Half-year Report

RNS Number : 2509S
Brunner Investment Trust PLC
13 July 2022
 

 

 

THE BRUNNER INVESTMENT TRUST PLC

HALF-YEARLY FINANCIAL REPORT

For the six months ended 31 May 2022

 

 

 

 

Financial Headlines

For the six months ended 31 May 2022

 

· Net asset value (debt at fair value) per share fell by 1.4% (2021: +11.4%)

· Net asset value (debt at par) per share fell by 2.9% (2021: +10.6%)

· Earnings per ordinary share increased by 18.4% to 13.5p (2021: 11.4p)

· Dividends for the half year increased by 9.6% to 10.30p1 (2021: 9.40p)

· Net asset value total return (debt at fair value) per share fell by 0.5% (2021: +12.4%)

· Net asset value total return (debt at par) per share fell by 2.0% (2021: +11.5%)

· Benchmark index total return fell by 1.3% (2021: +11.3%)

· Share price total return fell by 3.3% (2021: +18.2%)

· Discount of net asset value (debt at fair value) to share price 12.5% and an average of 9.2% over the period (2021: 9.3%, average over the period 13.4%) 

 

 

 

 

Revenue

Six months ended

31 May 2022

Six months ended

31 May 2021

 

%

change

 

Available for ordinary dividend

  £5,754,000

 4,874,000


+18.1

Earnings per ordinary share

13.5p

11.4p


+18.4

Dividends per ordinary share

10.3p1

9.4p


+9.6

Retail price index

  337.1

 301.9 


+11.7











 





Assets

 

At 31 May

2022

At 30 November

2021


%

change

Net asset value per ordinary share

(debt at fair value)

1149.1p

1165.4p


-1.4

Net asset value per ordinary share (debt at par)

1142.8p

1176.9p


-2.9

Ordinary share price

1005.0p

1050.0p


-4.3

Total net assets with debt at fair value

 490,569,000

 497,526,000


-1.4

Total net assets with debt at par

 487,887,000

 502,452,000


-2.9






Performance relative to the benchmark for the six months to 31 May 2022

 

Net Asset Value with debt at fair value relative to Benchmark2



 

Capital Return

 

Total Return 3






Change in net asset value



-1.4%

-0.5%

Change in benchmark



-2.7%

-1.3%




 

 

Percentage point performance against benchmark2



1.3%

0.8%




 

 










 

1 First interim 5.15p, second interim 5.15p

2 The benchmark applied is 70% FTSE World Ex UK Index and 30% FTSE All-Share Index.

3 Total returns are calculated with net dividends reinvested

 

 

 

 

Interim Management Report

 

Half-yearly report

· Invest in some of the world's best companies with superior business models delivering strong and consistent profitability with long-term growth potential

· Manage a diversified portfolio with exposure to most major geographic regions and industries

· Aim for growth in both capital and income, with a 50 year track record of continual dividend growth for shareholders

· Employ the expertise and scale of global asset manager AllianzGI to provide robust investment processes and oversight

· Provide all of this in a cost effective, actively managed fund.

 

 

 

 

Carolan Dobson

Chairman

 

 

 



 

 

Investment Manager's Review

 

Market Review

 

The past six months have seen a complete turnaround in global equity markets. All-time highs have been replaced by official bear markets, as interest rates have started to increase alongside fears of an imminent economic slowdown. At the heart of this seismic shift is inflation, which - having been restrained for almost three decades - has now reached forty-year highs in both the UK and United States1.

 

Today's inflation is a global phenomenon. COVID-19 provoked national lockdowns around the world, with many economies grinding to a halt. Restarting international supply chains, whilst often still managing high infection rates, has proved complex, with demand increasingly outpacing supply. In sectors such as energy and mining, years of underinvestment meant structural issues were building long before COVID. Meanwhile while many workers are seeking higher pay and/or better conditions having enjoyed the relative benefits of furlough schemes and flexible working.

