REG-New Star Investment Trust PLC New Star Investment Trust PLC: Half Year Results of the six months ended 31st December 2019
20/03/2020 16:55
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New Star Investment Trust PLC (NSI)
New Star Investment Trust PLC: Half Year Results of the six months ended
31st December 2019
20-March-2020 / 16:53 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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NEW STAR INVESTMENT TRUST PLC
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31st DECEMBER 2019
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVE
The Company's objective is to achieve long-term capital growth.
31st December 2019 30th June %
2019 Change
PERFORMANCE
Net assets (£ '000) 117,559 113,971 3.1
Net asset value per Ordinary 165.52p 160.47p 3.1
share
Mid-market price per Ordinary 117.00p 111.00p 5.4
share
Discount of price to net asset 29.31% 30.83% n/a
value
Six months ended Six months ended
31st December 2019 31st December
2018
Total Return* 4.02% -4.63% n/a
IA Mixed Investment 40-85% 4.41% -6.62% n/a
Shares (total return)
MSCI AC World Index (total 4.89% -5.47% n/a
return, sterling adjusted)
MSCI UK Index (total return) 3.03% -10.04% n/a
Six months ended Six months ended
31st December 31st December
2019 2018
REVENUE
Return (£'000) 792 607
Return per Ordinary share 1.1p 0.85p
Proposed dividend per Ordinary share - -
Dividend paid per Ordinary share 1.40p 1.00p
TOTAL RETURN
Return (£'000) 4,582 (5,154)
Net assets 3.1% -5.3%
Net assets (dividend added back) 4.0% -4.6%
* The total return figure for the Group represents the revenue and capital
return shown in the consolidated statement of comprehensive income plus
dividends paid (the alternative performance measure).
INTERIM REPORT
CHAIRMAN'S STATEMENT
PERFORMANCE
Your Company generated a positive total return of 4.02% over the six
months to 31st December 2019, taking the net asset value (NAV) per
ordinary share to 165.52p. By comparison, the Investment Association's
Mixed Investment 40-85% Shares Index rose 4.41%. The MSCI AC World Total
Return Index rose 4.89% while the MSCI UK Total Return Index rose 3.03%.
Over the same period, UK government bonds returned 2.05%. Further
information is provided in the investment manager's report.
Your Company made a revenue profit for the six months of £792,000 (2018:
£607,000).
GEARING AND DIVIDENDS
Your Company has no borrowings and ended the period under review with cash
representing 14.28% of its NAV. Your Company has small retained revenue
reserves and your Directors do not recommend the payment of an interim
dividend (2018: nil). Your Company paid a dividend of 1.4p per share
(2018: 1.0p) in November 2019 in respect of the previous financial year.
DISCOUNT
During the period, your Company's shares continued to trade at a
significant discount to their NAV. The Board keeps this issue under
review.
PERFORMANCE FEE
In November 2019, your Company announced that the current performance fee
arrangement was not appropriate in a low interest rate environment. The
current performance fee arrangements ceased from 1 January 2020. A
performance fee of £622,000 (2018: £nil) was payable in respect of the
period under review.
OUTLOOK
Risky assets fell sharply in the early spring of 2020 as the Covid-19
virus spread. Equity markets bore the brunt but corporate bonds and
property also registered declines. Central Banks have responded with
unprecedented interest rate reductions, increased quantitative easing and
measures to stimulate lending.
Monetary policy alone, however, is unlikely to be sufficient to address
the downturn because the virus impact is a supply-side shock, causing work
place closures and supply chain disruption. As a result, governments have
moved to alleviate the impact on businesses and families to shield the
economy from serious long-term harm.
Risky assets are likely to remain weak and volatile until the Covid-19
outbreak moderates. Your Company, however, entered this difficult period
with substantial cash holdings. Over the coming weeks, your Company's
defensive assets may provide some capital protection. There should also be
opportunities for your Company to deploy cash in investments with
attractive long-term potential, including in equity markets.
NET ASSET VALUE
Your Company's unaudited NAV per share at 29th February 2020 was 156.62p.
Your Company's unaudited NAV per share at 19th March 2020 was 136.12p.
Geoffrey Howard-Spink
Chairman
20th March 2020
INVESTMENT MANAGER'S REPORT
MARKET REVIEW
Global equities rose 4.89% and bonds fell 2.77% in sterling over the six
months to 31st December 2019 as central banks maintained policies of
monetary easing. Returns in overseas stock markets were stronger but
sterling investors were adversely affected as the pound rose against the
euro, yen and dollar by 5.60%, 4.99% and 4.09% respectively.
