Half Yearly Report

RNS Number : 3054L

Scottish American Investment Co PLC

29 July 2011

 



 

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C. (SAINTS)

RESULTS FOR THE SIX MONTHS TO 30 JUNE 2011

Net asset value total return (capital and income) was 1.3% and share price total return was 0.7%.  The benchmark (50% FTSE All-Share and 50% FTSE All-World Ex UK in sterling terms) total return was 2.6%.

·    The low level of market returns broadly reflects the global economic situation.  Growth rates varied widely across regions.  The developed economies continue to labour under significant levels of private and public sector debt. The developing economies are expanding at a rapid pace but giving rise to inflationary pressures.

·    Earnings per share totalled 5.07p (4.94p in the corresponding period in 2010). After the payment of a second interim dividend of 2.35p, the dividend for the six months will total 4.7p (4.6p in the corresponding period in 2010).  Revenue reserves stand at 9.9p per share.

·    Despite the challenging environment, the corporate sector appears in good health.  Margins may be sustainable at current levels for some time, profits are still growing and dividend payments are rising.  This last factor, if maintained, should boost SAINTS' revenue receipts over the coming years.

Past performance is not a guide to future performance. SAINTS is listed on the stock market. As a result, the value of the shares, and any income from them, can fall as well as rise and 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.

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 over £76 billion under management and advice as at 28 July 2010, is appointed as investment managers and secretaries to SAINTS.

29 July 2011

- ends -

For further information please contact:

Patrick Edwardson, Manager,                                                                                      

The Scottish American Investment Company P.L.C.                         0131 275 2133 or

                                                                                                            07812 537316

James Budden,

Baillie Gifford & Co                                                      0131 275 2816 or 07507201208

Roland Cross, Director

Broadgate Mainland                                                     0207 776 0512 or 07831 401309

 

The following is the unaudited Half-Yearly Financial Report for the six months

to 30 June 2011

 

 

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

 

Half-Yearly Financial Report to 30 June 2011

Responsibility Statement

 

We confirm that to the best of our knowledge:

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

b)   the Half-Yearly Management Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months, and their impact on the financial statements, and a description of principal risks and uncertainties for the remaining six months of the year); and

c)   the Half-Yearly Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

Sir Brian Ivory, CBE

Chairman

28 July 2011

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

 

Half-Yearly Management Report

The net asset value total return for the period covered by this report was 1.3% and the share price total return was slightly lower at 0.7%. The benchmark total return was 2.6%.

Earnings per share totalled 5.07p (4.94p in the corresponding period in 2010). After the payment of a second interim dividend of 2.35p, the dividend for the six months will total 4.7p (4.6p in the corresponding period in 2010). 

The low level of market returns is, we think, a broadly fair reflection of the global economic situation.  As a whole, the global economy grew strongly but growth rates varied widely across regions.  The developed economies continue to labour under very significant levels of private and public sector debt. The developing economies face no such constraint and are expanding at a rapid pace, but this is giving rise to inflationary pressures.

The global economy is therefore best described as unbalanced. We also feel that many of the factors that gave rise to this situation remain in place - fixed or managed exchange rates in many of the developing countries; excessive consumption and insufficient saving in some of the developed countries; and political indecision or intransigence preventing practical solutions.   Unsurprisingly, this is giving rise to considerable uncertainty in financial markets which have tended to veer between bouts of optimism and periods of pessimism.

More positively, and despite the challenging macro environment, the corporate sector appears to be in very good health.  Margins, although high when compared to the average of the last two or three decades, may well be sustainable at current levels for some time yet, profits are still growing and dividend payments are rising.  This last factor is particularly pleasing and, if maintained, should mean that SAINTS' revenue account improves significantly over the next year or so.

The broad positioning of the portfolio is little changed on the start of the year.  Our most significant exposure remains to stockmarkets with our equity investments representing approximately two-thirds of the portfolio (although this is a little less than we would normally have, reflecting our macro-economic concerns).  The balance of the portfolio is invested in credit markets and in UK commercial property.