 

This has been further exacerbated by geopolitical events. Russia's invasion of Ukraine in February provoked international outrage but also a sharp jolt to financial markets. Russia supplies large quantities of oil, gas, as well as industrial metals such as copper and nickel. The combination of sanctions and war has seriously constrained much of this supply, driving up commodity prices. Further afield, China's pursuit of a zero-COVID policy has led to repeated lockdowns, often in economically critical areas such as Shanghai, which hosts one of the largest trade ports in the world.

 

Because of these factors, inflation has proved higher and more persistent than expected. With the US Consumer Price inflation (CPI) running at over 8%, the Federal Reserve (Fed) has walked back its previous "transitory" assessment by raising interest rates three times to 1.75%. As of June, the Bank of England (BOE) is on its fifth rate hike in seven months to 1.25%, and in both regions a further four hikes are priced in before the year is out. The European Central Bank (ECB) is also now on a similar trajectory.

 

These changing dynamics have had a profound impact on global equity markets. At one end, the prospect of higher interest rates has forced investors to factor in a higher cost of debt, at the same time as discounting future earnings at a greater rate. This has sharply compressed valuations in high growth stocks, particularly those with some of the most speculative future earnings potential. This is why the Technology sector, with many of the highest growth names, has been one of the weakest performing sectors, falling over 15% in the six months ending 31 May.

 

Adding still more downward pressure to this sector has been the strong recovery from COVID, which has removed one of the key drivers behind last year's exceptional performance for many "spec tech" stocks. Q1 earnings season saw several high-profile pandemic winners delivering results and/or guidance that was weaker than expected. For example, with consumers no longer forced to stay at home with nothing but their digital devices for company, Netflix subscribers fell for their first time in a decade, dropping by 200,000.

 

Markets have taken an increasingly risk off approach since Russia's invasion of Ukraine, and any uncertainty regarding future outlooks has been met with short shrift. Consumer Discretionary names have in fact been the worst performing sector over the period, with Industrial stocks also struggling under the weight of rising input costs, supply chain issues and a potential economic slowdown. By comparison, more defensive sectors such as Consumer Staples and Health Care, have been more resilient.

 

The big winners over the past six months have been the Energy and to a lesser extent Materials sectors.  Their exposure to rising commodity prices, surging demand and low starting valuations have driven a sharp re-rating, with Energy stocks gaining almost 50%. This shift in markets has been one of the key reasons for the strong performance of so-called Value stocks, which are characterised by low valuations relative to their fundamentals, as well as often having greater cyclical exposure and near-term earnings visibility. The attractiveness of value stocks after a decade-long underperformance trend is a sure sign of just how much has changed in the past six months.

 

Portfolio Review

 

Over the six-month period to the end of May 2022 the trust's NAV total return was -0.5%, which compares to the benchmark's -1.3% return.  In the context of broader global equity markets, our balanced approach to portfolio construction has served us relatively well during this period. By comparison, the MSCI All Country World Index (a proxy for global equities) has registered a decline of -4.6% over the period.

 

The portfolio's attribution reflects the dynamics outlined in our previous market review section. Many of the strongest contributors came from the health care sector, where we find many companies that have the quality and growth characteristics we seek, whilst also being attractively valued. The sector has performed well during this period due to its defensive nature, whilst also not being overly exposed to cost inflation.

 

The largest positive contribution came from AbbVie. Shares in the pharmaceutical giant have benefited not only from its defensive profile but also better than expected results. Humira - the company's bestselling autoimmune drug - continues to grow even as it approaches patent expiry. At the same time, AbbVie's next generation of anti-inflammatory products (Skyrizi and Rinvoq) are also posting encouraging numbers. Given the strong performance and significant valuation re-rating we have reduced the holding in order to fund higher conviction ideas elsewhere in the portfolio.

