Half Yearly Report
To: RNS
From: Investors Capital Trust plc
Date: 12 November 2009
Highlights
-
Net asset value per share total return for the six months of 31.6 per cent compared to the FTSE All-Share Capped 5% Index total return of 36.3 per cent
-
Distribution yield of 6.9 and 6.7 per cent on A and B shares respectively at 30 September 2009
-
Distributions paid quarterly
Interim Results
The Board of Investors Capital Trust plc announces the unaudited interim results of the Company for the six month period to 30 September 2009
Chairman's Statement
Introduction
A marked improvement in investor optimism over the prospects for global economic recovery has contributed to a sharp rally in equity markets and other risk assets during the last six months. It is against this background that I report on the Company's financial results for the six month period to 30 September 2009.
Investment Objective and Policy
The Company's investment objective is to provide an attractive return to shareholders each year in the form of dividends and/or capital distributions together with prospects for capital growth.
The Company's investment portfolio is managed in two parts. The first part comprises investments in UK equities and equity-related securities (the Equities Portfolio) and the second part investments in fixed interest and other higher yielding securities (the Higher Yield Portfolio). This allocation will vary as a result of market movements and investment strategy.
At 30 September 2009 the Company's total assets were £134.0m, 61.7 per cent of total assets was allocated to the Equities Portfolio, 29.6 per cent to the Higher Yield Portfolio and the remaining 8.7 per cent was held as cash.
Investment Performance
The Company's net asset value per A share and per B share at 30 September 2009 was 76.4p and per unit was 305.6p. The capital performance, together with dividends and capital distributions added back, resulted in a net asset value total return of 31.6 per cent for share and unit holders over the six month period to 30 September 2009. This compares to the total return from the FTSE All-Share Capped 5% Index of 36.3 per cent over the same period.
At the time of writing my last report to shareholders the outlook for the global economy and financial markets appeared highly uncertain. Governments around the world had committed enormous amounts of capital to bank rescue and economic stimulus packages, Central Banks had reduced interest rates to close to zero and, in the US and UK the need for further stimulus had prompted the Federal Reserve and Bank of England to embark on quantitative easing or "printing money". During the first quarter of 2009 the UK economy suffered its worst contraction for over thirty years while financial markets remained in turmoil.
As the Company's current year began in April 2009 financial markets stabilised as the worst fears of depression and deflation subsided. The speed and scale of the fiscal and monetary policy response to the financial crisis appeared to have given investors confidence that not only would the global economy avoid a protracted downturn but that it would, in fact, grow in 2010. This marked shift in investor sentiment against a background of attractive valuations and high levels of institutional cash fuelled an aggressive rally in both equity and credit markets, which continued almost unabated through the last six months.
During the reporting period, the Company's Equities Portfolio produced a total return of 27.9 per cent, which was less than the 36.3 per cent total return from the FTSE All-Share Capped 5% Index. The Equities Portfolio is biased towards companies which have strong balance sheets, above average visibility of earnings, strong cash flow and good dividend cover. This focus has served the Company well since launch. During the recent market rally interest rate sensitive cyclical shares performed best by a considerable margin, most notably in the financial and commodity sectors of the market. While the Equities Portfolio is well represented in the commodities sectors of oil and gas, and mining, it has only a modest exposure to financials, where dividend cuts have been more prevalent. This limited equity exposure is in part due to the more significant exposure of the Higher Yield Portfolio to financial issuers. The Company's Higher Yield Portfolio which comprises predominantly investment grade corporate bonds returned 22.0 per cent during the period. The returns from the Equities Portfolio and the Higher Yield Portfolio, combined with the effect of gearing, resulted in the net asset value total return of 31.6 per cent.
Earnings
The Company achieved total revenue income of £3.1m for the six month period to 30 September 2009. The yield on the Equities Portfolio was 4.2 per cent at 30 September 2009, equivalent to a yield relative to the FTSE All-Share Index of 125 per cent. The yield on the Higher Yield Portfolio was 6.2 per cent as at 30 September 2009.
In my last report I noted that the outlook for dividend income had deteriorated. Indeed, the Company's revenues for the period were lower than initially anticipated due to cuts in dividend payments from within the Company's Equities Portfolio. The Company also received a reduced level of interest income due to the combination of low interest rates on deposits and a lower than average cash balance than in the prior period. The Company's cash balance was reduced over the past six months principally in favour of equities. Income from the Higher Yield Portfolio, which comprised predominantly investment grade corporate bonds, was broadly at the level anticipated.
