Half Yearly Report

RNS Number : 2976S

Lowland Investment Co PLC

14 May 2009

 



Page 1 of 8

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2009

This announcement contains regulated information

Interim Management Report

Chairman's Statement

Review

Over the six months to 31 March 2009, Lowland's net asset value fell 38.6%, while the FTSE All-Share Index fell 20.1%. The marked underperformance was the result of the rapid deterioration of the economy during the period. This particularly hit the share prices of manufacturing companies, which form a significant part of the portfolio. The general economy suffered the worst impact of the crisis in the banking sector during the fourth quarter of 2008. Dramatic falls in orders were experienced by many companies as inventories were reduced. Some equity investors overreacted, selling shareholdings at prices which bore little relation to their often much more substantial underlying value. Since the period end of 31 March 2009 up to the 12 May, the capital only net asset value has risen 27.8%, while the FTSE All-Share Index has risen 13.8%. This reflects results coming through which show the resilience and cash generating ability of many companies held in the portfolio.

Dividend

The interim dividend is being maintained at last year's level of 10p per share. The revenue earnings per share for the period are 8.0p, which is down from 14.7p last year. In 2008 the earnings benefited at the interim stage by 3.1p from the VAT rebate and from the large final dividends paid by banks which were much reduced this year. The Comany has £7.1m in its revenue reserve, roughly equivalent to last year's total dividend. This reserve allows the dividend progression to be smoothed. It is the portfolio manager's view that the underlying holdings in the portfolio will resume dividend growth during 2010. This gives the Board confidence to use the revenue reserve in the short term and not to reduce dividend payments. The Board is continuing its policy of taking all costs to the revenue account. This is considered to be the most conservative method of income recognition.

Activity

During the period there were some substantial cash calls from major companies such as Land Securities and HSBC. We sub-underwrote these issues and took up our rights entitlement. They have all so far been successful issues but we will remain selective in participating in future cash raisings. 

We have added to holdings in certain smaller companies whose market valuation does not appear to reflect the underlying strength of the company. An example of this would be Delta, which has net cash on its balance sheet and is operating strongly with a dividend that is growing. We will continue adding to good value investments in an opportunistic manner, while we will be receiving cash from bids from some of the holdings. During the period we received cash when Abacus was acquired. There has also been an approach for Chaucer that may lead to an offer.

VAT

We have received the interest on last year's VAT repayment. We may be able to recover a further payment plus interest in respect of the period 1990 to 1996, but this is not yet agreed. 

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LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2009

Interim Management Report (continued)

Outlook

The investment approach is to maintain a portfolio of sound companies that provide goods or services which add real value for their customers. We believe that these companies are expected to come through this difficult economic period, with some in an enhanced competitive position. These types of business should, over time, command a higher valuation and yield growing dividends for shareholders. The destocking that was prevalent during the end of 2008 and early 2009 has abated and there are early signs of a pick up in some of the world's industrial economies, most notably the Far East. 

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 performance of the Company during the period. Details of related party transactions are contained in the Annual Report and Financial Statements.

Principal Risks and Uncertainties

The principal risks and uncertainties associated with the Company's business can be divided into various areas:

• Investment objective and policy

• Gearing

• Market movements and performance of the portfolio 

Information on these risks is given in the Directors' Report and Notes to the Financial Statements in the Annual Report and Financial Statements. In the view of the Board these principal risks and uncertainties are applicable to the remaining six months of the financial year as they were to the six months under review.

Directors' Responsibility Statement

The Directors confirm that, to the best of their knowledge:

(a) the set of financial statements has been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports';

(b) the report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the report includes a fair review of the information required by the Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

John Hancox, Chairman

For further information please contact:

James Henderson                         

Fund Manager, Tel: [phone]

James de Sausmarez

Head of Investment Trusts, Henderson Global Investors, Tel: [phone]

Sarah Gibbons-Cook

Investor Relations and PR Manager, Henderson Global Investors, Tel: [phone]