 

UnitedHealth Group was another notable contributor. In April, the shares touched a record high after the medical insurance giant posted better than expected results and lifted full year revenue guidance, driven by double-digit revenue growth at both its UnitedHealthcare insurance and Optum health-services. UnitedHealth's growth is increasingly fuelled by providing medical care directly to patients, and these defensive characteristics have supported the stock in recent months.

 

In contrast to previous periods, some of the largest positive contributions to performance came from large stocks that we do not own, such as Amazon, Nvidia, Tesla and Meta, all of which experienced sizeable valuation de-ratings. This is a helpful reminder of the importance of active stock picking and not being overly influenced by benchmarks weightings, or indeed share price momentum.

 

As noted in the market review section, Energy has been by far and away the strongest performing sector during this period, as a confluence of supply side constraints and recovering demand led to much increased oil and gas prices. The two companies that we hold in this sector - TotalEnergies and Shell - have both benefited from these developments and were strong contributors to performance during the period.

 

Weaker contributions came from the Financials and Basic Materials sectors. Within Financials, our holdings have a bias towards asset-light business models in sub sectors such as payments, exchanges and wealth management. Such companies have delivered superior shareholder returns over the long term but have lagged more cyclical areas such as banks in recent months.

 

In particular, the private equity group Partners Group was a notable drag on performance. The shares de-rated over fears of rising interest rates potentially causing an end to the private up cycle. Partners generates revenues through fees and has been a substantial beneficiary of rising demand for alternative and private market assets in recent years. With rates rising, investors fear the company will both see a drop off in demand at the same time as its cost of financing rises. Whilst there is some logic to these concerns, we believe that the trend towards alternative assets is structural in nature. There is still much to play for as allocations generally remain low. In the near term, sentiment is clearly against the stock, but much negativity is already discounted into the share price.

 

Another major detractor was Adidas. Shares in the maker of sports apparel continued to face pressure as a result of its exposure to China - the company's most profitable region. The government's zero-COVID approach is limiting sales, while supply chain issues persist. We continue to believe that these issues are temporary in nature, and that Adidas is very well positioned for the long term. It is the only major global competitor to Nike in an end market that is still growing structurally in most regions. Furthermore, improvements in Adidas's business model such as a greater use of digital technology and more direct to consumer sales should drive improved profitability in the years to come.

 

Significant Transactions

 

In the past six months we have added five new holdings and sold three. These changes reflect the shifting dynamics across equity markets, as we seek to capitalise on short term turbulence by investing in companies with attractive long term prospects at sensible valuations. It is important to emphasise that our activity is not driven by any short-term view macroeconomic or stock market trends. As per our investment philosophy, we approach each stock from the bottom up, with broader market movements largely serving as context for fundamental analysis. The highly volatile and sentiment-driven nature of recent equity markets has driven a dramatic level of change in valuations for several fundamentally sound businesses.

 

For example, the sharp pull back in valuations across the technology sector has presented some new opportunities. We added new positions in Adobe and Align Technology. Adobe is a provider of creative content software. Since shifting to a Software as a Service (SaaS) business model, the company has been able to harness the ever-increasing consumption of digital content to generate annual revenue growth of around 20%. As a technology stock which - until recently - was on an elevated multiple, the valuation has become much more reasonable, enabling us to start a position.

 

Align designs and manufactures Invisalign clear aligners, as well as advanced 3D digital scanners for orthodontists and dentists.  A buying opportunity arose following a 65% decline in the share price driven by a slowdown in sales in China, as well the general de-rating of high growth companies. Align is a highly profitable company with a long runway for growth. It is an excellent example of a quality growth company that has suffered amidst the sell off this year, as the valuation has moved from a very high level to something much more reasonable.

 

Elsewhere, we initiated positions in SSP Group and Atalaya Mining, both of which are somewhat more cyclical business models, but where we expect compelling idiosyncratic drivers to drive growth in the years to come.