After providing for the second quarter dividend, the Company had revenue reserves of £0.8m at 30 September 2009.
Dividends and Capital Returns
Dividends to A shareholders and capital distributions to B shareholders are paid quarterly in August, November, February and May each year. In respect of the Company's first and second quarters, the dividends declared on the A shares and capital distributions on the B shares were 1.325p per share for each quarter.
The combination of aggressive cost cutting from the corporate sector together with evidence of global economic recovery suggests that the near-term prospects for corporate earnings have improved. The outlook for dividends is less clear, particularly looking into 2010, as the need for companies to strengthen balance sheets and rebuild working capital in the aftermath of recession can put strain on dividend payments even after corporate earnings have begun to recover. The Board will continue to monitor closely market developments in this regard. However it still envisages, barring unforeseen circumstances, that the Company will pay, through the partial use of revenue reserves, dividends to A shareholders and capital distributions to B shareholders of 1.325p per share for the third quarter and 1.375p per share in respect of the fourth quarter, totalling 5.35 pence per share for the year.
The distribution yields for A and B shareholders were 6.9 per cent and 6.7 per cent respectively based on the share prices as at 30 September 2009 and this compares favourably with the yield on the FTSE All-Share Index of 3.3 per cent at that date. For shareholders that hold units, the distribution yield was 7.0 per cent based on a unit price of 305.0p as at 30 September 2009.
The Company operates a distribution reinvestment scheme to enable B shareholders to reinvest their capital distributions in further B shares if they wish; details are available from the Company's Registrars.
Discount and buy backs
The share price of the Company's A shares and B shares traded over the six month period at an average discount to net asset value per A share of 0.8 per cent and an average premium per B share of 0.4 per cent. The Company has a stated buyback policy and, in accordance with this policy the Company bought back 0.2m A shares and 0.1m B shares to be held in treasury during the period at an average discount of five per cent to net asset value, thereby adding value for remaining shareholders.
During the period the Company resold 2.1m B shares from treasury, reflecting strong investor demand. These shares were sold at net asset value or above, enhancing returns for existing shareholders.
Directors
During the period the Board appointed Mr James Williams as a non executive director. He retired from Barings in 2002, where he was Chief Investment Officer and Head of Global Strategy. He is a director of other investment companies and his extensive involvement in the investment management industry for many years will, I am sure, contribute significantly to the deliberations of the Board.
Outlook
The worst of the financial crisis may now be behind us. Nevertheless there remain some major challenges to the sustainability of the economic recovery beyond the current year. These include the timing and pace at which the unprecedented policy stimulus is withdrawn, the ongoing reduction of leverage from the credit boom, and the extent to which consumer spending is impacted by rising unemployment, the need for higher taxes and perhaps a greater propensity to save. As a result, the Company's Equities Portfolio continues to favour businesses that have strong balance sheets and offer dividend resilience, and the Higher Yield Portfolio retains a bias to investment grade corporate bonds.
J Martin Haldane
Chairman
Unaudited Consolidated Income Statement
For the six month period to 30 September 2009
|
|
Six months to 30 September 2009 |
||
|
|
|
|
|
|
|
Revenue Return |
Capital |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Gains on investments held at fair value |
- |
21,144 |
21,144 |
|
Exchange differences |
- |
507 |
507 |
|
Investment income |
3,148 |
- |
3,148 |
|
Investment management fee |
(102) |
(307) |
(409) |
|
Other expenses |
(187) |
- |
(187) |
|
Profit before finance costs and taxation |
2,859 |
21,344 |
24,203 |
|
|
|
|
|
|
Net finance costs |
|
|
|
|
Interest on bank loan and interest rate swap |
