RIT Cap. Partners - Half-year Report
01/08/2023 07:00
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RNS Number : 8144H RIT Capital Partners PLC 01 August 2023
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1 August 2023
RIT Capital Partners plc
Results for the half year ended 30 June 2023
RIT Capital Partners plc today published its results for the half year ended
30 June 2023.
Summary:
· Markets continued to face difficult conditions, with persistent inflation and
rapidly increasing interest rates as central banks balance monetary tightening
with the risks of economic downturn. Nevertheless, many equity indices
performed well, buoyed by a recovery in mega-cap technology stocks, though the
UK market and China ended down
· Our net asset value per share (NAV) total return for the period was -0.2%
· Since inception, RIT has now participated in 74% of monthly market increases
but only 41% of market declines with RIT's NAV compounding at almost 11% per
annum, compared to the MSCI ACWI at 7%
Financial Highlights:
· NAV per share of 2,364 pence at 30 June 2023
· Share price closed at 1,868 pence, a discount of 21.0%
Performance Highlights:
· Our quoted equities returned almost 7%, contributing 2.6% to NAV. This
reflected good performance from our Japan and healthcare themes, as well as
strong stock selection, with Builders FirstSource a standout performer
· Our direct private investments returned 4.5%, with a number of transactions at
or above our December valuations, providing support for the robustness of our
valuation approach. However, mainly as a result of the receipt of Q4
valuations for our private funds, the book overall was down slightly. This
portfolio is well positioned for renewed optimism in the digital transition
theme
· Uncorrelated strategies delivered positive stable returns helped by credit and
interest rate positions as well as gold
· Currency translation detracted -2.9% from the NAV performance, largely due to
sterling strength, in particular against the US dollar
Dividends and Buybacks:
· Dividend of 19 pence per share was paid in April and maintained for October,
representing an increase of almost 3% over the previous year's dividend
· We have continued to meaningfully buyback shares, totalling 5.6 million shares
at a cost of £105 million. This added an estimated 0.8% to the NAV per
share return and the Board continues to believe that the opportunity to
buyback our shares at the current discount is a compelling investment for
shareholders
Commenting, Sir James Leigh-Pemberton, Chairman of RIT Capital Partners plc,
said:
"Many of the underlying conditions which made 2022 a particularly difficult
year for markets still prevail today... Across the US, UK and Europe, rates
have risen significantly, with the fastest average increases in four
decades… yield curves remain inverted… which has in the past been a
leading indicator of a future recession.
Despite this worrying backdrop… the S&P 500 finished the half year up
well into double digits, and the NASDAQ had one of its strongest gains in a
decade, up almost a third… However, excluding a handful of the largest
technology companies, the remaining stocks in the S&P 500 averaged more
modest returns.
Our NAV per share total return (including dividends) was broadly flat for the
half year at -0.2%, to end June at 2,364 pence per share. This compares to the
MSCI ACWI (50% £) which was up 11.0% and CPI plus 3% at 5.5%. Other equity
indices did less well, with the FTSE 250… declining by nearly 1%. In view
of the headwinds… we maintained a relatively low quoted equity exposure over
the period... Our quoted equity portfolio nevertheless performed well, helped
by some strong stock picks, as well as our healthcare and Japan exposures.
Private … direct holdings recorded a modest gain, supported by a number of
transactions at or above our previous carrying value.
The largest detractor in the first half was currency, driven by sterling's
appreciation… Our uncorrelated strategies portfolio was additive, with
credit and interest rate positions as well as gold, all in positive territory.
The discount … remains wider than we believe is warranted … The Board …
is responding with a two-pronged approach. Firstly… in share buybacks, to
lock in the accretive benefit for shareholders… Secondly… enhancing our
communications efforts to provide a more frequent and more detailed flow of
information…
… this complicated backdrop is providing a fertile environment for our
Manager, JRCM, to identify opportunities … which should, we believe, offer
healthy double-digit returns with a meaningful margin of safety. The ability
to identify these opportunities… is a core capability of JRCM. The strength
in depth which we have… is a cause for optimism for the future, and I am
delighted that Nick Khuu has been promoted to Co-CIO. Nick is a very
experienced investor who has been instrumental in the management of both our
quoted equities and uncorrelated strategies."
The Manager, J. Rothschild Capital Management Limited, commented:
"Our NAV… total return for the first half of the year was -0.2%...
We deliberately kept our technology holdings in the quoted equity book low,
given the exposure to the digital transition theme in our private investment
portfolio. Stripping out the few mega-cap technology stocks from the S&P
500, the remaining stocks averaged around 6%. Our quoted equity book returned
almost 7% in the first half, contributing 2.6% to NAV.
We do not believe that there are yet grounds for increasing our overall
exposure to equity markets, and we will continue to focus on specific themes,
such as healthcare, digital transition and Japan. In addition, we are
holding healthy liquidity balances as we believe these are fertile markets for
deploying long-term capital, in particular in US mid-cap stocks, and European
credit.
We aim to hold diversified investments that capitalise on structural themes
and market dislocations, where we can leverage our network of partners and
managers and the advantage of permanent capital, to take a differentiated view
for the benefit of our shareholders."
ENQUIRIES:
Brunswick Group LLP:
Nick Cosgrove, Tom Burns: +44 (0) 207 404 5959
About RIT Capital Partners plc:
RIT Capital Partners plc is an investment company listed on the London Stock
Exchange. Its net assets have grown from £280 million on
listing in 1988 to over £3.5 billion as at 30 June 2023. Lord Rothschild and
his immediate family interests retain a significant holding.
www.ritcap.com (http://www.ritcap.com)
A description of all terms used above, including further information on the
calculation of Alternative Performance Measures (APMs) is set
out in the Glossary and APMs section at the end of this RNS.
THE FOLLOWING IS EXTRACTED FROM THE COMPANY'S HALF-YEARLY FINANCIAL REPORT
Performance for the period 30 June 2023
RIT NAV per share total return(1) -0.2%
CPI plus 3.0% 5.5%
MSCI All Country World Index (ACWI) 11.0%
RIT share price total return(1) -11.2%
FTSE 250 Index(2) -0.6%
Key company data 30 June 2023 31 December 2022 Change
NAV per share 2,364 pence 2,388 pence -1.0%
Share price 1,868 pence 2,125 pence -12.1%
Premium/(discount) -21.0% -11.0% -10.0% pts
Net assets £3,551 million £3,722 million -4.6%
Gearing(1) 6.8% 6.7% 0.1% pts
Average net quoted equity exposure for the period 37% 38% -1.0% pts
Ongoing charges figure(1) n/a 0.89% n/a
First interim dividend paid 19.0 pence 18.5 pence 2.7%
Second interim dividend declared/paid 19.0 pence 18.5 pence 2.7%
Total dividend in year 38.0 pence 37.0 pence 2.7%
Performance history 1 Year 3 Years 5 Years 10 Years Since
inception
RIT NAV per share total return(1) -5.1% 27.1% 36.2% 110.3% 3,229%
CPI plus 3.0% per annum 10.9% 31.6% 43.2% 78.2% 623%
MSCI All Country World Index (ACWI) 13.3% 34.4% 48.6% 154.8% 1,050%
RIT share price total return(1) -20.7% 9.9% -1.6% 92.9% 3,345%
FTSE 250 Index(2) 1.9% 16.1% 0.5% 73.3% 1,810%
A description of the terms used in this report, including further information
on the calculation of Alternative Performance Measures (APMs), is set out in
the Glossary and APMs section.
