Final Results

RNS Number : 9343X

Scottish American Investment Co PLC

15 February 2013

 



RNS Announcement: Preliminary Results

In 2012 the net asset value, share price and earnings rose.  The dividend was increased ahead of inflation and was covered by earnings.

 Results for the year to 31 December 2012

¾ The net asset value total return (capital and income) was 12.3% and the share price total return, 13.0%.  The comparative index (50% FTSE All-Share and 50% FTSE All-World ex UK) total return was 12.2%.

¾ A final dividend of 2.5p is proposed which will bring the total for the year to 9.8p, an increase of 3.7% on 2011. Earnings per share were 10.2p per share compared to 9.3p in 2011.

¾ Equities performed well in 2012 despite a slowdown in the global economy.

¾ SAINTS is cautiously optimistic that the world's economy and financial markets are moving away from the fragility and nervousness that has characterised recent years.  In the view of the Board, long term investors can reasonably expect positive returns from current market levels.

15 February 2013

SAINTS' objective is to increase capital and grow income in order to deliver real dividend growth. Its policy is to invest flexibly and actively across a broad range of assets and markets. Listed equities, both UK and overseas, form the largest part of the portfolio. Investments are also made in bonds, property and other asset classes. 

Baillie Gifford & Co, the Edinburgh based fund management group with around £92 billion under management and advice as at 14 February 2013, is appointed as investment managers and secretaries to SAINTS.

Past performance is not a guide to future performance. SAINTS is a listed UK company. As a result, the value of its shares and any income from those shares is not guaranteed and could go down as well as up. You may not get back the amount you invested. As SAINTS invests in overseas securities, changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up. You can find up to date performance information about SAINTS on the SAINTS page of the Managers' website www.saints-it.com. 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.

For further information please contact:

Patrick Edwardson, Manager, The Scottish American Investment Company P.L.C.

Tel: [phone]

James Budden, Baillie Gifford & Co  

Tel: [phone] or 07507 201208

Roland Cross, Director, Broadgate Mainland

Tel: [phone] or 07831 401309

The following is the unaudited Annual Financial Report for the year to 31 December 2012.

Chairman's Statement

Overview

I am pleased to report on a successful year for SAINTS.  Net asset value, investment income and earnings per share all rose.  We are proposing a full year dividend of 9.8p.  This is an increase over the previous year's distribution, well ahead of inflation, and is fully covered by our earnings.

Performance

Equities, which represented on average 71% of invested portfolio, performed well in 2012 despite a slowdown in the global economy.  Many other asset classes also delivered positive returns, particularly those offering higher yields or whose valuations tend to move up or down with investor confidence.  The Managers' Report provides a full description of the economic environment and market developments but, in broad terms, SAINTS was a beneficiary as our portfolio was fully invested through the year, mainly in equities but also higher yielding bonds and property.

Net asset value (NAV) per share, with the debenture valued at its fair value, rose from 205.3p to 220.5p.  The net asset value total return (which captures both capital returns and income) was 12.3%.   This compares to a return of 12.2% on SAINTS' comparative index.  Net asset value total return, with the debenture at book value, was 11.7%.

The share price rose from 208.5p to 225.5p and the share price total return was 13%.  At the end of the year, SAINTS' shares traded at a 2.3% premium to the fair value NAV and a 5.1% discount to the book value NAV.

Revenues and Dividend

Total income for the year was £18.6m which compares to £17.3m in 2011, a rise of 7.2%.  This growth was driven by a 9.7% increase in dividend income from our equity portfolio, from £11.3m to £12.4m.  Rental income from our portfolio of directly held properties rose 18% to £3.2m as we received the full year benefit of purchases made in 2011.  Income from the bond portfolio fell by 10% to £3m as a result of disposals.

Net earnings (total income less administrative costs, borrowing costs and tax charges) rose 9.9% to £13.6m.  This equates to 10.22p on a per share basis, 9.7% higher than the 9.32p recorded in 2011.

This improvement in earnings per share allows us to recommend an increased dividend of 9.8p for 2012.  2.4p of this was paid in June and payments of 2.45p each were made in September and December.  We now propose a final dividend of 2.5p which will be paid on 12 April.

