Half Yearly Report

RNS Number : 6526X

JPMorgan Mid Cap Invest Trust PLC

17 February 2012

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN MID CAP INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST DECEMBER 2011

Chairman's Statement

Performance

After your Company delivered a 30% return to shareholders in the 12 months to 30th June 2011, stock markets sold off aggressively in the first two months of this review period as the continuing financial instability in the Eurozone and political wrangling in Washington undermined investor sentiment. In these two months alone the Company's benchmark index, the FTSE 250 (excluding investment trusts) fell by over 11%. The Company outperformed over the full six month period under review with the benchmark index falling by 14.6% on a total return basis, whilst the Company's total return on net assets faired better at -12.8%. The Company's return to shareholders (share price and net dividend) was -13.9%, reflecting a slight widening of the Company's discount to 17.0%. 

Revenue and Dividends

Net revenue after taxation for the six months to 31st December 2011 was £1,756,000 (2010: £1,233,000) and earnings per share, calculated on the average weekly number of shares in issue, were 7.07p (2010: 4.92p).

This is an encouraging improvement in net revenue from last year, which has been as a result of an improvement in the growth of dividends paid by the underlying companies in the portfolio and the receipt of some special dividends over the period. Furthermore in the second half of the financial year there will be a reduction in the Company's interest payments, following the repayment of the Company's debenture in December 2011. The Board has therefore decided to maintain the interim dividend at 5.5p (2010: 5.5p) again this year. The Board will give careful consideration to the level of the final dividend over the coming months having regard to the growth in dividends in the Company's portfolio and in its future earnings. The interim dividend will be paid on 5th April 2012 to shareholders on the register at the close of business on 9th March 2012.

Loan Facilities and Gearing

The Company has two £5 million loan facilities with ING Bank, one expiring in July 2012 and one expiring in July 2014. On 2nd December 2011, the Company redeemed its £9.5 million debenture and this will shortly be replaced with a 3 year £15 million loan facility with Scotiabank. Such facilities give the Manager the ability to gear tactically. The Board of Directors sets the overall gearing guidelines and reviews these at each meeting; gearing changes between meetings may be undertaken after consultation with the Board. At the half year, gearing was 102.0% and at the time of writing the Company is just over 104% geared.

Share Buybacks

During the period the Company repurchased 225,400 shares into Treasury and 146,158 for cancellation at an average discount to net asset value of 16.9%. The Board's objective remains to use the share repurchase authority to assist in managing any imbalance between supply and demand for the Company's shares, thereby reducing the volatility of the discount. The Board regularly reviews the level of discount at which the Company will repurchase its shares for cancellation. The total number of ordinary shares held in Treasury as at the period end was 1,400,900. The Company will only repurchase shares at a discount to their prevailing net asset value, and issue shares when they trade at a premium to their net asset value, so as not to prejudice existing shareholders.

Prospects

Eurozone uncertainties continue and the UK economy is in the early stages of a period of deleveraging which may take several years to complete. Consequently the economic growth rate may therefore be lower than in the past and the degree of volatility around this trend somewhat higher given the UK's sensitivity to external shocks. It is encouraging, however, that the US economy is showing signs of recovery. Interest rates everywhere also are expected to remain low, which is a helpful backdrop to equity markets and equities could become the preferred asset class once again.

Valuations are the key and here in the UK they are not overly demanding. Corporate earnings and dividends are exceeding expectations. Our investment managers continue to select individual companies that they believe have solid fundamentals and growth prospects, which should reward investors over the coming years.

Andrew Barker

Chairman

17th February 2012

Investment Managers' Report

Performance and Market Background

The Company's benchmark, the FTSE 250 (excluding Investment Trusts) fell by 14.6%on a total return basis over the six months under review. This compares with a -12.8% return on the net asset value of the Company. As stock markets fell and liquidity reduced the Company's discount widened from 16.2% to 17.0% resulting in a -13.9% return to shareholders.

After a strong start to the calendar year stock markets globally sold off sharply in July and August as investors priced in reduced growth prospects for the global economy. The failure to resolve, or for politicians at least to articulate a credible plan to address, Europe's Sovereign debt crisis also weighed heavily on investor sentiment.

The high level of macro economic uncertainty meant that we kept gearing within the portfolio at low levels throughout the first half of the Company's year. 

Portfolio

Despite the difficult consumer backdrop the portfolio is overweight in the consumer services and goods sectors, mainly due to our holdings in the bus and rail stocks and selected pub companies. We believe valuations already reflect the challenging trading conditions and the majority of our holdings in this sector have reported resilient trading over the last few months. The portfolio is underweight in the basic materials sector which includes chemical and mining stocks. We believe many of these stocks will find trading tough against a backdrop of slowing global growth.

