Half Yearly Results

RNS Number : 5774A

JPMorgan Mid Cap Invest Trust PLC

20 February 2014

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN MID CAP INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST DECEMBER 2013

Chairman's Statement

Performance

During the six months to 31st December 2013, the Company delivered a positive total return for shareholders of 30.5%. There were two contributors to this strong performance, firstly a total return on net assets per share of 19.0%, compared to the return of the FTSE 250 Index (excluding investment trusts) of 18.3%, and secondly, a dramatic narrowing of the Company's discount at which the ordinary shares trade to their net asset value per share. The re-rating of the Company is recognition for the continued improvement in the Company's performance since the new investment management team was put in place. A review of the Company's performance for the first six months and the outlook for the remainder of the year is provided in the Investment Manager's Report.

Revenue and Dividends

While the Company's mandate is to deliver strong capital growth, the Board is aware that income distribution is also very important to shareholders. Net revenue after taxation for the six months to 31st December 2013 was £2,607,000 (2012: £2,122,000) and earnings per share, calculated on the weighted average number of shares in issue, were 10.86p (2012: 8.84p). This improvement in the prior year's earnings at the half year stage reflects a greater contribution from special dividends compared to the first half last year; however as the portfolio currently stands a revenue estimate for the full year indicates that earnings will be marginally less than in 2013. Despite this the Company should be able to maintain last year's base dividend of 17.0p without having to draw on reserves. While special dividends continue to be paid by companies, as the Board has alluded to in the past, the payment of special dividends may not be a permanent feature of the investment portfolio.

In respect of the half year period, the Board has decided to maintain the interim dividend at 5.5p (2012: 5.5p) to be paid on 9th April 2014 to shareholders on the register at the close of business on 7th March 2014.

Loan Facilities and Gearing

The use of gearing over the period has continued to assist performance. The Board sets the overall gearing guidelines and reviews these at each meeting; changes in these guidelines between meetings may be undertaken after consultation with the Board. The Board has determined that in normal circumstances the Company's gearing range is (5%) net cash to 25% geared. At the time of writing the Company was 13% geared.

The Company has made use of two £15 million loan facilities with Scotiabank and a £5 million loan facility with ING Bank, with an average interest rate of 1.98% and varying maturity dates. Two of these facilities will expire by July 2014 and the Board is currently reviewing replacement terms.

Share Buybacks

During the period the Company's discount to net asset value reduced from 14.7% to 6.7% and accordingly the Company refrained from repurchasing any shares. 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 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.

Board of Directors

In line with the Board's current succession plan, Richard Huntingford was appointed as a Director on 1st December 2013. Richard brings a wealth of PLC experience to the Board having gained over 25 years of experience from a wide variety of executive, non-executive and advisory Board positions. He is a Chartered Accountant who previously spent 12 years at KPMG advising a broad range of companies at board level. John Emly will be retiring from the Board at the conclusion of the Company's 2014 Annual General Meeting.

Prospects

One should never be complacent in this new economic world as volatility seems to have become the norm and headwinds remain. However, the UK economy is continuing to recover along with many of its global partners and company balance sheets appear to have come out of the economic crisis for the better. In their report, our Investment Managers temper thoughts that the significant returns generated by the Company over the last 18 months can continue, but they are confident that the mid cap investment universe will continue to generate interesting opportunities with upside potential.

Andrew Barker

Chairman                                                                                                                                                                                            20th February 2014

Investment Managers' Report

Performance and Market Background

The Company produced a total return on net assets of 19.0% over the first six months of the financial year. This compares to the Company's benchmark, the FTSE 250 Index (excluding investment trusts) which returned 18.3%. The Company's discount to its net asset value continued to narrow, resulting in a very strong return to shareholders of 30.5%. The Company also benefited from being geared throughout the half year.

Prior to the start of the Company's financial year, the stock market declined as investors digested the implications of the likelihood of tapering by the US Federal Reserve of its monthly bond purchase programme. Subsequently, the market rallied strongly through the six month period. The growing strength of the UK economy was an important contributor to the stock market rise, in particular in the mid and small companies arena. Over the period forecasts for UK GDP growth in 2014 rose from 1.9% to 2.4%.

