Half Yearly Report

RNS Number : 0238E

F&C Capital & Income Inv Tst PLC

24 May 2012

 



Date:                24 May 2012

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 2012

HIGHLIGHTS

·      Net asset value per share increased by 13.0% to 220.21p during the half-year ended 31 March 2012.

·      1,375,000 shares issued during the six month period.

·      Strong increase in revenue return per share (+23.1%).

·      Interim dividends totalling 4.10 pence per share (+2.5%) and fully covered by earnings.

SUMMARY OF UNAUDITED RESULTS

Attributable to equity shareholders	31 March 2012	30 September 2011	% Change
Net assets	£191.99m	£167.29m	+14.8
Net asset value per share	220.21p	194.96p	+13.0
Share price	223.00p	206.00p	+8.3
	Half-year ended 31 March 2012	Half-year ended 31 March 2011	% Change
Revenue return per ordinary share	5.00p	4.06p	+23.2
Dividends per ordinary share
First interim dividend in respect of year to 30 September 2012	* 2.05p	-
30 September 2011	-	2.00p
Second interim dividend in respect of year to 30 September 2012	** 2.05p	-
30 September 2011	-	2.00p
Total interim dividends relating to the period	4.10p	4.00p	+2.5

*   Paid on 30 March 2012.

** Payable on 29 June 2012 to shareholders registered on 1 June 2012.

The Chairman, commenting on the results, said:

In my first report to you since taking over as Chairman after the AGM in February I am pleased to be able to report for the half year ending 31 March 2012 a good absolute increase in our Net Asset Value (NAV) per share of 13% and a total return in NAV (with dividends reinvested) of 15.5%.  This latter figure outperformed the 15.0% total return from the FTSE All-Share Index.

Capital performance

The UK stock market made good progress during the six months under review as the capital value of the FTSE All-Share Index rose by 13.1%.  This advance was not built on any positive economic developments domestically, but instead was more a consequence of companies generally reporting positive earnings and dividend growth, and further financial stimulus to protect the European banking system. While our own NAV kept pace with the index  our share price rose 8.3%, reflecting a contraction of the premium to NAV.

On the latest reported figures, the UK economy has returned to recession over the last six months, despite the poor comparative in the fourth quarter of 2010 when the weather was unusually severe.  The economy in general has experienced anaemic growth since the global financial crisis even though governments and monetary authorities around the world have continued to apply very considerable stimuli in conventional and unconventional ways.  Throughout the period UK interest rates have remained at 0.5% and although there is much talk of fiscal discipline the UK Government continues to spend more in cash terms than last year, increasing Government debt levels.  In Europe, the Central Bank weighed in with a new form of official intervention called the Long Term Refinancing Operation (LTRO); this provided cheap liquidity to banks and also helped to support Euro-zone sovereign bond markets.  It has had a positive impact on financial stocks, especially banks, and more generally on the cyclically sensitive areas of the market.  As our portfolio is underweight in the Banking sector and conversely relatively heavily exposed to more defensive areas such as Telecoms and Utilities, which have attractive yields, this was a drag on our relative performance.

The strongest positive driver of the investment portfolio's return relative to the Index was Cove Energy.  This company's great success in exploring for oil and gas off the east coast of Africa has attracted competing bids, and although this process has not yet completed we have already sold our holding at a premium of more than 210% to the price at the start of the year.  We also benefitted from our holding in Intermediate Capital Group, which has appreciated by more than one-third in value.  It is held in preference to a bank as it is lower risk and has a yield of more than 7%.

Revenue and dividend

Memories of dividend cuts following the financial crisis, subsequent recession and the disaster at BP's Macondo well are fading as companies have generally reported good results with earnings and dividend increases averaging more than 10%.  However, despite recent increases, the aggregate level of dividends from the Index is only back to the level of early 2008.  By contrast, our own dividend payments have been steadily progressive, with the result that as at 31 March 2012 the yield on our shares of 3.9% is significantly above that of the Index at 3.5%.Currently the yield is 4.3% compared with the index of 3.9%.