The Federal Reserve reduced interest rates by three-quarters of a
percentage point to 1.5-1.75%. Jobs data were strong but inflation
remained below its 2% target. The European Central Bank increased further
its negative interest rate by 10 basis points to -0.5%, said interest
rates would not rise until inflation was closer to 2% and resumed asset
purchases. The Bank of England left its bank rate unchanged. UK government
and sterling corporate bonds rose 2.05% and 3.52% respectively over the
period. Gold and gold securities rose 3.07% and 10.92% respectively in
sterling as the opportunity cost of holding this nil-yielding asset
remained low.
The Conservatives won December's UK election, averting a shift to the
left. UK stocks rose 3.03% but smaller companies, typically more sensitive
to domestic conditions, outperformed, rising 13.28%. Sterling briefly rose
above $1.35 but retreated as investors decided the risk of a "no deal"
Brexit had not disappeared, with the government legislating that a trade
deal had to be agreed during 2020, setting a demanding timetable. UK
assets are likely to prove sensitive to news about the talks.
Progress in Sino-US trade talks was confirmed when an interim deal was
signed in January 2020. Equities in emerging markets and Asia excluding
Japan benefited from end-of-year optimism but still lagged, up 3.11% and
2.74% respectively in sterling. Under the deal, China will increase
purchases of US goods and improve the protection of intellectual property.
In return, December's planned tariff increases were cancelled. The
thornier issues of national security and technology are outside the deal's
scope and may never be resolved. Protectionism is likely to remain a
feature of US trade policy.
US equities outperformed, rising 6.56% in sterling, with technology
stocks, up 13.57%, leading the way. Steady US jobs data supported consumer
spending but business investment and exports were weak. The Sino-US
agreement may, however, provide a fillip to exports in the longer term.
China's economy expanded 6% year-on-year during the period, the lowest
growth rate since 1992.
PORTFOLIO REVIEW
Your Company's total return over the period under review was 4.56% before
performance fees and 4.02% after performance fees. By comparison, the
Investment Association's Mixed Investment 40-85% Shares sector, comprising
a peer group of multi-asset funds that typically invest 40-85% of their
assets in global equities, rose 4.41%. The MSCI AC World Total Return
Index rose 4.89% in sterling while the MSCI UK Total Return Index rose
3.03%. Your Company benefited from investments in funds invested in UK
smaller companies, gold securities and technology stocks. The high
allocation to dollar cash, however, hurt performance as sterling
strengthened.
The Aberforth Split Level Income investment trust was the portfolio's best
performer, rising 26.09%, partly as a result of the leverage provided by
its zero-dividend preference shares. The manager takes a value-oriented
approach to investing in UK smaller companies. Such companies performed
strongly as the Tories' election victory reduced domestic political risk
and strengthened the government's hand in its EU trade negotiations.
Chelverton UK Equity Income, which also invests in smaller companies, rose
14.67%. Your Company's holding was increased in November. The Aberforth
and Chelverton funds have above-average dividend yields and their income
is derived from a broad range of sectors in contrast to the income from
the FTSE 100 Index, which is dominated by financial and resources stocks.
Man GLG UK Income and MI Brompton UK Recovery outperformed, benefitting
from gains among small and medium-sized companies. Trojan Income and
Schroder Income focus on larger companies but both outperformed, gaining
7.79% and 5.32% respectively.
BlackRock Gold & General gained 6.24%, beating the return from physical
gold but lagging the returns from gold miners. A minimum of 70% of the
portfolio is held in miners of precious metals. Miners typically offer a
geared return on gold because gold price changes are magnified in their
share prices as a result of operational gearing and financial leverage.
The sector consolidated in 2019 through mergers that will generate
operational efficiencies and scale benefits on top of any rise in the gold
price. At the period end, BlackRock Gold & General's two largest holdings
were Barrick and Newmont, which each represented about 10% of the
portfolio as a result of mergers. Regulatory reasons prevent the fund
manager from increasing these holdings yet these businesses account for a
larger proportion of the sector. This may at times lead the fund's
performance to diverge from the sector.
During the period, your Company had no direct investments in US equity
funds. This hurt performance because US equities outperformed, driven by
the technology sector. Within your Company's global holdings, Polar
Capital Global Technology rose 9.73%, benefitting from its holdings in US
technology companies such as Microsoft, Alphabet, Apple and Facebook.
Fundsmith Equity underperformed, however, rising 2.79%.
