REG - Witan Inv Tst PLC - Half-year Report
15/08/2023 07:00
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RNS Number : 2863J Witan Investment Trust PLC 15 August 2023
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
SUMMARY
• Witan's NAV total return was +8.7%, 1.5% ahead of our composite
global benchmark's total return of +7.2%
• The discount widened, although by less than the AIC Global sector
average; 4.2% of our shares were bought into treasury, at an average discount
of 8.5%
• A second interim quarterly dividend of 1.45 pence per ordinary
share will be paid in September. Total dividends paid in respect of the period
are 2.90 pence per ordinary share (2022: 2.80 pence)
• Our revenue earnings for the first half rose 16% on the
corresponding period of 2022
Key data((4))
(Unaudited) (Audited)
30 June 2023 31 December 2022
Share price 226.5p 221.5p
Net asset value per ordinary share (debt at fair value) ((3)) 251.4p 234.1p
Discount (NAV including income, debt at fair value) ((3)) 9.9% 5.4%
(Unaudited) (Unaudited)
30 June 2023 30 June 2022
Dividend per share 2.90p 2.80p
Total return performance
6 months 1 year 5 years 10 years
return return return return
% % % %
Share price total return ((1)(3)) 3.6 12.8 18.2 143.2
Net asset value total return ((1)(3)) 8.7 13.9 29.3 140.8
Witan benchmark ((1)) 7.2 11.2 46.3 147.9
MSCI ACWI Index((2)) 8.1 11.9 57.1 190.7
MSCI UK IMI Index((2)) 2.3 7.0 14.5 73.4
(1) Source: Witan/Morningstar.
(2) Source: Witan/Morningstar. See also MSCI for conditions of use
(www.msci.com).
(3) Alternative performance measures
The financial statements (on pages 10 to 18) set out the required statutory
reporting measures of the Company's financial performance. In addition, the
Board assesses the Company's performance against a range of criteria which are
viewed as particularly relevant for investment trusts. Definition of the
terms used and the Witan benchmark are set out in the Annual Report.
(4) 30 June 2023 data is unaudited.
Page 2 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Percentage of total funds as at 30 June 2023* %
North America 38
Europe 21
United Kingdom 18
Asia ex Japan 6
Japan 3
Other 2
Unquoted Funds 2
Investment Companies 10
Sector breakdown of the portfolio as at 30 June 2023((5)) %
Industrials 16
Financials 15
Information Technology 12
Healthcare 10
Consumer Staples 10
Consumer Discretionary 8
Communication Services 6
Materials 6
Energy 3
Other 1
Unquoted Funds 2
Investment Companies 10
Company size breakdown of the portfolio as at 30 June 2023((5)) %
Large Cap 69
Mid Cap 14
Small Cap 5
Unquoted Funds 2
Investment Companies 10
(5) Source: BNP Paribas as at 30 June 2023
* Figures may not sum due to rounding.
Page 3 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
INTERIM MANAGEMENT REPORT
Investment backdrop and performance
The first half of 2023 saw a degree of relief that earlier forecasts of global
recession were not borne out. In combination with disappointment at the slow
decline in inflation, this meant interest rates rose higher than expected.
Bond markets underestimated inflation's persistence, with yields declining in
Q1, then rising in Q2 as forecasts for the level of base rates were
recalibrated upwards.
Global equities delivered positive returns in both quarters but from
contrasting sources. Europe was the strongest region in Q1, with generally
positive returns from most other regions. In the second quarter, returns were
almost wholly driven by the US (and, within it, the technology majors) with
most other regions (apart from Japan) delivering near zero, or slightly
negative, returns. This reflected genuine excitement about the potential of
Artificial Intelligence ('AI') to disrupt many established businesses and
drive productivity growth, which favoured the US, given its leadership in the
key technologies. Elsewhere, weaker returns reflected flagging growth numbers
across Europe and disappointment about the lack of follow-through in the
Chinese recovery, following its lifting of Covid restrictions in late 2022.
This was a changeable environment for investors to navigate, both in terms of
the rotating leadership within equity markets and due to the unfamiliar
experience of bonds and cash offering genuine competition to equities,
following a decade in which cash and bond income returns were negligible.
Witan's NAV total return was +8.7%, 1.5% ahead of the return of +7.2% from our
benchmark. The share price total return was +3.6% (owing to a 4.5% widening of
the discount). For perspective, the AIC's Global sector experienced an average
+7.1% NAV total return and a 7.5% widening in its discount to NAV.
