Half-year Report

RNS Number : 3613V

Securities Trust of Scotland PLC

13 December 2021

 

To:  RNS

From:  Securities Trust of Scotland plc

LEI:  549300UZ1Y7PPQYJGE19

Date:  13 December 2021

Half-year financial report

Six months to 30 September 2021

FINANCIAL HIGHLIGHTS

 

Total return ^ (including reinvested dividends)	Six months ended 30 September 2021 %	Six months ended 30 September 2020 %
Net asset value per share	6.3	21.5
Lipper Global - Equity Global Income Index	6.0	15.5
Share price	6.8	13.5

Income	Six months ended 30 September 2021	Six months ended 30 September 2020
Revenue per share	3.15p	4.38p
Dividend per share	2.75p	2.75p

Ongoing charges^ (as a percentage of shareholders' funds)	Six months ended 30 September 2021 %	Six months ended 30 September 2020 %
Ongoing charges	0.9	0.9

^ For details of all Alternative Performance Measures refer to the half-year report.

INTERIM MANAGEMENT REPORT

Chairman's statement

Introduction

For the six month period to 30 September 2021 the net asset value ('NAV') total return for your company was +6.3%, marginally greater than the equivalent return of +6.0% from the benchmark, the Lipper Global - Equity Global Income Index.

There was a slight narrowing of the discount to NAV at which the share price traded over the period and the share price total return was therefore +6.8%.

Stock markets around the globe anticipated the economic recovery from the dislocation caused by the COVID-19 pandemic and this was reflected in the high capital returns generated from late 2020 and during the first half of 2021. These returns were initiated by positive news on the efficacy of the various vaccines being developed which emerged in November 2020.

The subsequent high take up of vaccinations and more recently booster vaccinations in most developed economies was, for the majority of the period under review, a strong factor in permitting economies to "open up" and more normal economic and social activity to resume.

The speed of recovery in industrial and commercial activity has brought with it new issues to ponder. In certain industries supply chains have been unable to cope with the scale of the rise in demand. There have been shortages and bottlenecks in many areas of both industrial and consumer sectors alike.

The rate of inflation in the USA and UK has risen sharply to levels not seen for a decade and there is a real debate as to whether such a rise is transitory in nature or the beginnings of a prolonged period of price adjustment. 

Central banks around the world are also seeking opportunities to reduce the various forms of Quantitative Easing ('QE') that has been providing liquidity to markets over the period of the pandemic and longer.  The combination of the need to reduce QE and potentially raise short term interest rates to address the inflationary pressures is unpalatable for markets and for bond investors in particular.

Revenue and earnings

Revenue earnings for the period were £3.70m significantly lower than the £5.45m recorded in the previous equivalent period. Following the appointment of Troy Asset Management ('Troy') as fund manager of the company in November 2020 the manager, as agreed, restructured the portfolio to one with a lower current dividend yield but one with expectations of faster dividend growth over time. Also, as agreed, no further income was received from the writing of covered call options. In the period to 30 September 2020 £0.8m was earned by the previous manager from option writing - there was no contribution in the equivalent current period.

Again, as agreed at the time of appointment Troy did not charge a management fee for the period under review. The 12 month anniversary of Troy's appointment was 12 November 2021 and agreed commercial fee arrangements are now in place.

Consequently, earnings per share for the period were 3.15p vs 4.38p for the previous period. The Board announced a first interim dividend on 6 October 2021 of 1.375p per share, which was paid in November. The Board is pleased to declare a second interim dividend of 1.375p per share, which will be paid on 21 January 2022 to shareholders on the register on 31 December 2021. The ex-dividend date will be 30 December 2021. The total dividends declared for the period is therefore 2.75p per share - unchanged from the previous year.

Discount management

Your Board operates a discount control mechanism with the objective of ensuring that, in normal market conditions, the shares trade consistently close to their NAV per share. Shares will be bought in or sold at the appropriate time in respect of this objective. During the period under review 2,288,000 shares were purchased at an average discount of 1.7%. As at 30 September 2021 the shares were trading at a premium of 0.1%

Borrowing facilities

The company currently has borrowing facilities in place with The Royal Bank of Scotland. The company renewed its revolving credit facility in October 2021 at an attractive rate. The Board is happy that the quantum, terms and tenure of the facilities gives the manager a flexible structure to use with the objective of enhancing shareholder returns.