Amongst your Company's emerging market equity holdings, the HSBC Russia
Capped exchange-traded fund did best, rising 11.68% in line with the gain
from Russian stocks. Stewart Investors Indian Subcontinent was, however,
the weakest holding, falling 3.22% as Indian stocks fell 4.04% in sterling
in response to slower economic growth. Emerging market debt outperformed
global bonds over the period. Franklin Templeton Emerging Markets Bond
lagged, however, down 5.24% as a result of its holdings in Argentine
bonds, which fell as politics shifted to the left.
Bond market weakness held back returns within EF Brompton Global
Conservative, which returned 3.37%, while the Aquilus Inflection hedge
fund returned 0.61%.
The valuation of your Company's unquoted portfolio rose 13.59% to £8.39
million over the period. This was solely due to a revaluation of the
shareholding in the largest unquoted holding, Embark, to the price paid by
new external investors in a £45 million fundraising in November. Embark
has continued to grow its assets under administration aggressively, both
organically and through acquisition.
OUTLOOK
Risky assets fell sharply across the world in the early spring of 2020 as
the Covid-19 virus spread outside China. Equity markets bore the brunt of
the falls but other asset classes including corporate bonds and commercial
property also registered significant declines. Major Central Banks across
the developed world and in emerging markets have responded to the economic
shock with sweeping measures. These included unprecedented interest rate
reductions in the US and the UK, as official rates were cut to near zero.
Other initiatives included increased quantitative easing and measures
designed to stimulate bank lending. Monetary policy alone, however, is
unlikely to be sufficient to address the global downturn because the virus
impact is a supply-side shock, with work places closing and supply chains
disrupted. Government measures targeted at alleviating the economic impact
on businesses and families are, therefore, likely to be critical in
ensuring the economy emerges strongly once this temporary shock subsides.
In the meantime, equities and other risky assets are likely to remain weak
and volatile until the numbers of new coronavirus cases moderate across
the world. This may take some months.
Your Company entered this period of turmoil with substantial investments
in cash, in particular in dollars. Some of the defensive assets in your
Company's portfolio such as gold and lower-risk multi-asset funds may
provide some capital protection over the coming weeks. There should also
be opportunities for long-term investors such as your Company to deploy
its cash in investments with attractive long-term potential, in particular
in equity markets.
Brompton Asset Management LLP, 20th March 2020
DIRECTORS' REPORT
PERFORMANCE
In the six months to 31st December 2019 the total return per Ordinary
share was 4.0% (2018: negative 4.6%) and the NAV per ordinary share
increased to 165.52p, whilst the share price increased by 5.4% to 117.00p.
This compares to an increase of 4.4% in the IA Mixed Investment 40-85%
Shares Index.
INVESTMENT OBJECTIVE
The Company's investment objective is to achieve long-term capital growth.
INVESTMENT POLICY
The Company's investment policy is to allocate assets to global investment
opportunities through investment in equity, bond, commodity, real estate,
currency and other markets. The Company's assets may have significant
weightings to any one asset class or market, including cash.
The Company will invest in pooled investment vehicles, exchange traded
funds, futures, options, limited partnerships and direct investments in
relevant markets. The Company may invest up to 15% of its net assets in
direct investments in relevant markets.
The Company will not follow any index with reference to asset classes,
countries, sectors or stocks. Aggregate asset class exposure to any one of
the United States, the United Kingdom, Europe ex UK, Asia ex Japan, Japan
or Emerging Markets and to any individual industry sector will be limited
to 50% of the Company's net assets, such values being assessed at the time
of investment and for funds by reference to their published investment
policy or, where appropriate, their underlying investment exposure.
The Company may invest up to 20% of its net asset value in unlisted
securities (excluding unquoted pooled investment vehicles) such values
being assessed at the time of investment. The Company will not invest
more than 15% of its net assets in any single investment, such values
being assessed at the time of investment.
Derivative instruments and forward foreign exchange contracts may be used
for the purposes of efficient portfolio management and currency hedging.
Derivatives may also be used outside of efficient portfolio management to
meet the Company's investment objective. The Company may take outright
short positions in relation to up to 30% of its net assets, with a limit
on short sales of individual stocks of up to 5% of its net assets, such
values being assessed at the time of investment. The Company may borrow
up to 30% of net assets for short-term funding or long-term investment
purposes. No more than 10%, in aggregate, of the value of the Company's
total assets may be invested in other closed-ended investment funds except
where such funds have themselves published investment policies to invest
no more than 15% of their total assets in other listed closed-ended
investment funds.