Manager performance
The full table of the performance of our incumbent managers as at 30 June is
shown on the following page. Four of our six core managers outperformed during
the period, notably the global managers with greater exposure to the US and
growth companies. In particular, Jennison, whose style had been a significant
handicap in 2022, delivered a total return of almost 25% in the period, 17%
ahead of their MSCI World benchmark. The UK and Emerging Markets were
relatively weak areas but Artemis and GQG respectively outperformed them by a
sufficient margin to match or exceed Witan's benchmark return of 7.2%. Amongst
the global managers, Lansdowne's relatively cyclical portfolio was strongly
ahead of the benchmark for most of the period, although the more cautious
market mood in Q2 meant that their 6.6% return was 1.5% behind their benchmark
at the end of June.
Page 4 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
INTERIM MANAGEMENT REPORT continued
Investment managers: Assets under management and investment performance as
at 30 June 2023
Witan assets managed as at 30.06.23 Annualised performance since appointment((2))
Performance in 2023 (%) (%)
Appoint-ment date
Investment manager Mandate
£m (%)((1)) Manager Benchmark Manager Benchmark
CORE
Jennison Global 31.08.20 134.6 7.3 24.8 8.1 2.2 9.9
Lansdowne Global 14.12.12 320.3 17.5 6.6 8.1 13.0 12.0
Lindsell Train Global 31.12.19 303.5 16.5 6.0 8.1 5.0 9.1
Veritas Global 11.11.10 319.7 17.4 10.1 8.1 12.0 10.8
WCM Global 31.08.20 208.7 11.4 11.2 8.1 5.3 9.9
Artemis UK 06.05.08 84.6 4.6 7.7 2.3 8.1 5.5
SPECIALIST
GMO Climate Change 05.06.19 113.0 6.2 0.9 8.1 15.1 10.2
GQG Emerging Markets 16.02.17 92.4 5.0 9.0 (0.6) 7.9 3.3
Unquoted Growth Specialist Funds 02.07.21 29.8 1.6 (8.8) 8.1 (11.6) 3.3
Witan Direct Holdings Specialist Funds 19.03.10 229.4 12.5 (0.3) 7.2 9.2 8.9
Notes:
1 Amount of percentage of Witan's investments managed, excluding centrally
managed cash.
2 The percentages are annualised where the date of appointment was more than one
year ago.
The two principal laggards were the directly managed portfolio of investment
companies (-0.3%) and the GMO Climate Change fund (+0.9%). The former was held
back by poor sentiment towards some of the specialist assets held, notably
life sciences, mining and sustainable energy. Although operational reports
were mostly positive, adverse sentiment and wider discounts meant these assets
delivered negative returns for investors. Our listed private equity
investments, by contrast, delivered positive returns (despite negative
sentiment towards the sector) and we were able to establish a new holding
(HarbourVest Global Private Equity) at a near 50% discount to NAV. The GMO
Climate Change portfolio also marked time, lagging the general rise in markets
(after performing well in 2022). Its exposure to the alternative energy and
commodities sectors was a drawback, in an environment of declining energy
prices and concern that the Chinese economy might be stalling.
Environmental, Social and Governance policy ('ESG')
Our responsible investment policy is set out in detail in Witan's 2022 Annual
Report. In summary, we aim to make well-informed investment decisions that
ensure that the pursuit of prosperity for our shareholders is not achieved at
the expense of the environment or the wellbeing of society. We believe
companies which disregard this will fail to deliver sustainable returns to
shareholders because, far from there being a conflict between good returns and
responsible investment, managing assets in line with these principles is key
to achieving good returns.
Page 5 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
INTERIM MANAGEMENT REPORT continued
This year, we have made progress on our Net Zero pathway and have set initial
Net Zero Asset Managers' Initiative targets. The interim target (a 50%
reduction in portfolio carbon emissions intensity by 2030) applies to Witan's
Core portfolio, which makes up 75% of our assets. The baseline year for this
target was 2019, when estimated portfolio emissions were 218 tons of CO(2) per
$1m sales. We are already well on the way to achieving this goal, with current
emissions running at 122.5 tons of CO(2) per $1m sales vs a 2030 target of 109
tons of CO(2) per $1m sales. Ultimately, hitting Net Zero by 2050 is the goal,
which will require significant investment in carbon-saving technology and
infrastructure by global economies. This investment will provide opportunities
for those companies which are well-placed to benefit from efforts to mitigate
or adapt to climate change. For this reason, we have invested a significant
proportion of Witan's specialist portfolio in companies within the climate
change, sustainable energy and infrastructure sectors (amounting in total to
c. 10% of Witan's whole portfolio).
Investment income and expenses
Revenue earnings per share for the period were 2.90 pence per share, a rise of
16% from the level of 2.51 pence seen in the first half of 2022. The
comparison between early 2023 and early 2022 may flatter the position but we
nonetheless expect revenue earnings to continue to show recovery from the
pandemic setback.