 

SSP Group is a world leading travel catering business serving customers predominantly in airports and train stations. After two very difficult years in which the company incurred significant losses, as well as two rights issues, SSP is now well placed to capitalise on the recovery in passenger transportation. Ongoing investment during the downturn has resulted in significant new business wins which should drive growth in market share as SSP's markets gradually reopen. This is a company that prior to COVID was growing rapidly on a relatively capital light model, and we expect this profile to return in time driving growth in both earnings and the valuation multiple.

 

Atalaya is a copper miner whose principal asset is the famous Rio Tinto mine in Spain, which has been operational since Roman times.  This is a high quality mine, with local expansion potential, in a country with a strong legal framework.  Copper is an attractive commodity, essential to renewable power generation and electricity storage and transmission, which are driving the energy transition away from fossil fuels.  With strong structural growth and limited new mine capacity, the long-term prospects for the copper price look well underpinned.

 

Lastly, we also purchased a position in Close Brothers. The company is a specialist UK bank which provides loans across small niche markets, such as asset finance for small businesses. Over several market cycles, the company has demonstrated consistently strong risk-adjusted returns, with steady self-funded growth in the loan book. With little exposure to interest rate rises, the recent market rotation has brought shares down substantially from their peak, providing an attractive entry opportunity.

 

The combination of share price recovery and declining levels of conviction led us to reassess and ultimately sell out of the following holdings.

 

Merlin Properties operates commercial real estate in Spain. The shares had rebounded strongly from the COVID lows, receiving a further boast as the company indicated its intention to sell its highly valued portfolio of bank branches. With limited visibility around longer-term growth prospects, especially amongst the retail assets, the shares looked fully valued.

 

Amadeus is a provider of software for the airline and leisure sectors. While the travel sector as a whole has not yet fully recovered, shares in the company already appeared to price much of this in. Amadeus's profitability is skewed towards business travel which we expect to take longer to recover. Given our conviction in the company's overall competitive positioning and longer-term growth had already weakened somewhat before the pandemic, we sold out in favour of higher conviction ideas.

 

Separately, our investment thesis for Fresenius was predicated on the company's defensive exposure to rising health care spend, without concerns about patent cycles. However, a series of operational missteps and declining profitability weakened our confidence in management and Fresenius' growth potential.

 

 

 

Market Outlook

 

Global markets continue to be unsettled. If 2021's gains were driven by a "fear of missing out" (FOMO), in 2022 there is an increasing feeling that there is nowhere to hide. As inflation continues to come in higher than expected, bond yields are trending upwards and central banks are forced to keep raising short term interest rates. This is causing valuations to decline across the board, but particularly for high growth companies.

 

At the same time, investors are discounting the inevitable macroeconomic slowdown as tighter monetary policy eventually causes the economic cycle to turn down. This is pressuring cyclical stocks, especially in the consumer and industrial sectors. Even defensive companies, which have to date held up relatively well, may come under pressure as valuations de-rate across the market.

 

In these market conditions, it is critical to retain a focus on the long term. This is especially important when other investors' time horizons are becoming shorter. Often the best long term investment opportunities occur in times of market stress, characterised by heightened volatility amidst periods of indiscriminate selling.  Already in the past six months we have seen some such opportunities emerge, and there may be more in the coming months.

 

Whilst it is always painful to experience losses, the flip side is that many good quality, structurally growing companies are now available at notably more attractive valuations. This is great news for long term oriented investors. The prospect for future returns is better today than it has been for quite some time. Of course, we cannot forecast when the current de-rating of growth stocks will end, or indeed when the short term macro economic outlook will improve, but at some point both these cycles will turn. In the meantime, we will continue to look for great long term investment opportunities amidst the shorter term volatility. 

 

Matthew Tillett

Allianz Global Investors

 

 

 

[1] All data in GBP as of 31 May 2022 unless stated.