SHARE CAPITAL
The Company's share capital comprises 305,000,000 Ordinary shares of 1p
each, of which 71,023,695 (2018: 71,023,695) have been issued and fully
paid. No Ordinary shares are held in treasury, and none were bought back
or issued during the six months to 31st December 2019.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks identified by the Board, and the steps the Board takes
to mitigate them, are as follows:
Investment strategy: Inappropriate long-term strategy, asset allocation
and fund selection could lead to underperformance. The Board discusses
investment performance at each of its meetings and the Directors receive
reports detailing asset allocation, investment selection and performance.
Business conditions and general economy: The Company's future performance
is heavily dependent on the performance of different equity and currency
markets. The Board cannot mitigate the risks arising from adverse market
movements. However, diversification within the portfolio will reduce the
impact. Further information is given in portfolio risks below.
Portfolio risks - market price, foreign currency and interest rate risks:
The twenty largest investments are listed above. Investment returns will
be influenced by interest rates, inflation, investor sentiment,
availability/cost of credit and general economic conditions in the UK and
globally. A proportion of the portfolio is in investments denominated in
foreign currencies and movements in exchange rates could significantly
affect their sterling value. The Investment Manager takes all these
factors into account when making investment decisions but the Company does
not normally hedge against foreign currency movements. The Board's policy
is to hold a spread of investments in order to reduce the impact of the
risks arising from the above factors by investing in a spread of asset
classes and geographic regions.
Net asset value discount: The discount in the price at which the Company's
shares trade to net asset value means that shareholders cannot realise the
real underlying value of their investment. For a number of years the
Company's share price has been at a significant discount to the Company's
net asset value. The Directors review regularly the level of discount,
however given the investor base of the Company, the Board is very
restricted in its ability to influence the discount to net asset value.
Investment Manager: The quality of the team employed by the Investment
Manager is an important factor in delivering good performance and the loss
of key staff could adversely affect returns. A representative of the
Investment Manager attends each Board meeting and the Board is informed if
any changes to the investment team employed by the Investment Manager are
proposed.
Tax and regulatory risks: A breach of The Investment Trust (Approved
Company) (Tax) Regulations 2011 (the 'Regulations') could lead to
capital gains realised within the portfolio becoming subject to UK
capital gains tax. A breach of the UKLA Listing Rules could result in
suspension of the Company's shares, while a breach of company law could
lead to criminal proceedings, financial and/or reputational damage. The
Board employs Brompton Asset Management LLP as Investment Manager, and
Maitland Administration Services Limited as Secretary and Administrator,
to help manage the Company's legal and regulatory obligations.
Operational: Disruption to, or failure of, the Investment Manager's or
Administrator's accounting, dealing or payment systems or the Custodian's
records could prevent the accurate reporting and monitoring of the
Company's financial position. The Company is also exposed to the
operational risk that one or more of its suppliers may not provide the
required level of service. The Company receives regular reports from its
contracted third parties.
INVESTMENT MANAGEMENT ARRANGEMENT AND RELATED PARTY TRANSACTIONS
In common with most investment trusts the Company does not have any
executive directors or employees. The day-to-day management and
administration of the Company, including investment management, accounting
and company secretarial matters, and custodian arrangements are delegated
to specialist third party service providers.
Details of related party transactions are contained in the Annual Report.
There have been no unusual material transactions with related parties
during the period which have had a significant impact on the performance
of the Company.
GOING CONCERN AND VIABILITY
The Directors believe that it is appropriate to continue to adopt the
going concern basis in preparing the accounts as the assets of the Company
consist mainly of securities that are readily realisable or cash and it
has no significant liabilities. Investment income exceeds annual
expenditure and current liquid net assets cover current annual expenses
for many years. Accordingly, the Company is of the opinion that it has
adequate financial resources to continue in operational existence for the
foreseeable future which is considered to be in excess of five years.
Five years is considered a reasonable time for investors when making their
investment decisions. In reaching this view the Directors reviewed the
anticipated level of annual expenditure against the cash and liquid assets
within the portfolio. The Directors have also considered the risks the
Company faces.
AUDITORS
The half year financial report has been reviewed, but not audited, by
Ernst & Young LLP pursuant to the Auditing Practices Board guidance on the
Review of Interim Financial Information.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
- The financial statements contained within the half year financial report
to 31st December 2019 has been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting';
- The Chairman's statement, Directors' report or the Investment Manager's
report include a fair review of important events that have occurred
during the first six months of the financial year and their impact on the
financial statements;
- The Chairman's statement, Directors' report or the Investment Manager's
report include a fair review of the potential risks and uncertainties for
the remaining six months of the year; and
- The Director's report and note 8 to the half year financial report
include a fair review of the information concerning transactions with the
investment manager and changes since the last annual report.