General expenses were little changed at £2.9m. Investment management expenses
declined 18% to £3.5m, owing to lower asset levels than in the first half of
2022. First half total expenses of £6.4m were down 11% on the comparative
2022 figure of £7.2m. Finance costs rose £1.9m to £4.7m, due to a rise in
short-term borrowing costs. We continue to benefit from the majority of our
borrowings having a fixed rate averaging under 3%. The ongoing charges figure
('OCF') for the six months was 0.43% (2022: 0.42%). The OCF for the whole of
2022 was 0.77%.
Dividend
As already noted, the Company's revenue earnings per share in the first half
of 2023 (2.90 pence) have shown a further recovery compared with the same
period of 2022 (2.51 pence). The Company has increased its dividend every year
since 1974 (a 48-year record of increases), recognising the importance for
investors of a reliable and growing income. The Board's policy remains to grow
the dividend each year and the full year's dividend for 2023 is expected to
show another year of growth.
The Board has stated its willingness to continue to smooth dividend pay-outs
using retained revenue reserves, which amounted to £31.3m at the start of
2023 (after payment of the fourth interim dividend in respect of 2022).
A second interim dividend of 1.45 pence per ordinary share (2022: 1.40 pence)
will be paid on 15 September 2023, for which the ex-dividend date will be 24
August 2023. This dividend is one quarter of the total paid in respect of 2022
(5.80 pence per share) and takes the dividends paid in respect of the first
half of 2023 to 2.90 pence (2022: 2.80 pence).
Page 6 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
INTERIM MANAGEMENT REPORT continued
Gearing
The Company's gearing has been maintained in a relatively high range of 13-15%
this year. This has been helpful to performance, given the rise in equity
markets. The Company has long-term borrowings of £155m with a blended
interest rate of 3%, fixed for an average of 25 years. This provides a very
low hurdle for investment of these funds to boost shareholder returns in the
future. In addition, the Company has a £125m short-term variable rate
facility (expandable to £150m), of which £104m was drawn at the period end.
The interest costs of this have risen significantly given the increase in bank
base rates but balances are repayable at will when not required for
investment.
Discount and buybacks
One of the Company's key performance indicators is for its shares to trade at
a sustainable low discount or a premium to NAV, subject to market
circumstances. This has been difficult to achieve in 2020-23, given the
successive shocks of the pandemic, rising inflation, higher interest rates and
worries about recession, all of which have subdued demand for equity
investments. Although markets generally rose during the first half of 2023,
investors appeared wary of committing additional funds, given the prevailing
uncertainties. Our discount, having ended 2022 at 5.4%, was 9.9% at the end of
June 2023. To put this into context, the discount on the AIC's Global Growth
sector widened from 6.8% to 14.3% over the same period, so we were less
affected than many others.
The Company has been active (in absolute terms and relative to its peers) in
buying back shares, buying 28.6m shares (4.2% of the total) into treasury in
the period, at an average discount of 8.5%. This added £6.0m to the net asset
value which more than offset the Company's investment management costs for the
period.
The Company remains cognisant of the benefit to shareholders from buying back
shares, taking account of prevailing market conditions, the level of the
discount and the impact on the NAV per share. The Company will only issue
shares at a premium to NAV.
Outlook
So far in 2023, equity markets have taken encouragement from a more positive
growth environment, weathering the consequence that central banks have had to
tighten monetary policy more than expected, owing to the resilience of
inflation. Headline inflation (affected by 2022's rises in energy costs
dropping out) has peaked but improvement at the underlying level has been more
elusive.
There are several plausible reasons (including the prevalence of fixed-rate
mortgages, US fiscal easing and consumer savings built up during the pandemic)
why higher rates have taken longer to affect economic growth than in the past.
However, central banks who lost credibility in 2022 by failing to anticipate
the inflationary surge may now be oversensitive to the slow progress in
reining it back and risk overestimating its persistence. If they raise rates
sufficiently to accelerate the fall in inflation, there is a risk of overkill
and having to reverse course in 2024.
Page 7 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
INTERIM MANAGEMENT REPORT continued
The recent tightening in conditions (as bond yields have risen sharply towards
the highest levels for over 10 years) seems likely to have a further dampening
effect on growth and inflation in coming months. Whether policy patience or
overreaction wins the day is not currently clear. However, given the burden of
debt in many economies, high rates are likely to prove unsustainable - a
combination of economic growth and moderate inflation (possibly higher than
official 2% targets) is likely to prove necessary to reduce debts as a
proportion of the economy's output. So, despite legitimate concerns that
inflation has so far failed to respond as hoped, a sustained plateau of
relatively high rates may prove more effective than a spike followed by a
collapse.
