Half Yearly Report

RNS Number : 2702M

F&C Capital & Income Inv Tst PLC

20 May 2010

 



Date:                20 May 2010

Contact:           Julian Cane                                                   

                        F&C Management Limited                              

                        020 7628 8000                                               

F&C Capital and Income Investment Trust PLC

Unaudited Statement of Results

for the half-year ended 31 March 2010

HIGHLIGHTS

·      Net asset value per share increased by 6.7% to 212.68p during the half-year ended 31 March 2010

·      Interim dividends totalling 3.90 pence per share.

·      575,000 shares issued during the six month period.

SUMMARY OF UNAUDITED RESULTS

Attributable to equity shareholders	31 March 2010	30 September 2009	% Change
Net assets	£179.12m	£166.68m	+7.5
Net asset value per ordinary share	212.68p	199.28p	+6.7
Share price	217.50p	199.00p	+9.3
	Half-year ended 31 March 2010	Half-year ended 31 March 2009	% Change
Revenue return per ordinary share	3.67p	4.12p	-10.9
Dividends per ordinary share
First interim dividend in respect of year to 30 September 2010	* 1.95p	-
30 September 2009	-	1.90p
Second interim dividend in respect of year to 30 September 2010	** 1.95p	-
30 September 2009	-	1.90p
Total interim dividends relating to the period	3.90p	3.80p	+2.6
Special dividend in respect of the year to 30 September 2009	-	0.40p

*   Paid on 31 March 2010.

** Payable on 30 June 2010 to shareholders registered on 4 June 2010.

The Chairman, commenting on the results, said:

The UK stock market continued to rally over the six months under review, with the FTSE All-Share Index (the "Index") rising by 10.5% as the economy began to recover from the longest post-war recession.  Gains of 9.3% and 6.7% respectively in your Company's share price and net asset value ("NAV") per share did not quite match the advance in the Index, for reasons set out below.  The overall level of recurring income has been maintained over the last six months and the two interim dividends for the period from 30 September 2009 to 31 March 2010 total 3.9 pence per share, an increase of 2.6% on the comparable period last year.

Your Company's portfolio has been built with the intention of generating a steadily rising income to shareholders and it is very encouraging that this has been achieved despite the difficult economic background.  Income from the portfolio grew 3.1% and this underpinned the combined increase in the two interim dividends for that period. In the short term, this focus on maintaining and growing dividends to our shareholders has not been to our advantage in terms of capital appreciation as more defensive, higher yielding shares have been left behind by more cyclically sensitive but lower yielding shares. 

Capital performance

The UK economy officially climbed out of recession before Christmas with positive economic growth reflecting the beneficial impact of the monetary and fiscal stimuli.  The scale of these stimuli is extraordinary with the Bank of England base rate at the historically unprecedented level of 0.5%, the fiscal deficit the largest seen in peacetime and £200bn of Quantitative Easing.  The initial estimate for fourth quarter growth was very weak but has been subsequently revised upwards and these signs of strengthening recovery from the economy, and more particularly from the corporate sector, have helped to drive a cyclical recovery in share prices.

The strongest driver of the investment portfolio's returns was Rio Tinto which generated a total return of more than 47% during the period on the back of an improving economic background and soaring metal prices.  Rio Tinto was the strongest performer amongst the large mining companies, but although the choice of Rio Tinto was successful, it was more than offset by a lack of exposure to the rest of the sector, which returned almost 39% on average.  Investments in the two financial companies Man Group and Intermediate Capital were disappointing, but they both have very attractive dividend yields and are expected to recover.

Revenue and dividend

Dividend payments have been under pressure during the financial crisis and recession as companies have struggled with a combination of lower profits and over-leveraged balance sheets.  In the many refinancings that have taken place, the dividend has frequently been a casualty.  Over the last six months, with the improving economic and corporate background, dividend payments have started to increase again, but they are still more than 16% below two years ago and 9% below one year ago.

VAT complicates comparison of this year's net revenue return; last year's figures benefited from the recovery of VAT wrongly levied in past years whilst this year we have incurred the cost of bringing a further case against HMRC for a further VAT refund.  After adjusting for these factors, the net revenue return registered a small increase against the comparable period.

Gearing

Although your Company's rise in NAV was not as rapid as that of the Index, it was still considerably ahead of the cost of borrowing, so the use of gearing during the period proved to be a profitable strategy.

Your Company has a £20m loan facility from Lloyds TSB Bank plc on which we are able to draw to invest when we expect returns to be greater than the cost of the borrowing.  The loan has been partially drawn down throughout the period under review as we have borrowed between £14 million and £18 million.