Portfolio

The key contributors to performance, in terms of sectors, were Support Services (our position in Ashstead in particular), Fixed Line Telecommunications (holdings in Talk Talk and Cable & Wireless Communications) and our underweight position in Oil and Gas. The two main negative contributors were Life Insurance (the position in Partnership Assurance, now sold) and Financial Services. The latter was due to our large holding in International Personal Finance, which was hit by regulatory concerns in Poland. The position has since been significantly reduced.

While long-awaited mergers and acquisitions failed to materialise in the period, IPOs (or new issues) were a feature, and we participated in the float of Merlin Entertainments, amongst others. Whilst we remain overweight in housebuilders, we sold Persimmon after its promotion to the FTSE 100, and likewise Mondi, but we retain significant positions in Ashtead and easyJet, both of which were also promoted into the FTSE 100.

Outlook

The UK economy continues to strengthen at a rapid rate and it is encouraging to hear how upbeat the management of many of our companies are. Company balance sheets are strong and dividend flows remain robust. The stock market has, however, anticipated much of this good news and the valuation of mid cap equities can no longer be described as cheap. Compared to many of the alternatives though, mid cap equities continue to look attractive to us, providing growth potential in both earnings and dividends.

We enter 2014 with gearing in double digits as we continue to find a number of investments where we think the prospective return will exceed the related cost of borrowing. Returns may be more volatile as economies adjust to Fed tapering and interest rates normalising, although we believe this will also provide interesting investment opportunities. However, we would caution against expecting the returns on the Company's portfolio to be as handsome in the second half of our year as the first.

Georgina Brittain

William Meadon

Investment Managers                                                                                                                                                                         20th February 2014

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; market; 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 31st December 2013.

Related Party 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.

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 yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half Yearly Financial Reports' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 30th September 2013, as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; and

(ii)  the interim 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.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Andrew Barker

Chairman                                                                                                                                                                                    

20th February 2014

Income Statement

for the six months ended 31st December 2013

	(Unaudited)				(Unaudited)			(Audited)
	Six months ended				Six months ended			Year ended
	31st December 2013				31st December 2012			30th June 2013
	Revenue	Capital	Total	Revenue		Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair
value through profit or loss	-	30,432	30,432	-		21,837	21,837	-	55,654	55,654
Income from investments	3,146	-	3,146	2,394		-	2,394	5,597	-	5,597
Other interest receivable and
similar income	10	-	10	17		-	17	57	-	57
Gross return	3,156	30,432	33,588	2,411		21,837	24,248	5,654	55,654	61,308
Management fee	(203)	(473)	(676)	(81)		(189)	(270)	(186)	(435)	(621)
Other administrative expenses	(260)	-	(260)	(168)		-	(168)	(333)	-	(333)
Net return on ordinary activities
before finance costs and
taxation	2,693	29,959	32,652	2,162		21,648	23,810	5,135	55,219	60,354
Finance costs	(82)	(190)	(272)	(36)		(84)	(120)	(100)	(233)	(333)
Net return on ordinary activities
before taxation	2,611	29,769	32,380	2,126		21,564	23,690	5,035	54,986	60,021
Taxation	(4)	-	(4)	(4)		-	(4)	(5)	-	(5)
Net return on ordinary activities
after taxation	2,607	29,769	32,376	2,122		21,564	23,686	5,030	54,986	60,016
Return per share (note 4)	10.86p	124.05p	134.91p	8.84p		89.83p	98.67p	20.95p	229.06p	250.01p

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 2013	capital	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2013	6,350	3,650	156,160	5,982	172,142
Net return on ordinary activities	-	-	29,769	2,607	32,376
Dividends appropriated in the period	-	-	-	(2,999)	(2,999)
At 31st December 2013	6,350	3,650	185,929	5,590	201,519
	Called up	Capital
Six months ended	share	redemption	Capital	Revenue
31st December 2012	capital	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2012	6,375	3,625	101,580	5,032	116,612
Repurchase and cancellation of the Company's
own shares	(25)	25	(407)	-	(407)
Net return on ordinary activities	-	-	21,564	2,122	23,686
Dividends appropriated in the period	-	-	-	(2,760)	(2,760)
At 31st December 2012	6,350	3,650	122,737	4,394	137,131
	Called up	Capital
Year ended	share	redemption	Capital	Revenue
30th June 2013	capital	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2012	6,375	3,625	101,580	5,032	116,612
Repurchase and cancellation of the Company's
own shares	(25)	25	(406)	-	(406)
Net return on ordinary activities	-	-	54,986	5,030	60,016
Dividends appropriated in the year	-	-	-	(4,080)	(4,080)
At 30th June 2013	6,350	3,650	156,160	5,982	172,142