BRUNNER INVESTMENT TRUST PLC

INVESTMENT PORTFOLIO AS AT 31 MAY 2022

 

Listed Equity Holdings

Name

Value

£'000s

% of Invested Funds

Sector

 Microsoft

 24,587

 4.74

 Software & Computer Services

 United Health

 22,077

 4.26

 Health Care Providers

 Visa

 18,171

 3.51

 Industrial Support Services

 Adidas

 14,423

 2.78

 Personal Goods

 Roche Holdings

 12,967

 2.50

 Pharmaceuticals & Biotechnology

 Taiwan Semiconductor

 12,854

 2.48

 Technology Hardware & Equipment

 Munich Re

 12,586

 2.43

 Non-Life Insurance

 Shell

 12,477

 2.41

 Oil, Gas & Coal

 Microchip Technology

 11,658

 2.25

 Technology Hardware & Equipment

 TotalEnergies

 11,318

 2.18

 Oil, Gas & Coal

 Schneider Electric

 10,800

 2.08

 Electronic & Electrical Equipment

 Novo Nordisk

 10,550

 2.04

 Pharmaceuticals & Biotechnology

 Accenture

 10,077

 1.94

 Industrial Support Services

 Unilever

 10,037

 1.94

 Personal Care, Drug & Grocery

 The Cooper Companies

 10,019

 1.93

 Medical Equipment & Services

 AIA

 9,816

 1.89

 Life Insurance

 Partners Group

 9,800

 1.89

 Investment Banking & Brokerage

 Itochu

 9,695

 1.87

 General Industrials

 AMETEK

 9,543

 1.84

 Electronic & Electrical Equipment

 National Grid

 9,492

 1.83

 Gas, Water & Multi-Utilities

 HomeServe

 9,304

 1.79

 Non-Life Insurance

 Estée Lauder 

 8,903

 1.72

 Personal Goods

 Charles Schwab

 8,192

 1.58

 Investment Banking & Brokerage

 Agilent Technologies

 8,102

 1.56

 Medical Equipment & Services

 Assa Abloy

 7,808

 1.51

 Construction & Materials

 Yum China Holdings

 7,764

 1.50

 Travel & Leisure

 St. James's Place

 7,761

 1.50

 Investment Banking & Brokerage

 Atlas Copco

 7,562

 1.46

 Industrial Engineering

 UBS

 7,467

 1.44

 Investment Banking & Brokerage

 Booking Holdings

 7,121

 1.37

 Travel & Leisure

 LVMH Moet Hennessy Louis Vuitton 

 7,107

 1.37

 Personal Goods

 Nestle

 6,973

 1.35

 Food Producers

 RELX

 6,825

 1.32

 Media

 Amphenol

 6,747

 1.30

 Technology Hardware & Equipment

 FleetCor Technologies

 6,705

 1.29

 Industrial Support Services

 Jumbo

 6,566

 1.27

 Leisure Goods

 GlaxoSmithKline

 6,496

 1.25

 Pharmaceuticals & Biotechnology

 AbbVie

 6,138

 1.18

 Pharmaceuticals & Biotechnology

 Adobe

 6,112

 1.18

 Software & Computer Services

 IG Group

 6,082

 1.17

 Investment Banking & Brokerage

 CME Group

 5,994

 1.16

 Investment Banking & Brokerage

 Intuit 

 5,918

 1.14

 Software & Computer Services

 DCC

 5,890

 1.14

 Industrial Support Services

 Redrow

 5,565

 1.07

 Household Goods & Home Construction

 Iberdrola

 5,487

 1.06

 Electricity

 Rio Tinto

 5,462

 1.05

 Industrial Metals & Mining

 Close Brothers

 5,382

 1.04

 Banks

 Paragon Banking

 5,164

 1.00

 Finance & Credit Services

 Intuitive Surgical

 5,144

 0.99

 Medical Equipment & Services

 MarketAxcess

 5,136

 0.99

 Investment Banking & Brokerage

 Ashmore

 5,125

 0.99

 Investment Banking & Brokerage

 Tyman

 5,083

 0.98

 Construction & Materials

 Helical 

 5,077

 0.98

 Real Estate Investment & Services