By comparison with our benchmark, we continue to be overweight emerging markets and underweight the developed world's stockmarkets.  For the short period of time covered by this report, this positioning was unhelpful but we are not proposing to change.  If anything, further weakness in the emerging markets may see us add to holdings in some of these markets.

Credit markets have performed very strongly in the last two years and some of the individual investments we have held over that time are now fully valued.  This has led to higher turnover in that part of the portfolio and a small net reduction in our exposure.

As for the property investments, we believe certain types of UK commercial property are attractively valued and are likely to prove a good source of long term income growth.  This view encourages us to add to this part of the portfolio.

The principal risks and uncertainties are set out in note 10 at the end of this document.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

INCOME STATEMENT

(unaudited)

	For the six months ended 30 June 2011				For the six months ended 30 June 2010			For the year ended 31 December 2010
	Revenue £'000	Capital £'000		Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on sales of  investments - securities	-	8,674		8,674	-	1,154	1,154	-	(3,478)	(3,478)
Changes in fair value of investments - securities	-	(8,073)		(8,073)	-	(2,439)	(2,439)	-	61,660	61,660
Currency gains/(losses)	-	6		6	-	(1,270)	(1,270)	-	(699)	(699)
Income - dividends and interest	7,907	-		7,907	8,034	-	8,034	13,838	-	13,838
Income - rent and other	1,360	-		1,360	1,221	-	1,221	2,541	-	2,541
Management fees	(331)	(615)		(946)	(298)	(554)	(852)	(618)	(1,147)	(1,765)
Other administrative expenses	(508)	-		(508)	(462)	-	(462)	(901)	-	(901)
Net return before finance costs and taxation	8,428	(8)		8,420	8,495	(3,109)	5,386	14,860	56,336	71,196
Finance costs of borrowings	(1,037)	(1,926)		(2,963)	(1,042)	(1,935)	(2,977)	(2,084)	(3,870)	(5,954)
Net return on ordinary activities before taxation	7,391	(1,934)		5,457	7,453	(5,044)	2,409	12,776	52,466	65,242
Tax on ordinary activities	(680)	315		(365)	(901)	599	(302)	(1,505)	977	(528)
Net return on ordinary activities after taxation	6,711	(1,619)		5,092	6,552	(4,445)	2,107	11,271	53,443	64,714
Net return per ordinary share (note 4)	5.07p		(1.23p)	3.84p	4.94p	(3.35p)	1.59p	8.51p	40.34p	48.85p

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

(unaudited)

Net return on ordinary activities after taxation	6,711	(1,619)	5,092	6,552	(4,445)	2,107	11,271	53,443	64,714
Gains on sales of investments - property	-	-	-	-	2,080	2,080	-	2,100	2,100
Changes in fair value of investments - property	-	(114)	(114)	-	(1,042)	(1,042)	-	(978)	(978)
Total recognised gains/(losses) for the period	6,711	(1,733)	4,978	6,552	(3,407)	3,145	11,271	54,565	65,836
Total recognised gains/(losses) per ordinary share (note 4)	5.07p	(1.31p)	3.76p	4.94p	(2.57p)	2.37p	8.51p	41.18p	49.69p
Note:
Dividends paid and payable per share (note 5)	4.70p			4.60p			9.25p

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

The total column of this statement is the profit and loss account of the Company.

