Half Yearly Report

RNS Number : 0846K

Scottish American Investment Co PLC

25 July 2013

 



RNS Announcement

The Scottish American Investment Company P.L.C. (SAINTS)

Results for the half-year to 30 June 2013

The following is the unaudited Half-Yearly Financial Report for the six months to 30 June 2013.

Half-Yearly Management Report

The net asset value total return for the first six months of 2013 was 10.1% and the share price total return 9.2%.  The benchmark total return was 11.5%.  Earnings per share rose to 6.26p from 5.22p in the same period last year, although this increase was largely due to the timing of dividend receipts and our expectation is that income for the full year will be similar to that earned in the year to 31 December 2012.

A first interim dividend of 2.50p was paid at the end of June and the second interim dividend (payable at the end of September) will be at a higher rate of 2.55p.  The total amount of dividends, 5.05p, is 4.1% higher than the amount paid for the corresponding period in 2012.  This rate of increase in the dividend exceeds the current rate of inflation.

 Global growth is still not strong and inflation is at low levels so most companies are having to work hard to achieve any growth in sales and profits.  However, this had little impact on stockmarkets during the period under review.  Share prices found support from investors channelling money away from bond markets and into equities.  Confidence was also buoyed by news from the United States where the economy seems to be recovering.

Towards the end of the first half, this growing confidence in the US economy gave rise to speculation about when quantitative easing would be withdrawn.  In response, stockmarkets fell back a little during May and June but have recovered in July, as has SAINTS' share price. 

Within SAINTS' portfolio the equity allocation rose slightly, in part because of market movements but also because we sold some of our bond investments to fund equity purchases.  The NAV performance lagged the benchmark return mainly because of our larger allocation to emerging markets (which underperformed those in the developed economies) and our choice of stocks in the UK.

The principal risks and uncertainties facing the Company are set out in note 10.

Baillie Gifford & Co

24 July 2013

Past performance is not a guide to future performance. The value of SAINTS' shares and any income from those shares is not guaranteed and could go down as well as up

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

24 July 2013

Income Statement (unaudited)

	For the six months ended  30 June 2013			For the six months ended 30 June 2012			For the year ended 31 December 2012
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on sales of investments - securities	-	13,529	13,529	-	13,033	13,033	-	18,109	18,109
Changes in fair value of investments - securities	-	7,080	7,080	-	(7,430)	(7,430)	-	7,069	7,069
Currency (losses)/gains	-	(1,315)	(1,315)	-	(6)	(6)	-	288	288
Income - dividends and interest	9,184	-	9,184	7,807	-	7,807	15,352	-	15,352
Income - rent and other	1,616	-	1,616	1,618	-	1,618	3,204	-	3,204
Management fees	(340)	(631)	(971)	(312)	(579)	(891)	(627)	(1,164)	(1,791)
Other administrative expenses	(450)	-	(450)	(446)	-	(446)	(881)	-	(881)
Net return before finance costs and  taxation	10,010	18,663	28,673	8,667	5,018	13,685	17,048	24,302	41,350
Finance costs of borrowings	(1,026)	(1,906)	(2,932)	(1,032)	(1,916)	(2,948)	(2,063)	(3,832)	(5,895)
Net return on ordinary activities before taxation	8,984	16,757	25,741	7,635	3,102	10,737	14,985	20,470	35,455
Tax on ordinary activities	(677)	236	(441)	(704)	365	(339)	(1,421)	705	(716)
Net return on ordinary activities after taxation	8,307	16,993	25,300	6,931	3,467	10,398	13,564	21,175	34,739
Net return per ordinary share (note 4)	6.26p	12.81p	19.07p	5.22p	2.62p	7.84p	10.22p	15.96p	26.18p

Statement of Total Recognised Gains and Losses (unaudited)

Net return on ordinary activities after taxation	8,307	16,993	25,300	6,931	3,467	10,398	13,564	21,175	34,739
Changes in fair value of investments - property	-	100	100	-	(550)	(550)	-	(750)	(750)
Total recognised gains for the period	8,307	17,093	25,400	6,931	2,917	9,848	13,564	20,425	33,989
Total recognised gains per ordinary share (note 4)	6.26p	12.88p	19.14p	5.22p	2.20p	7.42p	10.22p	15.39p	25.61p
Note:
Dividends paid and payable per share (note 5)	5.05p			4.85p			9.80p

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

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

Balance Sheet (unaudited)