Our income for the first six months of this year shows an increase of 16% over the comparable period last year.  This is partly a result of a special dividend received from Vodafone and also from increased derivative income.  We only write options opportunistically so the level of income we generate should not be taken as a predictor of annual growth, or indeed that we will produce the same income level next year.  There is underlying growth in dividends from the portfolio and this underpins our own progressive dividend.  Revenue return per ordinary share of 5.0 pence comfortably covers the two dividends (each of 2.05 pence per share) for this period.  The first interim dividend was paid on 30 March 2012 and the second dividend, which has been declared with these results, will be payable on 29 June 2012.

Gearing

The use of gearing throughout the half year has been a positive contributor to our returns.  The cost of borrowing at around 2.5% annualised has been well below the returns achieved on our investments and hence it has been profitable to borrow and invest.  Having started the fiscal year with a short-term loan of £15m, this was reduced to £5m by the half-year end as the tactical decision was taken to reduce gearing after such a strong rise in the stock market. Subsequently borrowings have been switched from sterling to euros.

Audit Review

As described in the annual report we conducted a review of the auditor and as a result of the open tendering process decided to reappoint PricewaterhouseCoopers.

New share issuance at a premium to NAV

For all but one trading day during the last six months, your Company's shares traded at a premium to their underlying NAV, with an average premium across the period of 2.4%.  In response to continued strong demand for your Company's shares, particularly from shareholders who reinvest their quarterly dividends, we issued 1,375,000 new shares during the half year and have issued a further 250,000 since.  The new shares were issued at a small premium to NAV to ensure there is no dilution for existing shareholders.

Outlook

The UK economy is not expected to make significant progress over the short- to medium-term as a combination of the burden of existing debt levels and government austerity precludes a rapid return to growth.  Companies, by contrast, generally have strong finances and many have considerable international exposure, giving them much greater potential for growth. Concerns about the scale of the sovereign debt crisis in the Euro-zone provide a significant headwind for equity markets. Changes in the political landscape in a number of countries have made difficult any predictions as to the likely course of events, and the banking sector in some countries remains under stress. This unhealthy combination is visible in stock market volatility as investors veer between optimism that a solution will be found and pessimism that a Euro-zone catastrophe awaits. In this emotional environment, it is important to stay focused on the portfolio and its ability to generate progressive dividend growth. Indeed, generally expectations for the UK corporate sector are for earnings and dividend growth to be around 10% for this year and next.

Your Company, with its well diversified portfolio, is well positioned and although our income benefited in the first half from special dividends which may not be repeated, our dividend is well covered by underlying earnings and we aim to build on our record of steady dividend growth.

Steven Bates

24 May 2012

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 2011. 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 details on related party transactions.

On behalf of the Board

Steven Bates

Chairman

24 May 2012

Unaudited Condensed Income Statement

Half-year ended 31 March 2012

Half-year ended 31 March 2011

Note		Revenue	Capital	Total	Revenue	Capital	Total
		£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
	Gains on investments and derivatives	-	21,760	21,760	-	10,256	10,256
	Foreign exchange gains/(losses)	-	21	21	-	(1)	(1)
	Income	4,911	-	4,911	4,218	-	4,218
	Management fee	(189)	(189)	(378)	(202)	(202)	(404)
	Other expenses	(338)	(3)	(341)	(390)	(5)	(395)
	Net return before finance costs and taxation	4,384	21,589	25,973	3,626	10,048	13,674
	Finance costs	(52)	(52)	(104)	(98)	(98)	(196)
	Net return on ordinary activities  before taxation	4,332	21,537	25,869	3,528	9,950	13,478
	Taxation on ordinary activities	(4)	-	(4)	(21)	-	(21)
	Net return attributable to shareholders	4,328	21,537	25,865	3,507	9,950	13,457
2	Return per share - pence	5.00	24.88	29.88	4.06	11.64	15.70