 International Flavors & Fragrances 

 4,909

 0.95

 Chemicals

 Brambles

 4,751

 0.92

 General Industrials

 Ecolab

 4,551

 0.88

 Chemicals

 Baltic Classifieds

 4,449

 0.86

 Software & Computer Services

 SThree

 4,445

 0.86

 Industrial Support Services

 Align Technology

 4,404

 0.85

 Medical Equipment & Services

 SSP

 4,076

 0.79

 Travel & Leisure

 Astellas Pharma

 4,060

 0.78

 Pharmaceuticals & Biotechnology

 Atalaya Mining

 3,800

 0.73

 Precious Metals & Mining

 Jiangsu Express

 3,460

 0.67

 Industrial Transportation

 Bright Horizons Family Solutions

 3,232

 0.62

 Consumer Services

 Australia & New Zealand Bank

 3,120

 0.60

 Banks


518,366

100%










 


 

GEOGRAPHICAL ANALYSIS AS AT 31 MAY 2022

 

Region

% of Invested Funds


 

North America

43.21

Continental Europe

25.36

UK

24.70

Pacific Basin

4.08

Japan

2.65

 


Total

100.00

 

 

 

SECTORAL ANALYSIS AS AT 31 MAY 2022

 

Sector

% of Invested Funds


 

Industrials

20.07

Financials

19.47

Health Care

17.34

Technology

13.95

Consumer Discretionary

13.81

Energy

4.59

Basic Materials

3.61

Consumer Staples

3.29

Utilities

2.89

Real Estate

0.98

 


Total

100.00

 



SUMMARY OF UNAUDITED RESULTS

INCOME STATEMENT

for the six months ended 31 May 2022

 


Revenue

Capital

Total Return

 

£'000s

£'000s

£'000s


 


(Note 2)

(Losses) on investments held at fair value through profit or loss

-

(14,519)

(14,519)

Losses on foreign currencies

-

(85)

(85)

Income from investments

7,403

-

7,403

Investment management fee

(352)

(822)

(1,174)

Administration expenses

(369)

(2)

(371)

Profit (loss) before finance costs and taxation

6,682

(15,428)

(8,746)

Finance costs: interest payable and similar charges

(141)

(301)

(442)

Profit (loss) on ordinary activities before taxation

6,541

(15,729)

(9,188)

Taxation

(787)

-

(787)

 




Profit (loss) after taxation attributable to ordinary shareholders

5,754

(15,729)

(9,975)

Earnings per ordinary share (Note 1)




(basic and diluted)

13.48p

(36.84p)

(23.36p)

 

 


 

BALANCE SHEET

as at 31 May 2022

 

 

 

£'000s



Investments held at fair value through profit or loss (Note 3)

 518,366

Net current liabilities

(5,090)

Total assets less current liabilities

513,276

Creditors: amount falling due after more than one year

(25,389)

Total net assets

487,887



Called up share capital

 10,673

Capital redemption reserve

 5,327

Capital reserves

 455,573

Revenue reserve

 16,314

Equity shareholders' funds

487,887



Net asset value per ordinary share

1,142.8p

 

 

The net asset value is based on 42,692,727 ordinary shares in issue at 31 May 2022


 



 

SUMMARY OF UNAUDITED RESULTS

INCOME STATEMENT

for the six months ended 31 May 2021

 


Revenue

Capital

Total Return

 

£'000s

£'000s

£'000s


 


(Note 2)

Gains on investments held at fair value through

-

45,472

45,472

profit or loss




Losses on foreign currencies

-

(51)

(51)

Income from investments

6,413

-

6,413

Investment management fee

(317)

(739)

(1,056)

Administration expenses

(328)

(1)

(329)