Leaving aside the preoccupation with timing the peak in rates and the trough
for economies, in the medium-term enormous sums have been committed to
mitigating and adapting to the effects of climate change, improving the
security of supply chains and increasing spending on military defence. Since
these plans are viewed as social (and economic) priorities, there will be
political pressure to create the conditions to be able to fund them. This
could include pressing for tolerance of the pace at which inflation converges
with target, or justifying additional borrowing where it is linked to
long-term investment plans.
As we approach the peak in rates worldwide and look towards better long-term
growth prospects in 2024 and beyond, Witan's managers will continue to select
companies with sound business strategies, resilient finances, and good
management, on the basis that companies that grow the fundamental value of
their business will create sustainable returns for shareholders.
For and on behalf of the Board
Andrew Ross
Chairman
14 August 2023
Page 8 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
REGULATORY DISCLOSURES
Principal risks and uncertainties
The principal risks and uncertainties associated with the Company's business
can be divided into various areas:
· market and investment portfolio (including political and
macro-economic topics such as inflation, military conflicts, trade wars and
pandemics);
· operational and cyber;
· compliance and regulatory change;
· accounting, taxation and legal;
· liquidity; and
· environmental, social and governance factors.
Information on these risks and other risks is given in the Strategic Report
and in the Notes to the Financial Statements in the Company's Annual Report
for the year ended 31 December 2022.
In the view of the Board, these principal risks and uncertainties are
applicable to the remaining six months of the financial year, as they were to
the six months under review.
Directors' responsibility statement
The directors confirm that, to the best of their knowledge:
(a) the condensed set of financial statements has been prepared in accordance
with IAS 34;
(b) the Interim Management Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.7R (an indication of
important events that have occurred during the first six months of the
financial year and a description of the principal risks and uncertainties for
the remaining six months of the financial year); and
(c) the Interim Management Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of
related party transactions and changes therein).
For and on behalf of the Board
Andrew Ross
Chairman
14 August 2023
Page 9 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
REGULATORY DISCLOSURES continued
Going concern
The assets of the Company consist mainly of securities that are readily
realisable and, accordingly, the Company has adequate financial resources to
continue in operational existence for at least the next 12 months.
The Company has at all times traded, and remains, well clear of all financial
covenants on its borrowings (which are detailed in note 13 of its 2022 Annual
Report).
Therefore, the Board has determined that it is appropriate to continue to
adopt the going concern basis in preparing the financial statements. In
reviewing the position as at the date of this report, the Board has considered
the guidance on this matter issued by the Financial Reporting Council.
Related party transactions
During the first six months of the year, no transactions with related parties
have taken place which have materially affected the financial position or
performance of the Company. Details of related party transactions during 2022
are contained in the Company's Annual Report for the year ended 31 December
2022.
Page 10 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Consolidated Statement of Comprehensive Income
(Unaudited) (Unaudited) (Audited)
Half year ended 30 June 2023 Half year ended 30 June 2022 Year ended 31 December 2022
Revenue Capital Revenue Capital Revenue Capital
return return Total return return Total return return Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment income 24,377 - 24,377 23,684 - 23,684 43,605 - 43,605
Other income 649 - 649 158 - 158 601 - 601
Gains/(losses) on investments held at fair value through profit or loss - 111,398 111,398 - (341,325) - (303,607) (303,607)
(Note 2)
(341,325)
Foreign exchange (losses)/gains on cash and cash equivalents - (915) (915) - 966 966 - 87 87
---------- ---------- ----------- --------- ---------- ----------- --------- ----------- -----------
Total income 25,026 110,483 135,509 23,842 (340,359) (316,517) 44,206 (303,520) (259,314)
Expenses
Management and performance fees (875) (2,626) (3,501) (1,066) (3,197) (4,263) (1,918) (7,672)
(5,754)
Other expenses (2,874) (58) (2,932) (2,875) (51) (2,926) (5,384) (101) (5,485)
---------- ---------- ---------- --------- ---------- ----------- --------- ----------- -----------
Profit/(loss) before finance costs and taxation 21,277 107,799 129,076 19,901 (343,607) (323,706) 36,904 (309,375) (272,471)
Finance costs (1,200) (3,471) (4,671) (704) (2,109) (2,813) (1,637) (4,657) (6,294)
---------- ---------- ----------- --------- ---------- ----------- --------- ----------- -----------
Profit/(loss) before taxation 20,077 104,328 124,405 19,197 (345,716) (326,519) 35,267 (314,032) (278,765)
Taxation (747) (437) (1,184) (1,004) 229 (775) (1,451) (338) (1,789)
---------- ---------- ----------- --------- ---------- ----------- --------- ----------- -----------
Profit/(loss) 19,330 103,891 123,221 18,193 (345,487) (327,294) 33,816 (314,370) (280,554)
attributable to equity
shareholders of the parent company
====== ====== ====== ===== ====== ====== ===== ====== ======
Earnings per ordinary share 2.90p 15.61p 18.51p 2.51p (47.75)p (45.24)p 4.78p (44.43)p (39.65)p
(Note 3)
===== ====== ====== ===== ====== ====== ===== ====== ======
The total column of this statement represents the Group's Statement of
Comprehensive Income, prepared in accordance with UK-adopted International
Accounting Standards.