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 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
Half-year ended 31 March 2011
Balance at 30 September 2010	21,336	87,452	4,146	4,434	54,572	5,487	177,427
Movements during the half-year ended 31 March 2011
Dividends paid	-	-	-	-	-	(3,931)	(3,931)
Ordinary shares issued	54	428	-	-	-	-	482
Return attributable to shareholders	-	-	-	-	9,950	3,507	13,457
Balance at 31 March 2011	21,390	87,880	4,146	4,434	64,522	5,063	187,435
Year  ended 30 September 2012
Balance at 30 September 2010	21,336	87,452	4,146	4,434	54,572	5,487	177,427
Movements during the year ended 30 September 2011
Dividends paid	-	-	-	-	-	(7,357)	(7,357)
Ordinary shares issued	116	922	-	-	-	-	1,038
Return attributable to shareholders	-	-	-	-	(12,159)	8,341	(3,818)
Balance at 30 September 2011	21,452	88,374	4,146	4,434	42,413	6,471	167,290

Unaudited Condensed Balance Sheet

	31 March 2012	31 March 2011	30 September 2011
	£'000s	£'000s	£'000s
Fixed assets
Investments	195,072	203,543	182,317
Current assets
Debtors	6,015	1,014	996
Cash at bank and short-term deposits	1,070	304	134
	7,085	1,318	1,130
Current liabilities
Short-term loans	(5,000)	(15,000)	(15,000)
Derivative financial instruments	-	(174)	(28)
Other creditors	(5,168)	(2,252)	(1,129)
	(10,168)	(17,426)	(16,157)
Net current liabilities	(3,083)	(16,108)	(15,027)
Net assets	191,989	187,435	167,290
Capital and reserves
Share capital	21,796	21,390	21,452
Share premium account	90,934	87,880	88,374
Capital redemption reserve	4,146	4,146	4,146
Special reserve	4,434	4,434	4,434
Capital reserves	63,950	64,522	42,413
Revenue reserve	6,729	5,063	6,471
Total shareholders' funds	191,989	187,435	167,290
Net asset value per ordinary share - pence	220.21	219.07	194.96

Unaudited Condensed Summary Cash Flow Statement

	Half-year ended	Half-year ended
	31 March 2012	31 March 2011
	£'000s	£'000s
Net cash inflow from operating activities	3,580	3,066
Interest paid	(119)	(241)
Equity dividends paid	(4,070)	(3,931)
Net cash inflow/(outflow) from purchases and sales of investments and derivatives	10,089	(3,716)
Net cash inflow/(outflow) before use of liquid resources and financing	9,480	(4,822)
(Increase)/decrease in short-term deposits	(796)	1,904
Net cash inflow/(outflow) from financing	(7,829)	2,229
Increase/(decrease) in cash	855	(689)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash	855	(689)
(increase)/decrease in short-term deposits	796	(1,904)
Decrease/(increase) in short-term loans	10,000	(1,000)
Exchange movement	21	(1)
Movement in net debt	11,672	(3,594)
Net debt at the beginning of the period	(15,602)	(11,854)
Net debt at the end of the period	(3,930)	(15,448)
Represented by:
Short-term deposits	930	304
Cash at bank/(overdrafts)	140	(752)
	1,070	(448)
Short-term loans	(5,000)	(15,000)
	(3,930)	(15,448)

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 2011.  These accounting policies are expected to be followed throughout the year ending 30 September 2012.

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 2012 £'000s	Half-year ended 31 March 2011 £'000s	Year ended 30 September 2011 £'000s
Revenue return	4,328	3,507	8,341
Capital return	21,537	9,950	(12,159)
Total return	25,865	13,457	(3,818)
	Number	Number	Number
Weighted average ordinary shares in issue	86,575,798	85,451,174	85,560,145

3    Dividend

The second interim dividend in respect of the year ending 30 September 2012 of 2.05 pence per share will be paid on 29 June 2012 to shareholders registered on 1 June 2012. The total cost of this dividend, based on 87,434,268 shares in issue and entitled to dividend on 1 June 2012, is £1,792,000.

4    Results

The results for the half-year ended 31 March 2012 and 31 March 2011, 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 2011; 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 2011 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

24 May 2012

 

END

 

 

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