Final Results
NEWS RELEASE
For immediate release - 18 December 2006
Finsbury Growth & Income Trust PLC
Finsbury Growth & Income Trust PLC today announces unaudited preliminary
results for the year ended 30 September 2006.
30 30 %
September September Change
2006 2005
Share Price 300.3p 260.3p +15.4
Share Price total return +19.6% +37.2% -
Net Asset Value per share 302.6p *257.8p +17.4
Net Asset Value per share total return +21.2% +31.5% -
FTSE All-Share Index (total return) +14.7% +24.9% -
(company benchmark)
(Discount)/premium (0.8%) *1.0% -
Shareholders' Funds £149.0m £115.9m +28.6
^Market Capitalisation £147.9m £117.0m +26.4
Dividends First Interim paid 4.2p 4.0p -
Special paid 2.3p - -
~Second Interim paid 4.2p 4.0p -
Total 10.7p 8.0p +33.8
#Total Expense Ratio 1.0% 1.0% -
*Restated - FRS 21, see note 1(c)
^ Based on the share price x number of Ordinary shares in issue
#TER is calculated based on assets as at 30 September.
~ The second 2006 interim was not paid or accrued at the year end.
For and on behalf of
Close Investments Limited
Company Secretary
The following are attached:
Chairman's Statement
Income Statement
Reconciliation of Movements in Shareholders' Funds
Balance Sheet
Cash Flow Statement
Notes
For further information please contact:
Tracey Lago, Close Investments Limited 020 7426 6219
Michael Reeve, Chairman 020 7602 2624
Nick Train, Lindsell Train Limited 020 7225 6411
Chairman's Statement
Your Company celebrated its eightieth birthday on 15 January 2006.
I am therefore particularly glad to be able to report another successful year
during which your Company has continued to grow in size and value. A total of
4,287,930 new shares were issued during the year at an average premium to net
asset value ('NAV') of 1.6% raising a further £11.7m. The market value of your
shares increased from 260.3p on 30 September 2005 to 300.3p at 30 September
2006, an increase of 15.4% and in the same period the market capitalisation of
your Company increased by 26.4% to £147.9m.
The NAV total return for the year was 21.2%, an outperformance of 6.5% against
our benchmark, the FTSE All-Share Index.
Return and Dividend
The Income Statement shows a total return per share of 55.24p per share (2005:
57.62p) made up of a revenue return of 12.37p (2005: 8.21p) (including 2.30p
accounted for by the special dividend declared by the London Stock Exchange)
and a capital return of 42.87p (2005: 49.41p).
Your Board has declared two interim dividends totalling 8.4p per share and,
reflecting a special dividend received from the London Stock Exchange, a
special dividend of 2.3p making a total dividend for the year of 10.7p per
share (2005: 8.0p per share). Your Board intends to continue a progressive
dividend policy with regard to regular dividends and will pay further special
dividends as and when it is felt appropriate.
Investments
Your Company continued to have a highly concentrated portfolio, which at the
end of the year included 22 equity investments. Investments are made with a
view to the long term and investment turnover is low. At the year-end 51.2% of
the portfolio was invested in FTSE 100 stocks. The average total return on the
22 equity investments in the portfolio during the year was 21.9%. Of particular
note was the contribution to NAV of 8.18p, 4.87p, 4.73p and 4.62p on our
investments in the London Stock Exchange, Wolverhampton & Dudley Brewery,
Bradford & Bingley and Diageo respectively. Indeed the only holding to produce
a negative contribution to NAV (0.58p) was the investment in Royal Dutch Shell.
All the fixed interest investments made a positive return including the Warburg
preference shares, which achieved a contribution to NAV of 1.16p per share in
the year.
The valuation of investments at 30 September 2006 was £166,347,000 (2005: £
132,911,000). The NAV per share was 302.6p (2005: 257.8p).
Borrowings
During the year your Company had a revolving credit facility of £20m for a
fixed term expiring in December 2008. This facility carried a variable rate of
interest, which could be fixed if so required. At 30 September 2006 £20m was
drawn down under this facility. In addition your Company also had an
uncommitted facility of £5m.
Since the year-end similar facilities have been entered into with ING Bank N.V.
on more favourable terms. At the time of writing, £22,350,000 was drawn down
under these facilities.
