Preliminary Announcement of Results
For immediate release
10 May 2011
To: City Editors
Finsbury Growth & Income Trust PLC
Announces Interim Results for the six months to 31 March 2011
Financial Highlights: (Unaudited) (Audited) % change
31 March 2011 30 September
2010
Share price 318.0p 297.8p +6.8
Net asset value per share (inc 326.0p 301.4p +8.2
income)
Net asset value per share (ex 321.6p 297.0p +8.3
income)
(Discount)/premium of share price (1.1)% 0.3% n/a
to net asset value per share (ex
income) 7.1% 6.7% n/a
Gearing+
Shareholders' funds £174.3m £159.6m +9.2
Market capitalisation £170.1m £157.7m +7.9
Number of shares in issue 53,487,423 52,947,423 +1.0
Six months to 31 One year to
March 2011
30 September
2010
Share price (total return)# +8.3% +33.1%
Net asset value per share (total +10.3% +25.6%
return)#
FTSE All-Share Index (total +8.5% +12.5%
return)
(Company benchmark)
Dividends Year ending 30 Year ended
September 2011
30 September
2010
First interim dividend 4.4p per share 4.4p per
share
Second interim dividend Yet to be 4.4p per
declared share
# Source - Morningstar
+ Calculated by dividing the drawn down amount from the loan facility by
Shareholders' funds.
For and on behalf of
Frostrow Capital LLP, Secretary
10 May 2011
- ENDS -
The following are attached:
* Chairman's Statement
* Investment Manager's Review
* Income Statement
* Reconciliation of Movements in Shareholders' Funds
* Balance Sheet
* Cash Flow Statement
* Notes to the Interim Accounts
For further information please contact:
Alastair Smith/Mark Pope, Frostrow Capital LLP 020 3008 4911/4913
Jo Stonier, Quill Communications 020 7758 2236
Nick Train, Lindsell Train Limited 020 7227 8200
Chairman's Statement
Performance
I am pleased to report that for the six months under review the Company
continued its strong run of performance with a net asset value per share total
return of 10.3% and a share price total return of 8.3%. These results compare
favourably with the Company's benchmark, the FTSE All-Share Index, measured on
a total return basis, which provided a return of 8.5% during the same period.
The principal contributors to net asset value performance were our holdings in
Rathbone Brothers, Schroders, Diageo and Fidessa. Further information on the
Company's entire portfolio can be found in our Investment Manager's Review.
The price of the Company's shares began the period at a 0.3% premium to the
Company's ex-income net asset value per share and moved to a 1.1% discount at
the period end. At the time of writing it is a 1.1% premium.
I am delighted to report that the Company was a winner in the UK Growth &
Income Category at the 2011 Moneywise, Investment Trust Awards.
Share Capital and Discount Control
The Company has now issued a total of 1,865,000 new shares since 1 October 2010
at a minimum 0.5% premium to the estimated cum income net asset value per share
at the time of issue. We believe our ability to meet the market's demand for
liquidity in this way is very beneficial for all investors: not just those
wishing to buy, but those continuing to hold and those wishing to sell. Good
liquidity also helps to preserve a narrower dealing spread in the Company's
shares.
The Board attaches considerable importance to its discount control mechanism
which we use actively when necessary. The Company's strong performance and
ongoing demand for its shares have kept the discount of the Company's share
price to the net asset value per share tight; the average month-end discount of
share price to the ex-income net asset value per share during the half year was
0.9%.
Return and Dividend
The Income Statement shows a total return per share of 28.9p (six months ended
31 March 2010: 37.8p) consisting of a revenue return per share of 2.8p (six
months ended 31 March 2010: 4.1p) and a capital return per share of 26.1p (six
months ended 31 March 2010: 33.7p). The Board has declared an unchanged first
interim dividend of 4.4p per share which was paid on 6 May 2011 to shareholders
on the register on 1 April 2011. The associated ex dividend date was 30 March
2011. The Company's net revenue return for the period under review was less
than the same period last year, due principally to timing differences in the
receipt of dividends from a number of the Company's investments.