1 The Group's designated APMs are the NAV per share total return, share price
total return, gearing and the ongoing charges figure.
2 RIT's shares are a constituent of the FTSE 250 Index.
CHAIRMAN'S STATEMENT
Background and performance
Many of the underlying conditions which made 2022 a particularly difficult
year for markets still prevail today. Persistent inflation has led to a
material shift in interest rates, and 'higher for longer' has become an often
stated refrain. The US has seen a reversal of the forecast rate declines which
were priced in following the regional banking crisis in March. Across the US,
UK and Europe, rates have risen significantly, with the fastest average
increases in four decades. In all of these markets, yield curves remain
inverted, a phenomenon which has in the past been a leading indicator of a
future recession.
Despite this worrying backdrop, many equity indices performed strongly. The
S&P 500 finished the half year up well into double digits, and the NASDAQ
had one of its strongest gains in a decade, up almost a third. A 'tech is
everything' narrative, buoyed by optimism around artificial intelligence, saw
a robust recovery for this sector, with investors viewing technology as a rare
source of innovation and growth in an otherwise low-growth world. However,
excluding a handful of the largest technology companies, the remaining stocks
in the S&P 500 averaged more modest returns.
Our NAV per share total return (including dividends) was broadly flat for the
half year at -0.2%, to end June at 2,364 pence per share. This compares to
the MSCI ACWI (50% £) which was up 11.0% and CPI plus 3% at 5.5%. Other
equity indices did less well, with the FTSE 250 (of which our shares are a
constituent) declining by nearly 1%. In view of the headwinds which we
continue to observe, we maintained a relatively low quoted equity exposure
over the period. We also deliberately had little exposure to publicly listed
technology stocks in our quoted book, as this sector is well‑represented in
our private investment portfolio. Our quoted equity portfolio nevertheless
performed well, helped by some strong stock picks, as well as our healthcare
and Japan exposures. Private investments were down slightly for the half year.
Our direct holdings recorded a modest gain, supported by a number of
transactions at or above our previous carrying value. For the private funds,
we have received March valuations for 93% of the portfolio, which show a
slight gain, partly offsetting a modest decrease from the December valuations
received earlier in the year. The largest detractor in the first half was
currency, driven by sterling's appreciation, with the translation impact most
pronounced for our US dollar-denominated assets. Our uncorrelated strategies
portfolio was additive, with credit and interest rate positions as well as
gold, all in positive territory.
Share capital and dividend
The discount at which our shares are trading relative to our NAV remains wider
than we believe is warranted. Part of the increase in the discount reflects
concerns regarding our private investments book, at a time when private assets
generally are out of favour - notwithstanding that they have been an important
contributor to returns throughout our history. The investment company sector
has also seen a general widening of discounts, particularly in the second
quarter, reflecting broader weakness across the UK market.
The Board has discussed this situation at length and is responding with a
two-pronged approach. Firstly, we have deployed a material amount of capital
in share buybacks, to lock in the accretive benefit for shareholders, improve
liquidity and help reduce the volatility in our rating. By 30 June, we had
acquired some 5.6 million shares at a cost of £105 million, to hold 6.2
million shares in treasury. The robustness of our private investment portfolio
valuations has been evidenced by three disposals in the half year at or above
our carrying values, and we continue to believe that the opportunity to
buyback our shares at the current discount is a compelling investment for
shareholders.
Secondly, we are enhancing our communications efforts to provide a more
frequent and more detailed flow of information on our portfolio and its
performance. This has meant an increase in the frequency of our meetings with
shareholders and publishing more regular commentary on portfolio developments
in our monthly NAV announcements. The reaction to these first steps has been
positive, for which we are grateful. Nevertheless, there is much more that we
can do in this regard, and continuous improvement in this area will be a key
focus for the Company and our Manager in the coming months.
We paid a first interim dividend of 19 pence per share in April and have
declared a second interim dividend of the same amount to be paid on 27 October
to shareholders registered on 6 October. This will provide shareholders with a
total dividend in 2023 of 38 pence per share, an increase of almost 3% from
2022.
Outlook
Some recent data releases suggest that the rates of inflation in Western
economies are showing the first signs of moderating. However, they remain
materially above central banks' target rates, and there is a strong body of
evidence pointing to the fact that we have not yet seen the peak in policy
rates, nor can the risk of recession be ruled out at this point. In view of
the time lag on the full effect of monetary tightening, we may not yet have
seen the full impact of tighter conditions on consumer demand, credit
conditions, corporate margins, earnings and financing costs. We therefore do
not believe that the grounds for our moderate levels of quoted equity exposure
have changed.
Nevertheless, this complicated backdrop is providing a fertile environment for
our Manager, JRCM, to identify opportunities in both quoted equity and credit
markets which should, we believe, offer healthy double-digit returns with a
meaningful margin of safety. The ability to identify these opportunities and
to conduct the in-depth analysis to assess them is a core capability of JRCM.
The strength in depth which we have in these areas at our Manager is a cause
for optimism for the future, and I am delighted that Nick Khuu has been
promoted to Co-CIO. Nick is a very experienced investor who has been
instrumental in the management of both our quoted equities and uncorrelated
strategies. He is an excellent addition to JRCM's senior leadership team.
Sir James Leigh-Pemberton
Chairman
31 July 2023
MANAGER'S REPORT
Overview
The first half of 2023 has seen the global economy impacted by bank failures,
persistent inflation and ongoing international conflict, while advances in
artificial intelligence have re-invigorated investors' convictions that
'technology is everything'. Meanwhile, central banks are engaged in a
difficult balancing act, maintaining interest rates at a higher level than
expected to curb inflationary pressure, without adversely impacting the
economy.
On the surface, many equity markets appeared unscathed, with the S&P 500
up 17%, Europe up 11% and Japan up 23%. By contrast, the UK market suffered
from a lack of support with the FTSE 250 down 1%, and MSCI China was down 6%.
Beneath the surface, macroeconomic indicators sent mixed signals. Rapid
interest rate rises and tightening credit conditions have put pressure on
company earnings, with the bulk of the indices' appreciation coming from
multiple expansion rather than earnings growth. By and large however, the
economy has withstood the radical shift in costs of capital significantly
better than many had anticipated. There is little doubt that this tightening
cycle has been unique as it unfolded at a time of record excess savings, an
expansionary fiscal stance and both corporates and consumers having fixed
their funding obligations at attractive rates. This confluence of factors has
rendered the economy unusually insensitive to higher interest rates.
Ironically, it also pushes central banks to be more aggressive than otherwise
to make a sufficient dent on growth, to ensure inflation returns to their
long-term targets. As rates keep grinding higher, so the pressure grows on the
resilience of the economy and of a financial system that has been weaned on a
diet of cheap money for more than a decade. These are clearly challenging
waters to navigate.