(297) |
(693) |
(990) |
|
Total finance costs |
(297) |
(693) |
(990) |
|
|
|
|
|
|
Return before taxation |
2,562 |
20,651 |
23,213 |
|
Tax on ordinary activities |
(179) |
179 |
- |
|
Net profit for the period |
2,383 |
20,830 |
23,213 |
|
Other comprehensive income: |
|
|
|
|
Net gain on revaluation of interest rate swap |
- |
418 |
418 |
|
Total comprehensive income for the period, net of tax |
2,383 |
21,248 |
23,631 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
1.9p |
16.5p |
18.4p |
Unaudited Consolidated Income Statement
For the six month period to 30 September 2008
|
|
Six months to 30 September 2008 |
||
|
|
|
|
|
|
|
Revenue |
Capital |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Losses on investments held at fair value |
- |
(13,348) |
(13,348) |
|
Exchange differences |
- |
(200) |
(200) |
|
Investment income |
3,718 |
- |
3,718 |
|
Investment management fee |
(119) |
(356) |
(475) |
|
Other expenses |
(206) |
- |
(206) |
|
Profit/(loss) before finance costs and taxation |
3,393 |
(13,904) |
(10,511) |
|
|
|
|
|
|
Net finance costs |
|
|
|
|
Interest on bank loan and interest rate swap |
(297) |
(692) |
(989) |
|
Total finance costs |
(297) |
(692) |
(989) |
|
|
|
|
|
|
Return before taxation |
3,096 |
(14,596) |
(11,500) |
|
Tax on ordinary activities |
(340) |
293 |
(47) |
|
Net profit/(loss) for the period |
2,756 |
(14,303) |
(11,547) |
|
Other comprehensive income: |
|
|
|
|
Net gain on revaluation of interest rate swap |
- |
264 |
264 |
|
Total comprehensive income for the period, net of tax |
2,756 |
(14,039) |
(11,283) |
|
|
|
|
|
|
Earnings per share |
2.1p |
(11.2p) |
(9.1p) |
Unaudited Consolidated Income Statement
For the year to 31 March 2009
|
|
Year to 31 March 2009* |
||
|
|
|
|
|
|
|
Revenue Return |
Capital |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Losses on investments held at fair value |
- |
(28,951) |
(28,951) |
|
Exchange differences |
- |
(2,440) |
(2,440) |
|
Investment income |
6,960 |
- |
6,960 |
|
Investment management fee |
(211) |
(491) |
(702) |
|
Other expenses |
(383) |
- |
(383) |
|
Profit/(loss) before finance costs and taxation |
6,366 |
(31,882) |
(25,516) |
|
|
|
|
|
|
Net finance costs |
|
|
|
|
Interest on bank loan and interest rate swap |
(592) |
(1,381) |
(1,973) |
|
Total finance costs |
(592) |
(1,381) |
(1,973) |
|
|
|
|
|
|
Return before taxation |
5,774 |
(33,263) |
(27,489) |
|
Tax on ordinary activities |
(620) |
524 |
(96) |
|
Net profit/(loss) for the period |
5,154 |
(32,739) |
(27,585) |
|
Other comprehensive income: |
|
|
|
|
Net loss on revaluation of interest rate swap |
- |
(2,668) |
(2,668) |
|
Total comprehensive income for the period, net of tax |
5,154 |
(35,407) |
(30,253) |
|
|
|
|
|
|
Earnings per share |
4.1p |
(25.9p) |
(21.8p) |
*These figures are audited
Condensed Unaudited Consolidated Balance Sheet
|
|
As at 30 Sept 2009 |
As at 30 Sept 2008 |
As at 31 March 2009* |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
Investments held at fair value through profit or loss |
122,368 |
105,742 |
87,661 |
|
|
122,368 |
105,742 |
87,661 |
|
Current assets |
|
|
|
|
Other receivables |
1,437 |
1,276 |
1,599 |
|
Cash and cash equivalents |
11,939 |
27,301 |
24,403 |
|
|
13,376 |
28,577 |
26,002 |
|
Total assets |
135,744 |
134,319 |
113,663 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Other payables |
(1,732) |
(1,306) |
(689) |
|
|
(1,732) |
(1,306) |
(689) |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Bank loan |
(33,478) |
(33,472) |
(33,476) |
|
Interest rate swap on bank loan |
(2,994) |
(480) |
(3,412) |
|
|
(36,472) |
(33,952) |
(36,888) |
|
|
|
|
|
|
Total liabilities |
(38,204) |
(35,258) |
(37,577) |
|
Net assets |
97,540 |
99,061 |
76,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
Called-up share capital |
134 |
138 |
134 |
|
Share premium |
22 |
22 |
22 |
|
Capital redemption reserve |
5 |
1 |
5 |
|
Buy back reserve |
90,990 |
89,851 |
89,227 |
|
Special capital reserve |
30,363 |
31,986 |
31,189 |
|
Capital reserves |
(26,007) |
(25,323) |
(46,725) |
|
Revenue reserve |
2,033 |
2,386 |
2,234 |
|
Shareholders' funds |
97,540 |
99,061 |
76,086 |
|
|
|
|
|
|
Net asset value per A share |
76.4p |
78.1p |
60.5p |
|
Net asset value per B share |
76.4p |
78.1p |
60.5p |
|
|
|
|
|
|
|
|
|
|
|
|
|||
*These figures are audited
Condensed Unaudited Consolidated Statement of Changes in Equity
|
|