	At 30 June 2013 £'000	At 30 June 2012 £'000	At 31 December 2012 £'000
Fixed assets
Investments - securities	381,370	340,903	362,004
Investments - property	38,750	38,850	38,650
	420,120	379,753	400,654
Current assets
Debtors	1,946	2,394	1,735
Cash and deposits	1,242	8,981	2,020
	3,188	11,375	3,755
Creditors
Amounts falling due within one year	(3,030)	(6,735)	(2,629)
Net current assets	158	4,640	1,126
Total assets less current liabilities	420,278	384,393	401,780
Debenture stock (note 6)	(86,199)	(86,719)	(86,467)
Net assets	334,079	297,674	315,313
Capital and reserves
Called up share capital	33,169	33,169	33,169
Share premium	357	357	357
Capital redemption reserve	22,781	22,781	22,781
Capital reserve	259,267	224,666	242,174
Revenue reserve	18,505	16,701	16,832
Shareholders' funds	334,079	297,674	315,313
Net asset value per ordinary share (debenture at fair value) (note 6)	238.0p	206.6p	220.5p
Net asset value per ordinary share (debenture at book value)	251.8p	224.4p	237.7p
Ordinary shares in issue (note 7)	132,675,943	132,675,943	132,675,943

Reconciliation of Movements in Shareholders' Funds (unaudited)

For the six months ended 30 June 2013

	Share capital £'000	Share Premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2013	33,169	357	22,781	242,174	16,832	315,313
Total recognised gains and losses	-	-	-	17,093	8,307	25,400
Dividends paid (note 5)	-	-	-	-	(6,634)	(6,634)
Shareholders' funds at 30 June 2013	33,169	357	22,781	259,267	18,505	334,079

For the six months ended 30 June 2012

	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	-	-	-	2,917	6,931	9,848
Dividends paid (note 5)	-	-	-	-	(6,368)	(6,368)
Shareholders' funds at 30 June 2012	33,169	357	22,781	224,666	16,701	297,674

For the year ended 31 December 2012

	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 (note 5)	-	-	-	-	(12,870)	(12,870)
Shareholders' funds at 31 December 2012	33,169	357	22,781	242,174	16,832	315,313

*       The Capital Reserve balance at 30 June 2013 includes investment holding gains of £62,580,000; (30 June 2012 - gains of £41,101,000; 31 December 2012 - gains of £55,400,000).

Condensed Cash Flow Statement (unaudited)

	Six months to 30 June 2013 £'000	Six months to 30 June 2012 £'000	Year to 31 December 2012 £'000
Net cash inflow from operating activities	8,735	7,770	15,832
Net cash outflow from servicing of finance	(3,200)	(3,200)	(6,400)
Total tax paid	(435)	(324)	(720)
Net cash inflow from financial investment	787	8,142	3,273
Equity dividends paid (note 5)	(6,634)	(6,368)	(12,870)
(Decrease)/increase in cash	(747)	6,020	(885)
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in the period	(747)	6,020	(885)
Translation difference	(31)	(204)	(260)
Other non-cash changes	268	253	505
Movement in net debt in the period	(510)	6,069	(640)
Net debt at start of the period	(84,447)	(83,807)	(83,807)
Net debt at end of the period	(84,957)	(77,738)	(84,447)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	28,673	13,685	41,350
Gains on investments - securities	(20,609)	(5,603)	(25,178)
Currency losses/(gains)	1,315	6	(288)
Changes in debtors and creditors	(523)	(209)	167
Other non-cash changes	(121)	(109)	(219)
Net cash inflow from operating activities	8,735	7,770	15,832

Performance Attribution (unaudited)

Portfolio Breakdown	Average allocation		Total return
	SAINTS %	Benchmark %	SAINTS %	Benchmark %
Quoted equities*	94.1	100	8.7	11.5
Bonds	13.2		4.4
Direct property	11.2		4.5
Quoted equity property  investments	3.4		20.2
Quoted equity forestry investments	1.9		(7.8)
Deposits	1.2		-
Debenture at book value	(25.0)		3.4
Portfolio total return (debenture at book value)			8.3	11.5
Other items #			(0.4)
Fund total return (debenture at book value)			7.9	11.5
Adjustment for change in fair value of debenture			2.2
Fund total return (debenture at fair value)			10.1	11.5

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.

Asset Allocation (unaudited)

	At 30 June 2013 %	At 30 June 2012%	At 31 December 2012 %
Quoted equities*	74.9	70.7	72.5
Bonds	10.1	12.0	12.8
Direct property	9.3	10.1	9.5
Quoted equity property investments	4.3	3.8	3.3
Quoted equity forestry investments	1.4	1.7	1.6
Unquoted	-	0.5	-
Net liquid assets	-	1.2	0.3
Total assets	100.0	100.0	100.0

* Excludes quoted equity property and forestry investments.