Profit before finance costs and taxation

5,768

44,681

50,449

Finance costs: interest payable and similar charges

(130)

(274)

(404)

Profit on ordinary activities before taxation

5,638

44,407

50,045

Taxation

(764)

-

(764)

 




Profit after taxation attributable to ordinary shareholders

4,874

44,407

49,281

Earnings per ordinary share (Note 1)




(basic and diluted)

11.42p

104.01p

115.43p

 

 


BALANCE SHEET

as at 31 May 2021

 

 

 

£'000s



Investments held at fair value through profit or loss (Note 3)

 491,308  

Net current assets

 875  

Total assets less current liabilities

492,183

Creditors: amount falling due after more than one year

(25,380)

Total net assets

466,803



Called up share capital

 10,673

Capital redemption reserve

 5,327

Capital reserves

435,455

Revenue reserve

 15,348

Equity shareholders' funds

466,803



Net asset value per ordinary share

1,093.4p

 

 

The net asset value is based on 42,692,727 ordinary shares in issue at 31 May 2021


 

 

 

STATEMENT OF CHANGES IN EQUITY

   

 

 

 

 

 

Called up

Share

Capital

£'000s

Capital Redemption Reserve

£'000s

 

Capital

Reserve

£'000s

 

Revenue Reserve

£'000s

 

 

Total

£'000s







Six months ended 31 May 2021






Net assets at 1 December 2020

 10,673

  5,327

391,048

 15,051

 422,099

Revenue profit

 -

 -

 -

4,874 

4,874

Dividends on ordinary shares (Note 4)

  -

 -

 -

(4,577)

(4,577)

Capital profit

  -

 -

44,407

 -

44,407







Net assets at 31 May 2021

  10,673

  5,327

435,455

15,348

466,803

 












Six months ended 31 May 2022






Net assets at 1 December 2021

 10,673

  5,327

471,302

 15,150

 502,452

Revenue profit

 -

 -

 -

 5,754

 5,754

Dividends on ordinary shares (Note 4)

  -

 -

 -

(4,590)

(4,590)

Capital profit

  -

 -

(15,729)

 -

(15,729)







Net assets at 31 May 2022

  10,673

  5,327

455,573

16,314

487,887

 






 

 



CASH FLOW STATEMENT

 


 

 

Six months

 

Six months


 

 

ended

 

ended


 

 

31 May

 

31 May


 

 

2022

 

2021

 

 

 

£000's

 

£000's

Operating activities






(Loss) profit before finance costs and taxation



(8,746)

 

50,449

Less: Losses (gains) on investments held at fair value through profit or loss



 14,519


 (45,472)

Add: Losses on foreign currency

 


 85


 51

Less: Overseas tax suffered

 


(787)


(764)

Increase in other receivables



(407)


(223)

(Decrease) increase in other payables



(121)


 47

Purchases of fixed asset investments held at fair value through profit or loss



(49,517)


(25,242)

Sales of fixed asset investments held at fair value through profit or loss



 50,975

 

 24,789

Net cash inflow from operating activities



6,001

 

3,635

 






Financing activities






Interest paid



(417)


(393)

Revolving Credit Facility drawdown



 -


2,500

Revolving Credit Facility repayment



 -


(2,500)

Dividend paid on cumulative preference stock



(11)


(11)

Dividends paid on ordinary shares



(4,590)


(4,577)

Net cash outflow from financing activities



(5,018)


(4,981)

 




 


Increase (Decrease) in cash and cash equivalents



983

 

(1,346)













Cash and cash equivalents at the start of the period



 3,695


 8,961 

Effect of foreign exchange rates



(85)


 (51)

Cash and cash equivalents at the end of the period



 4,593


 7,564




 


 

Comprising:



 


 

Cash at bank



4,593


7,564









 

 

Notes to the Financial Statements

Note 1

 

The returns per ordinary share have been calculated using a weighted average number of shares in issue of 42,692,727 (31 May 2021: 42,692,727 shares).