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

BALANCE SHEET

 (unaudited)

	At 30 June 2011	At 30 June 2010	At 31 December 2010
	£'000	£'000	£'000
Fixed assets
Investments - securities	380,444	328,225	381,239
Investments - property	35,150	29,900	31,950
	415,594	358,125	413,189
Current assets
Debtors	1,740	2,127	1,542
Cash and deposits	2,025	4,990	6,154
	3,765	7,117	7,696
Creditors
Amounts falling due within one year	(2,576)	(3,347)	(2,616)
Net current assets	1,189	3,770	5,080
Total assets (less current liabilities)	416,783	361,895	418,269
Debenture stock (note 6)	(87,209)	(87,669)	(87,446)
Net assets	329,574	274,226	330,823
Capital and reserves
Called-up share capital	33,121	33,121	33,121
Capital redemption reserve	22,781	22,781	22,781
Capital reserve	256,938	200,699	258,671
Revenue reserve	16,734	17,625	16,250
Shareholders' funds	329,574	274,226	330,823
Net asset value per ordinary share (Debenture at fair value) (note 6)	240.9p	199.3p	242.5p
Net asset value per ordinary share (Debenture at book value)	248.8p	207.0p	249.7p
Ordinary shares in issue (note 7)	132,485,943	132,485,943	132,485,943

 

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited)

For the six months ended 30 June 2011

 

	Share capital £'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	-	-	(1,733)	6,711	4,978
Dividends paid (note 5)	-	-	-	(6,227)	(6,227)
Shareholders' funds at 30 June 2011	33,121	22,781	256,938	16,734	329,574

 

For the six months ended 30 June 2010

	Share capital £'000	Capital redemption reserve £'000	Capital reserve * £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2010	33,121	22,781	204,106	17,167	277,175
Total recognised gains and losses	-	-	(3,407)	6,552	3,145
Dividends paid (note 5)	-	-	-	(6,094)	(6,094)
Shareholders' funds at 30 June 2010	33,121	22,781	200,699	17,625	274,226

For the year ended 31 December 2010

	Share capital £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2010	33,121	22,781	204,106	17,167	277,175
Total recognised gains and losses	-	-	54,565	11,271	65,836
Dividends paid (note 5)	-	-	-	(12,188)	(12,188)
Shareholders' funds at 31 December 2010	33,121	22,781	258,671	16,250	330,823

 

*      The Capital Reserve balance at 30 June 2011 includes investment holding gains of £84,296,000) 30 June 2010 - gains of £28,319,000; 31 December 2010 - gains of £92,483,000)

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

CONDENSED CASH FLOW STATEMENT (unaudited)
	Six months to 30 June 2011 £'000	Six months to 30 June 2010 £'000	Year to 31 December 2010 £'000
Net cash inflow from operating activities	7,412	7,929	13,616
Net cash outflow from servicing of finance	(3,200)	(3,200)	(6,400)
Total tax paid	(319)	(287)	(522)
Net cash (outflow)/inflow from financial investment	(1,850)	(4,004)	971
Equity dividends paid (note 5)	(6,227)	(6,094)	(12,188)
Decrease in cash	(4,184)	(5,656)	(4,523)
Reconciliation of net cash flow to movement in            net debt
Decrease in cash in the period	(4,184)	(5,656)	(4,532)
Translation difference	55	(37)	(6)
Other non-cash changes	237	223	446
Movement in net debt in the period	(3,892)	(5,470)	(4,083)
Net debt at start of the period	(81,292)	(77,209)	(77,209)
Net debt at end of the period	(85,184)	(82,679)	(81,292)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	8,420	5,386	71,196
(Gains)/losses on investments - securities	(601)	1,285	(58,182)
Currency (gains)/losses	(6)	1,270	699
Changes in debtors and creditors	(279)	(11)	(29)
Other non-cash changes	(122)	(1)	(68)
Net cash inflow from operating activities	7,412	7,929	13,616

 

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

PERFORMANCE ATTRIBUTION FOR THE SIX MONTHS TO 30 JUNE 2011

(unaudited)

Portfolio breakdown	Average allocation		Total return
	SAINTS %	Benchmark %	SAINTS %	Benchmark %
Total Quoted Equities*	88.1	100.0	1.3	2.6
Quoted Fixed Interest	19.3	-	8.4	-
Direct Property	10.3	-	3.7	-
Quoted Equity Property Investments	3.6	-	5.7	-
Quoted Equity Forestry Investments	2.7	-	(15.1)	-
Unquoted	0.5	-	(0.1)	-
Debenture at book value	(26.3)	-	(3.4)	-
Deposits	1.8	-	-	-
Portfolio Total Return (debenture at book value)	100.0	100.0	1.9	2.6
Other items†			(0.4)	-
Fund Total Return (debenture at book value)			1.5	2.6
Adjustment for change in fair value of debenture			(0.2)	-
Fund Total Return (debenture at fair value)			1.3	2.6

 

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.