Sale of Shares
Your Board intend to continue to grow your Company by issuing new shares at a
premium to NAV as demand arises. As at 13 December 2006, since the year end, a
further 1,500,850 shares have been so issued for a total consideration of £
4.6m. At an Extraordinary General Meeting on 12 April 2006 shareholders
approved a resolution to increase the authorised share capital to £25m, renewed
the authority to allot new shares and to disapply pre-emption rights in respect
of the allotment of a further 10% of the issued share capital of the Company.
Resolutions to be proposed at the Annual General Meeting
It is your Board's policy to continue to manage the discount, by buying back
shares, at the absolute discretion of the Board, should shares in your Company
trade at a discount of 5% or greater to NAV in the market. Therefore an
appropriate resolution will be tabled at the Annual General Meeting to empower
your Company to acquire up to 14.99% of its issued share capital of which 10%
may be held in treasury and be available for re-issue as demand arises. Your
Company bought back no shares in the year ended 30 September 2006.
Resolutions will also be proposed in connection with past dividends which have
been paid.
The Board
We were delighted that David Hunt accepted an invitation to join the Board in
July. David, who is a chartered accountant, is a director of Smith & Williamson
Ltd. He has agreed to be Chairman of the Audit Committee.
Outlook
In the last two years the market capitalisation of your Company has doubled and
the market price of your shares has increased by 50.0%. In my statement
accompanying the Report and Accounts last year I said that it would not be easy
for the progress achieved in that year (increase in market capitalisation and
share price 60.0% and 30.0% respectively) to be repeated. In fact the progress
in the year under review has been half that rate but nevertheless it has been
considerable.
Your Board's objective is to achieve long-term growth and an increasing revenue
return. It believes that the investment strategy adopted by our investment
adviser will continue to achieve these objectives in the long term in spite of
the fact that from time to time the stock market, from the vagaries of which
your Company cannot be immune, is likely to go into reverse.
Annual General Meeting
The Annual General Meeting of the Company will be held at 10 Crown Place,
London EC2A 4FT on Wednesday, 31 January 2007 at 12 noon. Last year I was
delighted that so many shareholders attended and I very much hope that this
will happen again.
Nick Train of Lindsell Train Limited, our Investment Adviser, will give a
presentation following the formal business of the meeting and thereafter light
refreshments will be served during which there will be an opportunity for
shareholders to exchange views with members of the board and our advisers.
Michael Reeve
Chairman
Income Statement
incorporating the revenue account for the year ended 30 September 2006
Restated*
Notes Revenue Capital 2006 Revenue Capital 2005
Return Return Total Return Return Total
£'000 £'000 £'000 £'000 £'000 £'000
---------- -------------- -------------- ----------- ----------- ----------
Gains on - 21,943 21,943 - 21,224 21,224
investments
held at
fair value
through
profit or
loss
Income from 2 7,155 - 7,155 4,369 - 4,369
investments
Management 3 (341) (691) (1,032) (246) (499) (745)
fee
Other (526) - (526) (458) - (458)
expenses
---------- -------------- -------------- ----------- ----------- -------------
Net return 6,288 21,252 27,540 3,665 20,725 24,390
on ordinary
activities
before
finance
charges and
taxation
Finance (373) (759) (1,132) (334) (677) (1,011)
charges
---------- -------------- -------------- ----------- ----------- -------------
Return on 5,915 20,493 26,408 3,331 20,048 23,379
ordinary
activities
before
taxation
Taxation on (2) - (2) - - -
return on
ordinary
activities
---------- -------------- -------------- ----------- ----------- -------------
Return on 5,913 20,493 26,406 3,331 20,048 23,379
ordinary
activities
after
taxation
---------- -------------- -------------- ----------- ----------- -------------
Return per 4 12.37p 42.87p 55.24p 8.21p 49.41p 57.62p
Ordinary
share ========== ============== ============== =========== =========== =============
* Restated - see note 1 (c)
The total column of this statement represents the profit and loss account of
the Company.
The revenue and capital columns are supplementary to this and are prepared
under guidance published by the Association of Investment Companies (AIC),
formerly the Association of Investment Trust Companies.
All items in the above statement derive from continuing operations.
