Results for the six months to 30 June 2015

RNS Number : 0837U

Scottish American Investment Co PLC

27 July 2015

 

RNS Announcement

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

Results for the six months to 30 June 2015

The following is the unaudited Interim Financial Report for the six months to 30 June 2015.

Interim Management Report

The net asset value total return for the first six months of 2015 was 4.0% and the share price total return was 10.4%. The total return of global equities, as measured by the FTSE All World Index in Sterling, was 2.2%. In June 285,000 shares were issued at a premium to net asset value, with SAINTS' shares ending the period at a significant premium to net asset value.  Earnings per share for the six months were 6.18p compared to 6.62p in the same period last year, but the underlying trend showed solid growth. Our expectation is that income for the full year will also show a modest fall compared with the 10.51p earned in the year to 31 December 2014.

A first interim dividend of 2.65p was paid at the end of June and the second interim dividend of 2.675p is payable at the end of September. The total amount of dividends, 5.325p, is 1.9% higher than the amount paid for the corresponding period in 2014. The rate of increase in the dividend exceeds the current annual rates of CPI and RPI inflation of 0.0% and 1.0% respectively as at the end of June 2015.  Revenue reserves stand at 10.2p per share.

The NAV performance exceeded the FTSE All World Index return mainly due to strong performance from our equity portfolio. The companies in which the portfolio is invested have in general continued to make solid operational progress. The financial services sector was an area of particular strength with our holdings of securities exchanges Deutsche Börse and Hong Kong Exchanges and Clearing performing well. The portfolio also benefitted from corporate activity with the announced acquisitions of portfolio constituents Rexam and BG Group.

The allocation to directly-held UK property increased modestly during the period, funded from the fixed income portfolio. Valuations on commercial property outside of London continue to look attractive, particularly in light of the continued economic recovery and increasing investment demand. Income from property was boosted by underlying rental income growth and the increased allocation. Prospects for capital and rental income growth from the property portfolio are strong,

We believe that our focus on identifying companies which have good growth prospects, and that offer a dependable and growing income stream, means that the outlook for SAINTS' income and capital growth is strong.

The principal risks and uncertainties facing the Company are set out on the inside front cover of this report.

Baillie Gifford & Co

24 July 2015

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 FRS 104 'Interim Financial Reporting';

b)   the Interim 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 Interim 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 2015

 

Income Statement (unaudited)

	For the six months ended  30 June 2015			For the six months ended 30 June 2014
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on sales of investments - securities	-	4,312	4,312	-	15,474	15,474
Gains/(losses) on sales of investments - property	-	217	217	-	(206)	(206)
Changes in fair value of investments - securities	-	1,972	1,972	-	(15,716)	(15,716)
Changes in fair value of investments - property	-	736	736	-	885	885
Currency (losses)/gains	-	(1,056)	(1,056)	-	613	613
Income - dividends and interest	8,747	-	8,747	9,501	-	9,501
Income - rent and other	1,990	-	1,990	1,819	-	1,819
Management fees	(351)	(651)	(1,002)	(339)	(629)	(968)
Other administrative expenses	(639)	-	(639)	(493)	-	(493)
Net return before finance costs and taxation	9,747	5,530	15,277	10,488	421	10,909
Finance costs of borrowings	(1,014)	(1,883)	(2,897)	(1,020)	(1,895)	(2,915)
Net return on ordinary activities before taxation	8,733	3,647	12,380	9,468	(1,474)	7,994
Tax on ordinary activities	(534)	90	(444)	(679)	140	(539)
Net return on ordinary activities after taxation	8,199	3,737	11,936	8,789	(1,334)	7,455
Net return per ordinary share (note 4)	6.18p	2.82p	9.00p	6.62p	(1.00p)	5.62p
Note: Dividends paid and payable per share (note 5)	5.325p			5.225p

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 2015 £'000	At 30 June 2014 £'000
Fixed assets
Investments - securities	374,359	376,566
Investments - property	58,250	50,250
	432,609	426,816
Current assets
Debtors	2,489	1,969
Cash and deposits	2,400	2,333
	4,889	4,302
Creditors
Amounts falling due within one year	(2,962)	(2,535)
Net current assets	1,927	1,767
Total assets less current liabilities	434,536	428,583
Creditors
Debenture stock (note 6)	(85,058)	(85,646)
Net assets	349,478	342,937
Capital and reserves
Called up share capital	33,240	33,169
Share premium	1,054	357
Capital redemption reserve	22,781	22,781
Capital reserve	274,189	267,768
Revenue reserve	18,214	18,862
Shareholders' funds	349,478	342,937
Net asset value per ordinary share (Debenture at fair value) (note 6)	248.4p	245.7p
Net asset value per ordinary share (Debenture at book value)	262.8p	258.5p
Ordinary shares in issue (note 7)	132,960,943	132,675,943