Performance commentary
Our NAV per share total return for the first half of the year was -0.2%. Our
performance lagged both of our reference indices: the ACWI (50% £) was up
11.0% and the 'inflation plus' hurdle (CPI plus 3%) was 5.5%.
The principal reasons for the underperformance were the low weighting of
technology stocks in our quoted equity book, and translation effects. We
deliberately kept our technology holdings in the quoted equity book low, given
the exposure to the digital transition theme in our private investment
portfolio. Stripping out the few mega-cap technology stocks from the S&P
500, the remaining stocks averaged around 6%. Our quoted equity book returned
almost 7% in the first half, contributing 2.6% to NAV. Sterling has
strengthened since December, appreciating against the US dollar by 5.1%. While
our hedging partially dampened the effect of this move, sterling's strength
reduced the NAV by 2.9% in the period. Given the outlook for the US and the UK
economies, we continue to believe that sterling's recent strength could leave
it vulnerable.
Quoted equity
Performance was driven by exposure to Japan, healthcare and reflation themes,
and strong stock selection, offsetting a modest decline from our China
exposure. Japan saw the benefits of corporate governance reforms and our
healthcare holdings performed well as 'big pharma' deployed capital to acquire
innovative companies. In single stocks, a notable contributor was Builders
FirstSource. We bought this distributor of homebuilding products amidst market
volatility in the second half of 2022, believing the stock to be significantly
undervalued. The shares have risen 110% this year, and we recently sold the
bulk of our holding to lock in this gain.
We have also added positions in stocks which we believe to be similarly
undervalued, including the mattress company, Tempur Sealy. Other core stocks
continue to perform well overall, with Mastercard and Marsh & McLennan
registering double-digit gains since December.
Private investments
The private investments book remains a core part of our long-term investment
strategy, comprising diversified funds and individual holdings, and with
exposure across different industry sectors, themes and vintages.
As the December 2022 GPs' valuations were received in the first quarter of
this year, our private funds saw some write‑downs, following the reset in
public markets. The recently received Q1 marks showed a modest overall
increase in valuations, resulting in an aggregate contribution for the half
year of -1.3%. As of the reporting date, 93% of the private funds were valued
as at 31 March, with the remainder at 31 December.
Our direct private investments returned 4.5%, contributing 0.5% to the NAV.
This portfolio saw an uplift in valuations for the half year, reflecting
continued underlying performance, a more constructive market backdrop and some
specific transactions. In late January we sold our holding in Infinity, a UK
data-centre operator, at a price above our December carrying value. We have
recently completed sales of the majority of two of our largest direct
positions at their December carrying values, realising returns of 2.0x to 3.9x
our original investments. Likewise in April, one of our largest investments,
Webull, benefited from a new fund-raising at a level higher than our December
value.
Within this portfolio we have exposure to high-quality innovative companies
within the ongoing digital transition theme. We estimate that the majority of
our investments are either profitable or have a cash runway of more than a
year, which puts them in a good position to take advantage of renewed
optimism.
Over time, we expect the share of NAV in private investments to naturally
rebalance to a lower level as the IPO market reopens, our funds continue to
make distributions, we take advantage of other opportunities to crystalise
gains and fewer new investments meet our very high hurdles.
Uncorrelated strategies
Our uncorrelated strategies book is designed to provide a diverse set of
returns with low correlation to equity markets. It includes absolute return
and credit positions, real assets, government bonds and interest rate
positions. This book delivered positive returns for the half year, mainly
driven by our credit investments and our holdings in gold. The early returns
from a recent ESG-related investment into Californian carbon credits (part of
the US carbon offset market) have been encouraging and we have recently added
a holding of senior secured bonds issued by Pizza Express. These short‑term
bonds have attractive structural protection and a healthy coupon, and we were
able to purchase them at a discount to par, further enhancing the return
opportunity. We have also added to our holdings of government bonds, with
yields on UK gilts particularly attractive.
Given our conviction in the portfolio, we continued to buyback shares at a
significant discount to the underlying net asset value. This has been
accretive for shareholders, and so far this year has added an estimated 0.8%
to the NAV per share return.
Outlook
Given choppy waters and unpredictable macroeconomic winds, we are keeping some
slack in our sails. We do not believe that there are yet grounds for
increasing our overall exposure to equity markets, and we will continue to
focus on specific themes, such as healthcare, digital transition and Japan. In
addition, we are holding healthy liquidity balances as we believe these are
fertile markets for deploying long-term capital, in particular in US mid-cap
stocks, and European credit.
While not owning mega-cap technology stocks influenced our relative returns
over the short-term, we remain resolute in our careful portfolio construction
and diversification, which we believe remains the best approach for long-term
capital growth with lower volatility. We aim to hold diversified investments
that capitalise on structural themes and market dislocations, where we can
leverage our network of partners and managers and the advantage of permanent
capital, to take a differentiated view for the benefit of our shareholders.
The combination of our deep bench of talent across the organisation and access
to a wide network globally remains one of our core differentiators. We are
therefore pleased to announce that Nick Khuu, our Head of Public Markets and a
member of our Investment Committee, has formally been appointed Co-CIO of
JRCM. Nick is a seasoned investor, with more than two decades of experience
covering equities, fixed income, rates and special situations. He has been
instrumental in helping to oversee our quoted equities and uncorrelated
strategies portfolio and is an excellent addition to our senior team as we
navigate the evolving landscape and opportunities ahead.
ASSET ALLOCATION AND PORTFOLIO CONTRIBUTION
30 June 2023 NAV per share
Asset category % net assets contribution %
Quoted equity 33.9% 2.6%(1)
Private investments 39.8% -0.8%
Uncorrelated strategies: 25.7% 0.7%
Absolute return and credit 21.2% 0.6%
Real assets 1.5% 0.2%
Government bonds and rates 3.0% -0.1%
Currency 0.7% -2.9%(2)
Total investments 100.1% -0.4%
Liquidity, borrowings and other -0.1% 0.2%(3)
Total 100.0% -0.2%
Average net quoted equity exposure(1) 37.0%
1 The quoted equity contribution reflects the profits from
the net quoted equity exposure held during the period as well as the costs of
portfolio hedges. The exposure can differ from the % NAV as the former
reflects notional exposure through derivatives as well as estimated
adjustments for derivatives and/or liquidity held by managers.
2 Currency exposure is managed centrally on an overlay basis,
with the translation impact and the results of the currency hedging and
overlay activity included in this category's contribution.
3 This category's contribution includes interest,
mark-to-market movements in the fixed interest notes, expenses and accretion
from the share buybacks.
ASSET CATEGORY (% OF NAV)
30 June 2023 31 December 2022
Asset category % NAV % NAV
Quoted equity(1) 33.9% 35.1%
Private investments 39.8% 40.7%
Uncorrelated strategies 25.7% 21.9%
Currency 0.7% 1.1%
Liquidity, borrowings and other -0.1% 1.2%
Net assets 100.0% 100.0%
Note: This table excludes exposure from derivatives.
1 For the period ending 30 June 2023, the underlying net quoted equity exposure
averaged 37% (31 December 2022: 38%).