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Page 3 of 8

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2009

Income Statement

for the half year ended 31 March 2009

	(Unaudited) Half year ended  31 March 2009			(Unaudited) Half year ended  31 March 2008			(Audited) Year ended  30 September 2008
	Revenue Return £'000	Capital  Return £'000	Total £'000	Revenue Return £'000	Capital  Return £'000	Total £'000	Revenue Return £'000	Capital  Return £'000	Total £'000
Losses on investments held at     fair value through profit or     loss	-	(66,690)	(66,690)	-	(47,866)	(47,866)	-	(99,709)	(99,709)
Income from investments held   at fair value through profit    or loss	3,083	-	3,083	5,145	-	5,145	11,974	-	11,974
Other interest receivable and    similar income	309	-	309	123	-	123	352	-	352
	---------	--------	---------	---------	---------	---------	---------	---------	---------
Gross revenue and capital    losses	3,392	(66,690)	(63,298)	5,268	(47,866)	(42,598)	12,326	(99,709)	(87,383)
Management fee	(527)	-	(527)	(672)	-	(672)	(1,319)	-	(1,319)
Write back of VAT (note 5)	95	-	95	830	-	830	831	-	831
Other administrative expenses	(235)	-	(235)	(138)	-	(138)	(357)	-	(357)
	---------	--------	---------	---------	---------	---------	---------	---------	---------
Net return/(loss) on    ordinary activities before   finance charges and     taxation	2,725	(66,690)	(63,965)	5,288	(47,866)	(42,578)	11,481	(99,709)	(88,228)
Finance charges	(610)	-	(610)	(1,383)	-	(1,383)	(2,700)	-	(2,700)
	---------	----------	---------	---------	---------	---------	---------	---------	---------
Net return/(loss) on    ordinary activities before    taxation	2,115	(66,690)	(64,575)	3,905	(47,866)	(43,961)	8,781	(99,709)	(90,928)
Taxation on net return on    ordinary activities	(14)	-	(14)	(25)	-	(25)	(57)	-	(57)
	---------	--------	--------	---------	---------	---------	---------	---------	---------
Net return/(loss) on    ordinary activities after    taxation	2,101	(66,690)	(64,589)	3,880	(47,866)	(43,986)	8,724	(99,709)	(90,985)
	=====	=====	=====	=====	=====	=====	=====	=====	=====
Return/(loss) per ordinary    share - basic and diluted     (note 2)	8.0p	(252.5p)	(244.5p)	14.7p	(181.2p)	(166.5p)	33.0p	(377.4p)	(344.4p)

The total columns of this statement represent the Income Statement of the Company. 

All revenue and capital items in the above statement derive from continuing operations. 

No operations were acquired or discontinued during the half year ended 31 March 2009. The Company

has no recognised gains or losses other than those disclosed in the Income Statement and the Reconciliation 

of Movements in Shareholders Funds.

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Page 4 of 8

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2009

Reconciliation of Movements in Shareholders' funds

For the half year ended 31 March 2009

		(Unaudited) Half year ended 31 March 2009
	Called up share capital £'000		Share premium account £'000	Capital redemption  reserve £'000	Other capital reserves £'000	Revenue  reserve £'000	Total £'000
At 30 September 2008	6,604		53,561	1,007	107,833	9,406	178,411
Net (loss)/ return on ordinary   activities after taxation	-		-	-	(66,690)	2,101	(64,589)
Final dividend (16.5p) for the     year ended 30 September 2008	-		-	-	-	(4,359)	(4,359)
	------------		------------	------------	------------	-------------	-----------
At 31 March 2009	6,604		53,561	1,007	41,143	7,148	109,463
	=======		=======	=======	=======	======	======

		(Unaudited) Half year ended 31 March 2008
	Called up share capital £'000		Share  premium account £'000	Capital  redemption  reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 30 September 2007	6,604		53,561	1,007	207,542	7,154	275,868
Net (loss)/return on ordinary     activities after taxation	-		-	-	(47,866)	3,880	(43,986)
Final dividend (14.5p) for the year ended 30 September 2007	-		-	-	-	(3,831)	(3,831)
	-----------		------------	----------	----------	------------	-----------
At 31 March 2008	6,604		53,561	1,007	159,676	7,203	228,051
	=======		=======	======	======	=======	======

		(Audited) Year ended 30 September 2008
	Called up share capital £'000		Share  premium account £'000	Captial redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 30 September 2007	6,604		53,561	1,007	207,542	7,154	275,868
Net (loss)/return on ordinary     activities after taxation	-		-	-	(99,709)	8,724	(90,985)
Final dividend (14.5p) for the year    ended 30 September 2007	-		-	-	-	(3,830)	(3,830)
Interim dividend (10.0p) for the     year ended 30 September 2008	-		-	-	-	(2,642)	(2,642)
	------------		------------	------------	------------	------------	-----------
At 30 September 2008	6,604		53,561	1,007	107,833	9,406	178,411
	=======		=======	=======	=======	=======	======

Purchase transaction costs for the half year ended 31 March 2009 were £127,000 (half year ended 31 March 2008: £365,000; year ended 30 September 2008: £513,000). These comprise mainly stamp duty and commission. Sale transaction costs for the half year ended 31 March 2009 were £50,000 (half year ended 31 March 2008: £20,000; year ended 30 September 2008: £82,000).                        

