Half Yearly Report

RNS Number : 9854D

Lowland Investment Co PLC

24 May 2012

 



LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

This announcement contains regulated information

Key Data

	(Unaudited) Half year ended 31 March 2012	(Unaudited) Half year ended 31 March 2011	(Audited) Year ended 30 September 2011
Net asset value per ordinary share    (including income)	958.3p	893.4p	811.0p
Share price	901.0p	825.0p	762.5p
Market capitalisation	£238.0m	£217.9m	£201.4m
Net revenue return per ordinary share	8.7p	8.1p	28.8p
Net dividends per ordinary share
- Interim	15.0p	10.5p	10.5p
- Second Interim	-	-	17.5p
Number of shares in issue	26,417,427	26,417,427	26,417,427

Interim Management Report

Chairman's Statement

Review

Over the six months under review, Lowland's net asset value total return was 20.6%, compared with the FTSE All-Share total return of 15.0%.  Our outperformance was mainly the result of our exposure to industrial and smaller companies whose share prices have risen thanks to a diet of self-help, aided by modest economic recovery. 

Recent results from most of the holdings in the portfolio have been satisfactory.  The most striking feature is the speed with which debt has been paid down or net cash accumulated.  Cash balances have encouraged a return of take-over activity during the period.  We received cash bids for several smaller companies in the portfolio.  The most significant was for Jacques Vert, a clothing company which was taken over at a large premium to its pre-bid quoted share price.

Dividend

Another consequence of the corporate cash generation has been strong dividend growth.  The Portfolio Manager believes dividend growth from the holdings in the portfolio will continue to be robust. 

The Company has always paid two dividends a year with the first interim that is smaller than the second larger interim, in lieu of a final dividend.  Shareholder's have expressed a view that it would be more attractive to receive four dividends a year of similar amounts. Consequently, the Board have decided to introduce a policy of paying four dividends per annum.  Therefore, this interim is for two quarterly dividends with the third quarter dividend being paid at the end of October of this year, and then a final dividend being paid after the AGM in January of next year. 

The next dividend of 15p has been declared payable on 19 June 2012 to shareholders on the register of members at the close of business on 1 June 2012.  The Company's shares will be quoted ex-dividend on 30 May 2012.  In this fiscal year and thereafter, a final dividend would be approved by shareholders at the Annual General Meeting before being paid at the end of January.  The Company aims to minimise the costs of this change in the frequency of the dividend payments by providing consolidated tax vouchers in the future, so that shareholders will only receive one tax voucher for the year with the final dividend payment.

 Page 2 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

Interim Management Report (continued)

Activity

The two largest holdings in the portfolio at the period end have got there through share price appreciation.  For reasons of portfolio balance they were both reduced during the period.  The money has been reinvested in some new holdings such as Centrica and taking up rights in companies that have earned the opportunity to expand such as D S Smith.

Outlook

The economic pick up in activity that has been evident in recent months has lessened. The strength of the upswing in economic growth has recently been questioned as some weaker than expected economic numbers have been reported.  The Portfolio Manager's view is that the  portfolio of industrial companies have strong cash  generation and margins, which should see them through the likely volatility of the unresolved crisis in the Eurozone. Since the period end equity markets have fallen. At 22 May 2012 the total return  for the financial year to date was up 13.5% while the total return for the benchmark index was up by 8.2%.

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 for the year ended 30 September 2011.

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.

Page 3 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

Interim Management Report (continued)

Directors' Responsibility Statement

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

(a)     the set of financial statements for the half year ended 31 March 2012 has been prepared in accordance with the Accounting  Standards Board's statement "Half-Yearly Financial Reports";

(b)     the Interim Management 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 Interim Management 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).