CURRENCY EXPOSURE (% OF NAV)
30 June 2023 31 December 2022
Currency % NAV % NAV
Sterling 47.1% 53.0%
US dollar 28.5% 24.5%
Euro 7.1% 6.4%
Japanese yen 5.6% 4.4%
Other 11.7% 11.7%
Net assets 100.0% 100.0%
Note: This table excludes exposure from currency options.
REGULATORY DISCLOSURES
Statement of Directors' responsibilities
In accordance with the Disclosure and Transparency Rules 4.2.4R, 4.2.7R and
4.2.8R, we confirm that to the best of our knowledge:
(a) The condensed set of financial statements has been prepared in
accordance with IAS 34, Interim Financial Reporting, as contained in UK
adopted international accounting standards (UK adopted IAS), as required by
the Disclosure and Transparency Rule 4.2.4R;
(b) The Interim Review includes a fair review of the information required
to be disclosed under the Disclosure and Transparency Rule 4.2.7R in an
interim management report. This includes an indication of important events
that have occurred during the first six months of the financial year, and
their impact on the condensed set of financial statements presented in the
Half-Yearly Financial Report. A further description of the principal risks and
uncertainties for the remaining six months of the financial year is set out
below; and
(c) In addition, in accordance with the disclosures required under the
Disclosure and Transparency Rule 4.2.8R, there were no transactions with
related parties in the first six months of the current financial year that
have had a material effect on the financial position or performance of the
Group, or any changes to related party transactions described in the Group's
Report and Accounts for the year ended 31 December 2022 that could do so.
Principal risks and uncertainties
The principal risks categories facing the Group for the second half of the
financial year are unchanged from those described in the Report and Accounts
for the year ended 31 December 2022. These principal risks, as well as
emerging risks such as those posed by artificial intelligence, are kept under
continual review. The principal risks we identify comprise:
● Investment strategy risk;
● Market risk;
● Liquidity risk;
● Credit risk;
● Key person dependency;
● Climate-related risks;
● Legal and regulatory risk; and
● Operational risk.
As an investment company, the most significant risk is market risk. As
described in the Chairman's Statement and Manager's Report, the macroeconomic
environment continues to be challenging. With persistent inflation, high
interest rates and geopolitical tensions still present, the elevated levels of
volatility and uncertainty in markets seen in recent years may endure
throughout 2023.
From an operational risk perspective, we continue to keep our internal
controls under close scrutiny and remain satisfied that the control
environment is effective.
Going concern
The key factors likely to affect the Group's ability to continue as a going
concern were set out in the Report and Accounts for the year ended 31 December
2022. As at 30 June 2023 there have been no significant changes to these
factors. Having reviewed the Company's forecasts and other relevant evidence,
the Directors have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing the condensed interim financial statements.
Sir James Leigh-Pemberton
Chairman
31 July 2023
For and on behalf of the Board.
CONDENSED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
Six months ended 30 June
2023 2022
£ million Notes Revenue Capital Total Revenue Capital Total
Income and gains
Investment income 14.4 - 14.4 5.2 - 5.2
Other income 0.1 - 0.1 0.9 - 0.9
Gains/(losses) on fair value investments - (14.0) (14.0) - (370.8) (370.8)
Gains/(losses) on monetary items and borrowings - 3.4 3.4 - 16.1 16.1
14.5 (10.6) 3.9 6.1 (354.7) (348.6)
Expenses
Operating expenses (17.8) (1.8) (19.6) (15.9) (8.4) (24.3)
Profit/(loss) before finance costs and tax 2 (3.3) (12.4) (15.7) (9.8) (363.1) (372.9)
Finance costs (3.4) (13.6) (17.0) (2.0) (8.0) (10.0)
Profit/(loss) before tax (6.7) (26.0) (32.7) (11.8) (371.1) (382.9)
Taxation - - - - - -
Profit/(loss) for the period (6.7) (26.0) (32.7) (11.8) (371.1) (382.9)
Earnings per ordinary share - basic 3 (4.4)p (17.1)p (21.5)p (7.6)p (238.0)p (245.6)p
Earnings per ordinary share - diluted 3 (4.4)p (17.1)p (21.5)p (7.6)p (238.0)p (245.6)p
The total column of this statement represents the Group's consolidated income
statement, prepared in accordance with UK adopted international accounting
standards (UK adopted IAS). The supplementary revenue and capital columns are
both prepared under guidance published by the Association of Investment
Companies (AIC). All items in the above statement derive from continuing
operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 June
2023 2022
£ million Revenue Capital Total Revenue Capital Total
Profit/(loss) for the period (6.7) (26.0) (32.7) (11.8) (371.1) (382.9)
Revaluation gain/(loss) on property, plant and equipment - (0.6) (0.6) - (0.3) (0.3)
Actuarial gain/(loss) in defined benefit pension plan - - - (0.4) - (0.4)
Deferred tax (charge)/credit allocated to actuarial gain/(loss) - - - (0.1) - (0.1)
Total comprehensive income/(expense) for the period (6.7) (26.6) (33.3) (12.3) (371.4) (383.7)
The notes are an integral part of these condensed interim financial
statements.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
30 June 31 December
£ million Notes 2023 2022
Non-current assets
Investments held at fair value 3,476.4 3,586.3
Investment property 37.0 37.9
Property, plant and equipment 19.9 20.7
Retirement benefit asset 0.5 0.5
Derivative financial instruments 1.8 1.0
3,535.6 3,646.4
Current assets
Derivative financial instruments 44.9 57.3
Other receivables 183.9 245.3
Amounts owed by group undertakings 4.3 4.5
Cash at bank 242.1 218.0
475.2 525.1
Total assets 4,010.8 4,171.5
Current liabilities
Borrowings (245.3) (236.2)
Derivative financial instruments (10.5) (10.4)
Other payables (69.9) (63.5)
Amounts owed to group undertakings (0.1) (0.1)
(325.8) (310.2)
Net current assets/(liabilities) 149.4 214.9
Total assets less current liabilities 3,685.0 3,861.3
Non-current liabilities
Borrowings (128.7) (134.4)
Derivative financial instruments (0.2) -
Deferred tax liability (0.2) (0.2)
Provisions (1.8) (1.8)
Lease liability (3.2) (3.2)
(134.1) (139.6)
Net assets 3,550.9 3,721.7
Equity attributable to owners of the Company
Share capital 156.8 156.8
Share premium 45.7 45.7
Capital redemption reserve 36.3 36.3
Own shares reserve (36.6) (46.3)
Capital reserve 3,375.7 3,548.9
Revenue reserve (35.8) (29.1)
Revaluation reserve 8.8 9.4
Total equity 3,550.9 3,721.7
Net asset value per ordinary share - basic 4 2,383p 2,414p
Net asset value per ordinary share - diluted 4 2,364p 2,388p
The notes are an integral part of these condensed interim financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Six months ended 30 June 2023 Share Share Capital redemption Own shares Capital Revenue Revaluation Total
£ million capital premium reserve reserve reserve reserve reserve equity
Balance at 1 January 2023 156.8 45.7 36.3 (46.3) 3,548.9 (29.1) 9.4 3,721.7
Profit/(loss) for the period - - - - (26.0) (6.7) - (32.7)
Revaluation gain/(loss) on property, plant and equipment - - - - - - (0.6) (0.6)
Actuarial gain/(loss) in defined benefit pension plan - - - - - - - -
Deferred tax (charge)/credit allocated to actuarial gain/(loss) - - - - - - - -
Total comprehensive income/(expense) for the period - - - - (26.0) (6.7) (0.6) (33.3)
Dividends paid (note 5) - - - - (28.8) - - (28.8)
Purchase of treasury shares - - - - (104.9) - - (104.9)
Movement in own shares reserve - - - 9.7 - - - 9.7
Movement in share-based payments - - - - (13.5) - - (13.5)
Balance at 30 June 2023 156.8 45.7 36.3 (36.6) 3,375.7 (35.8) 8.8 3,550.9
Six months ended 30 June 2022 Share Share Capital redemption Own shares Capital Revenue Revaluation Total
£ million capital premium reserve reserve reserve reserve reserve equity
Balance at 1 January 2022 156.8 45.7 36.3 (23.0) 4,174.4 (11.4) 11.5 4,390.3
Profit/(loss) for the period - - - - (371.1) (11.8) - (382.9)
Revaluation gain/(loss) on property, plant and equipment - - - - - - (0.3) (0.3)
Actuarial gain/(loss) in defined benefit pension plan - - - - - (0.4) - (0.4)
Deferred tax (charge)/credit allocated to actuarial gain/(loss) - - - - - (0.1) - (0.1)
Total comprehensive income/(expense) for the period - - - - (371.1) (12.3) (0.3) (383.7)
Dividends paid (note 5) - - - - (28.9) - - (28.9)
Purchase of treasury shares - - - - (1.5) - - (1.5)
Movement in own shares reserve - - - 2.2 - - - 2.2
Movement in share-based payments - - - - (4.1) - - (4.1)
Balance at 30 June 2022 156.8 45.7 36.3 (20.8) 3,768.8 (23.7) 11.2 3,974.3
The notes are an integral part of these condensed interim financial
statements.