Share price premium / discount to NAV per share

Over the six months under review, your Company's shares have continued to trade, on average, at a small premium to their NAV per share.  It is encouraging that the range at which they have traded has been fairly narrow at 4% either side of the NAV per share.  No share buy-backs were made during the period, but 575,000 shares were issued at a small premium to NAV per share which ensured that investors buying shares did not pay too high a price relative to NAV per share.

Outlook

The future path of the economy is particularly difficult to predict as the new coalition government has yet to announce in any detail both how and when it plans to reduce the very large fiscal deficit and huge national debt, both of which have undoubtedly made a major contribution to the avoidance of a much deeper recession and to the beginnings of recovery. There is still a risk of a double-dip recession and the markets are still very volatile. There is a considerable risk that sovereign bond markets may yet bring about a further shock at a time when economies are returning to growth, if they are not convinced by the IMF and Eurozone support package for Greece. Our "guess" about the outlook is unusually dependent on government policy decisions which themselves are likely to be strongly influenced by a judgment of the trade-off between continuing to stimulate growth and reassuring markets that the UK is capable of real fiscal discipline.

Notwithstanding these uncertainties, we continue to believe that the outlook for the UK stock market may be improving as companies generally have fairly low levels of debt and as profits are once again increasing, benefiting in part from a high proportion of overseas earnings.  Valuations are not as attractive as they were at the trough of the market, but the financial system is more stable now and the level of risk is altogether lower; equities still appear attractively valued relative to bonds or cash.  The outlook for our own dividend remains reasonably positive and has strengthened as dividends from our investee companies are growing again.

Pen Kent                                                                     

20 May 2010

Directors' Statement of Principal Risks and Uncertainties

The Company's assets consist mainly of listed securities and its principal risks are therefore market related. The Company may, from time to time, invest in leading overseas companies and so is exposed to currency risk in respect of these investments. Other key risks faced by the Company relate to investment strategy, investment management resources, regulatory issues, operational and financial controls and counterparty (including the custodian) failure. These risks, and the way in which they are managed, are described in more detail under the heading "Principal risks and their management" within the Directors' Report and Business Review contained within the Company's annual report for the year ended 30 September 2009. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.

Directors' Statement of Responsibilities in Respect of the Financial Statements

In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm, in respect of the report and accounts for the half-year ended 31 March 2010 of which this statement is an extract, that to the best of their knowledge:

·              the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards and gives a true and fair view of the assets, liabilities, financial position and return of the Company;

·              the half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·              the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

·              the half-yearly report includes details on related party transactions.

On behalf of the Board

Pen Kent

Chairman

20 May 2010

Unaudited Condensed Income Statement

Half-year ended 31 March 2010

Half-year ended 31 March 2009

Note		Revenue	Capital	Total	Revenue	Capital	Total
		£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
	Gains/(losses) on investments	-	12,224	12,224	-	(37,743)	(37,743)
	Foreign exchange gains	-	2	2	2	20	22
	Income	3,783	-	3,783	3,670	-	3,670
	Management fee	(179)	(179)	(358)	(139)	(139)	(278)
	Recoverable VAT	-	-	-	167	-	167
	Other expenses	(431)	(29)	(460)	(302)	(7)	(309)
	Net return before finance costs and taxation	3,173	12,018	15,191	3,398	(37,869)	(34,471)
	Finance costs	(86)	(86)	(172)	(97)	(97)	(194)
	Net return on ordinary activities  before taxation	3,087	11,932	15,019	3,301	(37,966)	(34,665)
	Taxation on ordinary activities	(8)	-	(8)	(1)	-	(1)
	Net return attributable to shareholders	3,079	11,932	15,011	3,300	(37,966)	(34,666)
2	Return per share - pence	3.67	14.23	17.90	4.12	(47.39)	(43.27)

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

            All revenue and capital items in the above statement derive from continuing operations.

            A statement of total recognised gains and losses is not required as all gains and losses of the Company have been reflected in the above

            statement.