For and on behalf of the Board

Peter Troughton, Chairman

For further information please contact:

James Henderson                                                                    

Portfolio 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]

Page 4 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

Income Statement

for the half year ended 31 March 2012

	(Unaudited) Half year ended 31 March 2012			(Unaudited) Half year ended 31 March 2011			(Audited) Year ended 30 September 2011
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Gains on investments held at    fair value through profit or     loss	-	41,884	41,884	-	35,584	35,584	-	11,112	11,112
Income from investments held    at fair value through profit    or loss	3,523	-	3,523	3,162	-	3,162	9,781	-	9,781
Other interest receivable and    similar income	60	-	60	88	-	88	125	-	125
	---------	--------	---------	---------	--------	--------	---------	---------	---------
Gross revenue and capital    gains	3,583	41,884	45,467	3,250	35,584	38,834	9,906	11,112	21,018
Management fee and     performance fee (note 2)	(584)	(639)	(1,223)	(516)	(702)	(1,218)	(1,043)	(698)	(1,741)
Other administrative expenses (note 2)	(237)	-	(237)	(194)	-	(194)	(402)	-	(402)
	---------	--------	---------	---------	--------	--------	---------	---------	---------
Net return on    ordinary activities before    finance charges and     taxation	2,762	41,245	44,007	2,540	34,882	37,422	8,461	10,414	18,875
Finance charges	(441)	-	(441)	(346)	-	(346)	(738)	-	(738)
	---------	--------	---------	---------	--------	--------	---------	---------	---------
Net return on ordinary    activities before taxation	2,321	41,245	43,566	2,194	34,882	37,076	7,723	10,414	18,137
Taxation on net return on    ordinary activities	(35)	-	(35)	(57)	-	(57)	(105)	-	(105)
	---------	--------	---------	---------	--------	--------	---------	---------	---------
Net return on ordinary    activities after taxation	2,286	41,245	43,531	2,137	34,882	37,019	7,618	10,414	18,032
	=====	=====	=====	=====	=====	=====	=====	=====	=====
Return per ordinary    share - basic and diluted  (note 3)	8.7p	156.1p	164.8p	8.1p	132.0p	140.1p	28.8p	39.5p	68.3p
	=====	=====	=====	=====	=====	=====	=====	=====	=====

The total columns of this statement represent the Profit and Loss Account of the Company.  The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

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 2012. The Company has no recognised gains or losses other than those disclosed in the Income Statement and the Reconciliation of Movements in Shareholders' Funds.

Page 5 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

Reconciliation of Movements in Shareholders' Funds

For the half year ended 31 March 2012

	(Unaudited) Half year ended 31 March 2012
	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 2011	6,604	53,561	1,007	145,400	7,679	214,251
Net return on ordinary    activities after taxation	-	-	-	41,245	2,286	43,531
Second interim dividend (17.5p) for   the year ended 30 September 2011	-	-	-	-	(4,624)	(4,624)
	------------	------------	------------	------------	------------	------------
At 31 March 2012	6,604	53,561	1,007	186,645	5,341	253,158
	=======	=======	=======	=======	=======	=======

	(Unaudited) Half year ended 31 March 2011
	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 2010	6,604	53,561	1,007	134,986	7,326	203,484
Net return on ordinary    activities after  taxation	-	-	-	34,882	2,137	37,019
Second interim dividend (17.0p) for    the year ended 30 September 2010	-	-	-	-	(4,491)	(4,491)
	------------	------------	------------	------------	-----------	-----------
At 31 March 2011	6,604	53,561	1,007	169,868	4,972	236,012
	=======	=======	======	======	=======	======

	(Audited) Year ended 30 September 2011
	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 2010	6,604	53,561	1,007	134,986	7,326	203,484
Net return on ordinary    activities after taxation	-	-	-	10,414	7,618	18,032
Second interim dividend (17.0p) for    the year ended 30 September 2010	-	-	-	-	(4,491)	(4,491)
First interim dividend (10.5p) for the    year ended 30 September 2011	-	-	-	-	(2,774)	(2,774)
	------------	------------	------------	------------	------------	-----------
At 30 September 2011	6,604	53,561	1,007	145,400	7,679	214,251
	=======	=======	=======	=======	=======	======