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Six months ended 30 June 30 June
£ million 2023 2022
Cash flows from operating activities:
Cash inflow/(outflow) before taxation and interest 174.1 (122.8)
Interest paid (17.0) (10.0)
Net cash inflow/(outflow) from operating activities 157.1 (132.8)
Cash flows from investing activities:
Purchase of property, plant and equipment (0.1) (0.1)
Net cash inflow/(outflow) from investing activities (0.1) (0.1)
Cash flows from financing activities:
Repayment of borrowings (311.5) (251.7)
Proceeds of borrowings 324.4 310.0
Purchase of ordinary shares by employee benefit trust(1) (9.5) (14.9)
Purchase of ordinary shares into treasury (104.9) (1.5)
Dividends paid (28.8) (28.9)
Net cash inflow/(outflow) from financing activities (130.3) 13.0
26.7 (119.9)
Increase/(decrease) in cash in the period
Cash at the start of the period 218.0 325.9
Effect of foreign exchange rate changes on cash (2.6) 14.4
Cash at the period end 242.1 220.4
(1) Shares are disclosed in the own shares reserve on the consolidated balance
sheet (unaudited).
The notes are an integral part of these condensed interim financial
statements.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of accounting
These condensed financial statements are the half-yearly consolidated
financial statements of RIT Capital Partners plc (RIT or the Company) and its
subsidiaries (together, the Group) for the six months ended 30 June 2023. They
are prepared in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority, and with International Accounting Standard (IAS)
34, Interim Financial Reporting, as adopted by the United Kingdom, and were
approved on 31 July 2023. These half-yearly consolidated financial statements
should be read in conjunction with the Report and Accounts for the year ended
31 December 2022, which were prepared in accordance with UK adopted IAS.
The half-yearly consolidated financial statements have been prepared in
accordance with the accounting policies set out in the notes to the
consolidated financial statements for the year ended 31 December 2022.
Critical accounting assumptions and judgements
As further described in the Report and Accounts for the year ended 31 December
2022, areas requiring a higher degree of judgement or complexity and areas
where assumptions and estimates are significant to the consolidated financial
statements, are in relation to the valuation of private investments and
property.
2. Business and geographical segments
For both the six months ended 30 June 2023 and the six months ended 30 June
2022, the Group is considered to have three principal operating segments, all
based in the UK, as follows:
AUM(1)
Segment Business £ million Employees(1)
RIT Investment trust - -
JRCM(2) Investment manager/administration 3,550.9 51
SHL(3) Events/premises management - 13
(1) At 30 June 2023
(2) J. Rothschild Capital Management Limited.
(3) Spencer House Limited.
Key financial information for the six months ending 30 June 2023 is as
follows:
Net Income/ Operating Profit/
£ million assets gains(1) expenses(1) (loss)(2)
RIT 3,446.6 2.1 (21.7) (19.6)
JRCM 110.5 20.4 (16.6) 3.8
SHL 0.9 1.8 (1.7) 0.1
Adjustments(3) (7.1) (20.4) 20.4 -
Total 3,550.9 3.9 (19.6) (15.7)
Key financial information for the six months ending 30 June 2022 is as
follows:
Net Income/ Operating Profit/
£ million assets gains(1) expenses(1) (loss)(2)
RIT 3,860.3 (349.3) (27.0) (376.3)
JRCM 120.1 25.4 (22.1) 3.3
SHL 0.6 1.7 (1.6) 0.1
Adjustments(3) (6.7) (26.4) 26.4 -
Total 3,974.3 (348.6) (24.3) (372.9)
(1) Includes intra-group income and expenses.
(2) Profit/(loss) before finance costs and tax.
(3) Consolidation adjustments in accordance with IFRS 10 Consolidated Financial
Statements.
3. Earnings per ordinary share - basic and diluted
The basic earnings per ordinary share for the six months ended 30 June 2023 is
based on the loss of £32.7 million (six months ended 30 June 2022: loss of
£382.9 million) and the weighted average number of ordinary shares in issue
during the period of 156.8 million (six months ended 30 June 2022: 156.8
million). The weighted average number of shares is adjusted for shares held in
the employee benefit trust (EBT) and in treasury in accordance with IAS 33.
Six months Six months
ended ended
£ million 30 June 2023 30 June 2022
Net revenue profit/(loss) (6.7) (11.8)
Net capital profit/(loss) (26.0) (371.1)
Total profit/(loss) for the period (32.7) (382.9)
Six months Six months
ended ended
Weighted average (million) 30 June 2023 30 June 2022
Number of shares in issue 156.8 156.8
Shares held in EBT (2.0) (0.7)
Shares held in treasury (2.8) (0.2)
Basic shares 152.0 155.9
Six months Six months
ended ended
Pence 30 June 2023 30 June 2022
Revenue earnings/(loss) per ordinary share - basic (4.4) (7.6)
Capital earnings/(loss) per ordinary share - basic (17.1) (238.0)
Total earnings per share - basic (21.5) (245.6)
The diluted earnings per ordinary share for the period is based on basic
shares (above) adjusted for the effect of dilutive share-based payment awards
for the period.