The revenue return and capital return columns are supplementary to this and
are prepared under guidance published by the Association of Investment
Companies.
The Group does not have any other comprehensive income and hence the total
profit/(loss), as disclosed above, is the same as the Group's total
comprehensive income. All items in the above statement derive from continuing
operations. All income is attributable to the equity holders of Witan
Investment Trust plc, the parent company. There are no non-controlling
interests.
Page 11 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Consolidated Statement of Changes in Equity
(Unaudited)
Half year ended 30 June 2023
Ordinary Share premium Capital Other
share account redemption reserve capital Revenue reserve
capital £'000 £'000 reserves £'000 Total
£'000 £'000 £'000
Total equity at 31 December 2022 50,018 99,251 46,498 1,303,740 42,302 1,541,809
Total comprehensive income: - - - 103,891 19,330 123,221
Profit for the period
Transactions with owners, recorded directly to equity: - - - - (20,296) (20,296)
Ordinary dividends paid
Buybacks of ordinary shares (held in - - - (65,005) - (65,005)
treasury) (Note 6)
----------- ----------- ------------- ------------- ----------- -------------
Total equity at 30 June 2023 50,018 99,251 46,498 1,342,626 41,336 1,579,729
======= ======= ======== ======== ======= ========
(Unaudited)
Half year ended 30 June 2022
Ordinary Share premium Capital Other
share account redemption reserve capital Revenue
capital £'000 £'000 reserves reserve Total
£'000 £'000 £'000 £'000
Total equity at 31 December 2021 50,018 99,251 46,498 1,747,379 48,895 1,992,041
Total comprehensive income: - - - (345,487) 18,193 (327,294)
(Loss)/profit for the period
Transactions with owners, recorded directly to equity: - - - - (21,150) (21,150)
Ordinary dividends paid
Buyback of ordinary shares (held in - - - (68,960) - (68,960)
treasury) (Note 6)
----------- ----------- ------------- ------------- ----------- -------------
Total equity at 30 June 2022 50,018 99,251 46,498 1,332,932 45,938 1,574,637
======= ======= ======== ======== ======= ========
(Audited)
Year ended 31 December 2022
Ordinary Share premium Capital Other
share account redemption reserve capital Revenue
capital £'000 £'000 reserves reserve Total
£'000 £'000 £'000 £'000
Total equity at 31 December 2021 50,018 99,251 46,498 1,747,379 48,895 1,992,041
Total comprehensive income: - - - (314,370) 33,816 (280,554)
(Loss)/profit for the year
Transactions with owners, recorded directly to equity: - - - - (40,409) (40,409)
Ordinary dividends paid
Buyback of ordinary shares (held in - - - (129,269) - (129,269)
treasury) (Note 6)
----------- ----------- ------------- ------------- ----------- -------------
Total equity at 31 December 2022 50,018 99,251 46,498 1,303,740 42,302 1,541,809
======= ======= ======== ======== ======= ========
Page 12 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Consolidated Balance Sheet
(Unaudited) (Unaudited) (Audited)
30 June 30 June 31 December 2022
2023 2022 £'000
£'000 £'000
Non current assets
Investments at fair value through profit or loss 1,820,781 1,771,175 1,760,824
Right-of-use asset: property 161 215 196
--------------- --------------- -------------
1,820,942 1,771,390 1,761,020
Current assets
Other receivables 6,122 14,607 4,661
Cash and cash equivalents 20,753 38,493 36,352
--------------- --------------- -------------
26,875 53,100 41,013
--------------- --------------- -------------
Total assets 1,847,817 1,824,490 1,802,033
Current liabilities
Other payables (6,340) (14,599) (6,242)
Bank loans (104,000) (78,000) (96,500)
--------------- --------------- -------------
(110,340) (92,599) (102,742)
--------------- --------------- -------------
Total assets less current liabilities 1,737,477 1,731,891 1,699,291
--------------- --------------- -------------
Non current liabilities
Other payables (157) (231) (218)
Deferred tax liability on Indian capital gains (984) (441) (667)
Borrowings:
Secured debt (Note 5) (154,052) (154,027) (154,042)
3.4 per cent. cumulative preference shares of £1 (2,055) (2,055) (2,055)
2.7 per cent. cumulative preference shares of £1 (500) (500) (500)
--------------- --------------- -------------
(157,748) (157,254) (157,482)
--------------- --------------- -------------
Net assets 1,579,729 1,574,637 1,541,809
========= ========= ========
Equity attributable to equity holders