By order of the Board
Maitland Administration Services Limited, 20th March 2020
SCHEDULE OF TOP TWENTY INVESTMENTS at 31st December 2019
Bid-market Value % of Net
Holding Investment Type Assets
£ '000
Fundsmith Equity Fund Investment Fund 7,952 6.76
Embark Group Unquoted 6,990 5.95
Investment
Polar Capital - Global Investment Fund 5,728 4.87
Technology Fund
FP Crux European Special Investment Fund 5,267 4.48
Situations Fund
Schroder Income Fund Investment Fund 4,945 4.21
Aberforth Split Level Income Investment 4,506 3.83
Trust Company
MI Chelverton UK Equity Income Investment Fund 4,405 3.75
Fund
EF Brompton Global Conservative Investment Fund 4,355 3.70
Fund
BlackRock Continental European Investment Fund 3,926 3.34
Income Fund
Artemis Global Income Fund Investment Fund 3,925 3.34
BlackRock Gold & General Fund Investment Fund 3,735 3.18
Aquilus Inflection Fund Investment Fund 3,721 3.17
Lindsell Train Japanese Equity Investment Fund 3,364 2.86
Fund
EF Brompton Global Equity Fund Investment Fund 2,981 2.53
Man GLG UK Income Fund Investment Fund 2,973 2.53
EF Brompton Global Opportunities Investment Fund 2,962 2.52
Fund
MI Brompton UK Recovery Unit Investment Fund 2,851 2.42
Trust
EF Brompton Global Growth Fund Investment Fund 2,830 2.41
Liontrust Asia Income Fund Investment Fund 2,758 2.35
First State Indian Subcontinent Investment Fund 2,628 2.23
Fund
82,802 70.43
Balance held in 21 investments 18,716 15.92
Total investments (excluding
cash) 101,518 86.35
Net current assets (including 16,041 13.65
cash)
117,559 100.00
Net Assets
The investment portfolio, excluding cash, can be further analysed as
follows:
£'000
Investment funds 84,023
Unquoted investments 8,390
Investment companies and exchange traded funds 8,086
Other quoted investments 1,019
101,518
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended
31st December 2019 (unaudited)
Six months ended
31st December 2019
(unaudited)
Total
Revenue Return Capital Return
£ '000 Return
£ '000 £ '000
Notes
INCOME
Investment income 1,127 - 1,127
Other operating income 167 - 167
Total income 2 1,294 - 1,294
GAINS AND LOSSES ON
INVESTMENTS
Losses on investments at fair 5 - 5,022 5,022
value through profit or loss
Other exchange losses - (612) (612)
Trail rebates - 2 2
1,294 4,412 5,706
EXPENSES
Management and performance 3 (364) (622) (986)
fees
Other expenses (138) - (138)
(502) (622) (1,124)
PROFIT /LOSS) BEFORE TAX 792 3,790 4,582
Tax - - -
PROFIT /(LOSS) FOR THE PERIOD 792 3,790 4,582
EARNINGS PER SHARE
Ordinary shares (pence) 4 1.11p 5.34p 6.45p
The total return column of this statement represents the Group's profit
and loss account, prepared in accordance with IFRS. The supplementary
Revenue Return and Capital Return columns are both prepared under guidance
published by the Association of Investment Companies. All items in the
above statement derive from continuing operations. No operations were
acquired or discontinued during the period.
All income is attributable to the equity holders of the parent company.
There are no minority interests.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31st December 2018 and the year ended 30th June
2019
Six months ended Year ended
31st December 2018 30th June 2019
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
Notes Return Return Return Return Return Return
£'000 £'000 £'000 £'000 £'000 £'000
INCOME
Investment income 930 - 930 1,890 - 1,890
Other operating 147 - 147 349 - 349
income
Total income 2 1,077 - 1,077 2,239 - 2,239
GAINS AND LOSSES ON
INVESTMENTS
Gains on investments
at fair value
through profit or 5 - (6,168) (6,168) - 1,992 1,992
loss
Other exchange - 405 405 - 443 443
losses
Trail rebates - 2 2 - 5 5
1,077 (5,761) (4,684) 2,239 2,440 4,679
EXPENSES
Management and 3 (339) - (339) (668) (410) (1,098)
performance fees
Other expenses (131) - (131) (266) - (266)
(470) - (470) (954) (410) (1,364)
PROFIT BEFORE TAX 607 (5,761) (5,154) 1,285 2,030 3,315
Tax - - - - - -
PROFIT FOR THE 607 (5,761) (5,154) 1,285 2,030 3,315
PERIOD
EARNINGS PER SHARE
Ordinary shares 4 0.85p (8.11)p (7.26)p 1.81p 2.86p 4.67p
(pence)
The total return column of this statement represents the Group's profit
and loss account, prepared in accordance with IFRS. The supplementary
Revenue Return and Capital Return columns are both prepared under guidance
published by the Association of Investment Companies. All items in the
above statement derive from continuing operations. No operations were
acquired or discontinued during the periods.
