Interim Results
F&C Capital & Income Inv Tst PLC
26 May 2006
Date: 26 May 2006
Contact: Julian Cane
F&C Management Limited
020 7628 8000
F&C CAPITAL AND INCOME INVESTMENT TRUST PLC
Unaudited Interim Statement of Results
for the half-year ended 31 March 2006
HIGHLIGHTS OF RESULTS
• The NAV per share produced a rise of 11.2%, modestly outperforming the
benchmark FTSE All-Share index's 11.0% return.
• At the end of the period the share price stood at a 3.8% discount to the
NAV per share (on an ex dividend basis). The Company tries to ensure that,
so far as possible, the share price does not trade at a material discount
to the NAV per share.
• The Company remains committed to steady dividend growth. The second
interim payment of 1.5 pence per share, together with the first interim
dividend of 1.4 pence per share, represents a 6.4% increase on last year's
single interim payment.
• Earnings per share increased 21.5% in the period.
SUMMARY OF UNAUDITED RESULTS FOR THE HALF-YEAR TO 31 MARCH 2006
31 March 2006 30 September 2005 % Change
Net assets £198.854m *£179.346m +10.9
Net asset value per share 245.15p *220.39p +11.2
Share price 233.00p 211.25p +10.3
6 months to 6 months to
31 March 2006 31 March 2005 % Change
Revenue earnings per share+ 3.28p 2.70p +21.5
Dividends per share 2.90p 2.725p +6.4
* Restated for changes in accounting policies (see note 1)
+ The results for the 6 months ended 31 March 2006 are not directly comparable
with the corresponding prior period as a consequence of the merger of the
Company with F&C Income Growth Investment Trust PLC on 5 May 2005.
Chairman's Statement
Dear Shareholder,
The six months under review from 30 September 2005 to 31 March 2006 saw a strong
rise in the UK stock market as the FTSE All-Share index increased by 11.0%. It
is positive that the net asset value per share of your Company increased by a
little more than this at 11.2%, although the share price only increased by 10.3%
as the shares moved to trade at a slightly larger discount to the net asset
value. The second interim dividend of 1.5 pence per share, together with the
first interim of 1.4 pence, gives an increase of 6.4% on last year's single
interim payment.
Capital Performance
The UK stock market continued to make strong progress from the low point it
experienced in March 2003, with the FTSE All-Share index more than 75% higher
than three years previously, but still a little below the peak reached at the
end of 1999. Companies reported good levels of profit and earnings growth over
the last six months and this was one of the main driving forces behind the
market's rise. In addition to this, the low level of bond yields and interest
rates were supportive, as in a relative sense they make equities more attractive
and encouraged a number of corporate bid approaches both from private equity and
other companies. Many of these bids were not successful, but they helped to
highlight the value in those companies approached and the market more generally.
Amongst the best performers in the portfolio over the six months were Alliance &
Leicester (+43%), BAA (+33%) and BOC (+34%) as they were all subject to
take-over rumours or activity, whether successful or not. It has been very
noticeable that smaller companies, which have tended to be the focus of such
corporate activity, have performed more strongly than larger companies. This
divergence shows clearly in the most disappointing investments which include
Vodafone (-18%) and Royal Dutch Shell (-4%) and BP (-2%), all amongst the very
largest companies in the market.
Revenue and dividend
Dividend growth for the UK stock market averaged close to 10% over the last year
as companies experienced good levels of profit growth and their financial
positions were strengthened by positive cash flows. Your Company's growth in
revenue earnings per share was very strong at 21.9% as it benefited from good
dividend increases from the companies in its portfolio, special dividends paid
by mining companies in response to exceptionally favourable conditions, and from
the timing of the receipt of dividends, some of which were received in the first
half of this year, compared to the second half of last year. The portfolio's
underlying rate of revenue growth was not quite as strong as the market as your
Company had an above average exposure towards higher yielding shares, where the
rates of dividend growth were not as marked. Overall, your Company's rate of
dividend growth compares well to the current rate of inflation.
Since the merger last year with F&C Income Growth Investment Trust, the Company
has moved to paying dividends on a quarterly basis; the two interim dividends
for the first half of this year, totalling 2.9 pence per share, compare to the
single interim dividend of 2.725 pence for the six months to 31 March 2005.