 

*      Excludes quoted equity property and forestry investments.

†      This includes Baillie Gifford and OLIM management fees, other costs of running the trust such as marketing expenditure and a residual item which arises because of a disparity between the NAV total return figure and the individual asset class portfolio return numbers as calculated by Baillie Gifford's performance measurement system (provided by Statpro).

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

 

TWENTY LARGEST INVESTMENTS At 30 June 2011 (unaudited)
Name	Business	Value £'000	% of total assets
Athena Debt Opportunities Fund	Structured finance investment fund	22,455	5.4
Brazil CPI Linked 15/05/2045	Brazilian government bond	18,773	4.5
Baillie Gifford Greater China Fund	Chinese equities investment fund	9,497	2.3
Cambium Global Timberland	Forestry investment fund	8,475	2.0
British American Tobacco	Cigarette manufacturer	8,269	2.0
Atlas Copco	Engineering	8,213	2.0
Holiday Village in New Romney	Holiday village	7,350	1.8
Baillie Gifford High Yield Bond Fund	High Yield bond fund	7,172	1.7
Rio Tinto	Mining	7,082	1.7
BHP Billiton	Mining	6,471	1.6
DBS	Banking	6,415	1.5
Philip Morris International	Cigarette manufacturer	6,199	1.5
Penn West Energy Trust	Oil exploration and production	6,167	1.5
Deere	Farm and construction machinery	5,947	1.4
Taiwan Semiconductor Manufacturing	Semiconductor manufacturer	5,555	1.3
Amlin	Property and casualty insurance	5,158	1.2
Royal Dutch Shell	Integrated oil company	5,109	1.2
Jeronimo Martins	Food retailer	5,088	1.2
CVRD	Mining	5,069	1.2
Scottish & Southern Energy	Electricity utility	5,015	1.2
		159,479	38.2

 

 

ASSET ALLOCATION

At 30 June 2011

(unaudited)

 

	30 June 2011 %	30 June 2010 %	31 December 2010 %
Quoted Equities*	70.8	69.7	70.0
Quoted Fixed Interest	14.9	14.9	15.4
Direct Property	8.5	8.2	7.7
Quoted Equity Property Investments	3.1	2.8	2.9
Quoted Equity Forestry Investments	2.0	2.9	2.4
Unquoted	0.4	0.5	0.4
Net Liquid Assets	0.3	1.0	1.2
	100.0	100.0	100.0

 

*   Excludes quoted equity and forestry investments

 

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited)