All income is attributable to the equity holders of the parent company.
There are no minority interests.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31st
December 2019 (unaudited)
Share Share Special Retained
premium reserve earnings
capital Total
£ '000 £ '000 £ '000
£ '000 £ '000
At 30th JUNE 2019 710 21,573 56,908 34,780 113,971
Total comprehensive income for - - - 4,582 4,582
the period
Dividend paid - - - (994) (994)
At 31st DECEMBER 2019 710 21,573 56,908 38,368 117,559
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31st
December 2018 (unaudited)
Share Share Special Retained
premium reserve earnings
capital Total
£ '000 £ '000 £ '000
£ '000 £ '000
At 30th JUNE 2018 710 21,573 56,908 32,175 111,366
Total comprehensive income for - - - (5,154) (5,154)
the period
Dividend paid - - - (710) (710)
At 31st DECEMBER 2018 710 21,573 56,908 26,311 105,502
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30th June
2019 (audited)
Share Share Special Retained
premium reserve earnings
capital Total
£ '000 £ '000 £ '000
£ '000 £ '000
At 30th JUNE 2018 710 21,573 56,908 32,175 111,366
Total comprehensive income for - - - 3,315 3,315
the year
Dividend paid - - - (710) (710)
At 30th JUNE 2019 710 21,573 56,908 34,780 113,971
CONSOLIDATED BALANCE SHEET at 31st December 2019
31st December 31st December 30th June
2019 2018 2019
Notes
(unaudited) (unaudited) (audited)
£ '000 £ '000 £ '000
NON-CURRENT ASSETS
Investments at fair value
through profit or loss
5 101,518 83,561 93,782
CURRENT ASSETS
Other receivables 100 213 220
Cash and cash equivalents 16,786 21,938 20,605
16,886 22,151 20,825
TOTAL ASSETS 118,404 105,712 114,607
CURRENT LIABILITIES
Other payables (845) (210) (636)
TOTAL ASSETS LESS CURRENT
LIABILITIES
117,559 105,502 113,971
NET ASSETS 117,559 105,502 113,971
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS
Called-up share capital 710 710 710
Share premium 21,573 21,573 21,573
Special reserve 56,908 56,908 56,908
Retained earnings 6 38,368 26,311 34,780
TOTAL EQUITY 117,559 105,502 113,971
NET ASSET VALUE PER ORDINARY 7 165.52p 148.54p 160.47p
SHARE (PENCE)
The interim report was approved and authorised for issue by the Board on
20th March 2020.
CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31st December
2019
Six months Six months Year
ended ended ended
31st December 31st December 30th June
2019 2018 2019
(unaudited) (unaudited) (audited)
£ '000 £ '000 £ '000
NET CASH INFLOW FROM OPERATING 501 644 1,334
ACTIVITIES
INVESTING ACTIVITIES
Purchase of investments (2,722) (2,023) (4,340)
Sale of investments 8 8,595 8,851
NET CASH INFLOW/(OUTFLOW) FROM
INVESTING ACTIVITIES
(2,714) 6,572 4,511
FINANCING
Equity dividend paid (994) (710) (710)
NET CASH INFLOW/(OUTFLOW) AFTER
FINANCING (3,207) 6,506 5,135
INCREASE /(DECREASE) IN CASH (3,207) 6,506 5,135
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET FUNDS
Increase/(Decrease) in cash (3,207) 6,506 5,135
resulting from cash flows
Exchange movements (612) 405 443
Movement in net funds (3,819) 6,911 5,578
Net funds at start of period/year 20,605 15,027 15,027
NET FUNDS AT END OF PERIOD/YEAR 16,786 21,938 20,605
RECONCILIATION OF (LOSS)/PROFIT
BEFORE FINANCE COSTS AND TAXATION TO
NET CASH FLOW FROM OPERATING
ACTIVITIES
Profit/( Loss) before finance costs 4,582 (5,154) 3,315
and taxation *
(Gains)/Loss on investments (5,022) 6,168 (1,992)
Exchange differences 612 (405) (443)
Management fee rebates (2) (2) (5)
Revenue profit before finance costs 170 607 875
and taxation
Decrease in debtors 120 59 43
Increase/(Decrease) in creditors 209 (24) 402
Taxation - - 9
Management fee rebates 2 2 5
NET CASH INFLOW FROM OPERATING 501 644 1,334
ACTIVITIES
* Includes dividends received in cash of £1,013,000 (30th June 2019:
£1,599,000) (2018: £788,000), accumulation income of £222,000 (30th June
2019: £278,000) (2018: £255,000) and interest income of £167,000 (30th
June 2019: £408,000) (2018: £84,000)
NOTES TO THE INTERIM FINANCIAL STATEMENTS for the six months ended 31st
December 2019
1. ACCOUNTING POLICIES
The condensed consolidated interim financial statements comprise the
unaudited results of the Company and its subsidiary, JIT Securities
Limited (together "the Group"), for the six months to 31st December 2019.
