '23). Lowland therefore captures more of these lowly valued domestic
businesses. This can be seen at the portfolio level, where the portfolio
trades at a discount to both the benchmark, and also relative to its own 10
year average:
12m historic P/E as at 30 September 2023 10 year average 12m historic P/E as at 30 September 2023
Lowland Portfolio 8.5x 12.5x
Source: Factset, weighted harmonic average.
Note that at the financial year end, the Company also traded at a discount to
its net asset value of 14.2%. Therefore taking this additional layer of
discount into account, the current 'look-through' valuation on the portfolio
is 7.3x 12 month historic earnings.
Portfolio Activity
The level of activity over the year has been low. Turnover, as defined by
purchases plus sales divided by two, was £54.5mn or 14.6%. Given the
weakness in medium and smaller companies there is a desire to refresh the
portfolio with purchases in this area. However, the headwinds of poor investor
sentiment and a weakening economy have meant it has been premature to buy
other than very selectively.
The five largest purchases during the year were:
· Vanquis Banking
· Legal & General
· Conduit Holdings
· Marshalls
· Strix Group
Of the five largest purchases over the year, four were in smaller companies
and three of those have fallen significantly since purchase, with one rising
(Conduit). At the time of purchase the three fallers had already experienced
substantial share price falls. However, in a bear market a large fall does not
mean 'it is all in the price'. With this in mind we have trodden gingerly in
buying stocks that are at seeming bargain levels; they can fall further. We
are positioned to buy more in the smaller company area as the weighting to it
in the portfolio is low by historic standards and it is in smaller companies
over the long term that the best returns have been made. We will slowly and
selectively be buyers of smaller companies so the portfolio will be well
positioned for a return of some investor confidence, which in time will
happen.
The five largest sales during the period were:
· K3 Capital *
· AstraZeneca
· Numis *
· Convatec
· Devro *
Three of these (starred) came after cash takeover approaches; this should
remind investors that there is very real long-term value in the quoted sector.
Dividends
2023 saw a further recovery in investment income, with the Company generating
6.7p in revenue earnings per share compared to 6.1p in the previous year.
Excluding special dividends, revenue earnings per share were 6.4p, with
positions such as Irish insurer FBD Holdings and iron castings producer
Castings paying large special dividends. Elsewhere there was a further
recovery in dividends from holdings such as Shell and BP which cut their
dividends materially during the pandemic. Encouragingly for future dividends,
the dividend pay-out ratio in the UK remains modest. In our view this is
because following the pandemic (and its associated widespread dividend cuts),
some companies took the opportunity to permanently lower their pay-out ratios
to arguably more sustainable levels.
http://www.rns-pdf.londonstockexchange.com/rns/6268V_5-2023-12-4.pdf (http://www.rns-pdf.londonstockexchange.com/rns/6268V_5-2023-12-4.pdf)
ESG
Our approach to environmental, social and governance (ESG) matters is laid out
in more detail in the annual report. We hold the view that seeking to better
understand how companies are managing material ESG factors and engaging with
them is a route more conducive to long-term progress than rigid sector
exclusions. We have included case studies on some recent discussions with
companies in the annual report.
Outlook
When we were writing last year's annual report the expectation was that 2023
would be a recession year. This has not proven to be the case. While 0.4% real
GDP growth in '23 (expected at the time of writing) cannot be classed as
stellar it needs to be viewed in the context of interest rates rising to a
decade high level and inflation coming down from over 10%.
When we look ahead to 2024 we continue to see pessimism reflected in both
company valuations and economic growth forecasts. The best remedy for this
pessimism is to meet company management teams, who serve as a reminder of the
dynamism and innovation that exist in the UK. The consumer is enjoying real
wage growth, with unemployment remaining low. Corporate balance sheets are, on
the whole, conservative. Yet company valuations continue to reflect a deep
scepticism about the sustainability of earnings. We disagree. The challenging
backdrop of recent years (COVID, the Ukraine war) has forced companies to look
hard at their cost base and run leanly. On any pickup in sales, it is
therefore our expectation that the boost to earnings will be meaningful.
The best returns can be made at times when earnings have the potential to grow
and valuations are starting from a low base. It is hard to argue that we are
not in those times currently.