Ordinary share capital (Note 6) 50,018 50,018 50,018
Share premium account 99,251 99,251 99,251
Capital redemption reserve 46,498 46,498 46,498
Retained earnings:
Other capital reserves 1,342,626 1,332,932 1,303,740
Revenue reserve 41,336 45,938 42,302
--------------- --------------- -------------
Total equity 1,579,729 1,574,637 1,541,809
========= ========= ========
Net asset value per ordinary share (Note 7) 242.56p 222.64p 226.80p
========= ========= ========
Page 13 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Consolidated Cash Flow Statement
(Unaudited) (Unaudited) (Audited)
30 June 30 June 31 December 2022
2023 2022
£'000 £'000 £'000
Cash flows from operating activities
Dividend income received 21,985 21,825 42,739
Interest received 532 17 299
Other income received 121 141 646
Operating expenses paid (7,053) (6,584) (14,095)
Taxation on overseas income (917) (1,137) (1,870)
Taxation recovered 2,806 2,379 2,640
------------- ------------- -------------
Net cash inflow from operating activities 17,474 16,641 30,359
Cash flows from investing activities
Purchases of investments (307,804) (423,431) (797,777)
Sales of investments 357,718 526,540 948,911
Capital gains tax on sales (120) (178) (518)
Settlements of future contracts 717 - 1,001
------------- ------------- -------------
Net cash inflow from investing activities 50,511 102,931 151,617
Cash flow from financing activities
Equity dividends paid (20,298) (21,116) (40,409)
Buybacks of ordinary shares (65,153) (72,612) (132,281)
Interest paid (4,651) (2,840) (6,044)
Repayment of lease liability (67) (67) (67)
Drawdown of bank loans 85,250 77,500 195,000
Repayment of bank loans (77,750) (97,500) (196,500)
------------- ------------- -------------
Net cash outflow from financing activities (82,669) (116,635) (180,301)
(Decrease)/increase in cash and cash equivalents (14,684) 2,937 1,675
Cash and cash equivalents at the start of the period 36,352 34,590 34,590
Effect of foreign exchange rate changes (915) 966 87
------------- ------------- -------------
Cash and cash equivalents at the end of the period 20,753 38,493 36,352
======== ======== ========
Page 14 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Notes to the Financial Statements
1 Basis of preparation
The condensed set of financial statements for the half year ended 30 June 2023
has been prepared on a going concern basis and in accordance with UK-adopted
International Accounting Standards ('IAS') and with the Statement of
Recommended Practice of Investment Trust Companies and Venture Capital Trusts
(the 'SORP') issued by the Association of Investment Companies (the 'AIC') in
July 2022, where the SORP is consistent with the requirements of IAS.
In assessing going concern, the directors have considered the risks noted in
the Annual Report and Notes to the Financial Statements for the year ended 31
December 2022. The directors believe that the Company has adequate resources
to continue in operational existence for the foreseeable future and has the
ability to meet its financial obligations as they fall due for at least a
period of 12 months from the date of this report. For this reason, the Company
continues to adopt the going concern basis of accounting in preparing the
financial statements.
The condensed set of financial statements for the half year ended 30 June 2023
has been prepared on the basis of the accounting policies set out in the
audited consolidated financial statements for the year ended 31 December 2022.
These condensed financial statements have not been audited or reviewed by the
Company's Auditor.
2 Transaction costs
The gains/(losses) on investments held at fair value through profit or loss
include purchase transaction costs of £471,000 (half year ended 30 June 2022:
£726,000; year ended 31 December 2022: £1,315,000) and sale transaction
costs of £168,000 (half year ended 30 June 2022: £293,000; year ended 31
December 2022: £524,000). The purchase and sale transaction costs comprise
mainly stamp duty and commissions.
3 Earnings per ordinary share
The earnings per ordinary share figure is based on the net profit for the half
year of £123,221,000 (half year ended 30 June 2022: loss of £327,294,000;
year ended 31 December 2022: loss of £280,544,000) and on 665,704,166
ordinary shares (half year ended 30 June 2022: 723,512,428; year ended 31
December 2022: 707,617,951) being the weighted average number of ordinary
shares in issue during the period.
