Half Year Results

RNS Number : 3390H

JPMorgan Mid Cap Invest Trust PLC

18 February 2010

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN MID CAP

INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST DECEMBER 2009

Chairman's Statement

Performance

Conditions for equity investors have much improved over the second half of 2009 as economies across the world emerged from recession. During this period the Company achieved a positive total return on net assets per share of 24.2%. The Company's return to shareholders (share price and net dividend) was 19.1%, reflecting a widening of the discount from 11.6% to 14.4%. In comparison, the return of the FTSE 250 Index (excluding investment trusts) was 27.7%.  In my Chairman's Statement for the last financial year, I commented on the appointment in May 2009 of Jane Lennard and William Meadon as the new management team from JPMorgan Asset Management. I am pleased to note an improvement in relative performance in recent months and your Board remains confident that we have the right team in place. 

A more detailed review of the Company's performance is given in the Investment Managers' Report.

Revenue and dividends

Revenue after taxation for the six months to 31st December 2009 was £1,358,000 (2008: £3,282,000) and earnings per share, calculated on the average weekly number of shares in issue, were 5.36p (2008: 12.89p). The significant decrease in revenue received over the first half of the year compared with the same period last year reflects the reduced dividend payouts by mid cap companies and the VAT and associated interest recovered by the Company in the earlier period amounting to £1.2 million.

The Board recognises the importance of income to shareholders and, despite intense pressure on corporate earnings and dividends, proposes to maintain this year's interim dividend at 5.50p (2009: 5.50p). It should be noted however that forecast revenue for the full year remains significantly depressed and, whilst the Company does have substantial revenue reserves, the level of the final dividend will depend upon the Board's assessment of the trends of dividend payouts by the midcap sector over the coming months. The interim dividend will be paid on 8th April 2010 to shareholders on the register at the close of business on 26th February 2010.

Loan facilities and Gearing

The Company remained modestly geared throughout the half year, reflecting the Board's view regarding the benefits of long term gearing, ending at 111%. The Company has a £9.5m debenture, which is redeemable at par in 2016 or at the option of the Company after 1st December 2011, and a one year £8m revolving credit facility with the ING Bank, which expires in June 2010. The Board is seeking to renew and extend the facility. Gearing contributed 1.6% to returns over the period.

Share Buybacks

No ordinary shares of the Company were purchased over the course of the six months under review. The total number of ordinary shares held in Treasury as at the period end was 820,500. 

Prospects

Despite considerable uncertainty about the strength of the economic recovery, UK companies appear to have strengthened their balance sheets and restored cash flows. Corporate profit expectations for the current year appear to be very positive and the valuation of UK equities does not seem extreme by past standards. We support our managers' positive view of UK equities and have confidence in their ability to find value in the midcap sector.

Investment trusts remain attractive long term investment vehicles and we believe our low costs compared with other trusts and our peer group gives us an added advantage.

Andrew Barker

Chairman                                                                                                                    

18th February 2010

Investment Managers' Report

Performance and Market Background

For the first half of the Company's financial year the net asset value total return of 24.2% underperformed the Company's benchmark index, the FTSE 250 excluding Investment Trusts, which returned 27.7%. A widening of the discount from 11.6% to 14.4% resulted in a total return to shareholders of 19.1%. The Company remained geared throughout the first six months of the financial year which added to performance as the market rose.

The UK equity market benefited from an increase in investor risk appetite and the FTSE 250 index continued to rally during the period under review. Many companies repaired their balance sheets with the equity market fulfilling its role as a provider of capital; during 2009 £82.2bn of new equity capital was raised by UK listed companies. In addition, poor returns on cash deposits prompted investors to consider the yield opportunities in the stock market. As balance sheet worries subsided and many companies reported better than expected profits, the market built on the positive momentum witnessed during the second quarter of the calendar year.

Portfolio

Having taken over responsibility for the portfolio in May of 2009, we spent the early part of the period under review reorganising the portfolio. This inevitably led to a higher than usual level of turnover (65%) during the first half of the year as, amongst others, Aggreko, Tullett Prebon, Wolseley and Ashtead were sold and Misys, Drax, Kesa and Venture Productions were bought.

Large transactions during the latest quarter included a purchase of Rentokil (the global services company that specialises in pest control and facilities management) that had been demoted from the FTSE 100 and Imagination Technologies (a company that develops and licences software for graphics chips used in consumer electronic products) which is benefiting from global sales of smart phones exceeding expectations. The Company's holding in house builders was reduced and the position in IG Group (the spread betting company) was sold.