James Henderson and Laura Foll
Fund Managers
December 2023
Twenty Largest Holdings as at 30 September 2023
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 2023
2023 (2022) portfolio £'000
1 (1) Shell 3.6 £173.3bn 14,333
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.
2 (2) BP 3.3 £81.8 bn 13,019
A vertically integrated oil and gas business. The company has announced
ambitious plans to reach net zero carbon emissions by 2050 and gradually
transition away from fossil fuels towards renewable energy. The cash
generation from their oil & gas business should enable this transition to
take place, while also continuing to fund cash returns to shareholders via
dividends and share buybacks.
3 (3) HSBC 2.8 £118.3bn 10,834
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.
4 (6) Standard Chartered 2.6 £16.6bn 10,072
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.
5 (4) GSK 2.2 £58.3bn 8,712
A global pharmaceutical and vaccine company, which spun-off its consumer
healthcare business (Haleon) in 2022. The remaining pharmaceutical company has
leading franchises in areas such as HIV, however has had a mixed R&D track
record in recent years. Under a new leadership team and with increased R&D
spending it has the potential to reinvigorate its pharmaceutical pipeline.
6 (20) M&G 2.0 £4.8bn 7,892
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
7 (11) FBD 2.0 £375m 7,882
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.
8 (17) Aviva 1.9 £11.1bn 7,679
This company provides a wide range of insurance and financial services. Under
a new CEO there is heightened focus on simplifying the business.
9 (12) Serica Energy 1.9 £866.3m 7,428
The company is a large producer of natural gas in the North Sea. Its portfolio
was built via acquisitions at attractive valuations from larger oil & gas
companies. At current gas prices the company is generating substantial amounts
of cash with a strong (net cash) balance sheet.
10 (13) Irish Continental 1.9 £624.4m 7,306
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.
11 (*) International Personal Finance 1.7 £273.5m 6,633
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.
12 (14) Rio Tinto 1.7 £65.5bn 6,467
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 ordinary dividend payment combined with some special dividends in
recent years.
13 (18) Barclays 1.6 £20.5bn 6,358
The company has a strong retail lending franchise combined with an investment
bank. Over time its strong retail franchise should allow it to generate good
returns on capital, however in the past these have not consistently come
through because of persistently low interest rates and volatile returns from
its investment bank. Higher interest rates and market share gains in its
investment bank could allow a period of better returns generation that in our
view is not reflected in the current valuation.
14 (16) NatWest 1.6 £17.2bn 6,344
The company is one of the leading retail and commercial lenders in the UK.
Since the financial crisis the balance sheet has materially improved and the
business has largely returned to its original focus on domestic lending.
Higher interest rates are now allowing the business to generate a good return
which is not (in our view) reflected in the valuation.
15 (*) Marks & Spencer 1.6 £4.4bn 6,270
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 businesand upgrade earnings expectations.
16 (9) Anglo American 1.6 £28.6bn 6,117
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.
17 (*) Senior 1.5 £661.8m 6,035
The company produces specialist components for use across aerospace and
broader industrial end markets. Its earnings were severely impacted by COVID
due to weakness in the aerospace market, however the business remains well
positioned in its end markets with good recovery potential.
18 (*) Hiscox 1.5 £3.4bn 5,945
The company is a global insurance provider that is growing well in markets
such as US small business insurance.
19 (8) Phoenix 1.5 £4.6bn 5,893
The company operates primarily in the UK and specialises in taking over and
managing closed life insurance and pension funds.
20 (*) Lloyds Banking 1.5 £26.7bn 5,879
The company is one of the leading retail lenders in the UK. Higher interest
rates are now allowing the business to generate a good return, which is not
(in our view) reflected in the current valuation.
157,098
At 30 September 2023 these investments totalled £157,098,000 or 40.0% of
portfolio.
* Not in the top twenty 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. No changes were made to the
principal risks and uncertainties as a result of this.
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 have heightened tensions across the world, and dividends is carried out. The Board monitors volatility, and holds a regular
significantly increased volatility in equity markets. dialogue with the Fund Managers to understand the impact on the Company's
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 residual impact of the coronavirus pandemic and the potential impact of Regular stress testing of the revenue account under different scenarios for
further global health crises on the Company's investments and its direct and dividends is carried out. The Board monitors the effects of the pandemic on
indirect effects, including the effect on the global economy. the operations of the Company and 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 or poor execution, for example, in terms accordance with investment limits and restrictions and policy determined by
of asset allocation or level of gearing, may result in underperformance the Board, which includes limits on the extent to which borrowings may be
against the Company's benchmark index and the companies in its peer group, and employed.