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LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2009

Balance Sheet

as at 31 March 2009

	(Unaudited) 31 March  2009 £'000	(Unaudited)  31 March  2008 £'000	(Audited) 30 September  2008 £'000
Fixed assets
Investments held at fair value through profit or loss	125,816	270,027	206,617
	-----------	-----------	-----------
Current assets
Debtors	979	3,610	5,279
Cash at bank and on deposit	494	1,746	1,116
	----------	-----------	-----------
	1,473	5,356	6,395
Creditors: amounts falling due within one year	(11,826)	(41,332)	(28,601)
	-----------	-----------	-----------
Net current liabilities	(10,353)	(35,976)	(22,206)
	-----------	-----------	-----------
Total assets less current liabilities	115,463	234,051	184,411
Creditors: amounts falling due after more than one year	(6,000)	(6,000)	(6,000)
	-----------	-----------	-----------
Total net assets	109,463	228,051	178,411
	======	======	======
Capital and reserves
Called up share capital	6,604	6,604	6,604
Share premium account	53,561	53,561	53,561
Capital redemption reserve	1,007	1,007	1,007
Other capital reserves	41,143	159,676	107,833
Revenue reserve	7,148	7,203	9,406
	-----------	-----------	-----------
Total equity shareholders' funds	109,463	228,051	178,411
	======	======	======
Net asset value per ordinary share (note 4)	414.4p	863.3p	675.4p

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LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2009

Cash Flow Statement

for the half year ended 31 March 2009

	(Unaudited) Half year ended  31 March  2009 £'000	(Unaudited) Half year ended 31 March  2008 £'000	(Audited) Year ended  30 September  2008 £'000
Net cash inflow from operating activities	4,058	3,544	10,307
Net cash outflow from servicing of finance	(631)	(1,327)	(2,687)
Net tax recovered	-	-	5
Net cash inflow/(outflow) from purchases and sales of     investments	16,884	(23,600)	(13,916)
Equity dividends paid	(4,359)	(3,831)	(6,472)
	----------	----------	-----------
Net cash inflow/(outflow) before financing	15,952	(25,214)	(12,763)
Net cash (outflow)/inflow from financing	(16,584)	27,154	14,069
	----------	-----------	------------
(Decrease)/increase in cash	(632)	1,940	1,306
	======	======	======
Reconciliation of operating revenue to net cash flow from    operating activities
Total loss before finance charges and taxation	(63,965)	(42,578)	(88,228)
Add: capital loss before finance charges and taxation	66,690	47,866	99,709
	----------	----------	------------
Net revenue return before finance charges and taxation	2,725	5,288	11,481
Decrease/(increase) in accrued income	695	(848)	10
Decrease/(increase) in other debtors	779	(765)	(766)
Decrease in creditors	(65)	(96)	(111)
Income tax suffered on property income dividends	(19)	(13)	(45)
Stock dividend included in investment income	(24)	-	(180)
Overseas withholding tax	(33)	(22)	(82)
	----------	----------	------------
Net cash inflow from operating activities	4,058	3,544	10,307
	======	======	======
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash as above	(632)	1,940	1,306
Cash outflow/(inflow) from movement in loans	16,584	(27,154)	(14,069)
Exchange movements	10	(20)	(16)
	----------	----------	------------
	15,962	(25,234)	(12,779)
Net debt at the beginning of the period	(32,470)	(19,691)	(19,691)
	----------	----------	------------
Net debt at the end of the period	(16,508)	(44,925)	(32,470)
	======	======	======
Represented by:
Cash at bank less bank overdrafts	494	1,746	1,116
Debt falling due within one year	(11,002)	(40,671)	(27,586)
Debt falling due after more than one year	(6,000)	(6,000)	(6,000)
	----------	----------	------------
	(16,508)	(44,925)	(32,470)
	======	======	======

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LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2009