Borrowings
Your Company has a fixed term committed secured revolving credit facility of £
20m which is subject to a variable rate of interest. As at 31 March 2011 a
total of £12.35m was drawn down under this facility. We believe that the
availability of a meaningful gearing facility of this kind is very useful for a
closed end investment company such as ours.
Developments in the Investment Trust Sector
HM Treasury's review of the tax and company law rules affecting investment
trusts set out in its consultation document last summer has now resulted in
sensible and beneficial amendments which will be advantageous to the whole
industry. Our trade association, the Association of Investment Companies (AIC),
played a leading role in reaching this satisfactory conclusion of the review.
The Alternative Investment Fund Managers Directive was passed into law by the
European Parliament last summer, but there is much detail still to emerge
before this Directive takes effect in 2013. It is however clear that much of
the over-bureaucratic regulation first proposed has been abandoned in favour of
more pragmatic measures and the AIC again played a major role in achieving
this.
Outlook
It is expected that the modest growth anticipated in the UK economy during the
rest of this year and into 2012 will be export led and that consumer spending
growth is likely to lag GDP growth as credit conditions remain relatively tight
and earnings growth remains subdued. However, shareholders will know that most
of the companies in our portfolio are international in their operations so they
are not entirely at the mercy of the UK economy.
Your Board believes that our Investment Manager's strategy of investing for the
long term in durable cash generative franchises capable of sustained dividend
growth will continue to deliver superior investment returns to shareholders.
Anthony Townsend
Chairman
Investment Manager's Review
Of course we are pleased that your Company's net asset value per share
outperformed the FTSE All-Share Index again over the recent period.
Nonetheless, we feel duty-bound to admit to shareholders that we regard such
outperformance as random. This is because we make no attempt to micro-manage
the portfolio to achieve a given performance objective from half year to half
year (or even from year to year). Trying to fine tune an investment strategy
over such relatively short term periods is far too difficult for us. Instead,
we hope to achieve satisfactory longer term returns for you by maintaining a
collection of holdings in fine businesses (which we analyse to be undervalued)
and otherwise leave as well alone as we prudently may.
This does not mean that we do not closely follow the companies in which we've
invested your capital - we do. And, in particular, we pay attention to dividend
progression. What follows is a brief review of each constituent (listed
alphabetically), beginning with an update on its most recent dividend
announcement. We hope you will be impressed by the pace of dividend growth
across the portfolio after our disappointments on this score last year, and
share our conviction that it remains positioned to generate acceptable absolute
and relative returns into the future.
A.G.Barr - (Last dividend +10% year on year). Key brands - IRN-BRU and Rubicon
(the latter an inspired 2007 acquisition) - will drive further growth and the
growth of soft drink brands has the propensity to generate a lot of valuable
cash. Barr remains a core holding for your Company. Nonetheless, given the size
of the commitment - at one stage in 2010 it accounted for nearly 15% of your
assets - and the sub 2% dividend yield at the current price, we still believe
it made sense to reduce the holding somewhat last year.
Burberry Group - (Dividend +43%). Sales of luxury goods continue to be
amazingly robust. Meanwhile LVMH, owner of Louis Vuitton, of course, and run by
the very shrewd M. Arnault, has recently twice placed values on comparable
assets - Hermes and Bulgari (by bidding for them) - that make Burberry look
undervalued.
Celtic - (Does not pay a dividend). The economics of Scottish football remain
challenging and the club is barely profitable. However, we note that both
Arsenal and Roma SA have changed hands in recent weeks, acquired by rational,
profit-seeking US entrepreneurs and at valuations very much higher than that
commanded by Celtic on the public market. This is a unique "trophy" asset and
an underexploited global brand.