Cash received from the bids for Charter and Northumbrian Water was reinvested in new positions in stocks such as IG Index (the spread betting company), Wood Group (the international energy services company) and Millennium & Copthorne (an international hotel operator).

Notable sales over the six month period included Meggitt on its promotion to the FTSE 100 and mining stocks such as Hochschild and Kenmare.

Outlook

Investors do not like uncertainty and the inability of politicians to present a comprehensive and decisive plan to resolve Europe's sovereign debt crisis has weighed on markets and adversely impacted growth. Sentiment has swung wildly from hope of a resolution to complete despair as yet another European Summit failed to result in definitive action. Until this political stalemate is resolved equity markets will remain volatile and are unlikely to make significant progress.

We take comfort, however, from the reasonable valuations of many mid cap stocks, many of which have strong balance sheets and also are trading well.

Jane Lennard

William Meadon

Investment Managers

17th February 2012

Interim Management Report

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

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company have not changed and fall into the following broad categories: investment and strategy; financial; accounting legal and regulatory; corporate governance and shareholder relations and operational. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th June 2011.

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 sufficient 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

17th February 2012

For further information, please contact:

Alison Vincent

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 4000

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 2011

	(Unaudited) Six months ended 31st December 2011			(Unaudited) Six months ended 31st December 2010			(Audited) Year ended 30th June 2011
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments held at fair value through profit or loss	-	(19,899)	(19,899)	-	25,706	25,706	-	28,009	28,009
Income from investments	2,177	-	2,177	1,637	-	1,637	3,768	-	3,768
Other interest receivable and similar income	1	-	1	-	-	-	67	-	67
Gross return/(loss)	2,178	(19,899)	(17,721)	1,637	25,706	27,343	3,835	28,009	31,844
Management fee	(79)	(185)	(264)	(78)	(182)	(260)	(166)	(388)	(554)
Other administrative expenses	(189)	-	(189)	(157)	-	(157)	(364)	-	(364)
Net return/(loss) on ordinary activities before finance costs and taxation	1,910	(20,084)	(18,174)	1,402	25,524	26,926	3,305	27,621	30,926
Finance costs	(148)	(345)	(493)	(169)	(394)	(563)	(343)	(800)	(1,143)
Net return/(loss) on ordinary activities before taxation	1,762	(20,429)	(18,667)	1,233	25,130	26,363	2,962	26,821	29,783
Taxation	(6)	-	(6)	-	-	-	(1)	-	(1)
Net return/(loss) on ordinary activities after taxation	1,756	(20,429)	(18,673)	1,233	25,130	26,363	2,961	26,821	29,782
Return/(loss) per share (note 4)	7.07p	(82.21)p	(75.14)p	4.92p	100.17p	105.09p	11.81p	106.95p	118.76p

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 2011	capital	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2011	6,533	3,467	120,279	5,293	135,572
Repurchase of shares into Treasury	-	-	(927)	-	(927)
Repurchase and cancellation of the Company's own shares	(37)	37	(534)	-	(534)
Net (loss)/return on ordinary activities	-	-	(20,429)	1,756	(18,673)
Dividends appropriated in the period	-	-	-	(2,860)	(2,860)
At 31st December 2011	6,496	3,504	98,389	4,189	112,578

	Called up	Capital
Six months ended	share	redemption	Capital	Revenue
31st December 2010	capital	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2010	6,533	3,467	94,046	6,597	110,643
Net return on ordinary activities	-	-	25,130	1,233	26,363
Dividends appropriated in the period	-	-	-	(2,885)	(2,885)
At 31st December 2010	6,533	3,467	119,176	4,945	134,121

	Called up	Capital
Year ended	share	redemption	Capital	Revenue
30th June 2011	capital	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2010	6,533	3,467	94,046	6,597	110,643
Repurchase of shares into Treasury	-	-	(588)	-	(588)
Net return on ordinary activities	-	-	26,821	2,961	29,782
Dividends appropriated in the year	-	-	-	(4,265)	(4,265)
At 30th June 2011	6,533	3,467	120,279	5,293	135,572