The Company had no recognised gains or losses other than those declared in the
Income Statement.
Reconciliation of Movements in Shareholders' Funds
Year ended 30 September 2006
Called-up Share Capital
share premium Special redemption Capital Revenue
capital account reserve reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
--------- --------- --------- ----------- --------- --------- ----------
At 30 11,237 14,843 12,424 3,453 70,978 2,933 115,868
September
2005
(restated)
Net return - - - - 20,493 5,913 26,406
from
ordinary
activities
Second - - - - - (1,796) (1,796)
interim
dividend
(4.0p per
share) for
the year
ended 30
September
2005
First - - - - - (2,020) (2,020)
interim
dividend
(4.2p per
share) for
the year
ended 30
September
2006
Special - - - - - (1,123) (1,123)
dividend
(2.3p per
share) for
the year
ended 30
September
2006
Ordinary 1,072 10,571 - - - - 11,643
shares
issued net
of issue
expenses
------------ ----------- ----------- --------------- ----------- ----------- ------------
Year ended 12,309 25,414 12,424 3,453 91,471 3,907 148,978
30
September
2006
------------ ----------- ----------- --------------- ----------- ----------- ------------
Year ended
30
September
2005
restated
At 30 9,614 121 12,424 3,453 47,451 1,167 74,230
September
2004
Add final - - - - - 1,496 1,496
dividend
of 4.1p
per share
accrued
but not
paid in
respect of
the year
30
September
2004
------------ ----------- ----------- --------------- ----------- ----------- ------------
At 30 9,614 121 12,424 3,453 47,451 2,663 75,726
September
2004
restated
Net return - - - - 20,048 3,331 23,379
from
ordinary
activities
Dividends - - - - - (1,496) (1,496)
paid in
respect of
year ended
30
September
2004
Less first - - - - - (1,565) (1,565)
interim
dividend
(4.0p per
share) for
the year
ended 30
September
2005
Ordinary 1,623 14,000 - - - - 15,623
shares
issued net
of issue
expenses
Treasury - 722 - - 3,479 - 4,201
shares
sold
------------ ----------- ----------- --------------- ----------- ----------- ------------
At 30 11,237 14,843 12,424 3,453 70,978 2,933 115,868
September
2005
------------ ----------- ----------- --------------- ----------- ----------- ------------
Balance Sheet
as at 30 September 2006
Restated*
2006 2005
£'000 £'000
----------------- -----------------
Fixed assets
Investment in subsidiary undertaking - 645
Investments held at fair value 166,347 132,911
through profit or loss
---------------- -----------------
Current assets
Debtors 1,346 1,313
Cash at bank 2,099 218
---------------- -----------------
3,445 1,531
---------------- -----------------
Creditors - amounts falling due (20,814) (19,219)
within one year
---------------- -----------------
Net current liabilities (17,369) (17,688)
---------------- -----------------
Total net assets 148,978 115,868
---------------- -----------------
Capital and reserves
Called-up share capital 12,309 11,237
Share premium account 25,414 14,843
Special reserve 12,424 12,424
Capital redemption reserve 3,453 3,453
Capital reserve
- realised 45,644 45,931
- unrealised 45,827 25,047
Revenue reserve 3,907 2,933
---------------- -----------------
Equity shareholders' funds 148,978 115,868
---------------- -----------------
Net asset value per Ordinary share 302.6p 257.8p
---------------- -----------------
* Restated - see note 1 (c)
Cash Flow Statement
for the year ended 30 September 2006
2006 2005
£'000 £'000
-------------- -------------
Net cash inflow from operating activities 4,735 2,573
-------------- -------------
Net cash outflow from servicing of finance (1,101) (1,020)
-------------- -------------
Financial investment
Purchase of investments (17,227) (40,111)
Sale of investments 6,741 19,006
-------------- -------------
Net cash outflow from financial investment (10,486) (21,105)
-------------- -------------
Equity dividends paid (4,939) (3,061)
-------------- -------------
Net cash outflow before financing (11,791) (22,613)
-------------- -------------
Financing
Issue of new shares net of issue expenses 11,772 15,494
Treasury shares sold - 4,236
Drawdown of loans 1,900 2,850
-------------- -------------
Net cash inflow from financing 13,672 22,580
-------------- -------------
Increase/(decrease) in cash 1,881 (33)
-------------- -------------
Reconciliation of net cash flow to movement in
net debt
Increase/(decrease) in cash resulting from 1,881 (33)
cashflows
Increase in debt (1,900) (2,850)
-------------- -------------
Movement in net debt (19) (2,883)
Net debt at 1 October 2005 (17,882) (14,999)
-------------- -------------
Net debt at 30 September 2006 (17,901) (17,882)
-------------- -------------
Notes
1. Accounting Policies
a) The accounts have been prepared under the historical cost convention, modified
to include fixed assets at valuation and in accordance with the Companies Act
1985, accounting standards applicable in the United Kingdom and with the
Statement of Recommended Practice "Financial Statements of Investment Trust
Companies" revised December 2005 (the revised SORP).