Outlook

The economy continues to convalesce; profitability is improving and corporate debt levels have been reduced. However, government debt is so high that an incoming Government (of whatever colour) will have some difficult decisions to make.

Inflation is not an immediate problem due to the excess capacity in most industries. Interest rates are therefore likely to stay low for some time.

The valuation of equities is reasonable and therefore, on balance, we anticipate that mid cap stocks will continue to make progress but probably with greater volatility than in the past six months.

Jane Lennard

William Meadon

Investment Managers                                                                                                  

18th February 2010

Interim Management Report

The Company is now required to make the following disclosures in its half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into six broad categories: market; investment and strategy; accounting, legal and regulatory; corporate governance and shareholder relations; operational and financial. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th June 2009.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the period.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)                     the condensed set of financial statements contained within the half year financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half Yearly Financial Reports'; and

(ii)                    the half year management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

For and on behalf of the Board

Andrew Barker  

Chairman

18th February 2010                                                                                                                   

For further information, please contact:

Andrew Norman

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 6000

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmmidcap.co.uk

Income Statement

for the six months ended 31st December 2009

	(Unaudited)				(Unaudited)				(Audited)
	Six months ended				Six months ended				Year ended
	31st December 2009				31st December 2008				30th June 2009
	Revenue	Capital	Total	Revenue		Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments
held at fair value through
profit or loss	-	19,865	19,865	-		(59,626)	(59,626)	-	(52,973)	(52,973)
Income from investments	1,695	-	1,695	2,479		-	2,479	4,338	-	4,338
Other interest receivable
and similar income	50	-	50	474		-	474	493	-	493
Gross return/(loss)	1,745	19,865	21,610	2,953		(59,626)	(56,673)	4,831	(52,973)	(48,142)
Management fee	(70)	(164)	(234)	(81)		(190)	(271)	(141)	(328)	(469)
VAT recoverable	-	-	-	766		819	1,585	766	819	1,585
Other administrative
expenses	(146)	-	(146)	(172)		-	(172)	(339)	-	(339)
Net return/(loss) on ordinary
activities before finance
costs and taxation	1,529	19,701	21,230	3,466		(58,997)	(55,531)	5,117	(52,482)	(47,365)
Finance costs	(171)	(399)	(570)	(182)		(424)	(606)	(357)	(832)	(1,189)
Net return/(loss) on ordinary
activities before taxation	1,358	19,302	20,660	3,284		(59,421)	(56,137)	4,760	(53,314)	(48,554)
Taxation	-	-	-	(2)		-	(2)	(2)	-	(2)
Net return /(loss) on ordinary
activities after taxation	1,358	19,302	20,660	3,282		(59,421)	(56,139)	4,758	(53,314)	(48,556)
Return/(loss) per share
(note 4)	5.36p	76.26p	81.62p	12.89p		(233.29)p	(220.40)p	18.74p	(209.97)p	(191.23)p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The Total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses ('STRGL'). For this reason a STRGL has not been presented.

Reconciliation of Movements in Shareholders' Funds

	Called up	Capital
Six months ended	share	redemption	Capital	Revenue
31st December 2009	capital	reserve	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2009	6,533	3,467	76,258	7,882	94,140
Net return on ordinary activities	-	-	19,302	1,358	20,660
Dividends appropriated in the period	-	-	-	(2,911)	(2,911)
At 31st December 2009	6,533	3,467	95,560	6,329	111,889
	Called up	Capital
Six months ended	share	redemption	Capital	Revenue
31st December 2008	capital	reserve	reserve	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2008	6,533	3,467	132,365	8,547	150,912
Repurchase of shares into Treasury	-	-	(2,793)	-	(2,793)
Net (loss)/return on ordinary activities	-	-	(59,421)	3,282	(56,139)
Dividends appropriated in the period	-	-	-	(2,791)	(2,791)
At 31st December 2008	6,533	3,467	70,151	9,038	89,189
	Called up	Capital
Year ended	share	redemption	Capital	Revenue
30th June 2009	capital	reserve	reserve	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2008	6,533	3,467	132,365	8,547	150,912
Repurchase of shares into Treasury	-	-	(2,793)	-	(2,793)
Net (loss)/return on ordinary activities	-	-	(53,314)	4,758	(48,556)
Dividends appropriated in the year	-	-	-	(5,423)	(5,423)
At 30th June 2009	6,533	3,467	76,258	7,882	94,140