Outlook

Recent events have proven that the COVID-19 virus has the ability to be unpredictable and new strains of the virus challenge the perception that the pandemic is being controlled by vaccines.  While the appearance of new strains is unsettling for markets it is still, as yet, unclear as to whether these new variants will require the scale of lockdowns which was required to address infection levels in 2020.

Your new managers have been running the portfolio for just over 12 months and it has proven to be an eventful period for stock markets and economies. Your company has an income objective and a most encouraging feature of the pandemic and the reaction to it has been the robustness of dividends on a global basis to a sharp decline in corporate profits.  Dividends from UK companies were cut more severely than their international peers - but there is evidence of a sharp recovery in dividends from certain sectors of the UK corporate sector. The benefit of a global income mandate has been clearly demonstrated over the past two years and the Board takes great encouragement from the portfolio's global positioning.

The economic background of uncertainty regarding future rates of inflation is a key issue for investors. However, your mangers have a carefully selected group of companies in the portfolio which have attractive margins, good cash flows and most importantly strong market positions with good pricing power. These characteristics should provide security in an inflationary environment to both profitability and shareholder dividends.

John Evans

Chairman

10 December 2021

Manager's review

We took over the management of the company a little over a year ago. Returns have been strong over this period and the company has also prospered. Our aim has been to provide investors with a closed ended vehicle which is true to Troy's investment principles. To provide both income and returns that are above average but with below average volatility over a full market cycle.

We live in a world where income is scarce and valuations across capital markets are rich, implying low expected returns and putting capital at risk of material, if not permanent, loss. Further technological and, increasingly, environmental disruption is undermining many businesses which historically were fertile ground for income investing but which we believe should now be avoided. 

This combination of scarce income and low expected returns means Troy's focus on absolute returns and the quality of the underlying businesses in which we invest is more important than ever. We are acutely aware that many of our underlying investors have irreplaceable capital and are dependent, in part, on the income we provide.  They are keen to avoid substantial drawdowns.

This in turn informs our attitude to risk and guides our distinctive approach. We confine ourselves to a relatively limited number of companies and sectors that we think can sustain high returns, grow, deliver income and that are resistant to disruption. Further, we favour companies that generally do not require large amounts of capital to grow. This is crucial as it 'squares the circle' between 1) being comfortable that a business generates sufficient predictable cash flow to re-invest to entrench their competitive advantages and 2) paying a dividend.

Rather than concentrate on relative measures of risk which fail to take into account that the benchmark itself may be risky, we instead focus on the durability of returns. Our concerns relate to such things as a better competing product, a loss of a patent, a lack of visibility or certainty of demand, regulatory risk if not priced in, underinvestment, an insufficient focus on returns on capital and poor management incentives or capital allocation.

Equally, there are other factors that we worry less about such as tracking error - or positioning and performance relative to a benchmark, missing out on the latest fad or short term macro-economic or speculative noise.

We do however consider the overall valuation of markets which themselves can impact on the prospects for particular businesses as well as, of course, expected returns.

Once we have established the portfolio we are reluctant to make too many changes to allow for the potentially undisturbed compounding of these high-quality businesses. Our typical holding period for an investment is 10+ years which is longer than most market cycles.

The jury is still out as to whether the trauma and related policy response of COVID-19 has kickstarted a new cycle rather than extended the current one. Our view is given that we have not seen a credit event we are still in the same cycle that started in 2008/9 and continues to this day. Our relative performance tends to be best at times of stress and we may need to wait until this cycle completes to fully demonstrate the value of our approach.

Inflation has also become a concern. We are keeping an open mind as to whether or not these worries are misplaced. We acknowledge that demand is currently strong driven by both policy and pockets of pent-up spending at a time when supply is struggling to respond. Balanced against this are the structural factors that have kept inflation low. These have intensified; debt levels have exploded, populations have aged further and technological disruption continues apace.

It is impossible to know the outcome of this complex conundrum. As such we are not managing the portfolio based upon an inflation forecast.

What we can be more convinced about is that interest rates cannot rise too much as there is simply too much debt. This leaves us with two possible outcomes. Either inflation dissipates or it remains persistent, but in both cases interest rates remain low. In the first instance, as supply disruptions normalise and inflation expectations peak, input costs will likely moderate. This will benefit our portfolio.