The earnings per ordinary share figure detailed above can be further analysed
between revenue and capital, as below. The Company has no securities in issue
that could dilute the return per ordinary share. Therefore, the basic and
diluted earnings per ordinary share are the same.
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Net revenue profit 19,330 18,193 33,816
Net capital profit/(loss) 103,891 (345,487) (314,370)
-------------- -------------- --------------
Net total profit/(loss) 123,221 (327,294) (280,554)
======== ======== ========
Weighted average number of ordinary shares in issue during the period 665,704,166 723,512,428 707,617,951
Page 15 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Notes to the Financial Statements continued
3 Earnings per ordinary share (continued)
Pence Pence Pence
Revenue earnings per ordinary share 2.90 2.51 4.78
Capital earnings/(loss) per ordinary share 15.61 (47.75) (44.43)
-------------- -------------- --------------
Total earnings/(loss) per ordinary share 18.51 (45.24) (39.65)
======== ======== ========
4 Interim dividend
The directors have declared a second interim dividend of 1.45 pence per
ordinary share (2022: 1.40 pence), payable on 15 September 2023 to
shareholders registered on 25 August 2023. The shares will be quoted
ex-dividend on 24 August 2023. A first interim dividend of 1.45 pence (2022:
1.40 pence) was paid on 9 June 2023.
5 Secured debt
(Unaudited) (Unaudited) (Audited)
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
3.29 per cent. secured notes due 2035 20,901 20,894 20,898
3.47 per cent. secured notes due 2045 53,687 53,679 53,684
2.39 per cent. secured notes due 2051 49,695 49,689 49,692
2.74 per cent. secured notes due 2054 29,769 29,765 29,768
-------------- -------------- --------------
154,052 154,027 154,042
======== ======== ========
6 Ordinary share capital
At 30 June 2023 there were 651,268,977 ordinary shares in issue (30 June 2022:
707,268,687; 31 December 2022: 679,823,171) and 349,086,023 shares held in
treasury (30 June 2022: 293,086,313; 31 December 2022: 320,531,829). During
the half year ended 30 June 2023, the Company bought back 28,554,194 of its
own ordinary shares (half year ended 30 June 2022: 30,707,180; year ended 31
December 2022: 58,152,696). The costs of the share buybacks were £65,005,000
(half year ended 30 June 2022: £68,960,000; year ended 31 December 2022:
£129,269,000).
7 Net asset value per ordinary share
The net asset value per ordinary share is based on the net assets (valuing
prior charges at par) attributable to the equity shareholders of
£1,579,729,000 (30 June 2022: £1,574,637,000; 31 December 2022:
£1,541,809,000) and on 651,268,977 (30 June 2022: 707,268,687; 31 December
2022: 679,823,171) ordinary shares, being the number of ordinary shares in
issue at the period end.
8 Subsidiary undertaking
The Company has an investment in the issued ordinary share capital of its
wholly owned subsidiary undertaking, Witan Investment Services Limited, which
was incorporated on 28 October 2004, is registered in England and Wales,
operates in the United Kingdom and is regulated by the Financial Conduct
Authority.
Page 16 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Notes to the Financial Statements continued
9 Financial instruments
Balance Sheet amount versus fair value
At the period end, the carrying value of financial assets and financial
liabilities approximates their fair value, with the exception of the non
current liabilities as detailed below:
Balance Sheet amount
Financial liabilities measured using effective interest method: Fair value £'000
£'000
Non current liabilities
Preference shares 1,300 2,555
Secured notes 97,965 154,052
-------------- --------------
99,265 156,607
-------------- --------------
Fair value hierarchy
The table above analyses recurring fair value measurements for financial
liabilities. These fair value measurements are categorised into different
levels in the fair value hierarchy based on the inputs to valuation techniques
used. The different levels are defined as follows:
Level 1 financial liabilities: The Company's preference shares are actively
traded on a recognised stock exchange. Their fair value has therefore been
deemed to be Level 1.
Level 3 financial liabilities: The Company's secured notes are not traded on a
recognised stock exchange and so the fair value is calculated by using a
discount rate which reflects the yield on a UK gilt of similar maturity plus a
credit spread of 1.50%. Their fair value has therefore been deemed to be Level
3.
The table below analyses fair value measurements for financial assets.
Financial assets at fair value through profit or loss at 30 June 2023 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments including derivatives:
Equity securities designated at fair value through profit or loss 1,660,899 1,660,899
- -
Warrants - 1 - 1
Investments in other funds - 130,043 29,838 159,881
------------ ---------- --------- ------------
Total financial assets carried at fair value 1,660,899 130,044 29,838 1,820,781
======= ====== ===== =======
There have been no transfers between levels of the fair value hierarchy during
the period. Transfers between levels of fair value hierarchy are deemed to
have occurred at the date of the event or change in circumstances that caused
the transfer.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset as follows:
Level 1: valued using quoted prices in an active market for identical assets.