Balance Sheet

at 31st December 2011

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	2011	2010	2011
	£'000	£'000	£'000
Fixed assets
Equity investments held at fair value through profit or loss	115,325	144,887	143,703
Investments in liquidity funds held at fair value through profit or loss	840	1,500	2,640
Total investments	116,165	146,387	146,343
Current assets
Debtors	516	550	3,270
Cash and short term deposits	227	173	35
	743	723	3,305
Creditors: amounts falling due within one year	(4,330)	(3,497)	(4,580)
Net current liabilities	(3,587)	(2,774)	(1,275)
Total assets less current liabilities	112,578	143,613	145,068
Creditors: amounts falling due after more than one year	-	(9,492)	(9,496)
Net assets	112,578	134,121	135,572
Capital and reserves
Called up share capital	6,496	6,533	6,533
Capital redemption reserve	3,504	3,467	3,467
Capital reserves	98,389	119,176	120,279
Revenue reserve	4,189	4,945	5,293
Total equity shareholders' funds	112,578	134,121	135,572
Net asset value per share (note 5)	457.9p	534.6p	543.2p

Company registration number: 1047690.

Cash Flow Statement

for the six months ended 31st December 2011

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December	31st December	30th June
	2011	2010	2011
	£'000	£'000	£'000
Net cash inflow from operating activities (note 6)	1,819	1,200	2,743
Net cash outflow from returns on investments and servicing of finance	(571)	(501)	(1,136)
Tax recovered	-	5	6
Net cash inflow/(outflow) from capital expenditure and financial investment	9,266	(661)	2,980
Dividends paid	(2,860)	(2,885)	(4,265)
Net cash (outflow)/inflow from financing	(7,462)	2,942	(366)
Increase/(decrease) in cash for the period	192	100	(38)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash for the period	192	100	(38)
Redemption of debenture	9,500	-	-
Net loans drawn down	(3,500)	(3,000)	-
Changes in net debt arising from cash flows	6,192	(2,900)	(38)
Net debt at the beginning of the period	(9,461)	(9,417)	(9,417)
Amortisation of issue expenses	(4)	(2)	(6)
Net debt at the end of the period	(3,273)	(12,319)	(9,461)
Represented by:
Cash and short term deposits	227	173	35
Debt falling due within one year	(3,500)	(3,000)	-
Debt falling due after more than one year	-	(9,492)	(9,496)
Net debt	(3,273)	(12,319)	(9,461)

Notes to the Accounts

for the six months ended 31st December 2011

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 2011 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 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' 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 2011.

3.   Dividends

		(Unaudited)	(Unaudited)	(Audited)
		Six months ended	Six months ended	Year ended
		31st December 2011	31st December 2010	30th June 2011
		£'000	£'000	£'000
	Final dividend in respect of the year ended 30th June 2011 of 11.5p (2010: 11.5p)	2,860	2,885	2,885
	Interim dividend in respect of the six months ended 31st December 2010 of 5.5p	-	-	1,380
		2,860	2,885	4,265

An interim dividend of 5.5p has been declared in respect of the six months ended 31st December 2011, costing £1,352,000.

4.   Return/(loss) per share

		(Unaudited)	(Unaudited)	(Audited)
		Six months ended	Six months ended	Year ended
		31st December 2011	31st December 2010	30th June 2011
		£'000	£'000	£'000
	Return/(loss) per share is based on the following:
	Revenue return	1,756	1,233	2,961
	Capital (loss)/return	(20,429)	25,130	26,821
	Total (loss)/return	(18,673)	26,363	29,782
	Weighted average number of shares in issue	24,848,671	25,086,680	25,078,189
	Revenue return per share	7.07p	4.92p	11.81p
	Capital (loss)/return per share	(82.21)p	100.17p	106.95p
	Total (loss)/return per share	(75.14)p	105.09p	118.76p

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 2011 of 24,585,122 (31st December 2010: 25,086,680 and 30th June 2011: 24,956,680), excluding shares held in Treasury.

6.   Reconciliation of total (loss)/return 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 2011	31st December 2010	30th June 2011
		£'000	£'000	£'000
	Total (loss)/return on ordinary activities before finance costs and taxation	(18,174)	26,926	30,926
	Add back capital loss/(return) before finance costs and taxation	20,084	(25,524)	(27,621)
	Scrip dividends received as income	(60)	-	-
	Decrease/(increase) in accrued income	181	29	(147)
	Decrease/(increase) in other debtors	20	(9)	(15)
	Decrease in accrued expenses	(46)	(40)	(11)
	Tax on unfranked investment income	(1)	-	(1)
	Management fee charged to capital	(185)	(182)	(388)
	Net cash inflow from operating activities	1,819	1,200	2,743

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

ENDS

A copy of the Half Year Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do

The Half Year Report will also shortly be available on the Company's website at www.jpmmidcap.co.uk  where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

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