In the second instance, if inflation is more persistent, but interest rates remain low, we will face an ongoing negative real interest rate environment (as inflation continues to exceed the level of interest rates). This favours an index-linked security or, dare I say it, a portfolio of high quality businesses that will likely be able to raise prices over the longer term.

This ability to raise prices stems from the same competitive advantages that allow for high returns on capital. In this scenario we believe that we are once again well placed. Although many of the sorts of businesses in which we invest are considered nominal bond proxies, in the sense that over short periods they are correlated with interest rates, over the longer term they are much more akin to an index-linked bond.  When viewed in this way the portfolio appears very good value.

We believe we have a resilient, high quality and good value collection of businesses. At the portfolio level we are generating a free cash flow yield of 5.2% funding a 2.8% dividend yield. This is driven by companies that are compounding capital at an attractive underlying rate. Thus, we have confidence that we have embedded in the company an attractive expected return balanced between income and growth.

James Harries

10 December 2021

The separate Investment Report marking the one year anniversary of Troy's appointment is available at www.stsplc.co.uk .

Risk and mitigation

The company's business model is longstanding and resilient to most of the short-term uncertainties that it faces, which the board believes are effectively mitigated by its internal controls and the oversight of the manager, as described in the latest annual report. The principal and emerging risks and uncertainties are therefore largely longer-term and driven by the inherent uncertainties of investing in global equity markets. The board believes that it is able to respond to these longer-term risks and uncertainties with effective mitigation so that both the potential impact and the likelihood of these seriously affecting shareholders' interests are materially reduced.

Risks are regularly monitored at board meetings and the board's planned mitigation measures are described in the latest annual report. The board maintains a risk register and also carries out a risk review as part of its annual strategy meeting. The board has identified the following principal risks to the company:

· Loss of investment trust status

· Long-term investment underperformance

· Market, financial and interest rate risk

· Operational risk

During the period the directors continued to assess the ongoing implications for the company and its principal risks as a result of the COVID-19 pandemic, including in relation to investment performance and operational risk. The board continues to work with the company's key service providers to mitigate such risks.

Further details of the above risks and how the board manages them can be found in the 2021 annual report and on the company's website www.stsplc.co.uk.

Directors' responsibility

In accordance with Chapter 4 of the Disclosure Guidance and Transparency Rules, and to the best of their knowledge, each director of the company confirms that the financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law) and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the AIC in April 2021. The directors are satisfied that the financial statements give a true and fair view of the assets, liabilities, financial position and profit of the company. Furthermore, each director certifies that the interim management statement includes an indication of important events that have occurred during the first six months of the financial year, and their impact on the financial statements, together with a description of the principal risks and uncertainties that the company faces. In addition, each director of the company confirms with the exception of management, secretarial fees, directors' fees and directors' shareholdings, that there have been no related party transactions during the six months to 30 September 2021.

Going concern status

The company's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Chairman's statement and Manager's review.

The financial position of the company as at 30 September 2021 is shown on the unaudited condensed statement of financial position. The unaudited condensed statement of cash flow of the company is below. 

In accordance with the 2019 AIC Code of Corporate Governance and the 2018 UK Corporate Governance Code, the directors have undertaken a rigorous review of the company's ability to continue as a going concern. The company's assets consist primarily of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale. The directors are mindful of the principal risks disclosed above, in particular those related to COVID-19 and have reviewed revenue forecasts. They believe that the company has adequate financial resources to continue its operational existence for the foreseeable future and for at least one year from the date of signing of these financial statements. Accordingly, the directors continue to adopt the going concern basis in preparing these financial statements. 