The dividend for 2012 is 3.7% higher than the 9.45p paid in 2011.  The rate of dividend growth exceeds the current rates of inflation (the Retail Price Index rose 3.1% in the year to end December 2012).  We are confident that SAINTS' dividend will continue to grow in real terms over the medium to long term.

Borrowings

SAINTS' borrowings take the form of a single debenture due for repayment in April 2022. During 2012, these borrowings mainly funded a range of higher yielding commercial property and bond investments. 

The book value of these borrowed funds is £86.5m which, at the year end, was equivalent to approximately 27% of shareholders' funds.  The estimated market or fair value of the debenture was £109.2m.   We expect the fair value of the debenture to converge on its book value over the remainder of its life but, for now,  the difference gives rise to a significant gap between book value NAV (which was 237.7p per share at year end) and fair value NAV (220.5p per share). 

Outlook

We are cautiously optimistic that the world's economy and financial markets are moving away from the fragility and nervousness that has characterised recent years. 

There are still significant problems to be resolved in various parts of the globe.  In particular, we think the high debt levels present in many developed economies will weigh on growth for some time.  However, central banks are following very supportive policies and seem ready to act boldly if growth prospects were to deteriorate to any great extent.

Stockmarket valuations are not cheap but nor are they greatly expensive.  We believe long term investors can reasonably expect positive returns from current market levels and our current investment positioning, explained more fully on the following pages, reflects this. 

The Board and the AGM

The AGM will be held at 11am on Thursday 4 April at Baillie Gifford's offices at Calton Square, 1 Greenside Row, Edinburgh. The Managers will make a presentation on the investment portfolio. There will also be an opportunity to ask questions and the Directors and Managers look forward to meeting you there.

Sir Brian Ivory, CBE

Chairman

14 February 2013

Income statement

The following is the unaudited preliminary statement for the year to 31 December 2012 which was approved by the Board on 14 February 2013. The Board of The Scottish American Investment Company P.L.C. is recommending to the Annual General Meeting of the Company to be held on 4 April 2013 the payment of a final dividend of 2.50p (2.40p last year) per ordinary share making a total of 9.80p (9.45p last year) paid and proposed for the year ended 31 December 2012.

	For the year ended 31 December 2012 (unaudited)			For the year ended 31 December 2011 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Net gains/(losses) on investments - securities	-	25,178	25,178	-	(31,679)	(31,679)
Currency gains/(losses)	-	288	288	-	(840)	(840)
Income (note 2)	18,556	-	18,556	17,316	-	17,316
Management fees	(627)	(1,164)	(1,791)	(627)	(1,163)	(1,790)
Other administrative expenses	(881)	-	(881)	(1,000)	-	(1,000)
Net return before finance costs and taxation	17,048	24,302	41,350	15,689	(33,682)	(17,993)
Finance costs of borrowings	(2,063)	(3,832)	(5,895)	(2,074)	(3,852)	(5,926)
Net return on ordinary activities before taxation	14,985	20,470	35,455	13,615	(37,534)	(23,919)
Tax on ordinary activities	(1,421)	705	(716)	(1,269)	698	(571)
Net return on ordinary activities after taxation	13,564	21,175	34,739	12,346	(36,836)	(24,490)
Net return per ordinary share (note 3)	10.22p	15.96p	26.18p	9.32p	(27.80p)	(18.48p)

Statement of total recognised gains and losses

	For the year ended 31 December 2012 (unaudited)			For the year ended 31 December 2011 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Net return on ordinary activities after taxation	13,564	21,175	34,739	12,346	(36,836)	(24,490)
Net losses on investments - property	-	(750)	(750)	-	(86)	(86)
Total recognised gains and losses for the year	13,564	20,425	33,989	12,346	(36,922)	(24,576)
Total recognised gains and losses per ordinary share (note 4)	10.22p	15.39p	25.61p	9.32p	(27.86p)	(18.54p)

The total column of the Income Statement is the profit and loss account of the Company.

All revenue and capital items in these statements derive from continuing operations.