b) Changes in presentation
The Company has adopted the provisions of the Revised SORP and revised UK Accounting
Standards, which have resulted in some changes to the presentation of the Company's
accounts.
The Statement of Total Return is now called the Income Statement, and the Total
column is now the profit and loss account of the Company. Dividends payable to
equity shareholders are no longer reflected in the Income Statement, they are
shown in the Reconciliation of Movements in Shareholders' Funds which is now
presented as a primary statement.
c) Changes in accounting policies
The Company has changed its accounting policy for the valuation of listed
investments and the recognition of dividends payable to equity shareholders in
accordance with the provisions of FRS 26 - Financial instruments: Recognition
and Measurement ("FRS 26") and FRS 21 - Events after the balance sheet date
("FRS 21") respectively. These changes in policy and the associated impact on
the results of the Company are referred to below.
d) Investment Policy
As the Company's business is investing in financial assets with a view to
profiting from their total return in the form of increases in fair value,
financial assets are designated as fair value through profit and loss on
initial recognition in accordance with FRS 26. The Company manages and
evaluates the performance of these investments on a fair value basis in
accordance with its investment strategy, and information about the investments
is provided on this basis to the Board of Directors.
Investments held at fair value through profit or loss are initially recognised
at fair value. After initial recognition, investments that are classified as at
fair value through profit or loss, are measured at fair value, which is either
the bid price or the last traded price depending on the convention of the
exchange on which the investment is listed. Gains or losses on investments
classified as at fair value through profit or loss are recognised in the
capital column of the Income Statement.
All purchases and sales of investments are accounted for on the trade date
basis.
Prior to 1 October 2005, listed investments were valued at middle market
prices. Following the introduction of FRS 26 - Financial instruments:
Measurement, listed investments are now valued at fair value. In accordance
with the exemption conferred by FRS 26, comparatives have not been restated for
this change in accounting policy and therefore listed investments shown at 30
September 2005 are stated at middle market prices.
This change in accounting policy has had no material effect on the current
year's results.
The Company's policy is to capitalise transaction costs on acquisition and the
profit or loss on disposal is calculated net of transaction costs on disposal.
FRS 26 requires that transaction costs for financial assets at fair value
through profit or loss be expensed. The total of such expenses, showing the
total amounts included in disposals and additions are disclosed below, as
recommended by the revised SORP.
Transaction costs on the acquisition and sale of investments totalled £87,000
and £nil respectively (2005: £233,456 and £674).
e) Dividends payable to equity shareholders
Under FRS 21 dividends should not be accrued in the accounts unless they have
been approved before the Balance Sheet date. Dividends payable to equity
shareholders are recognised in the Reconciliation of Movements in Shareholders'
Funds when they are paid, or have been approved by shareholders in the case of
a final dividend and become a liability of the Company.
The effect of this change is to increase net assets at 30 September 2005 by £
1,796,000 (or 4.0p per share) and at 30 September 2004 by £1,496,000 (or 4.1p
per share).
f) Investment Income
Dividends on quoted equity shares are taken to income on the ex-dividend date.
Fixed returns on non-equity shares are recognised on a time apportionment basis
so as to reflect the effective yield on shares.
Special dividends: In deciding whether a dividend should be regarded as a
capital or revenue receipt, the Company reviews all relevant information as to
the reasons for and sources of the dividend on a case by case basis before a
conclusion can be reached.
g) Expenditure and Finance charges
All the expense and finance costs are accounted for on an accruals basis.