The Directors' aim for the year is to build on your Company's record of steady
dividend growth. To this end, stronger dividend growth in the market generally,
together with the benefits that continue to accrue from last year's merger,
should be helpful.
The Company has adopted new accounting policies, detailed in notes 1 and 8.
Dividends are no longer accrued in the year to which they relate and are no
longer taken through the Income Statement. Instead they are recognised when
paid, through the Reconciliation of Movements in Shareholders' Funds.
Discount to Net Asset Value and Share Buy-Backs
The Board believes that shareholders are appreciative of a share price that does
not trade at any material discount to net asset value, and it has maintained its
commitment to manage this, so far as is possible. With this aim in view,
260,000 shares were repurchased during the period under review. In spite of
this the discount widened slightly from 2.8% to 3.8% but remained below the peer
group average.
Outlook
Over the last couple of weeks there has been considerable volatility as share
prices have dropped fairly rapidly. No one single event appears to have been
the cause for this, but uncertainty over the course of future interest rates and
inflation are key. Although there are other reasons to be concerned, such as
high levels of personal indebtedness and a rising tax burden, the economic
environment is generally supportive. Companies have been reporting good
increases in earnings and dividends and the current expectation is for this
growth to continue at close to double digit rates throughout this year, before
moderating in 2007.
This strong growth, together with valuation levels which still compare
favourably relative to bonds or cash, should provide some underpinning to the
market. However it remains to be seen whether, in the short term, these will be
sufficient to reverse all or part of the recent downturn.
Pen Kent
May 2006
UNAUDITED INCOME STATEMENT
6 months to 31 March 2006 6 months to 31 March 2005
Restated* Restated*
Revenue Capital Total+ Revenue Capital Total+
£'000s £'000s £'000s £'000s £'000s £'000s
Gains on investments - 20,261 20,261 - 9,463 9,463
Exchange gains/(losses) on currency balances 1 (24) (23) (1) (8) (9)
Income 3,264 - 3,264 1,615 - 1,615
Management fee (230) (230) (460) (119) (119) (238)
Other expenses (260) (15) (275) (123) (12) (135)
Net return before finance costs and
taxation 2,775 19,992 22,767 1,372 9,324 10,696
Interest payable and similar charges (95) (95) (190) (72) (72) (144)
Return on ordinary activities before
taxation 2,680 19,897 22,577 1,300 9,252 10,552
Taxation on ordinary activities (14) - (14) (8) - (8)
Return attributable to equity shareholders 2,666 19,897 22,563 1,292 9,252 10,544
Return per ordinary share - pence 3.28 24.50 27.78 2.70 19.32 22.02
+The total column 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.
* Restated for changes in accounting policies (see note 1)
UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Called up Share Capital Total
Share premium redemption Special Capital Revenue Shareholders'
capital account reserve reserve reserves reserve Funds
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance at 30 September 2004
(as previously reported) 12,051 18,771 3,154 12,348 36,970 1,005 84,299
Investment valuation
restatements* - - - - (83) - (83)
Dividend accrued at
30 September 2004* - - - - - 1,293 1,293
Balance at 30 September 2004
(restated) 12,051 18,771 3,154 12,348 36,887 2,298 85,509
Dividends paid during the year* - - - - - (2,615) (2,615)
Purchase of ordinary shares held
in treasury during the year - - - (2,360) - - (2,360)
Sale of ordinary shares held in
treasury during the year - 272 - 1,972 - - 2,244
Issue of ordinary shares during
the year 8,497 57,291 - - - - 65,788
Return attributable to equity
shareholders during the year
ended 30 September 2005
(as previously reported) - - - - 26,785 4,046 30,831
Investment valuation
restatements* - - - - (51) - (51)
Balance at 30 September 2005
(restated) 20,548 76,334 3,154 11,960 63,621 3,729 179,346