Purchase transaction costs for the half year ended 31 March 2012 were £101,000 (half year ended 31 March 2011: £103,000; year ended 30 September 2011: £201,000). Sale transaction costs for the half year ended 31 March 2012 were £25,000 (half year ended 31 March 2011: £28,000; year ended 30 September 2011: £149,000).  These comprise mainly stamp duty and commission.                                                                                

Page 6 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

Balance Sheet

as at 31 March 2012

	(Unaudited) 31 March 2012 £'000	(Unaudited)  31 March 2011 £'000	(Audited) 30 September 2011 £'000
Fixed assets
Investments held at fair value through profit or loss	290,193	267,226	246,055
	-----------	-----------	-----------
Current assets
Debtors	1,251	3,202	1,559
Cash at bank and on deposit	1,335	813	1,297
	-----------	-----------	-----------
	2,586	4,015	2,856
Creditors: amounts falling due within one year	(39,621)	(35,229)	(34,660)
	-----------	-----------	-----------
Net current liabilities	(37,035)	(31,214)	(31,804)
	-----------	-----------	-----------
Total net assets	253,158	236,012	214,251
	======	=======	=======
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	186,645	169,868	145,400
Revenue reserve	5,341	4,972	7,679
	-----------	-----------	-----------
Total equity shareholders' funds	253,158	236,012	214,251
	======	=======	=======
Net asset value per ordinary share (note 4)	958.3p	893.4p	811.0p
	======	=======	=======

Page 7 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

Cash Flow Statement

for the half year ended 31 March 2012

	(Unaudited) Half year ended 31 March 2012 £'000	(Unaudited) Half year ended 31 March 2011 £'000	(Audited) Year ended 30 September 2011 £'000
Net cash inflow from operating activities	2,380	2,744	8,163
Net cash outflow from servicing of finance	(406)	(420)	(803)
Net tax recovered	9	28	63
Net cash outflow from financial investments	(1,994)	(4,315)	(6,614)
Equity dividends paid	(4,624)	(4,491)	(7,265)
	----------	----------	----------
Net cash outflow before financing	(4,635)	(6,454)	(6,456)
Net cash inflow from financing	4,665	5,000	5,500
	----------	----------	----------
Increase/(decrease) in cash	30	(1,454)	(956)
	======	======	======
Reconciliation of operating revenue to net cash flow from    operating activities
Total return before finance charges and taxation	44,007	37,422	18,875
Less capital gain before finance charges and taxation	(41,245)	(34,882)	(10,414)
	----------	----------	----------
Net revenue return before finance charges and taxation	2,762	2,540	8,461
Decrease/(increase) in accrued income	353	286	(181)
(Decrease) /increase in creditors	(35)	685	704
Expenses charged to capital	(639)	(702)	(698)
Income tax suffered on property income dividends	(15)	(8)	(18)
Overseas withholding tax	(46)	(57)	(105)
	----------	----------	----------
Net cash inflow from operating activities	2,380	2,744	8,163
	======	======	======
Reconciliation of net cash flow to movement in net debt
Increase/ (decrease) in cash as above	30	(1,454)	(956)
Cash inflow from movement in loans	(4,665)	(5,000)	(5,500)
Exchange movements	8	(15)	(29)
	----------	----------	----------
	(4,627)	(6,469)	(6,485)
Net debt at the beginning of the period	(32,203)	(25,718)	(25,718)
	----------	----------	----------
Net debt at the end of the period	(36,830)	(32,187)	(32,203)
	======	======	======
Represented by:
Cash at bank less bank overdrafts	1,335	813	1,297
Debt falling due within one year	(38,165)	(33,000)	(33,500)
	----------	----------	----------
	(36,830)	(32,187)	(32,203)
	======	======	======