Balance sheet

	At 31 December 2012 (unaudited)		At 31 December 2011 (audited)
	£'000	£'000	£'000	£'000
Fixed assets
Investments - securities	362,004		341,005
Investments - property	38,650		39,400
		400,654		380,405
Current assets
Debtors	1,735		1,552
Cash and deposits	2,020		3,165
	3,755		4,717
Creditors
Amounts falling due within one year	(2,629)		(3,956)
Net current assets		1,126		761
Total assets less current liabilities		401,780		381,166
Creditors
Amounts falling due after more than one year		(86,467)		(86,972)
Total net assets		315,313		294,194
Capital and reserves
Called up share capital		33,169		33,169
Share premium		357		357
Capital redemption reserve		22,781		22,781
Capital reserve		242,174		221,749
Revenue reserve		16,832		16,138
Shareholders' funds		315,313		294,194
Net asset value per ordinary share (debenture at fair value)		220.5p		205.3p
Net asset value per ordinary share (debenture at book value)		237.7p		221.7p
Ordinary shares in issue (note 6)		132,675,943		132,533,834

Reconciliation of movements in shareholders' funds

For the year ended 31 December 2012 (unaudited)

	Share capital £'000	Share Premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2012	33,169	357	22,781	221,749	16,138	294,194
Total recognised gains and losses	-	-	-	20,425	13,564	33,989
Dividends paid in the year (note 4)	-	-	-	-	(12,870)	(12,870)
Shareholders' funds at 31 December 2012	33,169	357	22,781	242,174	16,832	315,313

For the year ended 31 December 2011 (audited)

	Share capital £'000	Share Premium £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2011	33,121	-	22,781	258,671	16,250	330,823
Total recognised gains and losses	-	-	-	(36,922)	12,346	(24,576)
Shares issued (note 6)	48	357	-	-	-	405
Dividends paid in the year (note 4)	-	-	-	-	(12,458)	(12,458)
Shareholders' funds at 31 December 2011	33,169	357	22,781	221,749	16,138	294,194

Condensed cash flow statement

	Year Ended 31 December 2012 (unaudited)		Year Ended 31 December 2011 (audited)
	£'000	£'000	£'000	£'000
Net cash inflow from operating activities		15,832		14,253
Servicing of finance
Interest paid	(6,400)		(6,400)
Net cash outflow from servicing of finance		(6,400)		(6,400)
Taxation
Overseas tax incurred	(720)		(564)
Income tax refunded	-		9
Total tax paid		(720)		(555)
Financial investment
Acquisitions of investments	(75,401)		(51,733)
Disposals of investments	78,382		54,225
Forward currency contracts	292		(782)
Net cash inflow from financial investment		3,273		1,710
Equity dividends paid		(12,870)		(12,458)
Net cash outflow before financing		(885)		(3,450)
Financing
Shares issued	-		405
Net cash inflow from financing		-		405
Decrease in cash		(885)		(3,045)
Reconciliation of net cash flow to movement in net debt
Decrease in cash		(885)		(3,045)
Translation difference		(260)		56
Other non-cash changes		505		474
Movement in net debt in the year		(640)		(2,515)
Net debt at 1 January		(83,807)		(81,292)
Net debt at 31 December		(84,447)		(83,807)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation		41,350		(17,993)
(Gains)/losses on investments - securities		(25,178)		31,679
Currency (gains)/losses		(288)		840
Decrease/(increase) in accrued income and prepaid expenses		193		(128)
Decrease in other debtors		4		43
(Decrease)/increase in creditors and prepaid income		(30)		43
Other non-cash changes		(219)		(231)
Net cash inflow from operating activities		15,832		14,253

Asset allocation

	At 31 December 2012 % (unaudited)		At 31 December 2011 % (audited)
UK quoted equities*	23.5		26.3
Overseas quoted equities*	49.0		45.1
Total quoted equities*	72.5		71.4
Bonds	12.8		12.3
Direct property	9.5		10.4
Quoted equity property investments	3.3		3.0
Quoted equity forestry investments	1.6		2.2
Unquoted	-		0.5
Net liquid assets	0.3		0.2
Total assets	100.0		100.0

* Excludes quoted equity property and forestry investments.