Statement of Changes in Equity (unaudited)

For the six months ended 30 June 2015

	Share capital £'000	Share Premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2015	33,169	357	22,781	270,452	17,047	343,806
Shares issued	71	697	-	-	-	768
Net return on ordinary activities after taxation	-	-	-	3,737	8,199	11,936
Dividends paid (note 5)	-	-	-	-	(7,032)	(7,032)
Shareholders' funds at 30 June 2015	33,240	1,054	22,781	274,189	18,214	349,478

For the six months ended 30 June 2014

	Share capital £'000	Share Premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 January 2014	33,169	357	22,781	269,102	16,973	342,382
Net return on ordinary activities after taxation	-	-	-	(1,334)	8,789	7,455
Dividends paid (note 5)	-	-	-	-	(6,900)	(6,900)
Shareholders' funds at 30 June 2014	33,169	357	22,781	267,768	18,862	342,937

*      The Capital Reserve balance at 30 June 2015 includes investment holding gains of £57,365,000; (30 June 2014 - gains of £54,107,000).

 

Condensed Cash Flow (unaudited)

	Six months to 30 June 2015 £'000	Six months to 30 June 2014 £'000
Net cash inflow from operating activities	7,830	8,817
Net cash outflow from servicing of finance	(3,200)	(3,200)
Total tax paid	(439)	(549)
Net cash (outflow)/inflow from financial investment	(4,010)	205
Equity dividends paid (note 5)	(7,032)	(6,900)
Net cash outflow before financing	(6,851)	(1,627)
Financing
Shares issued	768	-
Net cash inflow from financing	768	-
Decrease in cash	(6,083)	(1,627)
Reconciliation of net cash flow to movement in net debt
Decrease in cash in the period	(6,083)	(1,627)
Translation difference	(1,493)	4
Other non-cash changes	302	285
Movement in net debt in the period	(7,274)	(1,338)
Net debt at start of the period	(75,384)	(81,975)
Net debt at end of the period	(82,658)	(83,313)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	15,277	10,909
(Gains)/losses on investments - securities	(6,284)	242
Gains on investment - property	(953)	(679)
Currency losses/(gains)	1,056	(613)
Changes in debtors and creditors	(1,223)	(1,026)
Other non-cash changes	(43)	(16)
Net cash inflow from operating activities	7,830	8,817

 Performance Attribution (unaudited)

Portfolio Breakdown	Average allocation		Total return
	SAINTS %	Benchmark %	SAINTS %	Benchmark %
Global equities	100.4	100.0	4.1	2.2
Bonds	6.7		(0.9)
Direct property	14.5		5.5
Deposits	1.7		-
Debenture at book value	(23.3)		3.4
Portfolio total return (debenture at book value)			4.2	2.2
Other items *			(0.8)
Fund total return (debenture at book value)			3.4	2.2
Adjustment for change in fair value of debenture			0.6
Fund total return (debenture at fair value)			4.0	2.2

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

Source: Baillie Gifford

*      Includes Baillie Gifford and OLIM management fees.

Past performance is not a guide to future performance.

Asset Allocation (unaudited)

	At 30 June 2015 %	At 30 June 2014 %
Global equities	81.5	82.0
Bonds	4.7	5.9
Direct property	13.4	11.7
Net liquid assets	0.4	0.4
Total assets	100.0	100.0

Twenty Largest Equity Holdings (unaudited)

Name	Business	Value at  30 June 2015 £'000	% of total assets*
Taiwan Semiconductor Manufacturing	Semiconductor manufacturer	8,059	1.9
Rio Tinto	Mining	7,685	1.8
Analog Devices	Integrated circuits	7,551	1.7
Coca Cola	Beverage manufacturer	7,495	1.7
Want Want	Snacks and milk-based products	7,406	1.7
Deutsche Boerse	Securities exchange owner/operator	7,215	1.7
Roche Holdings	Pharmaceuticals	6,941	1.6
Capita	Business process outsourcing	6,812	1.6
Hiscox	Property and casualty insurance	6,684	1.5
Total	Integrated oil company	6,618	1.5
AVI	Staple foods manufacturer	6,492	1.5
Pepsico	Snack and beverage manufacturer	5,933	1.4
WPP	Advertising agencies	5,807	1.3
Sonic Healthcare	Laboratory testing	5,799	1.3
China Mobile	Mobile telecommunications services	5,720	1.3
Aviva	Investment and life assurance	5,451	1.3
Amlin	Property and casualty insurance	5,341	1.2
Scottish & Southern Energy	Electricity utility	5,308	1.2
New York Community Bank	Banking	5,303	1.2
Johnson and Johnson	Pharmaceuticals and healthcare products	5,262	1.2
		128,882	29.6

*      Before deduction of the debenture.