Twenty Largest Investments (unaudited)

Name	Business	Value at  30 June 2013 £'000	% of total assets*
Athena Debt Opportunities Fund	Structured finance investment fund	13,536	3.2
Brazil CPI Linked 15/05/2045	Brazilian government bond	12,894	3.1
Progressive	Property and casualty insurance	11,791	2.8
Baillie Gifford Greater China Fund	Chinese equities investment fund	8,839	2.1
Taiwan Semiconductor Manufacturing	Semiconductor manufacturer	8,556	2.0
Holiday Village in New Romney	Holiday village	8,100	1.9
Rio Tinto	Mining	7,888	1.9
Samsung Electronics	Electronic devices	6,924	1.6
Baillie Gifford High Yield Bond Fund	High yield bond fund	6,451	1.5
Penn West Energy Trust	Oil exploration and production	6,204	1.5
Amlin	Property and casualty insurance	6,125	1.5
Cambium Global Timberland	Forestry investment fund	6,075	1.4
Industrial & Infrastructure Fund	Japanese commercial property fund	6,053	1.4
Jeronimo Martins	Food retailer	5,907	1.4
Japan Residential Investment Company	Japanese residential property fund	5,672	1.4
Philip Morris International	Cigarette manufacturer	5,589	1.3
Nursing home in Kenilworth	Nursing home	5,550	1.3
AES Tiete	Electricity utility	5,519	1.3
Analog Devices	Integrated circuits	5,494	1.3
Royal Dutch Shell	Integrated oil company	5,004	1.2
		148,171	35.1

*      Before deduction of the debenture.

Notes to the Condensed Financial Statements (unaudited)

1.	The condensed financial statements for the six months to 30 June 2013 comprise the statements set out in the previous pages together with the related notes below. They have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 31 December 2012 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 borrowing 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 2012 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified and did not contain statements under sections 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 Property 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 132,675,943 (30 June 2012 - 132,675,943; 31 December 2012 - 132,675,943) ordinary shares of 25p, being the weighted average 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 132,675,943 (30 June 2012 - 132,675,943; 31 December 2012 - 132,675,943) ordinary shares of 25p, being the weighted average number of ordinary shares in issue during each period.
5.	Dividends	Six months to  30 June  2013 £'000	Six months to 30 June  2012 £'000	Year to 31 December 2012 (audited) £'000
	Amounts recognised as distribution in the period:
	Previous year's final of 2.50p (2012 - 2.40p), paid 12April 2013	3,317	3,184	3,184
	First interim of 2.50p (2012 - 2.40p), paid 28 June 2013	3,317	3,184	3,184
	Second interim (2012 - 2.45p)	-	-	3,251
	Third interim (2012 - 2.45p)	-	-	3,251
		6,634	6,368	12,870

Notes to the Condensed Financial Statements (unaudited) (ctd)

5.	Dividends (ctd)	Six months to  30 June 2013 £'000	Six months to 30 June  2012 £'000	Year to 31 December 2012 (audited) £'000
	Amounts paid and payable in respect of the period:
	First interim of 2.50p (2012 - 2.40p), paid 28 June 2013	3,317	3,184	3,184
	Second interim of 2.55p (2012 - 2.45p)	3,383	3,251	3,251
	Third interim (2012 - 2.45p)	-	-	3,251
	Final dividend (2012 - 2.50p)	-	-	3,317
		6,700	6,435	13,003
	The second interim dividend was declared after the period end date and has therefore not been included as a liability in the balance sheet. It is payable on 27 September 2013 to shareholders on the register at the close of business on  23 August 2013.  The ex-dividend date is 21 August 2013. The Company's Registrars offer a Dividend Reinvestment Plan and the final date for elections for this dividend is 6 September 2013.
6.	The market value of the 8% Debenture Stock 2022 at 30 June 2013 was £104.5m (30 June 2012 - £110.2m; 31 December 2012 - £109.2m).
7.	At 30 June 2013, the Company had the authority to buy back 19,888,123 ordinary shares, and to issue 13,267,592 ordinary shares without application of pre-emption rights, in accordance with the authorities granted at the AGM in April 2013. No shares were bought back or issued during the period under review.
8.	During the period, transaction costs on purchases amounted to £68,000 (30 June 2012 - £37,000; 31 December 2012 - £67,000) and transaction costs on sales amounted to £23,000 (30 June 2012 - £18,000; 31 December 2012 - £38,000).
9.	The Half-Yearly Financial Report will be available on the SAINTS page of the Managers' website: www.saints-it.com‡ on or around 9 August 2013.
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 18 of the Company's Annual Report and Financial Statements for the year to 31 December 2012. 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.

‡    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.

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 £98 billion under management and advice as at 23 July 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]

Roland Cross, Director, Broadgate Mainland

Tel: [phone]  

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