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 market value of the Company's portfolio would have an adverse effect on
equity shareholders' funds. The Fund Managers closely monitor the portfolio between meetings and mitigate
this risk through diversification of investments. The Fund Managers
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. The Company has revenue
reserves of £9.9 million (before payment of the third interim and final
A reduction in dividend income could adversely affect the Company's dividend dividend) and distributable capital reserves of £270.0million.
record.
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 see note 14 in the Annual Report.
Gearing risk At the point of drawing down debt, gearing will never exceed 29.99% 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
share and, consequently, its share price.
The Company minimises the risk by the regular monitoring of the levels of the
Company's borrowings in accordance with the agreed limits. The Company
confirms adherence to the covenants of the loan facilities on a monthly basis.
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 this
Strategic 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, in particular the impact on income and the
Company's ability to meet its investment objective. The Board does not believe
that they will have a long-term impact on the viability of the Company and its
ability to continue in operation, notwithstanding the short-term uncertainty
they have 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.
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 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.
For and on behalf of the Board
Robert Robertson
Chairman
December 2023
INCOME STATEMENT
Year ended Year ended
30 September 2023 30 September 2022
Revenue return £'000 Capital return £'000 Revenue return £'000 Capital return £'000
Total Total
£'000 £'000
Gains/(losses) on investments held at fair value through profit or loss (note - 36,546 36,546 - (79,801) (79,801)
2)
Income from investments (note 3) 20,669 - 20,669 18,666 - 18,666
Other interest receivable and similar income (note 4) 107 - 107 70 - 70
Gross revenue and capital gains/(losses) 20,776 36,546 57,322 18,736 (79,801) (61,065)
Management fee (856) (857) (1,713) (862) (861) (1,723)
Administrative expenses (686) - (686) (645) - (645)
Net return/(loss) before finance costs and taxation 19,324 35,689 54,923 17,229 (80,662) (63,433)
Finance costs (1,027) (1,027) (2,054) (657) (657) (1,314)
Net return/(loss) before taxation 18,207 34,662 52,869 16,572 (81,319) (64,747)
Taxation on net return (80) - (80) (81) - (81)
Net return/(loss) after taxation 18,127 34,662 52,789 16,491 (81,319) (64,828)
Return/(loss) per ordinary share 6.71p 12.83p 19.54p 6.10p (30.10p) (24.00p)
- basic and diluted (note 5)
===== ===== ===== ===== ===== =====
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 2023
At 1 October 2022 6,755 61,619 1,007 235,389 8,266 313,036
Net (loss)/return after taxation - - - 18,127 52,789
34,662
Third interim dividend (1.525p) for the year ended 30 September 2022 paid 31 - - - - (4,120) (4,120)
October 2022
Final dividend (1.525p) for the year ended 30 September 2022 paid 31 January - - - - (4,120) (4,120)
2023
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 9,913 349,345
At 30 September 2023 270,151
===== ===== ===== ====== ===== ======
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 2022
At 1 October 2021 6,755 61,619 1,007 318,244 6,660 394,285
Net (loss)/return after taxation - - - 16,491 (64,828)
(81,319)
- - - - (4,053) (4,053)
Third interim dividend (1.5p(1)) for the year ended 30 September 2021 paid 31
October 2021
Final dividend (1.525p(1)) for the year ended 30 September 2021 paid 31 - - - (1,513) (2,607) (4,120)
January 2022
First interim dividend (1.525p) for the year ended 30 September 2022 paid 29 - - - - (4,120) (4,120)
April 2022
Second interim dividend (1.525p) for the year ended 30 September 2022 paid 29 - - - - (4,120) (4,120)
July 2022
Return of unclaimed dividends - - - - 15 15
--------- ---------- ---------- ----------- ---------- ----------
6,755 61,619 1,007 8,266 313,036
At 30 September 2022 235,389
(1) Comparative figures have been restated due to the sub-division of each
ordinary share of 25p each into ten ordinary shares of 2.5p on 7 February 2022
STATEMENT OF FINANCIAL POSITION
As at 30 September 2023 As at 30 September
£'000 2022
£'000