Daily Mail & General Trust - ( Dividend +11%). We remain excited by the growth
in the company's online properties, particularly MailOnline, which is turning
into a Facebook-type phenomenon. In the first quarter of this year Time Warner
purchased US gossip website Huffington Post. If we extrapolate from the very
fancy price paid by Time Warner there are £100ms of unrecognised value in Daily
Mail, in our opinion.
Diageo - (Dividend +6%). Peripheral Europe is very tough and it is true that
Greece, Ireland and Spain are important Diageo markets. What is reassuring is
Diageo's relatively debt-free balance sheet which allows it to take a place at
the table for all current auctions of spirits brands. Diageo is one of the UK's
few truly industry-leading global companies, positioning itself for much higher
earnings into the next upswing. Meanwhile its shares offer market beating yield
and dividend growth.
Dr Pepper Snapple - (Dividend +20%). Coke and Pepsi are struggling for growth
in US, but Pepper's non-cola brands are taking share there and, like Barr, it
is a lovely cash machine.
Euromoney Institutional Investor - (Dividend +52%). Daily Mail's sister
company. Shares are consolidating after a great run in 2010, but this is still
the best collection of business to business financial media assets we know in
the world. Bank Credit Analyst, Euromoney and Metal Bulletin, for instance, are
"must-reads" for their respective industries.
Fidessa - (Dividend +10%). Shares are hitting new 10 year highs, but still 25%
below the all time peak of the Tech Boom. Fidessa is a much bigger and better
company today than it was in 2000 and is an increasingly indispensible part of
the plumbing of world capital markets.
Fuller Smith & Turner - (Dividend +5.5%). Investors worry about the economic
squeeze on Middle England pub visits, but Fuller's London bias and clean
balance sheet are helping it. We expect the company to pick up more fine assets
from distressed competitors.
Greene King - (Dividend +6.7%). Maintained capital expenditure paid back debt
and increased dividend in 2010 - triply reassuring. But it sits in the
unpopular pub/brewing sector. Greene King offers a growing dividend, starting
from a yield 70% above the market average. For us this adequately compensates
for temporary tough times. Now a c2.0% holding and one to which we have been
adding in 2011.
Hargreaves Lansdown - (Dividend +22%). Asset growth remains exceptionally
strong. A beneficiary of both the urgent requirement felt by UK individuals to
provide for their retirements and the general suspicion and disdain felt for
High Street financial service providers.
Kraft Foods - (Dividend unchanged). We expect the undoubted benefits of its
Cadbury acquisition to hasten a return to dividend growth.
Lloyds Preference Shares - (No dividend). Assuming Lloyds is no worse a risk
than RBS, we think these preferred shares could trade at c£1.00, rather than c£
0.90 today. We are still 12 months away from dividend resumption; although, on
balance, we think the chances of that resumption have improved.
London Stock Exchange - (Dividend +4.7%). Volumes of share dealing and new
listings are picking up with the capital market cycle. Meanwhile the exchange
industry is in flux, as participants look to establish dominant global
liquidity pools. The London Stock Exchange remains a resonant brand and likely
lynch-pin in any such global combination.
Marston's - (Dividend unchanged). The recent trading update was encouraging,
highlighting the self-help available to an inherently cash-generative business,
even in a downturn. Its directors have been buying shares for their own
accounts, while similar pub assets are changing hands across the industry at
prices that make Marston's look cheap.
Pearson - (Dividend +7%). By applying digital technology to the education
industry Pearson has accelerated its growth and improved its profitability.
This is a major holding for your Company and one where we have high hopes for a
major rerating. The company has the look of one of the great growth stock
stories of second decade of the century.
Rathbone Brothers - (Dividend +8%). Rathbone's shares have perked up in 2011,
after a dull phase. The company remains a conservatively financed and strong
franchise in the savings industry, offering participation to wealth creation in
the UK economy and the fortunes of global financial markets. We are bullish on
both.