Balance Sheet

at 31st December 2009

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	2009	2008	2009
	£'000	£'000	£'000
Fixed assets
Equity investments held at fair value through profit or loss	124,063	92,795	100,519
Investments in liquidity funds held at fair value through
profit or loss	980	3,540	4,500
Total Investments	125,043	96,335	105,019
Current assets
Debtors	329	2,377	6,356
Cash and short term deposits	257	165	133
	586	2,542	6,489
Creditors: amounts falling due within one year	(4,255)	(211)	(7,886)
Net current (liabilities)/assets	(3,669)	2,331	(1,397)
Total assets less current liabilities	121,374	98,666	103,622
Creditors: amounts falling due after more than one year	(9,485)	(9,477)	(9,482)
Total net assets	111,889	89,189	94,140
Capital and reserves
Called up share capital	6,533	6,533	6,533
Capital redemption reserve	3,467	3,467	3,467
Capital reserve	95,560	70,151	76,258
Revenue reserve	6,329	9,038	7,882
Shareholders' funds	111,889	89,189	94,140
Net asset value per share (note 5)	442.0p	352.4p	371.9p

Cash Flow Statement

for the six months ended 31st December 2009

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December	31st December	30th June
	2009	2008	2009
	£'000	£'000	£'000
Net cash inflow from operating activities (note 6)	1,210	2,431	6,034
Net cash outflow from returns on investments
and servicing of finance	(562)	(607)	(1,188)
Net cash (outflow)/inflow from capital expenditure and
financial investment	(1,613)	5,888	5,382
Dividends paid	(2,911)	(2,875)	(5,423)
Net cash inflow/(outflow) from financing	4,000	(4,897)	(4,897)
Increase/(decrease) in cash for the period	124	(60)	(92)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash for the period	124	(60)	(92)
Cash (inflow)/outflow from changes in debt	(4,000)	2,000	2,000
Changes in net debt arising from cash flows	(3,876)	1,940	1,908
Net debt at the beginning of the period	(9,349)	(11,249)	(11,249)
Amortisation of issue expenses	(3)	(3)	(8)
Net debt at the end of the period	(13,228)	(9,312)	(9,349)
Represented by:
Cash and short term deposits	257	165	133
Debt due within one year	(4,000)	-	-
Debt due after five years	(9,485)	(9,477)	(9,482)
Net debt	(13,228)	(9,312)	(9,349)

Notes to the Accounts

for the six months ended 31st December 2009

1.             Financial statements

                The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's auditors.

                The figures and financial information for the year ended 30th June 2009 are extracted from the latest published accounts of the Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.             Accounting policies

                The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' issued in January 2009.

                All of the Company's operations are of a continuing nature.

                The accounting policies applied to these interim accounts are consistent with those applied in the accounts for the year ended 30th June 2009.

3.             Dividends

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2009	31st December 2008	30th June 2009
	£'000	£'000	£'000
Final dividend in respect of the year ended
30th June 2009 of 11.5p (2008: 11.0p)	2,911	2,791	2,791
Interim dividend in respect of the six months ended
31st December 2008 of 5.5p	-	-	1,392
Special dividend of 4.9p	-	-	1,240
	2,911	2,791	5,423

An interim dividend of 5.5p has been declared in respect of the six months ended 31st December 2009, costing £1,392,000.

4.             Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2009	31st December 2008	30th June 2009
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	1,358	3,282	4,758
Capital return/(loss)	19,302	(59,421)	(53,314)
Total return/(loss)	20,660	(56,139)	(48,556)
Weighted average number of shares in issue	25,311,680	25,471,199	25,391,440
Revenue return per share	5.36p	12.89p	18.74p
Capital return/(loss) per share	76.26p	(233.29)p	(209.97)p
Total return/(loss) per share	81.62p	(220.40)p	(191.23)p

5.             Net asset value per share

Net asset value per share is calculated by dividing shareholders' funds by the number of shares in issue at 31st December 2009 of 25,311,680 (31st December 2008: 25,311,680 and 30th June 2009: 25,311,680), excluding shares held in Treasury.

6.             Reconciliation of total return/(loss) on ordinary activities before finance costs and taxation to net cash inflow from operating activities

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2009	31st December 2008	30th June 2009
	£'000	£'000	£'000
Net return/(loss) on ordinary activities before finance
costs and taxation	21,230	(55,531)	(47,365)
Add back capital (return)/loss before finance costs and
taxation	(19,701)	58,997	52,482
(Increase)/decrease in accrued income	(99)	(74)	431
Increase in other debtors	(9)	(1,563)	-
Decrease in accrued expenses	(47)	(27)	(5)
Net expenses (charged)/credited to capital	(164)	629	491
Net cash inflow from operating activities	1,210	2,431	6,034

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

 

END

 

 

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