This adjustment is not required for either six month period as an increase in
the shares in issue would reduce the basic loss per ordinary share. As a
result, there is no difference between the basic and diluted loss per ordinary
share.
Six months Six months
ended ended
Weighted average (million) 30 June 2023 30 June 2022
Basic shares 152.0 155.9
Effect of share-based payment awards - -
Diluted shares 152.0 155.9
Six months Six months
ended ended
Pence 30 June 2023 30 June 2022
Revenue earnings/(loss) per ordinary share - diluted (4.4) (7.6)
Capital earnings/(loss) per ordinary share - diluted (17.1) (238.0)
Total earnings/(loss) per ordinary share - diluted (21.5) (245.6)
4. Net asset value per ordinary share - basic and diluted
Net asset value per ordinary share is based on the following data:
30 June 31 December
2023 2022
Net assets (£ million) 3,550.9 3,721.7
Number of shares in issue (million) 156.8 156.8
Shares held in EBT (million) (1.6) (2.0)
Shares held in treasury (million) (6.2) (0.7)
Basic shares (million) 149.0 154.1
Effect of share-based payment awards (million) 1.2 1.7
Diluted shares (million) 150.2 155.8
30 June 31 December
Pence per share 2023 2022
Net asset value per ordinary share - basic 2,383 2,414
Net asset value per ordinary share - diluted 2,364 2,388
5. Dividends
Six months Six months
ended June ended June Six months Six months
2023 2022 ended June ended June
Pence per Pence per 2023 2022
share share £ million £ million
Dividends paid in period 19.0 18.5 28.8 28.9
The Board of Directors declared an interim dividend of 19 pence per ordinary
share (£28.8 million) on 27 February 2023, which was paid on 28 April 2023.
The Board has declared the payment of a second interim dividend of 19 pence
per ordinary share in respect of the year ending 31 December 2023. This will
be paid on 27 October 2023 to shareholders on the register on 6 October 2023.
Both payments are funded from accumulated capital profits.
Additional commentary may be found in the Report and Accounts for the year
ended 31 December 2022.
6. Financial instruments
IFRS 13 requires the Group to classify its financial instruments held at fair
value using a hierarchy that reflects the significance of the inputs used in
the valuation methodologies. These are as follows:
● Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities;
● Level 2: Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
● Level 3: Inputs for the asset or liability that are not based on observable
market data (i.e. unobservable inputs).
The vast majority of the Group's financial assets and liabilities, investment
properties and property, plant and equipment are measured at fair value on a
recurring basis.
The Group's policy is to recognise transfers into and transfers out of fair
value hierarchy levels at the end of the reporting period when they are deemed
to occur.
A description of the valuation techniques used by the Group with regards to
investments categorised in each level of the fair value hierarchy is detailed
below. Where the Group invests in a fund or a partnership, which is not itself
listed on an active market, the categorisation of such investment between
levels 2 and 3 is determined by reference to the nature of the fund or
partnership's underlying investments. If such investments are categorised
across different levels, the lowest level of the hierarchy that forms a
significant proportion of the fund or partnership exposure is used to
determine the reporting disclosure.
If the proportion of the underlying investments categorised between levels
changes during the period, these will be reclassified to the most appropriate
level.
Level 1
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. A market is regarded as active
if quoted prices are readily and regularly available from an exchange, dealer,
broker, industry group, pricing service, or regulatory agency, and those
prices represent actual and regularly occurring market transactions on an
arm's length basis. The quoted market price used for financial assets held by
the Group is the current bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted. Where a market
price is available, but the market is not considered active, the Group has
classified these investments as level 2.
Level 2
The fair value of financial instruments that are not traded in an active
market is determined by using valuation techniques which maximise the use of
observable market data where it is available. Specific valuation techniques
used to value OTC derivatives include quoted market prices for similar
instruments, counterparty quotes and the use of forward exchange rates to
estimate the fair value of forward foreign exchange contracts at the balance
sheet date. Investments in externally‑managed funds which themselves invest
primarily in listed securities are valued at the price or net asset value
released by the investment manager or fund administrator as at the balance
sheet date.
Level 3
The Group considers all private investments, whether direct or funds, (as
described in the Investment Portfolio) as level 3 assets, as the valuations of
these assets are not typically based on observable market data. Where other
funds invest into illiquid stocks, these are also considered by the Group to
be level 3 assets.
Private fund investments are held at the most recent fair values provided by
the GPs managing those funds, adjusted for subsequent investments,
distributions, and currency movements up to the period end, and are subject to
periodic review by the Manager.
Direct co-investments are also held at the most recent fair values provided by
the GPs managing those co-investments, adjusted for subsequent investments,
distributions, currency moves, as well as pricing events or material changes
in public market valuations, where the Manager has sufficient information to
suggest the period-end valuation should be adjusted. The remaining
directly-held private investments are valued on a semi-annual basis using
techniques including a market approach, income approach and/or cost approach.
The valuation process involves the investment functions of the Manager who
prepare the proposed valuations, which are then subject to review by the
finance function, with the final valuations being presented to the Valuation
Committee, comprised entirely of independent non-executive Directors,
of which the Audit and Risk Committee Chair is also a member.
Specific valuation techniques used will typically include the value of recent
transactions, earnings multiples, discounted cash flow analysis, and, where
appropriate, industry specific methodologies. The acquisition cost, if
determined to be fair value, may be used to calibrate inputs to the valuation.
The valuations will often reflect a synthesis of a number of distinct
approaches in determining the final fair value estimate. The individual
approach for each investment will vary depending on relevant factors that a
market participant would take into account in pricing the asset. These might
include the specific industry dynamics, the company's stage of development,
profitability, growth prospects or risk as well as the rights associated with
the particular security.
Borrowings at 30 June 2023 comprise bank loans and senior loan notes. The bank
loans are revolving credit facilities paying floating interest and are
typically drawn in tranches with a duration of three or six months. The loans
are therefore short-term in nature, and their fair value approximates their
nominal value. The loan notes were issued in 2015 with tenors of between 10
and 20 years with a weighted average of 16 years. They are valued on a monthly
basis using a discounted cash flow model where the discount rate is derived
from the yield of similar tenor UK Government bonds, adjusted for any
significant changes in either credit spreads or the perceived credit risk of
the Company.
The fair value of investments in non-consolidated subsidiaries is considered
to be the net asset value of the individual subsidiary as at the balance sheet
date. The net asset value comprises various assets and liabilities which are
fair valued on a recurring basis and is considered to be level 3.
On a semi-annual basis, the Group engages external, independent and qualified
valuers to determine the fair value of the Group's investment properties and
property, plant and equipment held at fair value.