Performance attribution

Portfolio Breakdown	Average allocation		Total return
	SAINTS %	Benchmark %	SAINTS %	Benchmark %
Quoted equities*	91.7	100.0	10.5	12.2
Bonds	16.1		25.6
Direct property	12.6		6.1
Quoted equity forestry investments	2.2		(20.0)
Quoted equity property investments	3.3		4.3
Unquoted	0.4		(4.3)
Deposits	1.5		1.3
Debenture at book value	(27.8)		6.8
Portfolio total return (debenture at book value)			12.8	12.2
Other items #			(1.1)
Fund total return (debenture at book value)			11.7	12.2
Adjustment for change in fair value of debenture			0.6
Fund total return (debenture at fair value)			12.3	12.2

*      Excludes quoted equity property and forestry investments.

#      This includes Baillie Gifford and OLIM management fees.

The above returns are calculated on a total return basis with net income reinvested.

Past performance is not a guide to future performance.

Source: Baillie Gifford & Co

Thirty largest holdings (unaudited)

Name	Classification	Business	2012 Value £'000	2012 % of total assets	2011 Value %
Athena Debt Opportunities Fund	Bonds	Structured finance investment fund	15,863	3.9	12,758
Baillie Gifford High Yield Bond Fund	Bonds	High yield bond fund	13,054	3.3	6,642
Progressive	Overseas Quoted Equities	Property and casualty insurance	10,518	2.6	1,367
Brazil CPI Linked 15/05/2045	Bonds	Brazilian government bond	10,061	2.5	17,742
Baillie Gifford Greater China Fund	Overseas Quoted Equities	Chinese equities investment fund	8,734	2.2	7,676
Holiday Village in New Romney	Direct Property	Holiday village	7,750	1.9	7,450
Taiwan Semiconductor Manufacturing	Overseas Quoted Equities	Semiconductor manufacturer	7,478	1.9	5,870
Samsung Electronics	Overseas Quoted Equities	Electronic devices	6,735	1.7	5,096
Rio Tinto	United Kingdom Quoted Equities	Mining	6,600	1.6	5,875
Cambium Global Timberland	Quoted Equity Forestry Investments	Forestry investment fund	6,600	1.6	8,250
Philip Morris International	Overseas Quoted Equities	Cigarette manufacturer	6,162	1.5	7,528
BHP Billiton	United Kingdom Quoted Equities	Mining	6,133	1.5	6,344
Penn West Exploration	Overseas Quoted Equities	Oil exploration and production	5,962	1.5	5,472
Amlin	United Kingdom Quoted Equities	Property and casualty insurance	5,906	1.5	4,886
Nursing home in Kenilworth	Direct Property	Nursing home	5,500	1.4	4,950
Japan Residential Investment Company	Quoted Equity Property Investments	Japanese residential property fund	5,156	1.3	5,063
Scottish & Southern Energy	United Kingdom Quoted Equities	Electricity utility	5,101	1.3	4,644
Jeronimo Martins	Overseas Quoted Equities	Food retailer	5,054	1.3	4,552
Royal Dutch Shell	United Kingdom Quoted Equities	Integrated oil company	4,999	1.2	5,643
Partners Group	Overseas Quoted Equities	Asset management	4,671	1.2	3,722
SAP	Overseas Quoted Equities	Business software developer	4,620	1.2	3,204
Doric Nimrod Air Two	United Kingdom Quoted Equities	Aircraft leasing	4,620	1.2	4,480
Rexam	United Kingdom Quoted Equities	Beverage can manufacturer	4,584	1.1	2,048
Industrial & Infrastructure Fund	Quoted Equity Property Investments	Japanese commercial property fund	4,343	1.1	-
eBay	Overseas Quoted Equities	Online trading and payment	4,163	1.0	1,541
Office and leisure property in Sunderland	Direct Property	Mixed use property	4,100	1.0	4,250
Fleet Street 2 FRN's 2017	Bonds	German commercial mortgage-backed   security	4,065	1.0	3,053
Barclays Bank 14% 2019	Bonds	Bank bond	3,998	1.0	3,362
Aviva	United Kingdom Quoted Equities	Investment and life assurance	3,841	1.0	3,092
Vodafone	United Kingdom Quoted Equities	Mobile telecommunication services	3,773	0.9	4,372
			190,144	47.4	160,932