1.	The condensed financial statements for the six months to 30 June 2011 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Financial Statements at 31 December 2010 and in accordance with the ASB's Statement 'Half-Yearly Financial Reports' and have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowings covenants are reviewed by the Board on a regular basis. The Company has no short term borrowings and the redemption date for the Company's Debenture is April 2022. Accordingly, the Half-Yearly Financial Report has been prepared on the going concern basis as it is the Directors' opinion that the Company will continue in operational existence for the foreseeable future.
2.	The financial information contained within this Half-Yearly Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006.  The financial information for the year ended 31 December 2010 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts were unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
3.	Baillie Gifford & Co are employed by the Company as investment managers and secretaries under a management agreement which can be terminated on six months' notice.  Baillie Gifford & Co receive an annual fee of 0.45% of total assets less current liabilities, excluding the property portfolio, calculated on a quarterly basis. Although holdings in collective investment schemes (OEICs) managed by Baillie Gifford & Co are subject to this fee the OEIC share class held by the Company does not itself attract a fee, thereby avoiding any duplication of fees. The property portfolio is managed by OLIM Limited, which receives an annual fee of 0.5% of the value of the property portfolio, subject to a minimum quarterly fee of £6,250.  The agreement can be terminated on three months' notice.
4.	Returns per ordinary share Net return per ordinary share is based on the return on ordinary activities after taxation figures in the Income Statement and on 132,485,943 ordinary shares of 25p, being the number of ordinary shares in issue during each period.  Total recognised gains and losses per ordinary share is based on the total recognised gains for the period in the Statement of Total Recognised Gains and Losses and on 132,485,943 ordinary shares of 25p, being the number of ordinary shares in issue during each period.
		Six months to 30 June  2011	Six months to 30 June  2010	Year to 31 December 2010
		£'000	£'000	£'000
5.	Dividends
	Amounts recognised as distributions in the period:
	Previous year's final of 2.35p (2010 - 2.30p), paid 11 April 2011	3,113	3,047	3,047
	First interim of 2.35p (2010 - 2.30p), paid 30 June 2011	3,114	3,047	3,047
	Second interim (2010 - 2.30p)	-	-	3,047
	Third interim (2010 - 2.30p)	-	-	3,047
		6,227	6,094	12,188

 

THE SCOTTISH AMERICAN INVESTMENT COMPANY P.L.C.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited) (Ctd)

		Six months to 30 June  2011	Six months to 30 June  2010	Year to 31 December 2010
		£'000	£'000	£'000
5.	Dividends (Ctd)
	Amounts paid and payable in respect of the period:
	First interim of 2.35p (2010 - 2.30p), paid 30 June 2011	3,114	3,047	3,047
	Second interim of 2.35p (2010 - 2.30p)	3,113	3,047	3,047
	Third interim (2010 - 2.30p)	-	-	3,047
	Final dividend (2010- 2.35p)	-	-	3,113
		6,227	6,094	12,254
	The second interim dividend was declared after the period end date and therefore has not been included as a liability in the balance sheet.  It is payable on 30 September 2011 to shareholders on the register at the close of business on 2 September 2011. The ex-dividend date is 31 August 2011. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for this dividend is 9 September 2011.
6.	The market value of the 8% Debenture Stock 2022 at 30 June 2011 was £97.7m (30 June 2010 - £97.8m; 31 December 2010 - £97.0m).
7.	At 30 June 2011, the Company had the authority to buy back 19,859,642 of its own shares. No shares were bought back during the period under review.
8.	During the period, transaction costs on purchases amounted to £60,000 (30 June 2010 - £29,000; 31 December 2010 - £54,000) and transaction costs on sales amounted to £16,000 (30 June 2010 - £3,000; 31 December 2010 - £15,000).
9.	The Half-Yearly Financial Report will be available on the SAINTS page of the Managers' website: www.saints-it.com‡ on or around 12 August 2011.
10.	Principal Risks and Uncertainties The principal risks facing the Company relate to the Company's investment activities. These risks are market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. An explanation of these risks and how they are managed is contained in note 19 of the Company's Annual Report and Financial Statements for the year to 31 December 2010. The principal risks and uncertainties have not changed since the publication of the Annual Report, which can be obtained free of charge from Baillie Gifford & Co and is available on the SAINTS page of the Managers' website: www.saints-it.com‡. Other risks facing the Company include the following: regulatory risk (that the loss of investment trust status or a breach of applicable legal and regulatory requirements could have adverse financial consequences and cause reputational damage); operational/financial risk (failure of service providers' accounting systems could lead to inaccurate reporting or financial loss); the risk that the discount can widen; and gearing risk (the use of borrowing can magnify the impact of falling markets). Further information can be found on page 22 of the Annual Report.
None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
‡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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