B y order of the board

John Evans, Chairman

10 December 2021

Portfolio Summary Portfolio distribution as at 30 September 2021
By region (excluding cash)	As at 30 September 2021	As at 31 March 2021
	%	%
North America	53.5	52.9
Europe	43.1	44.0
Asia	3.4	3.1
	100.0	100.0

By sector (excluding cash)	As at 30 September 2021	As at 31 March 2021
	%	%
Consumer staples	41.8	42.4
Information technology	19.6	18.9
Healthcare	17.1	17.3
Real estate	5.8	4.9
Industrials	5.4	5.3
Financials	5.3	5.4
Consumer discretionary	3.4	3.3
Communication services	1.6	2.5
	100.0	100.0

By asset class (including cash and borrowings)	As at 30 September 2021	As at 31 March 2021
	%	%
Equities	105.5	106.8
Cash	1.4	0.2
Borrowings	(6.9)	(7.0)
	100.0	100.0

Largest 10 holdings	30 September 2021	30 September 2021	31 March 2021	31 March 2021
	Market value	% of total	Market value	% of total
	£000	portfolio	£000	portfolio
British American Tobacco	12,786	5.7	14,145	6.4
Philip Morris	11,870	5.3	11,322	5.1
Unilever	11,775	5.2	11,722	5.3
Paychex	11,493	5.1	10,098	4.6
Reckitt & Benckiser	10,538	4.7	11,508	5.2
Diageo	10,077	4.5	8,625	3.9
Automatic Data Processing	9,714	4.3	9,164	4.1
PepsiCo	9,410	4.2	9,063	4.1
CME Group	9,182	4.1	8,923	4.0
Medtronic	9,163	4.1	8,662	3.9

Unaudited Condensed Statement of Comprehensive Income

		(Unaudited) Six months to 30 September 2021			(Unaudited) Six months to 30 September 2020
	Note	Revenue £000	Capital £000	Total £000	Revenue £000	Capital £000	Total £000
Net gains on investments	5	-	10,135	10,135	-	32,319	32,319
Net currency gains/ (losses)		5	(257)	(252)	56	198	254
Income	3	3,704	-	3,704	5,450	-	5,450
AIFM fee		(11)	(20)	(31)	(206)	(384)	(590)
Other expenses		(239)	-	(239)	(316)	-	(316)
Net return before finance costs and taxation		3,459	9,858	13,317	4,984	32,133	37,117
Finance costs		(74)	(137)	(211)	(94)	(162)	(256)
Net return on ordinary activities before taxation		3,385	9,721	13,106	4,890	31,971	36,861
Taxation on ordinary activities	4	(201)	-	(201)	(311)	-	(311)
Net return attributable to ordinary redeemable shareholders		3,184	9,721	12,905	4,579	31,971	36,550
Net return per ordinary redeemable share	2	3.15p	9.60p	12.75p	4.38p	30.59p	34.97p

		(Audited)
		Year to 31 March 2021
		Revenue	Capital	Total
	Note	£000	£000	£000
Net gains on investments	5	-	40,826	40,826
Net currency gains/ (losses)		(12)	1,031	1,019
Income	3	9,109	-	9,109
Investment management fee		(285)	(529)	(814)
Other expenses		(995)	-	(995)
Net return before finance costs and taxation		7,817	41,328	49,145
Finance costs		(161)	(299)	(460)
Net return on ordinary activities before taxation		7,656	41,029	48,685
Taxation on ordinary activities	4	(611)	-	(611)
Net return attributable to ordinary redeemable shareholders		7,045	41,029	48,074
Net return per ordinary redeemable share	2	6.76p	39.39p	46.15p

The total columns of this statement are the profit and loss accounts of the company.

The revenue and capital items are presented in accordance with the Association of Investment Companies ('AIC') Statement of Recommended Practice ('SORP 2021').

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

No operations were acquired or discontinued during the period.

The notes below form part of these condensed financial statements.

Unaudited Condensed Statement of Financial Position

		(Unaudited) As at 30 September 2021		(Unaudited) As at 30 September 2020		(Audited) As at 31 March 2021
	Note	£000	£000	£000	£000	£000	£000
Fixed assets
Investments at fair value through profit or loss	5		225,854		212,195		221,771
Current assets
Trade and other receivables	6	1,358		11,077		1,206
Cash and cash equivalents		1,899		6,163		825
		3,257		17,240		2,031
Current liabilities
Trade payables - amounts falling due within one year	7	(113)		(10,494)		(129)
Dividend payable		-		-		(1,410)
Total current liabilities		(113)		(10,494)		(1,539)
Net current assets			3,144		6,746		492
Total assets less current liabilities			228,998		218,941		222,263
Trade payables - amounts falling due after more than one year	8		(14,834)		(15,444)		(14,585)
Total net assets			214,164		203,497		207,678
Capital and reserves
Called up share capital		1,223		1,223		1,223
Capital redemption reserve		78		78		78
Share premium account		30,725		30,401		30,725
Special distributable reserve*		73,383		81,583		78,194
Capital reserve*		104,249		85,470		94,528
Revenue reserve*		4,506		4,742		2,930
Total shareholders' funds			214,164		203,497		207,678
Net asset value per ordinary share	2		213.78p		195.58p		202.68p

*These reserves are distributable.