The following table analyses the Group's assets and liabilities within the
fair value hierarchy, at 30 June 2023:
As at 30 June 2023
£ million Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss (FVPL):
Portfolio investments 644.8 1,039.8 1,652.1 3,336.7
Non-consolidated subsidiaries - - 139.7 139.7
Investments held at fair value 644.8 1,039.8 1,791.8 3,476.4
Derivative financial instruments - 46.7 - 46.7
Total financial assets at FVPL 644.8 1,086.5 1,791.8 3,523.1
Non-financial assets measured at fair value:
Investment property - - 37.0 37.0
Property, plant and equipment - - 19.9 19.9
Total non-financial assets measured at fair value - - 56.9 56.9
Financial liabilities at FVPL:
Borrowings - - (374.0) (374.0)
Derivative financial instruments - (10.7) - (10.7)
Total financial liabilities at FVPL - (10.7) (374.0) (384.7)
Total net assets measured at fair value 644.8 1,075.8 1,474.7 3,195.3
Other non-current assets 0.5
Cash at bank 242.1
Other current assets 188.2
Other current liabilities (70.0)
Other non-current liabilities (5.2)
Net assets 3,550.9
Movement in level 3 assets
Investments
Six months ended 30 June 2023 held at fair
£ million value Properties Total
Opening balance 1,875.3 58.6 1,933.9
Purchases 123.8 0.2 124.0
Sales (107.1) (0.1) (107.2)
Realised gains/(losses) through profit or loss (1.2) - (1.2)
Unrealised gains/(losses) through profit or loss (100.9) (1.0) (101.9)
Unrealised gains/(losses) through other comprehensive income - (0.6) (0.6)
Transfer into/out of level 3 2.0 - 2.0
Other (0.1) (0.2) (0.3)
Closing balance 1,791.8 56.9 1,848.7
Further information in relation to the directly-held private investments is
set out in the following table. This summarises the portfolio by the primary
method used in estimating the fair value of the investments. As we seek to
employ a range of valuation methods and inputs in the valuation process,
selection of a primary method is subjective, and designed primarily to assist
the subsequent sensitivity analysis.
Primary valuation method/approach 30 June 31 December
£ million 2023 2022
Third-party valuations(1) 246.7 246.3
Recent transaction 74.6 23.6
Discount to recent transaction(2) 53.9 90.5
Other industry metrics 19.5 21.7
Discount to sale proceeds 12.6 10.8
Original invested cost 10.7 -
Earnings multiple 5.0 49.8
Total 423.0 442.7
1. Included in this method are direct private investments held within the
non-consolidated subsidiaries with a total of £25.2 million (December 2022:
£24.5 million).
2. Included in this method are direct private investments which have been
discounted due to a decline in public market comparables or a general decline
in markets related to or impacting the businesses.
The majority of the direct private investments are structured as
co-investments, managed by a GP. For these investments, we typically use the
latest quarterly fair valuations provided by the GP, adjusted for any
subsequent investments/distributions and currency moves as well as pricing
events or material changes in public market valuations, where there is
sufficient information to suggest the period-end valuation should be adjusted.
Where the Manager has sufficient information to undertake its own valuation, a
range of methods will typically be used. For companies with positive earnings,
we seek to utilise an earnings multiple approach, typically using EBITDA or
similar. The earnings multiple is assessed by reference to similar listed
companies or transactions involving similar companies. When an asset is
undergoing a sale and the price has been agreed but not yet completed or an
offer has been submitted, we use the agreed or offered price, with a discount
as appropriate to reflect the risks associated with the transaction completing
or any price adjustments. Where a company has been the subject of a recent
financing round which is viewed as representative of fair value, we will use
this transaction price. Other methods employed include discounted cash flow
analysis and industry metrics such as multiples of assets under management or
revenue, where market participants use these approaches in pricing assets.
Level 3 assets - sensitivity analysis
The following table provides a sensitivity analysis of the valuation of
directly-held private investments and the impact on net assets:
Valuation method/approach Sensitivity analysis
Third-party valuations A 5% change in the value of these assets would result in a £12.3 million or
0.35% (2022: £12.3 million, 0.33%) change in net assets.
Recent transaction A 5% change in the value of these assets would result in a £3.7 million or
0.10% (2022: £1.2 million, 0.03%) change in net assets.
Discount to recent Assets in this category are valued using a discount applied to a recent
financing round or secondary transaction. Discounts range between 27% and 56%,
transaction reflecting a number of different factors including elapsed time since the
transaction, and the movement in market prices of broadly similar listed
companies. A 5% change to the discounts applied would result in a £2.7
million or 0.08% (2022: £4.5 million, 0.12%).
Other industry metrics A 5% change in the value of these assets would result in a £1.0 million or
0.03% (2022: £1.1 million, 0.03%) change in net assets.
Discount to sale proceeds The asset in this category is valued at a 10% discount to the sale proceeds,
to account for the time value prior to receipt. A 5% change in discount would
result in a £0.1 million or <0.01% (2022: £0.1 million, <0.01%)
change in net assets.
Original invested cost A 5% change in the value of these assets would result in a £0.5 million or
0.02% (2022: n/a) change in net assets.
Earnings multiple Assets in this category are valued using EV/sales multiples in the range of
4.8x - 9.7x. If the multiple used for valuation purposes is increased or
decreased by 5% then the net assets would increase/decrease by £0.2 million
or 0.01% (2022: £2.5 million, 0.07%).
The investment property and property, plant and equipment with an aggregate
fair value of £56.9 million (2022: £58.6 million) were valued using a
third-party valuation provided by Jones Lang LaSalle. The properties were
valued using weighted average capital values of £1,530 per square foot (2022:
£1,580) developed from rental yields and supported by recent market
transactions. A £100 per square foot increase/decrease in capital values
would result in a £3.3 million increase/decrease in fair value (2022: £3.3
million increase/decrease).
The non-consolidated subsidiaries are held at their fair value of £139.7
million (2022: £101.1 million) representing £136.8 million of portfolio
investments (2022: £104.7 million) and £2.9 million of remaining assets
(2022: liabilities of £3.3 million). A 5% change in the value of these
assets would result in £7.0 million or 0.2% (2022: £5.1 million, 0.1%)
change in total net assets.
The remaining investments held at fair value and classified as level 3 were
valued using third-party valuations from a GP, administrator, or fund manager
totalling £1,254.3 million (2022: £1,355.7 million). A 5% change in the
value of these assets would result in a £62.7 million or 1.77% (2022: £67.8
million, 1.82%) change in net assets.
In aggregate, the sum of the direct private investments, investment property,
property, plant and equipment, non‑consolidated subsidiaries and the
remaining fund investments represents the total level 3 assets of £1,848.7
million (2022: £1,933.9 million).