Page 8 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

Notes to the Financial Statements

1.	Accounting policies
	The financial statements have been prepared using the same accounting policies as set out in the Company's Report and Financial Statements for the year ended 30 September 2011. The financial statements have not been audited or reviewed by the Company's auditors. The taxation charge for each period is based on overseas tax suffered.
2.	Expenses
	All expenses with the exception of the performance fee 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. A provision of £639,000 (31 March 2011: £702,000; 30 September 2011:£698,000)  has been made for a performance fee based on Lowland's performance relative to the FTSE All-Share Index (Lowland's benchmark) over the eighteen months to 31 March 2012. The actual performance fee payable will be calculated based on the actual relative performance for the twenty-four months to 30 September 2012 and will be equal to 15% of any outperformance (on a total return basis) of the FTSE All-Share Index by more than 10% (the "hurdle rate"). The total of the management and performance fees are capped at 0.75% of average net assets for the year. The provision, which is the maximum that could be charged under the cap arrangements, has been charged to the capital column of the income statement whereas the management fee is charged to the revenue column.
3.	Return per ordinary share - basic and diluted
		(Unaudited) Half year ended 31 March 2012 £'000	(Unaudited) Half year ended 31 March 2011 £'000	(Audited) Year ended 30 September 2011 £'000
	The return per ordinary share is based    on the following figures:
	Revenue return	2,286	2,137	7,618
	Capital return	41,245	34,882	10,414
		----------	----------	----------
	Total	43,531	37,019	18,032
		======	======	======
	Weighted average number of ordinary shares    in issue for each period	26,417,427	26,417,427	26,417,427
	Revenue return per ordinary share	8.7p	8.1p	28.8p
	Capital return per ordinary share	156.1p	132.0p	39.5p
		----------	----------	----------
	Total	164.8p	140.1p	68.3p
		======	======	======
	The Company does not have any dilutive securities; therefore basic and diluted returns per share are the same.
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 £253,158,000 (31 March 2011: £236,012,000; 30 September 2011: £214,251,000) and on 26,417,427 ordinary shares (31 March 2011: 26,417,427; 30 September 2011: 26,417,427) being the number of ordinary shares in issue at the end of each period.

Page 9 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

5.	VAT on management fees
	While the Company has received back from HMRC 100% of the VAT which had been borne by the Company between 1990 and 1996, and 2000 and 2007, as well as simple interest on those amounts, there remains an amount outstanding relating both to VAT reclaims for 1996 to 2000 and compound interest for 1990 to 2007.  It is uncertain whether any further amounts will be recovered.
6.	Interim dividend
	An interim dividend of 15.0p per ordinary share has been declared and will be paid on 19 June 2012 to shareholders on the register of members at the close of business on 1 June 2012.  The ex-dividend date is 30 May 2012.
7.	Going concern
	The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements.  The assets of the Company consist mainly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.
8.	Comparative information
	The financial information contained in this half year report does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 31 March 2012 and 31 March 2011 has not been audited or reviewed by the Company's auditors. The figures and financial information for the year ended 30 September 2011 have been extracted from the latest audited financial statements of the Company. These financial statements 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.
9.	General Information
	a) Company Objective The Company aims to give shareholders a higher than average return with growth of both capital and income over the medium to long term. b) Company Status The Company is a UK domiciled investment trust company, registered number 670489. c) Directors, Secretary and Registered Office The Directors of the Company are Peter Troughton (Chairman), Rupert Barclay, Karl Sternberg, Kevin Carter and Robert Robertson.  The Secretary is Henderson Secretarial Services Limited, represented by Wendy King FCIS. The registered office is 201 Bishopsgate, London EC2M 3AE. d) Website Details of the Company's share price and net asset value, together with general information about the Company, monthly factsheets and data, profiles of the Board, copies of announcements, reports and details of general meetings can be found at www.lowlandinvestment com