The comparative information for the six months to 31st December 2018 and
the year to 30th June 2019 are a condensed set of accounts and do not
constitute statutory accounts under the Companies Act 2006. Full statutory
accounts for the year to 30th June 2019 included an unqualified audit
report, did not contain any statements under section 498 of the Companies
Act 2006, and have been filed with the Registrar of Companies.
The half year financial statements have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting', and
are presented in pounds sterling, as this is the Group's functional
currency.
The same accounting policies have been followed in the interim financial
statements as applied to the accounts for the year ended 30th June 2019,
which were prepared in accordance with IFRSs as adopted by the European
Union.
No segmental reporting is provided as the Group is engaged in a single
segment.
2. TOTAL INCOME
Year ended
Six months ended 31st 30th June
December 2019 Six months ended
31st December 2018 2019
£'000
£'000
£'000
Income from
Investments
UK net dividend 1,045 792 1,691
income
Unfranked investment 82 138 199
income
1,127 930 1,890
Other Income
Bank interest 167 140 336
receivable
Loan interest income - 7 13
167 147 349
Year ended
Six months ended 31st December 30th June
2019 Six months ended
31st December 2018 2019
£'000
£'000
£'000
Total income
comprises
Dividends 1,127 930 1,890
Other income 167 147 349
1,294 1,077 2,239
3. MANAGEMENT FEES
Year ended
Six months ended 31st 30th June
December 2019 Six months ended
31st December 2018 2019
£'000
£'000
£'000
Investment management 364 339 688
fee
Performance fee 622 - 410
986 339 1,098
The Investment Manager receives a management fee, payable quarterly in
arrears, equivalent to an annual 0.75 per cent of total assets after the
deduction of the value of any investments managed by the Investment
Manager or its associates (as defined in the investment management
agreement). The Investment Manager was also entitled to a performance fee
of 15% of the growth in net assets over a hurdle of 3-month Sterling LIBOR
plus 1% per annum, payable six monthly in arrears, subject to a high water
mark. The aggregate of the Company's management fee and any performance
fee is subject to a cap of 4.99% of net assets in any financial year (with
any performance fee in excess of this cap capable of being earned in
subsequent periods). The performance fee will be charged 100% to capital,
in accordance with the Board's expectation of how any out-performance will
be generated. A performance fee of £622,000 was payable in respect of the
period.
The Company has agreed with the Investment Manager that the existing
performance fee was not appropriate in a low interest rate environment.
Accordingly the current performance fee agreement ceased with effect from
1st January 2020.