The following table analyses the Group's assets and liabilities within the
fair value hierarchy, at 31 December 2022:
As at 31 December 2022
£ million Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss (FVPL):
Portfolio investments 506.8 1,204.2 1,774.2 3,485.2
Non-consolidated subsidiaries - - 101.1 101.1
Investments held at fair value 506.8 1,204.2 1,875.3 3,586.3
Derivative financial instruments 6.4 51.9 - 58.3
Total financial assets at FVPL 513.2 1,256.1 1,875.3 3,644.6
Non-financial assets measured at fair value:
Investment property - - 37.9 37.9
Property, plant and equipment - - 20.7 20.7
Total non-financial assets measured at fair value - - 58.6 58.6
Financial liabilities at FVPL:
Borrowings - - (370.6) (370.6)
Derivative financial instruments - (10.4) - (10.4)
Total financial liabilities at FVPL - (10.4) (370.6) (381.0)
Total net assets measured at fair value 513.2 1,245.7 1,563.3 3,322.2
Other non-current assets 0.5
Cash at bank 218.0
Other current assets 249.8
Other current liabilities (63.6)
Other non-current liabilities (5.2)
Net assets 3,721.7
Movements in level 3 assets
Investments
Year ended 31 December 2022 held at fair
£ million value Properties Total
Opening balance 1,914.3 61.4 1,975.7
Purchases 222.2 0.1 222.3
Sales (210.3) - (210.3)
Realised gains/(losses) through profit or loss 8.7 - 8.7
Unrealised gains/(losses) through profit or loss (59.7) (0.4) (60.1)
Unrealised gains/(losses) through other comprehensive income - (2.1) (2.1)
Transfer into level 3 - - -
Transfer out of level 3 - - -
Other 0.1 (0.4) (0.3)
Closing balance 1,875.3 58.6 1,933.9
During the period no investments were reclassified between level 2 and level
3.
7. Comparative information
The financial information contained in this Half-Yearly Financial Report does
not constitute statutory accounts as defined in section 434 of the Companies
Act 2006. The financial information for the half years ended 30 June 2023 and
30 June 2022 has been neither reviewed nor audited.
The information for the year ended 31 December 2022 has been extracted from
the latest published audited financial statements.
The audited financial statements for the year ended 31 December 2022 have been
filed with the Registrar of Companies and the report of the auditors on those
accounts contained no qualification or statement under section 498(2) or (3)
of the Companies Act 2006.
GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES
Glossary
Within this Half-Yearly Financial Report, we publish certain financial
measures common to investment trusts. Where relevant, these are prepared in
accordance with guidance from the AIC, and this glossary provides additional
information in relation to them.
Alternative performance measures (APMs): APMs are numerical measures of the
Company's current, historical or future financial performance, financial
position or cash flows, other than financial measures defined or specified in
the Company's applicable financial framework - namely UK adopted IAS and the
AIC SORP. They are denoted with an * in this section.
CPI: The CPI refers to the United Kingdom Consumer Price Index as calculated
by the Office for National Statistics and published monthly. It is the UK
Government's target measure of inflation and is used as a measure of inflation
in one of the Company's key performance indicators (KPIs), CPI plus 3.0% per
annum.
Gearing*: Gearing is a measure of the level of debt deployed within the
portfolio. The ratio is calculated in accordance with AIC guidance as total
assets, net of cash, divided by net assets (with debt at par value) and
expressed as a 'net' percentage, e.g. 110% would be shown as 10%.
30 June 31 December
£ million 2023 2022
Total assets 4,010.8 4,171.5
Less: cash (242.1) (218.0)
Sub total(a) 3,768.7 3,953.5
Net assets (with debt at fair value) 3,550.9 3,721.7
Net assets (with debt at par value)(b) 3,529.1 3,705.5
Gearing(a/b) 6.8% 6.7%
Note: Gearing has been amended slightly following a clarification from the AIC
to use debt as par value (rather than debt at fair value, which had been
previously used).
Leverage: Leverage, as defined by the UK Alternative Investment Fund Managers
Directive (AIFMD), is any method which increases the exposure of the
portfolio, whether through borrowings or leverage embedded in derivative
positions or by any other means.
MSCI All Country World Index: The MSCI All Country World Index is a total
return, market capitalisation-weighted equity index covering major developed
and emerging markets. Described in this report as the ACWI or the ACWI (50%
£), this is one of the Company's KPIs or reference hurdles and, since its
introduction in 2013, has incorporated a 50% sterling measure. This is
calculated using 50% of the ACWI measured in sterling and therefore exposed to
translation risk from the underlying foreign currencies. The remaining 50%
uses a sterling-hedged ACWI from 1 January 2015 (from when this is readily
available). This incorporates hedging costs, which the portfolio also incurs,
to protect against currency risk and is an investable index. Prior to this
date it uses the index measured in local currencies. Before December 1998,
when total return indices were introduced, the index is measured using a
capital-only version.
Net asset value (NAV) per share: The NAV per share is calculated by dividing
the total value of all the assets of the trust less its liabilities (net
assets) by the number of shares outstanding. Unless otherwise stated, this
refers to the diluted NAV per share, with debt held at fair value.
NAV total return*: The NAV total return for a period represents the change in
NAV per share, adjusted to reflect dividends paid during the period. The
calculation assumes that dividends are reinvested in the NAV at the month end
following the NAV going ex-dividend. The NAV per share at 30 June 2023 was
2,364 pence, a decrease of 24 pence, or 1.0%, from 2,388 pence at the previous
year end. As dividends totalling 19 pence per share were paid during the
period, the effect of reinvesting the dividends in the NAV is 0.8%, which
results in a NAV total return of -0.2%.
Net quoted equity exposure: This is the estimated level of exposure that the
trust has to listed equity markets. It includes the assets held in the quoted
equity category of the portfolio adjusted for the notional exposure from
quoted equity derivatives, as well as estimated cash balances held by
externally-managed funds and estimated exposure levels from hedge fund
managers.
Notional: In relation to derivatives, this represents the estimated exposure
that is equivalent to holding the same underlying position through a cash
security.
Ongoing charges figure (OCF)*: As a self-managed investment trust with
operating subsidiaries, the calculation of the Company's OCF requires
adjustments to the total operating expenses. In accordance with AIC guidance,
the main adjustments are to remove JRCM compensation which is linked directly
to investment performance, as this is analogous to a performance fee for an
externally-managed trust. This calculation is performed annually with further
information in the 2022 Report & Accounts.
% Average net
£ million 2022 assets
Average net assets 4,044.7
Operating expenses 43.6 1.08%
JRCM direct performance-related compensation (7.6) (0.19)%
Other adjustments 0.0 0.00%
Ongoing charges 36.0 0.89%
OCF 0.89%
In addition to the above, managers charge fees within the external funds (and
in a few instances directly to RIT in relation to segregated accounts). We
have estimated that, based on average net assets across the year and annual
management fee rates per fund (excluding performance fees), these represented
an additional 0.88% of average net assets for 2022.
Premium/discount: The premium or discount (or rating) is calculated by taking
the closing share price on 30 June 2023 and dividing it by the NAV per share
at 30 June 2023, expressed as a net percentage. If the share price is
above/below the NAV per share, the shares are said to be trading at a
premium/discount.
Share price total return or total shareholder return (TSR)*:
The TSR for a period represents the change in the share price adjusted to
reflect dividends paid during the period. Similar to calculating a NAV total
return, the calculation assumes the dividends are notionally reinvested at the
daily closing share price following the shares going ex-dividend. The share
price on 30 June 2023 closed at 1,868 pence, a decrease of 257 pence, or
12.1%, from 2,125 pence at the previous year end. Dividends totalling 19 pence
per share were paid during the period, and the effect of reinvesting the
dividends in the share price is 0.9% which results in a TSR of -11.2%.
The TSR is one of the Company's KPIs.
END OF HALF-YEARLY FINANCIAL REPORT EXTRACTS
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