Half Yearly Report

RNS Number : 4268F

F&C Capital & Income Inv Tst PLC

23 May 2013

 



Date:                23 May 2013

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 2013

HIGHLIGHTS

·      Total return (increase in net asset value per share with dividends reinvested) for the half-year ended 31 March 2013 was 14.5%.

·      300,000 shares were issued at a premium to net asset value during the six month period.

·      Strong increase of 7.2% in revenue return per share.

·      Continuing our record of increasing dividends every year since launch in 1992, interim dividends are increased by 4.9% to 4.30 pence per share and are fully covered by earnings.

SUMMARY OF UNAUDITED RESULTS

Attributable to equity shareholders	31 March 2013	30 September 2012	% Change
Net assets	£219.29m	£195.11m	+12.4
Net asset value per share	248.67p	222.01p	+12.0
Share price	249.50p	225.50p	+10.6
	Half-year ended 31 March 2013	Half-year ended 31 March 2012	% Change
Revenue return per ordinary share	5.36p	5.00p	+7.2
Dividends per ordinary share
First interim dividend in respect of year to 30 September 2013	* 2.15p	-
30 September 2012	-	2.05p
Second interim dividend in respect of year to 30 September 2013	** 2.15p	-
30 September 2012	-	2.05p
Total interim dividends relating to the period	4.30p	4.10p	+4.9

*   Paid on 28 March 2013.

** Payable on 28 June 2013 to shareholders registered on 7 June 2013.

The Chairman, commenting on the results, said:

Despite the difficult economic background, I am pleased to report that over the six months from 30 September 2012 to 31 March 2013, the UK stock market and your fund both performed well. The total return (increase in net asset value per share with dividends reinvested) for both your fund and the FTSE All-Share Index was 14.5%.

Capital performance

During each calendar month of our first half year, the UK stock market rose, with March being the tenth successive month of increase. This excellent performance has not been because of any economic improvement. Indeed, the Euro crisis has continued to rumble along, with both Greece and Cyprus needing bail-outs during the period, while here in the UK, corporate earnings have been disappointing. Instead, market strength seems to reflect investor confidence that interest rates will stay lower for longer than seemed possible six months ago, and that there was no point waiting for returns on cash to improve. This has led to a belief that we have a 'heads we win tails you lose' environment, where either the economy improves and earnings rise or the economy stays weak in which case more liquidity will be pumped into the system through quantitative easing. Strong markets have been the result. Over the six months under review, our net asset value per share increased by 12.0% against an increase of 12.7% in the capital value of the FTSE All-Share Index. Given that your company has a higher yield than the Index, this shortfall was all made good when comparison is made at the total return level.

Looking over a longer time period of three years, equity returns have been reasonably strong, albeit with more volatility than we have experienced over the last six months. Over this period, our total return (increase in net asset value per share with dividends reinvested) was 31.7%, a compound growth rate of almost 10% per annum. This compares favourably with a total return for the FTSE All-Share Index of 28.7% and reflects well on the stock selection skills of Julian Cane, your fund manager.

Revenue and dividend

As shown by the All-Share Index, reported company earnings fell across calendar 2012 by 3%. Because of this, it is perhaps surprising that dividends continued to make progress. Dividend payments from companies seem to have responded much more to the strength of company balance sheets than to the fall in earnings, as a result of which dividend cover has fallen to about two times, i.e companies pay out in dividends about one half of their stated earnings. It is encouraging that companies see dividend growth as a characteristic which is valued by the market, and the rising trend is unlikely to be derailed until there is evidence of a strong economic recovery which will require companies to divert resources into significant new capital investment.

Our income has grown by 8.1%, benefiting from several factors. An increase in the portfolio size as a result of new shares issued over the course of last year has helped as has the use of debt in a rising market. We have also seen growth in underlying dividends, and received a number of special dividends, most notably from our insurance investments. These positive factors were partially offset by reduced option writing activity. Our revenue return of 5.36 pence per share is an increase of 7.2% on the comparative period and comfortably covers the two quarterly dividends for this period, each of 2.15 pence per share. The first interim dividend was paid on 31 March 2013, and the second dividend, which has been declared with these results, will be paid on 28 June.

Loan Facility and Gearing

We have used gearing throughout the half year as we anticipated that returns from our investments would be greater than the cost of borrowing. This proved to be correct, although with hindsight, given the returns that our portfolio made and the low cost of borrowing, we might have borrowed more to enhance returns further.