Notes (unaudited)

1.	The financial statements for the year to 31 December 2012 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements to 31 December 2011.
2.	Income					2012 £'000		2011 £'000
	Income from investments
	Franked investment income					3,995		3,989
	UK unfranked investment income					1,198		1,114
	Overseas dividends					8,357		7,272
	Overseas interest					1,793		2,215
						15,343		14,590
	Other income
	Deposit interest					9		6
	Rental income					3,153		2,670
	Other income					51		50
						3,213		2,726
	Total income					18,556		17,316
3.	Returns per ordinary share	2012				2011
		Revenue	Capital		Total	Revenue	Capital		Total
	Net return per ordinary share (Income Statement)	10.22p	15.96p		26.18p	9.32p	(27.80p)		(18.48p)
	Total recognised gains and losses per ordinary share	10.22p	15.39p		25.61p	9.32p	(27.86p)		(18.54p)
	Net return per ordinary share is based on the return on ordinary activities after taxation figures in the Income Statement and on 132,675,943 (2011 - 132,533,834) ordinary shares of 25p, being the weighted average number of ordinary shares in issue during each year. Total recognised gains and losses per ordinary share is based on the total recognised gains and losses for the year in the Statement of Total Recognised Gains and Losses and on 132,675,943 (2011 - 132,533,834) ordinary shares of 25p, being the weighted average number of ordinary shares in issue during each year. There are no dilutive or potentially dilutive shares in issue.
4.	Ordinary Dividends			2012		2011	2012 £'000			2011 £'000
	Amounts recognised as distribution in the year:
	Previous year's final (paid 13 April 2012)			2.40p		2.35p	3,184			3,113
	First interim (paid 29 June 2012)			2.40p		2.35p	3,184			3,113
	Second interim (paid 28 September 2012)			2.45p		2.35p	3,251			3,114
	Third interim (paid 27 December 2012)			2.45p		2.35p	3,251			3,118
				9.70p		9.40p	12,870			12,458

Notes (unaudited) (ctd)

4.	Dividends (ctd)
	We also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution out of current year profits by way of dividend for the year is £13,564,000 (2011 - £12,346,000).
		2012	2011	2012 £'000	2011 £'000
	Dividends paid and payable in respect of the year:
	First interim (paid 29 June 2012)	2.40p	2.35p	3,184	3,113
	Second interim (paid 28 September 2012)	2.45p	2.35p	3,254	3,114
	Third interim (paid 27 December 2012)	2.45p	2.35p	3,251	3,118
	Current year's proposed final dividend (payable 12 April 2013)	2.50p	2.40p	3,317	3,184
		9.80p	9.45p	13,003	12,529
	If approved the final dividend of 2.50p will be paid on 12 April 2013 to all shareholders on the register at the close of business on 8 March 2013. The ex-dividend date is 6 March 2013. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for the receipt of elections for reinvestment of this dividend is 20 March 2013.
5.	The fair value of the 8% Debenture Stock 2022 at 31 December 2012 was £109.2m (2011 - £108.8m).
6.	The Company allotted no shares in the year to 31 December 2012 (2011 - allotted 190,000 ordinary shares with a nominal value of £47,500 for a total consideration of £405,000). At 31 December 2012 the Company had authority to buy back 19,888,123 ordinary shares and to allot 13,267,592 ordinary shares without application of pre-emption rights in accordance with the authorities granted at the AGM in April 2012. No shares were bought back during the year.
7.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2012. The financial information for 2011 is derived from the statutory accounts for 2011 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2011 accounts, their report was unqualified and did not contain a statement under section 495 to 497 of the Companies Act 2006. The statutory accounts for 2012 are unaudited and will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
8.	The Report and Accounts will be available on the SAINTS page of the Managers' website www.saints-it.com on or around 1 March 2013.‡

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

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

- ends -

 

END

 

 

FR USUNROBAUAAR