Notes to the Financial Statements

1.	Accounting policies
	The accounts have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with applicable Accounting Standards, pronouncements on interim reporting issued by the Accounting Standards Board and the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ('SORP' dated January 2003, revised December 2005). All of the Company's operations are of a continuing nature. The same accounting policies used for the year ended 30 September 2008 have been applied. The taxation charge for each period is based on foreign tax suffered.
2.	(Loss)/return per ordinary share - basic and diluted
		(Unaudited) Half year ended 31 March 2009 £'000	(Unaudited) Half year ended  31 March  2008 £'000	(Audited) Year ended  30 September 2008 £'000
	The (loss)/return per ordinary share is based on the following figures:
	Revenue return	2,101	3,880	8,724
	Capital loss	(66,690)	(47,866)	(99,709)
		----------	-----------	-----------
	Total	(64,589)	(43,986)	(90,985)
		======	======	======
	Weighted average number of ordinary share in issue for each period	26,417,427	26,417,427	26,417,427
	Revenue return per ordinary share	8.0p	14.7p	33.0p
	Capital loss per ordinary share	(252.5p)	(181.2p)	(377.4p)
		----------	-----------	-----------
	Total	(244.5p)	(166.5p)	(344.4p)
		======	======	======
	The Company does not have any dilutive securities, therefore basic and diluted returns per share are the same.
3.	Expenses
	All expenses are charged wholly to revenue. Expenses which are incidental to the purchase or sale of an investment are included in the cost or deducted from the proceeds of sale of the investment.
4.	Net asset value per ordinary share
	The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £109,463,000 (31 March 2008: £228,051,000; 30 September 2008: £178,411,000) and on 26,417,427 ordinary shares (31 March 2008: 26,417,427; 30 September 2008: 26,417,427) being the number of ordinary shares in issue at the end of each period.

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LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2009

5.	VAT on management fees
	In 2004 the Association of Investment Companies (the 'AIC'), together with JPMorgan Claverhouse Investment Trust plc, launched a case against HM Revenue & Customs ('HMRC') to challenge whether Value Added Tax ('VAT') should be charged on fees paid for management services provided to investment trust companies. On 28 June 2007 the European Court of Justice delivered its judgement on the case in favour of the AIC. Since then, HMRC has accepted that the provision of investment management services to investment trust companies is VAT exempt and has acknowledged its liability to pay claims in respect of VAT borne by investment companies. The manager (Henderson Global Investors Limited) has now reclaimed and received from HMRC the amount of VAT charged to the Company in respect of investment management services from 1 October 2000 to 30 June 2007, to the extent that such VAT was paid by the manager to HMRC. VAT has not been applied to investment management fees invoiced since June 2007. Accordingly, VAT of £831,000 borne by the Company on investment management fees invoiced in the period from 1 October 2000 to 30 June 2007 was written back in the previous period ends, in accordance with an agreement reached between the Manager and the Company. A further £95,000 has been written back in this half year. All of this VAT has now been received. The write back has been allocated to revenue return according to the allocation of the amounts originally paid. In addition, interest of £148,000 has also been received and written back to revenue in this half year. The Company may be able to recover further amounts of the VAT charged on investment management fees back to 1990, in particular in respect of the period from 1 January 1990 to 4 December 1996 (following the decision of the House of Lords in the Fleming/Conde Nast case). The Company may also receive from the Manager any interest paid by HMRC on the amounts eventually recovered. With regard to both of these potential recoveries, the Board considers that there are currently too many uncertainties for any reasonable estimate of the amounts potentially recoverable during that period to be calculated.
6.	Interim dividend
	An interim dividend of 10.0 pence has been declared and will be paid on 19 June 2009 to shareholders on the register on 29 May 2009.  The ex-dividend date is 27 May 2009.
7.	Financial Information
	The financial information contained in this half year report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 31 March 2009 and 31 March 2008 has not been audited or reviewed by the Company's auditors. The figures and financial information for the year ended 30 September 2008 have been extracted from the latest published accounts of the Company. These 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 237(2) or 237(3) of the Companies Act 1985.
8.	Half year report
	A copy of the Company's report for the half year ended 31 March 2009 will be posted to shareholders in May and will be available on our website (www.lowlandinvestment.com). Copies can also be requested thereafter from the Secretary at the Registered Office at 201 Bishopsgate, London EC2M 3AE.

- ENDS -

 

END

 

 

IR ILFIDERISLIA