The company is registered in Scotland no.SC283272.

The notes below form part of these condensed financial statements.

The financial statements were approved by the board of directors on 10 December 2021 and signed on its behalf by John Evans, Chairman.

Unaudited Condensed Statement of Changes in Equity

For the period ended 30 September 2021 (Unaudited)	Called up share capital £000	Capital redemption reserve £000	Share premium account £000	Special distributable reserve* £000	Capital reserve* £000	Revenue  reserve* £000	Total £000
As at 1 April 2021	1,223	78	30,725	78,194	94,528	2,930	207,678
Net return attributable to shareholders**	-	-	-	-	9,721	3,184	12,905
Ordinary shares bought back during the period	-	-	-	(4,811)	-	-	(4,811)
Dividends paid	-	-	-	-	-	(1,608)	(1,608)
As at 30 September 2021	1,223	78	30,725	73,383	104,249	4,506	214,164

For the period ended 30 September 2020 (Unaudited)	Called up share capital £000	Capital redemption reserve £000	Share premium account £000	Special distributable reserve* £000	Capital reserve* £000	Revenue  reserve* £000	Total £000
As at 1 April 2020	1,223	78	30,401	82,943	53,499	2,321	170,465
Net return attributable to shareholders**	-	-	-	-	31,971	4,579	36,550
Ordinary shares bought back during the period	-	-	-	(1,360)	-	-	(1,360)
Dividends paid	-	-	-	-	-	(2,158)	(2,158)
As at 30 September 2020	1,223	78	30,401	81,583	85,470	4,742	203,497

For the year ended 31 March 2021 (Audited)	Called up share capital	Capital redemption reserve	Share premium account	Special distributable reserve*	Capital reserve*	Revenue  reserve*	Total
	£000	£000	£000	£000	£000	£000	£000
As at 1 April 2020	1,223	78	30,401	82,943	53,499	2,321	170,465
Net return attributable to shareholders**	-	-	-	-	41,029	7,045	48,074
Ordinary shares issued during the year	-	-	324	943	-	-	1,267
Ordinary shares bought back during the year	-	-	-	(5,692)	-	-	(5,692)
Dividends paid	-	-	-	-	-	(6,436)	(6,436)
As at 31 March 2021	1,223	78	30,725	78,194	94,528	2,930	207,678

*These reserves are distributable.

**The company does not have any other income or expenses that are not included in the 'Net return attributable to ordinary redeemable shareholders' as disclosed in the Condensed statement of comprehensive income above, and therefore this is also the 'Total comprehensive income' for the period.

The notes below form part of these condensed financial statements.

Unaudited Condensed Statement of Cash Flow

		(Unaudited) Six months to		(Unaudited) Six months to		(Audited) Year to
		30 September 2021		30 September 2020		31 March 2021
	Note	£000	£000	£000	£000	£000	£000
Cashflows from operating activities
Net return on ordinary activities before taxation			13,106		36,861		48,685
Adjustments for:
Gains on investments	5	(10,135)		(32,319)		(40,826)
Finance costs		211		256		460
Exchange movement on bank borrowings	9	249		(321)		(1,180)
Purchases of investments*	5	(8,398)		(34,520)		(248,428)
Sales of investments*	5	14,450		44,313		257,152
Dividend income	3	(3,704)		(4,632)		(8,288)
Other income	3	-		-		(3)
Premium income - written options	3	-		(818)		(818)
Dividend income received		3,581		4,750		7,959
Other income received		-		-		3
Premium income received - written options		-		818		818
Decrease/(increase) in receivables		21		(7,953)		2,608
(Decrease)/increase in payables		(26)		75		(302)
Overseas withholding tax suffered		(251)		(311)		(853)
			(4,002)		(30,662)		(31,698)
Net cash flows from operating activities			9,104		6,199		16,987
Cash flows from financing activities
Repurchase of ordinary share capital		(4,811)		(1,360)		(5,692)
Issue of ordinary share capital		-		166		1,433
Equity dividends paid		(3,018)		(3,676)		(6,544)
Repayment of the Sterling loan facility		-		-		(10,000)
Interest paid on borrowings		(201)		(267)		(460)
Net cash flows from financing activities			(8,030)		(5,137)		(21,263)
Net increase/(decrease) in cash and cash equivalents			1,074		1,062		(4,276)
Cash and cash equivalents at the start of the period			825		5,101		5,101
Cash and cash equivalents at the end of the period	9		1,899		6,163		825