 

Note 2

 

The total column of this statement is the profit and loss account of the company.

 

All revenue and capital items derive from continuing operations. No operations were acquired or discontinued in the period.

 

Purchases for the half year ended 31 May 2022 were £49,383,000 (31 May 2021: £24,479,000) and sales for the half year ended 31 May 2022 were £50,421,000 (31 May 2021: £23,759,000). 

Included in the cost of investments are transaction costs on purchases which amounted to £102,000 (31 May 2021: £85,000) and transaction costs on sales which amounted to £6,000 (31 May 2021: £9,000).   

Note 3

 

Investments are designated as held at fair value through profit or loss in accordance with FRS 102 sections 11 and 12.  Investments are initially recognised at fair value, which is determined to be their cost. Subsequently, investments are revalued at fair value which is the bid market price for listed investments.

 

FRS 102 sets out three fair value levels.

 

Level 1: The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date

 

Level 2: Inputs other than quoted prices included within Level 1 that are observable (i.e., developed using market data) for the asset or liability, either directly or indirectly

 

Level 3: Inputs are unobservable (i.e., for which market data are unavailable) for the asset or liability

 

As at 31 May 2022, the financial assets at fair value through profit and loss of £518,366,000 (30 November 2021: £533,924,000) are categorised as follows:


As at


As at


31 May


30 November


2022


2021


 '000s


 '000s





Level 1

 518,366


533,924

Level 2

 -


 -

Level 3

 -


-


 518,366

 

533,924

 

 

Note 4

 

In accordance with section 32 FRS102 ' Events After the end of the Reporting Period', dividends declared after the end of the reporting period shall not be recognised as a liability.



 

Dividends paid on ordinary shares in respect of earnings for each period are as follows :

 


Six months ended

31 May 2022

£'000s

Six months ended

31 May 2021

£'000s

Year ended

30 November 2021

£'000s

 

Final dividend 6.05p paid 1 April 2022 (2021: 6.05p)

2,583

2,583

 2,583

First interim dividend 4.70p paid 22 July 2021 (2020: 4.67p)

 -

 -

 2,007

Second interim dividend 4.70p paid 16 September 2021 (2020: 4.67p)

 -

 -

 2,007

Third interim dividend 4.70p paid 10 December 2021 (2020: 4.67p)

2,007

1,994

 1,994


4,590

4,577

8,591

 

Dividends declared after the period end are not recognised as a liability under section 32 FRS 102 'Events after the end of the reporting period'. Details of these dividends are set out below.


 

Six months ended

31 May 2022

£'000s

 

Six months ended

31 May 2021

£'000s

 

Year ended

30 November 2021

£'000s





First interim dividend 5.15p payable 21July 2022 (2021: 4.70p)

 2,199

 2,007

-

Second interim dividend 5.15p payable 15 September 2022 (2021: 4.70p)

2,199

2,007

-

Third interim dividend 4.70p

-

-

 2,007

 Final dividend 6.05p

  -

  -

 2,583


4,398

4,014

4,590

 

 

The final and interim dividends above are based on the number of shares in issue at the period end. However, the dividend payable will be based upon the number of shares in issue on the record date and will reflect any purchase or cancellation of shares by the company settled subsequent to the period end.

 

 

Note 5

 

The directors believe it is appropriate to continue to adopt the going concern basis in preparing the financial statements, as the assets of the company consist mainly of securities which are readily realisable and accordingly, that the company has adequate financial resources to continue in operational existence for the foreseeable future.

 

Note 6

 

The half-yearly report has neither been audited nor reviewed by the company's auditors. The financial information for the year ended 30 November 2021 has been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under either section 498(2) or (3) of the Companies Act 2006.

 

 

The half-yearly financial report will be sent to shareholders in late July 2022 and will be available to members of the public from the company's registered office at 199 Bishopsgate, London EC2M 3TY.

 

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