Reed Elsevier - (Dividend unchanged). As demonstrated by other portfolio
holdings (e.g. Fidessa and Pearson), we are already in the early stages of a
new and potentially very rewarding bull market for Media and Technology
companies. Reed, however, remains disappointingly stranded, both in terms of
its business and its share price. This despite its wonderful assets - number
one in Global Scientific Publishing, number two in Global Legal Publishing,
number one in Global Exhibitions. The new Chairman and CEO have talked a decent
story over the last 12 months, now is the time to deliver.
Sage Group - (Dividend +6%). Sage is valued as if it were a low growth
engineering company, despite high profit margins and wonderful cash generation.
If its new CEO can conjure up even a modest acceleration in its sales growth
then the shares could move back toward previous highs - almost 3.0x above
today's levels.
Schroders - (Dividend +24%). Blow-out recent results, with a welcome marked
acceleration in dividend growth. The company is in a phase that could see a
transformative leap in its assets under management, we hope.
Thomson Reuters - (Dividend +4%). Visionary family owners encourage its
executives to invest heavily into market-leading professional information
services. A high return company in a sector investors are warming to, after
years of disregard. Please take note Reed Elsevier!
Unilever - (Dividend+5.4%). Unilever has just sold its Sanex brand to Colgate
for 3.6x Sanex' annual sales. However the rest of Unilever is valued by stock
market investors at only 1.5x sales, despite 50% of these sales deriving from
Emerging Markets. Unilever is a big company trading at a big discount to its
true strategic worth. The 4% dividend yield and dividend growth pay us to wait
while this value is unlocked.
Young & Co's Brewery - (Dividend+2%). London is a formidable economy in its own
right - as a financial centre, seat of government and tourist destination.
Youngs' pubs and beer brands offer a secure participation in the fortunes of
the capital city.
Nick Train, Lindsell Train Limited
Investment Manager
Income Statement
For the six months ended 31 March 2011
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31 March 2011 31 March 2010 30 September 2010
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on - 14,364 14,364 - 17,609 17,609 - 28,733 28,733
investments
held at fair
value through
profit or loss
Exchange - - - - (3) (3) - (3) (3)
difference
Income (note 1,952 - 1,952 2,570 - 2,570 5,363 - 5,363
2)
Investment (184) (374) (558) (140) (285) (425) (305) (619) (924)
management and
management - - - 11 23 34 11 23 34
fees
(note 3)
Recovery of
VAT on
investment
management fee
previously
paid
Other expenses (208) (4) (212) (278) (87) (365) (492) (89) (581)
Return on 1,560 13,986 15,546 2,163 17,257 19,420 4,577 28,045 32,622
ordinary
activities
before finance
charges and
taxation
Finance (53) (107) (160) (69) (140) (209) (109) (221) (330)
charges
Return on 1,507 13,879 15,386 2,094 17,117 19,211 4,468 27,824 32,292
ordinary
activities
before
taxation
Taxation on (48) - (48) (35) - (35) (84) - (84)
ordinary
activities
Return on 1,459 13,879 15,338 2,059 17,117 19,176 4,384 27,824 32,208
ordinary
activities
after taxation
Return per 2.8p 26.1p 28.9p 4.1p 33.7p 37.8p 8.5p 54.0p 62.5p
share (note 4)
The "Total" column of this statement represents the Income Statement of the
Company. The "Revenue" and "Capital" columns are supplementary to this and are
prepared under guidance published by the Association of Investment 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
(Unaudited) Share Share Capital Special Capital Revenue Total
capital premium redemption reserve reserve
Six months ended 31 £'000 reserve reserve £'000
March 2011 account £'000 £'000
£'000 £'000 £'000
At 30 September 2010 13,237 37,213 3,453 12,424 88,939 4,324 159,590
Netreturnfrom - - - - 13,879 1,459 15,338