Dividends paid during the period* - - - - - (2,499) (2,499)
Purchase of ordinary shares held
in treasury during the period - - - (556) - - (556)
Return attributable to equity
shareholders during the
period - - - - 19,897 2,666 22,563
Balance carried forward at
31 March 2006 20,548 76,334 3,154 11,404 83,518 3,896 198,854
* Restated for changes in accounting policies (see note 1)
UNAUDITED BALANCE SHEET
At 31 Mar 2006 At 31 Mar 2005 At 30 Sep 2005
(Restated)* (Restated)*
£'000s £'000s £'000s
Fixed assets
Investments held at fair value 206,394 101,554 185,730
Current assets
Debtors 1,552 782 6,568
Taxation recoverable 2 5 14
Cash at bank and short-term deposits 9 337 1,700
1,563 1,124 8,282
Creditors: amounts falling due within
one year
Short-term loans (8,000) (5,500) (8,500)
Other creditors (1,103) (333) (6,166)
(9,103) (5,833) (14,666)
Net current liabilities (7,540) (4,709) (6,384)
Net assets 198,854 96,845 179,346
Capital and reserves
Called up share capital 20,548 12,144 20,548
Share premium account 76,334 19,679 76,334
Capital redemption reserve 3,154 3,154 3,154
Special reserve 11,404 13,454 11,960
Capital reserves 83,518 46,139 63,621
Revenue reserve 3,896 2,275 3,729
Total equity shareholders' funds 198,854 96,845 179,346
Net asset value per ordinary share
- pence 245.15 199.70 220.39
* Restated for changes in accounting policies (see note 1)
UNAUDITED CASH FLOW STATEMENT
6 months to 6 months to
31 March 2006 31 March 2005
£'000s £'000s
Net cash inflow from operating activities 1,814 3,752
Interest paid (190) (360)
Total tax paid (1) (45)
Equity dividends paid (2,499) (2,615)
Net cash outflow from purchases and sales of investments (40) (1,482)
Net cash inflow before use of liquid resources and financing (916) (750)
Decrease/(increase) in short-term deposits 1,700 (1,700)
Net cash (outflow)/inflow from financing (1,170) 1,379
Decrease in cash during the period (386) (1,071)
Reconciliation of net cash flow to movement in net debt
Decrease in cash during the period (386) (1,071)
(Decrease)/increase in short-term deposits (1,700) 1,700
(Decrease)/increase in short-term loans 500 (2,500)
Exchange movement (24) 9
Movement in net debt in the period (1,610) (1,862)
Net funds at the beginning of the period (7,119) (5,257)
Net debt at the end of the period (8,729) (7,119)
Notes
1 ACCOUNTING POLICIES
Changes in Accounting Policies
With effect from 1 October 2005, the Company has adopted Financial Reporting
Standards (FRS) 21 to 26. The effects of adoption are described briefly below.
FRS 21 (Events after the Balance Sheet date) - Dividends paid by the Company are
accounted for in the period in which the Company is liable to pay them.
Previously the Company accrued dividends in the period in which the net revenue
to which those dividends related, was accounted for.
FRS 25 (Financial Instruments: Disclosure and Presentation) and FRS 26
(Financial Instruments: Measurement) - The Company has designated its assets as
being measured at "fair value through profit and loss". The fair value of fixed
asset listed investments is deemed to be the bid value of those investments at
the close of business on the relevant date. Previously, all listed investments
were valued at middle market value.
There have been no other changes to accounting policies during the period.
The accounts for the period ended 31 March 2005 and for the year ended 30
September 2005 have been restated to give effect to the above changes. Notes 3
and 4 further explain these restatements.
2 DIVIDEND
The first interim dividend of 1.40p was paid on 3 April 2006 to shareholders
registered on 3 March 2006. The total cost of this dividend, based on
81,116,279 shares entitled to the dividend, was £1,136,000. The second interim
dividend of 1.50p will be paid on 3 July 2006 to shareholders registered on 9
June 2006. The total cost of this dividend, based on 81,116,279 shares entitled
to the dividend, is £1,217,000.
3 RETURN PER ORDINARY SHARE
Returns 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 reflective of the total likely to be received in the
full accounting year.