4. RETURN PER ORDINARY SHARE
Year ended 30th
Six months ended June
31st December 2019 Six months ended
31st December 2018 2019
£'000
£'000
£'000
Revenue return 792 607 1,285
Capital return 3,790 (5,761) 2,030
Total return 4,582 (5,154) 3,315
Weighted average
number of Ordinary 71,023,695 71,023,695 71,023,695
shares
Revenue return per 1.11p 0.85p 1.81p
Ordinary share
Capital return per 5.34p (8.11)p 2.86p
Ordinary share
Total return per 6.45p (7.26)p 4.67p
Ordinary share
5. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
At At At
31st December 31st December 30th June
2019 2018
2019
£'000 £'000
£'000
GROUP AND COMPANY 101,518 83,561 93,782
ANALYSIS OF INVESTMENT
PORTFOLIO - GROUP AND COMPANY
Six months ended 31st December
2019
Total
Listed* Unlisted**
(level 1 and (level 3)
2)
£'000 £'000
£'000
Opening book cost 60,372 8,448 68,820
Opening investment holding 26,024 (1,062) 24,962
gains/(losses)
Opening valuation 86,396 7,386 93,782
Movement in period:
Purchase at cost 2,722 - 2,722
Sales
- Proceeds (8) - (8)
- Realised gains on sales 8 - 8
Movement in investment holding 4,010 1,004 5,014
gains/(losses)
Closing valuation at 31 December 93,128 8,390 101,518
2019
Closing book cost 63,094 8,448 71,542
Closing investment holding 30,034 (58) 29,976
gains/(losses)
Closing valuation 93,128 8,390 101,518
* Listed investments include unit trust and OEIC funds which are valued at
quoted prices. Included within Listed Investments is one monthly valued
investment of £3,721,000 (30th June 2019: £3,698,000) (2018: £3,562,000).
** The Unlisted investments, representing just over 7% of the Company's
NAV, have been valued in accordance with IPEVC valuation guidelines. The
largest unquoted investment amounting to £6,990,000 (30th June 2019:
£5,942,000) (2018: £3,268,000) was valued at the latest transaction price.
The second largest investment has been valued based on cost and is in its
development phase. A 10% increase or decrease in the earnings of the
largest investment would not have a material impact on the valuation of
the investment. This investment has not reached maturity and is not
valued on the basis of its current earnings.
There were no reclassifications for assets between Level 1, 2 and 3.
Year
Six months ended Six months ended
ended
31st December 31st December
2019 2018 30th June
£'000 £'000 2019
£'000
ANALYSIS OF CAPITAL GAINS AND
LOSSES
Realised gains on sales of 8 4,168 4,175
investments
Increase in investment holding 5,014 (10,336) (2,183)
gains/( losses)
5,022 (6,168) 1,992
6. RETAINED EARNINGS
At At
At
31st December 2019 30th June
31st December 2018
£'000 2019
£'000
£'000
Capital reserve - realised 6,769 8,339 7,977
Capital reserve - 29,959 16,809 24,962
revaluation
Revenue reserve 1,640 1,163 1,841
38,368 26,311 34,780
7. NET ASSET VALUE PER ORDINARY SHARE
31st December 30th June
2019 31st December
2018 2019
£'000
£'000 £'000
Net assets attributable to Ordinary
shareholders 117,559 105,502 113,971
Ordinary shares in issue at end of
period 71,023,695 71,023,695 71,023,695
Net asset value per Ordinary share 165.52p 148.54p 160.47p
8. TRANSACTIONS WITH THE INVESTMENT MANAGER
During the period there have been no new related party transactions that
have affected the financial position or performance of the Group.
Since 1st January 2010 Brompton has acted as Investment Manager to the
Company. This relationship is governed by an agreement dated 23rd December
2009.
Mr Duffield is the senior partner of Brompton Asset Management Group LLP
the ultimate parent of Brompton. Mr Duffield owns a majority (59.14%) of
the shares in the Company.
Mr Gamble has an immaterial holding in Brompton Asset Management Group
Limited LLP.
The total investment management fee payable to Brompton for the half year
ended 31st December 2019 was £364,000 (30th June 2019: £688,000) (2018:
£339,000) and at the half year £183,000 (30th June 2019: £177,000) (2018:
£164,000) was accrued. The performance fee payable in respect of the six
months ended 31st December 2019 was £622,000 (30th June 2019: £410,000)
(2018: £nil). The existing performance fee arrangements ceased with
effect from 1 January 2020.
The Group's investments include seven funds managed by Brompton or its
associates valued at £20,551,000 (30th June 2019: £19,680,000) (2018:
£18,001,000). No investment management fees were payable directly by the
Company in respect of these investments.
9. POST BALANCE SHEET EVENTS
Coronavirus and the current pandemic has resulted in a significant fall in
the market and introduced significant market volatility. Further details
are provided in the Chairman's Statement and Investment Manager's Report
above.
The Company's unaudited NAV per share was 136.12p and the share price was
95p at close of business on 19th March 2020.
══════════════════════════════════════════════════════════════════════════
ISIN: GB0002631041
Category Code: IR
TIDM: NSI
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
Sequence No.: 53855
EQS News ID: 1003555
End of Announcement EQS News Service
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1 fncls.ssp?fn=show_t_gif&application_id=1003555&application_name=news&site_id=reuters8
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