Fixed assets
Investments held at fair value through profit or loss:
Listed at market value in the United Kingdom 294,983 247,017
Listed at market value on AIM 52,186 58,664
Listed at market value overseas 15,484 15,503
Unlisted 2,368 2,908
Investments on loan 27,408 27,989
----------- -----------
392,429 352,081
----------- -----------
Current assets
Debtors 2,805 1,228
Cash at bank 2,926 9,395
----------- -----------
5,731 10,623
----------- -----------
Creditors: amounts falling due within one year (19,003) (19,866)
----------- -----------
Net current liabilities (13,272) (9,243)
----------- -----------
Total assets less current liabilities 379,157 342,838
Creditors: amounts falling due after one year (29,812) (29,802)
----------- -----------
Net assets 349,345 313,036
======= =======
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 270,051 235,389
Revenue reserve 9,913 8,266
----------- -----------
Total shareholders' funds 349,345 313,036
======= =======
Net asset value per ordinary share - basic and diluted 129.3p 115.9p
======= =======
STATEMENT OF CASH FLOWS
Year ended Year ended
30 September 2023 30 September 2022
£'000 £'000
Cash flows from operating activities
Net return/(loss) before taxation 52,869 (64,747)
Add back: finance costs 2,054 1,314
Add: (gains)/losses on investments held at fair value through profit or loss (36,546) 79,801
Withholding tax on dividends deducted at source 41 (59)
(Increase)/decrease in other debtors (1,697) 41
(Decrease)/increase in other creditors (496) 98
----------- -----------
Net cash inflow from operating activities 16,225 16,448
Cash flows from investing activities
Purchase of investments (56,075) (40,491)
Sale of investments 52,572 57,726
----------- -----------
Net cash (outflow)/inflow from investing activities (3,503) 17,235
Cash flows from financing activities
Equity dividends paid (net of refund of unclaimed distributions and reclaimed (16,480) (16,398)
distributions)
Costs relating to sub-division of shares - (23)
Loans drawn down 55,092 9,149
Loans repaid (55,796) (23,726)
Interest paid (1,996) (1,294)
----------- -----------
Net cash outflow from financing activities (19,180) (32,292)
----------- -----------
Net (decrease)/increase in cash and cash equivalents (6,458) 1,391
Cash and cash equivalents at start of year 9,395 7,976
Effect of foreign exchange rates (11) 28
----------- -----------
Cash and cash equivalents at end of year 2,926 9,395
======= =======
Comprising:
Cash at bank 2,926 9,395
----------- -----------
2,926 9,395
======= =======
Cash inflow from dividends net of taxation was £18,934,000 (2022:
£18,835,000) and Interest received was £62,000 (2022: £4,000).
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') amended in July 2022 by the Association of Investment Companies
('AIC').
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.
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 financial year.
The Directors do not believe that any accounting judgements 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 of the investments in
active markets and therefore reflect participants' views of climate change
risk.
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 wars in Ukraine and
Israel, 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 the 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.
2. 2023 2022
Gains on investments held at fair value through profit or loss £'000 £'000
Gains on the sale of investments based on historical cost 7,085 12,602
Less: revaluation gains/(losses) recognised in previous years 3,499 (7,450)
----------- -----------
Gains on investments sold in the year based on carrying value at previous 10,584 5,152
Statement of Financial Position date
Revaluation gains/(losses) on investments held at 30 September 25,973 (84,981)
Exchange (losses)/gains (11) 28
---------- ----------
36,546 (79,801)
====== ======
3. 2023 2022
Income from Investments £'000 £'000
UK dividends:
Listed investments 17,210 16,180
Unlisted 13 13
Property income dividends 615 460
--------- ---------
17,838 16,653
--------- ---------
Non UK dividends:
Overseas dividend income 2,831 2,013
--------- ---------
2,831 2,013
--------- ---------
20,669 18,666
===== =====
2023 2022
4. £'000 £'000
Other Interest Receivable and Similar Income
Stock lending commission 42 62
Bank interest 65 8
--------- ---------
107 70
===== =====
Stock lending commission has been shown net of brokerage fees of £11,000
(2022: £16,000).