*Receipts from the sale of, and payments to acquire investment securities, have been classified as components of cash flows from operating activities because they form part of the company's dealing operations.

The notes below form part of these condensed financial statements.

Notes to the Condensed Financial Statements

Note 1:  Accounting policies

For the period ended 30 September 2021 (and the year ended 31 March 2021), the company is applying The Financial Reporting Standard applicable in the UK and Republic of Ireland ('FRS 102'), which forms part of Generally Accepted Accounting Practice ('UK GAAP') issued by the Financial Reporting Council ('FRC') in 2015.

These condensed financial statements have been prepared on a going concern basis in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, FRS 102 issued by the FRC in September 2015, FRS 104 Interim Financial Reporting issued by the FRC in March 2015 and the revised Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ('SORP') issued by the AIC in April 2021.

The accounting policies applied for the condensed set of financial statements are set out in the company's annual report for the year ended 31 March 2021.

Note 2:  Returns and net asset value

	(Unaudited) Six months to 30 September 2021	(Unaudited) Six months to 30 September 2020	(Audited) Year to 31 March 2021
Revenue return
Revenue return attributable to ordinary redeemable shareholders	£3,184,000	£4,579,000	£7,045,000
Weighted average number of shares in issue during the period*	101,253,026	104,531,440	104,176,945
Revenue return per ordinary redeemable share	3.15p	4.38p	6.76p
Capital return
Capital return attributable to ordinary redeemable shareholders	£9,721,000	£31,971,000	£41,029,000
Weighted average number of shares in issue during the period*	101,253,026	104,531,440	104,176,945
Capital return per ordinary redeemable share	9.60p	30.59p	39.39p
Net return
Net return per ordinary redeemable share	12.75p	34.97p	46.15p
Net asset value per share
Net assets attributable to shareholders	£214,164,000	£203,497,000	£207,678,000
Number of shares in issue at period end	100,180,075	104,046,075	102,468,075
Net asset value per share	213.78p	195.58p	202.68p

* Calculated excluding shares held in treasury.

During the six months ended 30 September 2021 there were 2,288,000 shares bought back into treasury at a cost of £4,811,000 (six months ended 30 September 2020: 714,560 shares bought back into treasury at a cost of £1,360,000; twelve months ended 31 March 2021: 2,917,560 shares bought back into treasury at a cost of £5,692,000). No shares were issued from treasury during the six month period to 30 September 2021 (six months ended 30 September 2020: no shares were issued from treasury; twelve months ended 31 March 2021: 625,000 shares were issued from treasury for proceeds of £1,267,000). There have been no shares cancelled from treasury during the six months ended 30 September 2021 (six months ended 30 September 2020: no shares were cancelled from treasury; twelve months ended 31 March 2021: no shares were cancelled from treasury). As at 30 September 2021 there were 22,119,073 shares held in treasury.

Total return

The total return per share for the company is the combined effect of the rise and fall in the share price or NAV together with the reinvestment of the quarterly dividends paid.

The tables below provide the NAVs and share prices of the company on the dividend reinvestment dates for the periods ended 30 September 2021 and 30 September 2020.

2021	Dividend rate	NAV	Share price
31 March 2021	n/a	202.68	202.00
2 July 2021	1.575	216.51	213.00
30 September 2021	n/a	213.78	214.00
Total return		6.3%	6.8%

2020	Dividend rate	NAV	Share price
31 March 2020	n/a	162.72	168.50
9 July 2020	2.06	189.87	193.00
30 September 2020	n/a	195.58	189.25
Total return		21.5%	13.5%

Note 3:  Revenue

	(Unaudited) Six months to 30 September 2021 £000	(Unaudited) Six months to 30 September 2020 £000	(Audited) Year to 31 March 2021 £000
From listed investments
UK - equities	1,682	512	1,711
Overseas - equities	2,022	4,120	6,577
	3,704	4,632	8,288
Other revenue
Premium - written options	-	818	818
Other income	-	-	3
	3,704	5,450	9,109

During the six months to 30 September 2021 the company received no special dividends treated as capital (30 September 2020: £nil; year to 31 March 2021: £nil).