Balance Sheet

at 31st December 2013

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	2013	2012	2013
	£'000	£'000	£'000
Fixed assets
Equity investments held at fair value through profit or loss	222,978	151,726	191,399
Investments in liquidity funds held at fair value through
profit or loss	3,670	-	2,400
Total investments	226,648	151,726	193,799
Current assets
Debtors	2,452	393	2,835
Cash and short term deposits	253	90	572
	2,705	483	3,407
Creditors: amounts falling due within one year	(13,334)	(78)	(5,064)
Net current (liabilities)/assets	(10,629)	405	(1,657)
Total assets less current liabilities	216,019	152,131	192,142
Creditors: amounts falling due after more than one year	(14,500)	(15,000)	(20,000)
Net assets	201,519	137,131	172,142
Capital and reserves
Called up share capital	6,350	6,350	6,350
Capital redemption reserve	3,650	3,650	3,650
Capital reserves	185,929	122,737	156,160
Revenue reserve	5,590	4,394	5,982
Total equity shareholders' funds	201,519	137,131	172,142
Net asset value per share (note 5)	839.8p	571.4p	717.3p

Company registration number: 1047690.

Cash Flow Statement

for the six months ended 31st December 2013

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December	31st December	30th June
	2013	2012	2013
	£'000	£'000	£'000
Net cash inflow from operating activities (note 6)	2,217	2,129	4,578
Net cash outflow from returns on investments
and servicing of finance	(260)	(135)	(325)
Tax recovered	-	1	1
Net cash outflow from capital expenditure and
financial investment	(2,777)	(4,915)	(14,373)
Dividends paid	(2,999)	(2,760)	(4,080)
Net cash inflow from financing	3,500	5,593	14,594
(Decrease)/increase in cash for the period	(319)	(87)	395
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash for the period	(319)	(87)	395
Net loans drawn down	(3,500)	(6,000)	(15,000)
Changes in net fund/(debt) arising from cash flows	(3,819)	(6,087)	(14,605)
Net debt at the beginning of the period	(23,428)	(8,823)	(8,823)
Net debt at the end of the period	(27,247)	(14,910)	(23,428)
Represented by:
Cash and short term deposits	253	90	572
Debt falling due within one year	(13,000)	-	(4,000)
Debt falling due after more than one year	(14,500)	(15,000)	(20,000)
Net debt at the end of the period	(27,247)	(14,910)	(23,428)

Notes to the Accounts

for the six months ended 31st December 2013

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 2013 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 2013.

3.   Dividends

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2013	31st December 2012	30th June 2013
	£'000	£'000	£'000
Final dividend in respect of the year ended
30th June 2013 of 11.5p (2012: 11.5p)	2,759	2,760	2,760
Special dividend in respect of the year ended
30th June 2013 of 1.0p (2012: nil)	240	-	-
Interim dividend in respect of the six months ended
31st December 2012 of 5.5p	-	-	1,320
	2,999	2,760	4,080

4.   Return per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2013	31st December 2012	30th June 2013
	£'000	£'000	£'000
Return per share is based on the following:
Revenue return	2,607	2,122	5,030
Capital return	29,769	21,564	54,986
Total return	32,376	23,686	60,016
Weighted average number of shares in issue	23,997,180	24,005,513	25,005,536
Revenue return per share	10.86p	8.84p	20.95p
Capital return per share	124.05p	89.83p	229.06p
Total return per share	134.91p	98.67p	250.01p

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 2013 of 23,997,180 (31st December 2012: 23,997,180 and 30th June 2013: 23,997,180), excluding shares held in Treasury.

6.   Reconciliation of total 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 2013	31st December 2012	30th June 2013
	£'000	£'000	£'000
Net return on ordinary activities before finance costs
and taxation	32,652	23,810	60,354
Less capital return before finance costs and taxation	(29,959)	(21,648)	(55,219)
Scrip dividends received as income	-	(12)	(23)
Changes in net debtors and accrued income	37	197	(25)
Changes in accrued expenses	(36)	(24)	(17)
Tax on unfranked investment income	(4)	(5)	(41)
Management fee charged to capital	(473)	(189)	(435)
Net cash inflow from operating activities	2,217	2,129	4,578

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 incorporatedinto, 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.morningstar.co.uk/uk/NSM

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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