Our floating rate, multi-currency loan facility for £20m with Scotia Bank expired just after the half-year end and it has been replaced by a new facility from State Street. The new loan has two elements, £20m at a fixed rate for five years (this has been fully drawn down, although the proceeds have not yet been fully invested) and £15m available at floating rates (this has not been drawn down). The interest rates on both tranches are very attractive and we expect to use the flexibility offered by this facility when we think it appropriate. Despite increasing the amounts we are able to borrow, though, we continue to take a conservative view of gearing and recognise that it will not always add to returns.

Rating of the Shares and New Share Issuance

For five of the six months under review, your shares traded at a premium to their underlying net asset value. The reason for the slip to a discount for a month seems to lie in the changes that were made to the charging structure of some of the F&C savings schemes. The stock market probably anticipated that the changes would lead to a large number of shareholders exiting the savings schemes and selling their shares. In the event, this did not happen, and subsequently, the shares have moved back to the premium that they had enjoyed before the changes.

There was one issue of new shares; this saw 300,000 shares being issued at a 1.5% premium to net asset value on 2 January in response to investors looking to reinvest their quarterly dividend.

Outlook

Only modest levels of economic growth are expected in the UK for the reasonably foreseeable future. The structural problems faced by most developed nations, in particular the high levels of debt, are likely to weigh on future growth rates, and the simultaneous slow-down we are currently experiencing makes it more difficult for any one country to escape as both export markets and domestic consumption are both weak. However, despite the difficult background, company finances are generally in a reasonable state and dividends are expected to increase even if earnings progression proves more elusive.

It is unlikely that stock markets can continue to rerate indefinitely, but the dividend yield on equities remains attractive against many other asset classes such as deposit rates or bond yields and this is expected to provide support.

Your company has a well diversified portfolio and is able to pay an attractive dividend, well covered by underlying earnings. It remains our aim to continue to build on our record of steady dividend growth.

Steven Bates

23 May 2013

Forward -looking statements

This interim report may contain forward-looking statements with respect to the financial condition, results of operations and business of the company. Such statements involve risk and uncertainty because they relate to future events and circumstances that could cause actual results to differ materially from those expressed or implied by forward-looking statements. The forward looking statements are based on the Directors' current view and on information known to them at the date of this report. Nothing should be construed as a profit forecast.

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 invests in 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 2012. 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, 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 a fair review of the related party transactions that have taken place in the first six months of the financial year.

·              In light of the controls and monitoring processes that are in place, the Company has adequate resources and arrangements to continue operating within its stated objective policy for the foreseeable future. Accordingly, the accounts continue to be drawn up on the basis that the Company is a going concern.

On behalf of the Board

Steven Bates

Chairman

23 May 2013

Unaudited Condensed Income Statement

Half-year ended 31 March 2013

Half-year ended 31 March 2012

Note		Revenue	Capital	Total	Revenue	Capital	Total
		£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
	Gains on investments and derivatives	-	24,014	24,014	-	21,760	21,760
	Foreign exchange gains/(losses)	50	(584)	(534)	-	21	21
	Income	5,311	-	5,311	4,911	-	4,911
	Management fee	(223)	(223)	(446)	(189)	(189)	(378)
	Other expenses	(353)	(3)	(356)	(338)	(3)	(341)
	Net return before finance costs and taxation	4,785	23,204	27,989	4,384	21,589	25,973
	Finance costs	(53)	(53)	(106)	(52)	(52)	(104)
	Net return on ordinary activities  before taxation	4,732	23,151	27,883	4,332	21,537	25,869
	Taxation on ordinary activities	(12)	-	(12)	(4)	-	(4)
	Net return attributable to shareholders	4,720	23,151	27,871	4,328	21,537	25,865
2	Return per share - pence	5.36	26.30	31.66	5.00	24.88	29.88

The total column of this statement is the profit and loss account of the Company.  The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. 