Level 2: valued by reference to valuation techniques using observable inputs
other than quoted prices within Level 1.
Level 3: valued by reference to valuation techniques using inputs that are not
based on observable market data.
Page 17 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Notes to the Financial Statements continued
Level 2 Financial assets
Level 2 Financial assets refer to investments in GMO Climate Change Fund and a
Vanguard FTSE 250 ETF (December 2022: GMO Climate Change Fund) and warrant
holdings in Wulliangye Yibin (December 2022: none).
Level 3
A reconciliation of fair value movements within Level 3 is set out below:
(Unaudited) Half year ended (Audited)
30 June Year ended
2023 31 December
Level 3 Investments at fair value through profit or loss £'000 2022
£'000
Opening balance 32,728 37,774
Acquisitions - -
Total losses included in the Statement of Comprehensive Income - on assets (2,890) (5,046)
held at period end
-------------- --------------
Closing balance 29,838 32,728
======== ======
The key inputs to unquoted investments (i.e. the holdings in Unquoted Growth
Funds with Lindenwood and Lansdowne) included within Level 3 are net asset
value statements provided by investee entities, which represent fair value
(2022: same).
10 Segment reporting
As detailed in the Company's Annual Report for the year ended 31 December
2022, geographical segments are considered to be the Group's primary reporting
segment and business segments the secondary reporting segment. The Group has
two business segments: (i) its activity as an investment trust, which is the
business of the parent company; and (ii) the provision of alternative
investment fund manager, executive and marketing management services, which is
the business of the subsidiary, Witan Investment Services Limited, and
recorded in the accounts of that company. The investment trust is managed by
reference to a geographical benchmark, as set out in the Annual Report ; the
geographical allocation of the portfolio, as at 30 June 2023, is set out on
page 2. The schedule on page 4 summarises the assets under management and
investment performance relating to each investment manager. This information
is updated and reviewed regularly for internal management purposes and is
essential for assessing the structure of the overall portfolio and the
performance of each investment manager.
Page 18 of 18
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2023
Notes to the Financial Statements continued
10 Segment reporting (continued)
(Unaudited) (Unaudited) (Audited)
Half year ended 30 June 2023 Half year ended 30 June 2022 Year ended 31 December 2022
Invest-ment Manage-ment Total Invest-ment Manage-ment Total Invest-ment Manage-ment services Total £'000
trust services £'000 trust services £'000 trust £'000
£'000 £'000 £'000 £'000 £'000
External revenue 25,026 - 25,026 23,842 - 23,842 44,206 - 44,206
Other revenue 110,483 - 110,483 (340,359) - (340,359) (303,520) - (303,520)
Segment expenses
-Management expenses
(3,501) - (3,501) (4,263) - (4,263) (7,672) - (7,672)
-Other expenses (2,641) (291) (2,932) (2,670) (256) (2,926) (4,971) (514) (5,485)
-Finance costs (4,671) - (4,671) (2,813) - (2,813) (6,294) - (6,294)
Segment profit /(loss) before taxation
124,696 (291) 124,405 (326,263) (256) (326,519) (278,251) (514) (278,765)
Segment assets 1,578,521 1,217 1,579,729 1,573,486 1,151 1,574,637 1,540,618 1,191 1,541,809
11 Comparative information
The financial information contained in this half year 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 not been audited or reviewed by the Auditor.
The figures and financial information for the year ended 31 December 2022 are
extracted from the latest published audited financial statements of the
Company and do not constitute the statutory accounts for that year. The
audited financial statements for the year ended 31 December 2022 have been
filed with the Registrar of Companies. The report of the independent auditors
on those accounts contained no qualification or statement under section 498(2)
or section 498(3) of the Companies Act 2006.
Financial report for the half year ended 30 June 2023
A copy of the financial report for the half year ended 30 June 2023 has been
submitted to the National Storage Mechanism and will shortly be available for
inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
and on the Company's website, www.witan.com (http://www.witan.com) .
Printed copies or electronic notification will be sent to shareholders in
August 2023 and will be available thereafter from the Secretary at the
Company's registered office, 14 Queen Anne's Gate, London SW1H 9AA.
- ENDS -
For further information please contact:
Andrew Bell Isabella Seekings
Chief Executive Officer Director of Marketing
Witan Investment Trust plc Witan Investment Trust plc
Telephone: 020 7227 9770 Telephone: 020 7227 9770
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