6 months to 6 months to Year to
31 Mar 2006 31 Mar 05 30 Sep 05
(Restated) (Restated)
£'000s £'000s £'000s
Total return 22,563 10,544 30,780
Revenue return 2,666 1,292 4,046
Capital return 19,897 9,252 26,734
Weighted average ordinary shares in issue* 81,229,686 47,882,947 61,686,327
* Shares held in treasury have been excluded
from the weighted average number of shares in
issue.
6 months to Year to
31 Mar 05 30 Sep 05
As previously stated £'000s £'000s
Total return 10,553 30,831
Capital return 9,261 26,785
The total and capital returns for the six months to 31 March 2005 and year to 30
September 2005 have been decreased by £9,000 (0.02 per share) and £51,000 (0.08
pence per share) respectively. This reflects the effect of the decrease in
valuation of investments, as a result of the change in accounting policy, at 1
October 2004 by £83,000, 31 March 2005 by £92,000 and 30 September
2005 by £134,000. (see note 4).
4 RESTATEMENT OF OPENING BALANCES
A reconciliation is given between the closing balances per the 31 March 2005 and
30 September 2005 accounts and the restated balances following adoption of
revisions to UK GAAP.
Balance Sheet Previously reported Restated
31 March 2005 Adjustment 31 March 2005
£'000s £'000s £'000s
Fixed assets
Investments held at fair value* 101,646 (92) 101,554
Current assets
Debtors 782 - 782
Taxation recoverable 5 - 5
Cash at bank and short-term deposits
337 - 337
1,124 - 1,124
Creditors: amounts falling due within
one year
Short-term loans (5,500) - (5,500)
Other creditors** (1,655) 1,322 (333)
(7,155) 1,322 (5,833)
Net current liabilities (6,031) 1,322 (4,709)
Net assets 95,615 1,230 96,845
Capital and reserves
Called up share capital 12,144 - 12,144
Share premium account 19,679 - 19,679
Capital redemption reserve 3,154 - 3,154
Special reserve 13,454 - 13,454
Capital reserves* 46,231 (92) 46,139
Revenue reserve** 953 1,322 2,275
Total equity shareholders' funds 95,615 1,230 96,845
Net asset value per ordinary share -
pence
197.16 2.54 199.70
Note to the restatement of opening balances
* Effect of revaluation of fixed asset investments from middle market value to
bid value
** Effect of not recognising dividends paid declared after the balance sheet
date
4 RESTATEMENT OF OPENING BALANCES (continued)
Balance Sheet Previously reported Restated
30 September 2005 Adjustment 30 September 2005
£'000s £'000s £'000s
Fixed assets
Investments held at fair value* 185,864 (134) 185,730
Current assets
Debtors 6,568 - 6,568
Taxation recoverable 14 - 14
Cash at bank and short-term deposits
1,700 - 1,700
8,282 - 8,282
Creditors: amounts falling due within
one year
Short-term loans (8,500) - (8,500)
Other creditors** (8,677) 2,511 (6,166)
(17,177) 2,511 (14,666)
Net current liabilities (8,895) 2,511 (6,384)
Net assets 176,969 2,377 179,346
Capital and reserves
Called up share capital 20,548 - 20,548
Share premium account 76,334 - 76,334
Capital redemption reserve 3,154 - 3,154
Special reserve 11,960 - 11,960
Capital reserves* 63,755 (134) 63,621
Revenue reserve** 1,218 2,511 3,729
Total equity shareholders' funds 176,969 2,377 179,346
Net asset value per ordinary share -
pence
217.47 2.92 220.39
Note to the restatement of opening balances
* Effect of revaluation of fixed asset investments from middle market value to
bid value
** Effect of not recognising dividends paid after the balance sheet date
5 RESULTS
The results for the six months to 31 March 2006 and 31 March 2005, which are
unaudited, constitute non-statutory accounts within the meaning of Section 240
of the Companies Act 1985. The latest published accounts which have been
delivered to the Registrar of Companies are for the year ended 30 September
2005; the report of the auditors thereon was unqualified and did not contain a
statement under Section 237 of the Companies Act 1985. The abridged financial
statements shown above for the year ended 30 September 2005 are an extract from
those accounts (except as noted above).
By order of the Board
F&C Management Limited, Secretary
Exchange House, Primrose Street, London EC2A 2NY
26 May 2006
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