5. Return per Ordinary Share - Basic and Diluted
The return/(loss) per ordinary share is based on the net return attributable
to the ordinary shares of £52,789,000 (2022: net loss of £64,828,000) and on
270,185,650 ordinary shares (2022: 270,185,650) being the weighted average
number of ordinary shares in issue during the year. The return/(loss) per
ordinary share can be further analysed between revenue and capital, as below.
2023 2022
£'000 £'000
Net revenue return 18,127 16,491
Net capital return/(loss) 34,662 (81,319)
--------- ---------
Net total return/(loss) 52,789 (64,828)
===== =====
Weighted average number of ordinary shares in issue during the year 270,185,650 270,185,650
2023 2022
Pence Pence
Revenue return per ordinary share 6.71 6.10
Capital return/(loss) per ordinary share 12.83 (30.10)
---------- ----------
Total return/(loss) per ordinary share 19.54 (24.00)
====== ======
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 2023 2022
Record date Payment date £'000 £'000
Third interim dividend (1.5p(1)) for the year ended 30 September 2021 30 September 2021 29 October 2021 - 4,053
Final dividend (1.525p(1)) for the year ended 30 December 2021 31 January 2022 - 4,120
30 September 2021
First interim dividend (1.525p) for the year ended 30 September 2022 31 March 2022 29 April 2022 - 4,120
Second interim dividend (1.525p) for the year ended 30 September 2022 30 June 2022 29 July 2022
- 4,120
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 -
Return of unclaimed dividends - (15)
--------- ---------
16,480 16,398
===== =====
(1) Comparative figures for the year ended 30 September 2021 have been
restated due to the sub-division of each ordinary share of 25p into ten
ordinary shares of 2.5p each on 7 February 2022
The third interim dividend and the final dividend for the year ended 30
September 2023 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.
2023
£'000
18,127
Revenue available for distribution by way of dividend for the year
First interim dividend (1.525p) for the year ended 30 September 2023 (4,120)
Second interim dividend (1.525p) for the year ended 30 September 2023 (4,120)
Third interim dividend (1.600p) for the year ended 30 September 2023 (4,323)
Final dividend (1.600p) for the year ended 30 September 2023 (based on (4,323)
270,185,650 ordinary shares in issue at 1 December 2023)
---------
Transfer to reserves 1,241(1)
=====
(1) The residual will be transferred to the revenue reserve (2022: transfer to
revenue reserve £26,000)
7. Called up Share Capital
Number of shares entitled to dividend Total number of shares Nominal value of shares
£'000
At 30 September 2022 and 2023 270,185,650 270,185,650 6,755
----------- ----------- -----------
No shares were allotted or bought back during the year (2022: nil).
8. Net Asset Value per Ordinary Share
The net asset value per ordinary share of 123.9p (2022: 115.9p) is based on
the net assets attributable to the ordinary shares of £349,345,000 (2022:
£313,036,000) and on 270,185,650 (2022: 270,185,650) shares in issue on 30
September 2023.
The movements during the year of the assets attributable to the ordinary
shares were as follows:
2023 2022
£'000 £'000
Total net assets at start of year 313,036 394,285
Total net return/(loss) after taxation 52,789 (64,828)
Costs relating to sub-division of shares - (23)
Net dividends paid in the year:
Ordinary shares (16,480) (16,398)
----------- -----------
Net assets attributable to the ordinary shares at 30 September 349,345 313,036
====== ======
9. 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 but have not
yet been delivered to 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.
10. 2022 Financial Information
The figures and financial information for the year ended 30 September 2022 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 2022 have been audited and filed with
the Registrar of Companies. The Independent Auditor's Report on the 2022
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 1.600p per ordinary share will be paid on 31 January 2024 to
shareholders on the register of members at the close of business on 29
December 2023. This will take the total dividends for the year to 6.25p (2022:
6.10p). The Company's shares will be traded ex-dividend on 28 December 2023.
12. Annual Report
The Annual Report will be posted to shareholders in December 2023 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 24 January 2024 at 2.00pm at 201
Bishopsgate, London EC2M 3AE. The Notice of Meeting will be sent to
shareholders with 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.
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