            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 2013
Balance at 30 September 2012	21,971	92,250	4,146	4,434	64,789	7,522	195,112
Movements during the half-year ended 31 March 2013
Dividends paid	-	-	-	-	-	(4,401)	(4,401)
Ordinary shares issued	75	630	-	-	-	-	705
Return attributable to Shareholders	-	-	-	-	23,151	4,720	27,871
Balance at 31 March 2013	22,046	92,880	4,146	4,434	87,940	7,841	219,287
Half-year ended 31 March 2012
Balance at 30 September 2011	21,452	88,374	4,146	4,434	42,413	6,471	167,290
Movements during the half-year ended 31 March 2012
Dividends paid	-	-	-	-	-	(4,070)	(4,070)
Ordinary shares issued	344	2,560	-	-	-	-	2,904
Return attributable to shareholders	-	-	-	-	21,537	4,328	25,865
Balance at 31 March 2012	21,796	90,934	4,146	4,434	63,950	6,729	191,989
Year  ended 30 September 2012
Balance at 30 September 2011	21,452	88,374	4,146	4,434	42,413	6,471	167,290
Movements during the year ended 30 September 2012
Dividends paid	-	-	-	-	-	(7,664)	(7,664)
Ordinary shares issued	519	3,876	-	-	-	-	4,395
Return attributable to shareholders	-	-	-	-	22,376	8,715	31,091
Balance at 30 September 2012	21,971	92,250	4,146	4,434	64,789	7,522	195,112

Unaudited Condensed Balance Sheet

	31 March 2013	31 March 2012	30 September 2012
	£'000s	£'000s	£'000s
Fixed assets
Investments	232,501	195,072	197,312
Current assets
Debtors	2,306	6,015	580
Cash at bank and short-term deposits	5,306	1,070	5,587
	7,612	7,085	6,167
Creditors amounts falling within one year
Short-term loans	-	(5,000)	(7,967)
Other creditors	(826)	(5,168)	(400)
	(826)	(10,168)	(8,367)
Net current assets/(liabilities)	6,786	(3,083)	(2,200)
Creditors amounts falling due after more than one year Loans	(20,000)	-	-
Net assets	219,287	191,989	195,112
Capital and reserves
Share capital	22,046	21,796	21,971
Share premium account	92,880	90,934	92,250
Capital redemption reserve	4,146	4,146	4,146
Special reserve	4,434	4,434	4,434
Capital reserves	87,940	63,950	64,789
Revenue reserve	7,841	6,729	7,522
Total shareholders' funds	219,287	191,989	195,112
Net asset value per ordinary share - pence	248.67	220.21	222.01

Unaudited Condensed Summary Cash Flow Statement

	Half-year ended	Half-year ended
	31 March 2013	31 March 2012
	£'000s	£'000s
Net cash inflow from operating activities	3,378	3,580
Interest paid	(108)	(119)
Equity dividends paid	(4,401)	(4,070)
Net cash (outflow)/ inflow from purchases and sales of investments and derivatives	(11,304)	10,089
Net cash (outflow)/inflow before use of liquid resources and Financing	(12,435)	9,480
Decrease/(increase) in short-term deposits	5,460	(796)
Net cash inflow/(outflow) from financing	12,282	(7,829)
Increase in cash	5,307	855
Reconciliation of net cash flow to movement in net debt
Increase in cash	5,307	855
(Decrease)/increase in short-term deposits	(5,460)	796
(increase)/decrease in short-term loans	(11,577)	10,000
Exchange movement	(584)	21
Movement in net debt	(12,314)	11,672
Net debt at the beginning of the period	(2,380)	(15,602)
Net debt at the end of the period	(14,694)	(3,930)
Represented by:
Short-term deposits	-	930
Cash at bank	5,306	140
	5,306	1,070
Loans	(20,000)	(5,000)
	(14,694)	(3,930)

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 2012.  These accounting policies are expected to be followed throughout the year ending 30 September 2013.

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 2013 £'000s	Half-year ended 31 March 2012 £'000s
Revenue return	4,720	4,328
Capital return	23,151	21,537
Total return	27,871	25,865
	Number	Number
Weighted average ordinary shares in issue	88,030,935	86,575,798

3    Dividend

The second interim dividend in respect of the year ending 30 September 2013 of 2.15 pence per share will be paid on 28 June 2013 to shareholders registered on 7 June 2013. The total cost of this dividend, based on 88,184,268 shares in issue and entitled to dividend on 5 June 2013, is £1,896,000.

4    Results

The results for the half-year ended 31 March 2013 and 31 March 2012, 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 2012; 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 2012 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

23 May 2013

 

END

 

 

IR PGUWUAUPWUBW