ordinary activities
Second interim - - - - - (2,330) (2,330)
dividend (4.4p per
share) for the year
ended 30 September 20
10
Issue of shares 135 1,612 - - - - 1,747
At 31 March 2011 13,372 38,825 3,453 12,424 102,818 3,453 174,345
(Unaudited)
Six months ended 31 M
arch 2010
At 30 September 2009 13,199 35,914 3,453 12,424 57,890 4,779 127,659
Net return from - - - - 17,117 2,059 19,176
ordinary activities
Second interim dividend - - - - - (2,615) (2,615)
(5.1p per share) for
the year ended 30
September 2009
Repurchase of shares - - - - (5,435) - (5,435)
into treasury
Sale of shares from - 420 - - 4,132 - 4,552
treasury
At 31 March 2010 13,199 36,334 3,453 12,424 73,704 4,223 143,337
(Audited)
Year ended 30
September 2010
At 30 September 2009 13,199 35,914 3,453 12,424 57,890 4,779 127,659
Net return from - - - - 27,824 4,384 32,208
ordinary activities
Second interim - - - - - (2,615) (2,615)
dividend (5.1p per
share) for the year
ended 30 September
2009
First interim dividend - - - - - (2,224) (2,224)
(4.4p per share) for
the year ended 30 38 381 - - - - 419
September 2010
Issue of shares
Repurchase of shares - - - - (5,934) - (5,934)
into treasury
Sale of shares from - 918 - - 9,159 - 10,077
treasury
At 30 September 2010 13,237 37,213 3,453 12,424 88,939 4,324 159,590
Balance Sheet
As at 31 March 2011
(Unaudited) (Unaudited) (Audited)
31 March2011 31 March 2010 30 September 2010
£'000 £'000 £'000
Fixedassets
Investments designated 185,653 147,826 168,514
at fair value through
profit or loss
Current assets
Debtors 527 2,529 613
Cash at bank 670 7,646 1,387
1,197 10,175 2,000
Current liabilities
Creditors (155) (214) (224)
Bank loan (12,350) (14,450) (10,700)
(12,505) (14,664) (10,924)
Net current liabilities (11,308) (4,489) (8,924)
Total net assets 174,345 143,337 159,590
Capital and reserves
Share capital 13,372 13,199 13,237
Share premium account 38,825 36,334 37,213
Capital redemption 3,453 3,453 3,453
reserve
Special reserve 12,424 12,424 12,424
Capital reserve 102,818 73,704 88,939
Revenue reserve 3,453 4,223 4,324
Equity shareholders' 174,345 143,337 159,590
funds
Net asset value per 326.0p 281.9p 301.4p
share
(note 5)
Cash Flow Statement
For the six months ended 31 March 2011
(Unaudited) (Unaudited) (Audited)
31 March 2011 31 March 2010 30 September 2010
£'000 £'000 £'000
Net cash inflow from 1,202 276 4,244
operating activities (note
7)
Servicing of finance
Loan interest and (212) (192) (326)
arrangement fees paid
Financial investment
Purchase of investments (5,470) (6,473) (19,152)
Sale of investments 2,696 15,055 18,170
Net cash (outflow)/inflow (2,774) 8,582 (982)
from financial investment
Equity dividends paid (2,330) (2,615) (4,839)
Net cash (outflow)/inflow (4,114) 6,051 (1,903)
before financing
Financing
Shares issued net of issue 1,747 - 419
expenses
- (5,435) (5,934)
Repurchase of shares into
treasury
Sale of shares from - 4,552 10,077
treasury
Drawdown/repayment of loans 1,650 950 (2,800)
Net cash inflow from 3,397 67 1,762
financing
(Decrease)/increase in cash (717) 6,118 (141)
Reconciliation of net cash
flow to movement in net
debt
(Decrease)/increase in cash (717) 6,118 (141)
resulting from cashflows
(Increase)/decrease in debt (1,650) (950) 2,800
Exchange movements - (3) (3)
Movement in net debt (2,367) 5,165 2,656
Net debt at start of period (9,313) (11,969) (11,969)
/year
Net debt at end of period/ (11,680) (6,804) (9,313)
year
Notes to the interim accounts
1. Basis of Preparation
The condensed financial statements have been prepared under the historical
cost convention, except for the measurement of investments at fair value of
investments and in accordance with UK Generally Accepted Accounting
Practice (GAAP) and the Statement of Recommended Practice (SORP) for
`Financial Statements of Investment Trust Companies and Venture Capital
Trusts' issued by the Association of Investment Companies dated January
2009.