Six months to 30 Sept 2009 |
Six months to 30 Sept 2008 |
Year to 31 March 2009* |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Opening equity shareholders' funds |
76,086 |
115,255 |
115,255 |
|
Net profit/(loss) for the period |
23,213 |
(11,547) |
(27,585) |
|
Unrealised gain/(loss) on revaluation of interest rate swap |
418 |
264 |
(2,668) |
|
Shares sold from treasury |
1,427 |
- |
60 |
|
Shares bought back for cancellation |
- |
- |
(544) |
|
Shares bought back for treasury |
(194) |
(1,455) |
(1,629) |
|
Dividends paid on A shares |
(2,584) |
(2,633) |
(5,183) |
|
Capital distributions paid on B shares |
(826) |
(823) |
(1,620) |
|
|
|
|
|
|
Closing equity shareholders' funds |
97,540 |
99,061 |
76,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*These figures are audited
Condensed Unaudited Consolidated Cash Flow Statement
|
|
Six months to 30 Sept 2009 |
Six months to 30 Sept 2008 |
Year to 31 March 2009* |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Net cash flow from operating activities |
(9,673) |
3,872 |
7,870 |
|
Net cash flow from financing activities |
(3,649) |
(5,897) |
(10,398) |
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
(13,322) |
(2,025) |
(2,528) |
|
Currency gains/(losses) |
858 |
(297) |
(2,692) |
|
Cash and cash equivalents at beginning of period |
24,403 |
29,623 |
29,623 |
|
Cash and cash equivalents at end of period |
11,939 |
27,301 |
24,403 |
*These figures are audited
Statement of Principal Risks and Uncertainties
The Company's assets consist mainly of listed securities and its principal risks are therefore market related. Other risks faced by the Company include external, investment and strategic, regulatory, operational and financial risks. These risks, and the way in which they are managed, are described under the heading Principal Risks and Risk Management within the Report of the Directors in the Group's Annual Report for the year ended 31 March 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 remaining six months of the Group's financial year.
Statement of Directors' Responsibilities in Respect of the Interim Results
We confirm that to the best of our knowledge:
-
the condensed set of consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting';
-
the Chairman's Statement (constituting the Interim Management Report) together with the Statement of Principal Risks and Uncertainties include a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of consolidated financial statements; and
-
the Chairman's Statement together with the condensed set of consolidated financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.
On behalf of the Board
J Martin Haldane
Director
IAS 1 'Presentation of Financial Statements (Amendment)'
|
|
30 Sept 2009
|
30 Sept 2008
|
31 March 2009
|
|
|
£'000
|
£'000
|
£'000
|
|
Equity investments
|
1,923
|
1,883
|
3,559
|
|
Fixed interest investments
|
1,158
|
1,150
|
2,452
|
|
Deposit interest
|
45
|
685
|
939
|
|
Other income
|
22
|
-
|
10
|
|
|
3,148
|
3,718
|
6,960
|
Business Limited receives an investment management fee comprising a base fee and a performance fee.
|
|
Six months to
30 Sept
2009 |
Six months to
30 Sept
2008 |
Year
to
31 March 2009
|
|
|
£'000
|
£'000
|
£'000
|
|
In respect of the previous period:
|
|
|
|
|
Fourth interim dividend paid at 1.375p per A share
|
1,317
|
1,347
|
1,347
|
|
Fourth capital distribution paid at 1.375p per B share
|
413
|
421
|
421
|
|
|
|
|
|
|
In respect of the period under review:
|
|
|
|
|
First interim dividend paid at 1.325p per A share
|
1,267
|
1,286
|
1,286
|
|
First capital distribution paid at 1.325p per B share
|
413
|
402
|
402
|
|
Second interim dividend paid at 1.325p per A share
|
-
|
-
|
1,281
|
|
Second capital distribution paid at 1.325p per B share
|
-
|
-
|
400
|
|
Third interim dividend paid at 1.325p per A share
|
-
|
-
|
1,269
|
|
Third capital distribution paid at 1.325p per B share
|
-
|
-
|
397
|
|
|
3,410
|
3,456
|
6,803
|
95,578,144 A shares and 32,051,703 B shares, being the number of shares in issue at the period end (30 September 2008 - 96,658,144 A shares and 30,206,703 B shares; 31 March 2009 - 95,818,144 A shares and 30,026,703 B shares).
The Interim Report will be posted to shareholders during November and will be available on the website:
www.investorscapital.co.uk
This information is provided by RNS
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