Expenses are charged through the revenue column of the Income Statement except
as follows:
1. expenses which are incidental to the acquisition or disposal of an investment
are treated as part of the cost or proceeds of that investment;
2. expenses are taken to capital reserve realised via the capital column of
the Income Statement, where a connection with the maintenance or enhancement of
the value of the investments can be demonstrated. In line with the Boards'
expected long term split of returns, in the form of capital gains and income,
from the Company's investment portfolio, 67% of the investment management fee
and interest charges are taken to the capital reserve realised.
h) Taxation
The payment of taxation is deferred or accelerated because of timing
differences between the treatment of certain items for accounting and taxation
purposes. Full provision for deferred taxation is made under the liability
method, without discounting, on all timing differences that have arisen, but
not reversed by the balance sheet date, unless such provision is not permitted
by Financial Reporting Standard 19.
Any tax relief obtained in respect of management fees, finance costs and other
capital expenses charged or allocated to the capital column of the Income
Statement is reflected in the Capital reserve - realised and a corresponding
amount is charged against the revenue column of the Income Statement. The tax
relief is the amount by which corporation tax payable is reduced as a result of
these capital expenses.
i) Reserves
Capital reserves - Realised
The following are taken to this reserve:
1. Gains and losses on the realisation of investments;
2. Realised exchange differences of a capital nature;
3. Expenses, together with the related taxation effect, allocated to this reserve
in accordance with the above policies; and
Capital reserves - unrealised
The following are taken to this reserve:
1. Increase and decrease in the valuation of investments held at the year end; and
2. Unrealised exchange differences of a capital nature.
j) Subsidiary
During the year the Company applied to have its subsidiary, Tynepower Limited,
which was valued at 30 September 2005 at £645,000, struck off. During the year
£645,000, being the reserves of the subsidiary was paid up by way of a dividend
to the parent company.
2. Income
2006 2005
£'000 £'000
-------------- ---------------
Income from investments
Franked investment income
- dividends 5,161 4,187
- special dividend 1,142 -
Unfranked investment income
- dividends 156 109
- money market dividend 8 -
-------------- ---------------
6,467 4,296
Other income
Dividend received from subsidiary 645 -
Bank interest 43 73
-------------- ---------------
Total income 7,155 4,369
-------------- ---------------
3. Investment Management Fee
Revenue Capital Revenue Capital
return return Total return return Total
2006 2006 2006 2005 2005 2005
£'000 £'000 £'000 £'000 £'000 £'000
----------- ---------- -------- ----------- ----------- ---------
Investment 290 588 878 209 425 634
management
fee
VAT 51 103 154 37 74 111
thereon
----------- ---------- -------- ----------- ----------- ---------
341 691 1,032 246 499 745
----------- ---------- -------- ----------- ----------- ---------
4. Return per Ordinary share
The total return per Ordinary share is based on the total return attributable
to equity shareholders of £26,406,000 (2005: £23,379,000), and on
47,801,791 (2005: 40,573,992) Ordinary shares, being the weighted average
number of Ordinary shares in issue during the year.
Revenue return per Ordinary share is based on the net revenue on
ordinary activities after taxation of £5,913,000 (2005: £3,331,000), and on
47,801,791 (2005: 40,573,992) Ordinary shares, being the weighted average
number of Ordinary shares in issue during the year.
Capital return per Ordinary share is based on net capital gains for the
year of £20,493,000 (2005 restated: £20,048,000), and on 47,801,791
(2005: 40,573,992) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the year.
5. Financial information
This preliminary statement is not the Company's statutory accounts. The above
results for the year ended 30 September 2006 have been agreed with the Auditors
and are an abridged version of the Company's full draft accounts, which have
not yet been approved, audited or filed with the Registrar of Companies.
The statutory accounts for the year ended 30 September 2005 have been delivered
to the Registrar of Companies and those for 30 September 2006 will be
despatched to shareholders shortly. The statutory accounts for the year ended
30 September 2005 received an audit report which was unqualified, did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying the report, and did not contain statements under
Section 237 (2) and (3) of the Companies Act 1985.
Close Investments Limited, Company Secretary
18 December 2006
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