The same accounting policies used for the year ended 30 September 2010 have
been applied.
2. Income
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 30
September
31 March 2011 31 March 2010 2010
£'000 £'000 £'000
Income from investments
Franked investment income 1,679 2,293 4,807
-dividends
Unfranked investment income
-limited liability partnership - 80 80
profit-share
-overseas dividends 273 184 463
Other income 1,952 2,557 5,350
Interest from HMRC (ie:VAT - 13 13
reclaim on management fees)
1,952 2,570 5,363
Total
3. Investment Management and Management Fees
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended
30 September
31 March 201 31 March
1 2010 2010
£'000 £'000 £'000
Investment management fee 370 277 606
Management fee 158 127 272
VAT thereon* 30 21 46
Total 558 425 924
* VAT on management fee.
4. Returnpershare
The total return per share is based on the total return attributable to
equity shareholders of £15,338,000 (six months ended 31 March 2010: return
of £19,176,000; year ended 30 September 2010: return of £32,208,000) and on
53,062,424 shares (six months ended 31 March 2010: 50,760,106; year ended
30 September 2010: 51,546,561), being the weighted average number of shares
in issue.
The revenue return per share is calculated by dividing the net revenue
return of £1,459,000 (six months ended 31 March 2010: return of £2,059,000;
year ended 30 September 2010: return of £4,384,000) by the weighted average
number of shares in issue as above.
The capital return per share is calculated by dividing the net capital
return attributable to shareholders of £13,879,000 (six months ended 31
March 2010: loss of £17,117,000; year ended 30 September 2010: return of £
27,824,000) by the weighted average number of shares in issue as above.
5. Net asset value per share
The net asset value per share is based on net assets attributable to shares
of £174,345,000 (31 March 2010: £143,337,000 and 30 September 2010: £
159,590,000) and on 53,487,423 shares in issue (31 March 2010: 50,855,811
and 30 September 2010: 52,947,423) (excluding treasury shares)
6. Transaction costs
Purchase transaction costs for the six months ended 31 March 2011 were £
39,000 (six months ended 31 March 2010: £47,000; year ended 30 September
2010: £141,000).
Sales transaction costs for the six months ended 31 March 2011 were £4,000
(six months ended 31 March 2010: £9,000; year ended 30 September 2010: £
22,000).
7. Reconciliation of net totalreturnbefore finance costs and taxation to net
cash inflow from operating activities
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended 31 ended 31
March 2011 March 2010 30
September
£'000 £'000
2010
£'000
Total return before finance charges and 15,546 19,420 32,622
taxation
Less capital return before finance charges (13,986) (17,257) (28,045)
and taxation
Net revenue before finance costs and 1,560 2,163 4,577
taxation
Decrease in accrued income 85 572 260
Decrease/(increase) in other debtors 1 (2,092) 135
(Decrease)/increase in creditors (17) 3 26
Taxation - irrecoverable overseas tax paid (49) (21) (69)
Investment management, management and (374) (262) (596)
performance fees charged to capital
Other expenses charged to capital (4) (87) (89)
Net cash inflow from operating activities 1,202 276 4,244
8. 2010Account
The figures and financial information for the year ended 30 September 2010
are extracted from the latest published accounts of the Company and do not
constitute statutory accounts for the year.
Those accounts have been delivered to the Registrar of Companies and
included the Report of the Auditors which was unqualified and did not
contain a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report, and did not contain a
statement under section 498 of the Companies Act 2006.
Frostrow Capital LLP
Company Secretary
10 May 2011
- ENDS -
Finsbury Growth & Income Trust PLC
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