Unaudited Condensed Reconciliation of Movements in Shareholders' Funds

		Share	Capital				Total
	Share	premium	redemption	Special	Capital	Revenue	shareholders'
	capital	account	reserve	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Half-year ended 31 March 2010
Balance at 30 September 2009	20,911	84,399	4,146	4,434	46,992	5,802	166,684
Movements during the half-year ended 31 March 2010
Dividends paid	-	-	-	-	-	(3,772)	(3,772)
Ordinary shares issued	144	1,049	-	-	-	-	1,193
Return attributable to shareholders	-	-	-	-	11,932	3,079	15,011
Balance at 31 March 2010	21,055	85,448	4,146	4,434	58,924	5,109	179,116
Half-year ended 31 March 2009
Balance at 30 September 2008	19,731	77,630	4,146	4,434	46,365	5,895	158,201
Movements during the half-year ended 31 March 2009
Dividends paid	-	-	-	-	-	(4,159)	(4,159)
Ordinary shares issued	516	2,926	-	-	-	-	3,442
Return attributable to shareholders	-	-	-	-	(37,966)	3,300	(34,666)
Balance at 31 March 2009	20,247	80,556	4,146	4,434	8,399	5,036	122,818
Year ended 30 September 2009
Balance at 30 September 2008	19,731	77,630	4,146	4,434	46,365	5,895	158,201
Movements during the year ended 30 September 2009
Dividends paid	-	-	-	-	-	(7,303)	(7,303)
Ordinary shares issued	1,180	6,769	-	-	-	-	7,949
Return attributable to shareholders	-	-	-	-	627	7,210	7,837
Balance at 30 September 2009	20,911	84,399	4,146	4,434	46,992	5,802	166,684

Unaudited Condensed Balance Sheet

	31 March 2010	31 March 2009	30 September 2009
	£'000s	£'000s	£'000s
Fixed assets
Investments	191,351	127,723	178,710
Current assets
Debtors	1,634	928	946
Cash at bank and short-term deposits	657	4,557	2,466
	2,291	5,485	3,412
Current liabilities
Short-term loans	(14,000)	(10,000)	(14,000)
Other creditors	(526)	(390)	(1,438)
	(14,526)	(10,390)	(15,438)
Net current liabilities	(12,235)	(4,905)	(12,026)
Net assets	179,116	122,818	166,684
Capital and reserves
Share capital	21,055	20,247	20,911
Share premium account	85,448	80,556	84,399
Capital redemption reserve	4,146	4,146	4,146
Special reserve	4,434	4,434	4,434
Capital reserves	58,924	8,399	46,992
Revenue reserve	5,109	5,036	5,802
Total shareholders' funds	179,116	122,818	166,684
Net asset value per ordinary share - pence	212.68	151.65	199.28

Unaudited Condensed Summary Cash Flow Statement

	Half-year ended	Half-year ended
	31 March 2010	31 March 2009
	£'000s	£'000s
Net cash inflow from operating activities	2,471	3,742
Interest paid	(164)	(141)
Equity dividends paid	(3,772)	(4,159)
Net cash outflow from purchases and sales of investments	(1,965)	(7,957)
Net cash outflow before use of liquid resources and financing	(3,430)	(8,515)
Decrease/(increase) in short-term deposits	1,365	(4,091)
Net cash inflow from financing	1,619	13,442
(Decrease)/increase in cash	(446)	836
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash	(446)	836
(Decrease)/increase in short-term deposits	(1,365)	4,093
Decrease in short-term loans	-	(10,000)
Exchange movement	2	20
Movement in net debt	(1,809)	(5,051)
Net debt at the beginning of the period	(11,534)	(392)
Net debt at the end of the period	(13,343)	(5,443)
Represented by:
Cash at bank	40	4,557
Short-term deposits	617	-
	657	4,557
Short-term loans	(14,000)	(10,000)
	(13,343)	(5,443)

Notes

1    Accounting policies

These financial statements have been prepared on the basis of the accounting policies set out in the Company's financial statements at 30 September 2009.  These accounting policies are expected to be followed throughout the year ending 30 September 2010.

2    Return per ordinary share

Return per ordinary share attributable to ordinary shareholders reflects the overall performance of the Company in the period.  Net revenue recognised in the first six months is not indicative of the total likely to be received in the full accounting year.

	Half-year ended 31 March 2010 £'000s	Half-year ended 31 March 2009 £'000s	Year ended 30 September 2009 £'000s
Revenue return	3,079	3,300	7,210
Capital return	11,932	(37,966)	627
Total return	15,011	(34,666)	7,837
	Number	Number	Number
Weighted average ordinary shares in issue	83,866,278	80,116,686	81,433,763

3    Dividend

The second interim dividend in respect of the year ending 30 September 2010 of 1.95 pence per share will be paid on 30 June 2010 to shareholders registered on 4 June 2010. The total cost of this dividend, based on 84,219,268 shares in issue and entitled to dividend on 18 May 2010, is £1,642,000.

4    Results

The results for the half-year ended 31 March 2010 and 31 March 2009, which are unaudited, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 September 2009; the report of the independent auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 September 2009 are an extract from those accounts.

5    Half-yearly report and accounts

The half-yearly report and accounts will be posted to shareholders and made available on the internet at www.fandccit.com shortly.  Copies may be obtained during normal business hours from the Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY.

By order of the Board

F&C Management Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

20 May 2010

 

END

 

 

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