    Page 10 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

Investments	Sector	Market Value £'000	% of Portfolio
Senior	Aerospace & Defence	15,492	5.3
Carclo	Chemicals	14,810	5.1
Royal Dutch Shell	Oil & Gas Producers	10,448	3.6
GlaxoSmithKline	Pharmaceuticals & Biotechnology	7,681	2.7
Hiscox	Nonlife Insurance	6,963	2.4
D S Smith	General Industrials	6,668	2.3
Interserve	Support Services	6,096	2.1
BP	Oil & Gas Producers	6,013	2.1
Vodafone	Mobile Telecommuncations	5,726	2.0
Canfor Pulp*	Forestry & Paper	5,621	1.9
Top 10 holdings		85,518	29.5
IP Group	Financial Services	5,360	1.9
GKN	Automobiles & Parts	5,359	1.9
Croda	Chemicals	5,265	1.8
Hill & Smith	Industrial Engineering	5,248	1.8
IMI	Industrial Engineering	5,111	1.7
Aviva	Life Insurance	4,973	1.7
International Personal Finance	Financial Services	4,729	1.6
Phoenix	Life Insurance	4,661	1.6
Meggitt	Aerospace & Defence	4,645	1.6
Amlin	Nonlife Insurance	4,542	1.6
Top 20 holdings		135,411	46.7
Elementis	Chemicals	4,338	1.5
Provident Financial	Financial Services	4,298	1.5
Diageo	Beverages	4,177	1.4
Daily Mail & General	Media	4,064	1.4
RPC	General Industrials	3,680	1.3
Renold	Industrial Engineering	3,624	1.2
Morgan Crucible	Electronic & Electrical Equipment,	3,542	1.2
Cape	Oil Equipment, Services & Distribution	3,507	1.2
Barclays Bank 6% 15/12/17	Fixed Interest	3,406	1.2
Low & Bonar	Construction & Materials	3,326	1.1
Top 30 holdings		173,373	59.7
Gibson Energy*	Oil & Gas Producers	3,218	1.1
Pearson	Media	3,204	1.1
Castings	Industrial Engineering	3,190	1.1
Avon Rubber	Aerospace & Defence	3,187	1.1
Balfour Beatty	Construction & Materials	3,161	1.1
†H&T	Financial Services	3,148	1.1
Greene King	Travel & Leisure	3,078	1.1
Oxford Instruments	Electronic & Electrical Equipment	3,037	1.1
Scottish & Southern Energy	Electricity	2,990	1.0
Scapa†	Chemicals	2,939	1.0
Top 40 holdings		204,525	70.5

Page 11 of 11

LOWLAND INVESTMENT COMPANY PLC

Unaudited Results for the Half Year Ended 31 March 2012

Investments	Sector	Market Value £'000	% of Portfolio
Consort Medical	Health Care Equipment & Services	2,889	1.0
Standard Life	Life Insurance	2,871	1.0
BAE Systems	Aerospace & Defence	2,849	1.0
Rolls-Royce	Aerospace & Defence	2,842	1.0
Clarkson	Industrial Transportation	2,819	0.9
St Modwen	Real Estate	2,663	0.9
Weir	Industrial Engineering	2,646	0.9
FBD	Nonlife Insurance	2,640	0.9
Herald Investment	Equity Investment Instruments	2,608	0.9
Goldenport*	Industrial Transportation	2,594	0.9
Top 50 holdings		231,946	79.9
Rest of Portfolio		58,247	20.1
Total Portfolio		290,193	100.0

^†  AIM Stocks

* Overseas Quoted Stocks

Sector Analysis	% as at 31 March 2012	% as at 30 September 2011
Industrials	32.3	30.7
Other Financials	21.9	19.9
Basic Materials	12.9	12.7
Oil & Gas	8.0	9.1
Consumer Goods	7.6	7.8
Consumer Services	6.4	7.5
Health Care	3.6	4.2
Telecommunications	2.6	3.0
Utilities	2.6	3.6
Banks including Fixed Interest	2.1	1.5
	--------	--------
Total	100.0	100.0
	=====	=====

-ENDS-

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.

 

END

 

 

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