 

Notes to the Condensed Financial Statements (unaudited)

1.	The condensed financial statements for the six months to 30 June 2015 comprise the statements set out in the previous pages together with the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance 'Review of Interim Financial Information'. The Company has adopted FRS 102 for its financial year ending 31 December 2015 which has required a change in the treatment of property as explained below. The financial statements for the six months to 30 June 2015 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 2014 except as follows; Property As a result of adopting FRS 102, changes in the fair value of investment property and gains and losses on disposal of investment property are recognised as capital items in the Income Statement. Previously these were recognised through the Statement of Total Recognised Gains and Losses. This change in treatment has no impact on net assets. The basis of determining fair values and levelling of financial instruments is unchanged, details can be found on pages 41 and 42 of the Annual Report and Financial Statements at 31 December 2014. 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 Interim 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 Interim 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 2014 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, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report, and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.
3.	Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed by the Company as its Alternative Investment Fund Manager (AIFM) and Company Secretary. The investment management function has been delegated to Baillie Gifford & Co. The management agreement can be terminated on six month's notice. The annual fee is 0.45% of total assets less current liabilities, excluding the property portfolio, calculated on a quarterly basis. As AIFM, Baillie Gifford & Co Limited has delegated the management of the property portfolio to OLIM Property Limited. OLIM 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.

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

4.	Returns per ordinary share		Six months to  30 June  2015 £'000	Six months to 30 June  2014 £'000
	Revenue return on ordinary activities after taxation		8,199	8,789
	Capital return on ordinary activities after taxation		3,737	(1,334)
	Total net return		11,936	7,455
	Weighted average number of ordinary shares in issue		132,677,821	132,675,943
	The net return per ordinary share figures are based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue.
5.	Dividends		Six months to  30 June  2015 £'000	Six months to 30 June  2014 £'000
	Amounts recognised as distribution in the period:
	Previous year's final of 2.65p (2014 - 2.60p), paid 10April 2015		3,516	3,450
	First interim of 2.65p (2014 - 2.60p), paid 26 June 2015		3,516	3,450
			7,032	6,900
	Amounts paid and payable in respect of the period:
	First interim of 2.65p (2014 - 2.60p), paid 26 June 2015		3,516	3,450
	Second interim of 2.675p (2014 - 2.625p)		3,559	3,483
			7,075	6,933
		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 25 September 2015 to shareholders on the register at the close of business on 21 August 2015.  The ex-dividend date is 20 August 2015. The Company's Registrars offer a Dividend Reinvestment Plan and the final date for elections for this dividend is 4 September 2015.
6.		The market value of the 8% Debenture Stock 2022 at 30 June 2015 was £104.2m (30 June 2014 - £102.6m).
7.		At 30 June 2015, the Company had the authority to buy back 19,888,123 ordinary shares, and to issue 12,982,592 ordinary shares without application of pre-emption rights, in accordance with the authorities granted at the AGM in April 2015. During the period under review, 285,000 (2014 - Nil) shares were issued at a premium to net asset value raising proceeds of £768,000 (2014 - Nil). No shares were bought back.
8.		During the period, transaction costs on equity purchases amounted to £74,000 (30 June 2014 - £75,000) and on equity sales £47,000 (30 June 2014 - £29,000). Transaction costs on property purchases amounted to £550,000 (30 June 2014 - £535,000) and on property sales £8,000 (30 June 2014 - £11,000).
9.		The Interim Financial Report will be available on the SAINTS page of the Managers' website: www.saints-it.com‡ on or around 7 August 2015.
10.		Principal Risks and Uncertainties The principal risks facing the Company are financial risk, regulatory risk, operational risk, premium/discount volatility and leverage risk. An explanation of these risks and how they are managed is set out on page 7 of the Company's Annual Report and Financial Statements for the year to 31 December 2014 which is available on the company's website: www.saints-it.com‡. The principal risks and uncertainties have not changed since the publication 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 deliver real dividend growth by increasing capital and growing income. Its policy is to invest mainly in equity markets, but other investments may be held from time to time including bonds, property and other asset classes.

Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, is appointed as investment managers and secretaries to SAINTS. Baillie Gifford & Co, the Edinburgh based fund management group has around £123 billion under management and advice as at 24 July 2015.

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:

Alex Blake, Baillie Gifford & Co

Tel: [phone]

Cara Penkethman, Account Director, Broadgate Mainland 

Tel: [phone]

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