Note 4: Taxation on ordinary activities

	(Unaudited) Six months to 30 September 2021 £000			(Unaudited) Six months to 30 September 2020 £000			(Audited) Year to 31 March 2021 £000
Foreign tax			201			311			611

Note 5:  Investments at fair value through profit or loss

	(Unaudited) As at 30 September 2021 £000	(Unaudited) As at 30 September 2020 £000	(Audited) As at 31 March 2021 £000
Opening book cost	215,911	182,216	182,216
Opening investment holding gains	5,860	7,453	7,453
Opening market value	221,771	189,669	189,669
Acquisitions at cost	8,398	34,520	248,428
Disposal proceeds	(14,450)	(44,313)	(257,152)
Gains on investments	10,135	32,319	40,826
Closing market value of investments	225,854	212,195	221,771
Closing book cost	210,221	171,515	215,911
Closing investment holding gains	15,633	40,680	5,860
Closing market value	225,854	212,195	221,771

The company received £14,450,000 (six months ended 30 September 2020: £44,313,000; twelve months ended 31 March 2021: £257,152,000) from investments sold in the six months ended 30 September 2021.  The average book cost of these investments when they were purchased was £14,088,000 (six months ended 30 September 2020: £45,224,000; twelve months ended 31 March 2021: £214,733,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of investments.

Transaction costs

During the period, expenses were incurred in acquiring or disposing of investments classified as fair value though profit or loss. These have been expensed through capital and are included within gains/(losses) on investments in the statement of comprehensive income. The total costs were as follows:

	(Unaudited) Six months to 30 September 2021 £000	(Unaudited) Six months to 30 September 2020 £000	(Audited) Year to 31 March 2021 £000
Acquisitions	10	51	434
Disposals	6	33	164
	16	84	598

Note 6:  Trade and other receivables

	(Unaudited) As at 30 September 2021 £000	(Unaudited) As at 30 September 2020 £000	(Audited) As at 31 March 2021 £000
Dividends receivable	851	280	728
Tax recoverable	483	305	433
Prepayments and other debtors	24	21	45
Due from brokers	-	10,471	-
	1,358	11,077	1,206

None of the company's trade and other receivables are past due or impaired at any period end.

Note 7:  Trade payables - amounts falling due within one year

	(Unaudited) As at 30 September 2021 £000	(Unaudited) As at 30 September 2020 £000	(Audited) As at 31 March 2021 £000
Interest accrued	23	2	13
Sterling bank revolving loan facility	-	10,000	-
Other trade payables	90	492	116
	113	10,494	129

Note 8:  Trade payables - amounts falling due after more than one year

	(Unaudited) As at 30 September 2021 £000	(Unaudited) As at 30 September 2020 £000	(Audited) As at 31 March 2021 £000
Bank term loans	14,834	15,444	14,585

The term loans carry an annual fixed rate interest of 2.1408%, 1.4175% and 3.1925% for Facility A, Facility B and Facility C respectively. The rate of interest for the revolving credit facility (Facility D) is set at each roll-over date and is made up of a fixed margin of 0.7% plus LIBOR rate. Under this agreement £nil was drawn at 30 September 2021.

The repayment date of the term loans is the same as their termination date which is the 19 September 2023. The repayment date of the revolving facility is the last day of its interest period and the termination date was 14 October 2021. Subsequent to the period end, on 12 October 2021, the company renewed the agreement whereby the termination date of the revolving facility was extended to 30 September 2023. The fixed margin element of interest on the revolving facility was also increased to 1.0%.

The main covenant under the agreement requires the company to ensure that, at the end of each month, the aggregate of the loans outstanding does not exceed an amount equal to 25% of its net tangible assets and, unless otherwise agreed with the lender, net tangible assets are not less than £100,000,000.

As at 30 September 2021 the company had drawn down the full amount of the loan facilities A to C and the balances as at that date were for Facility A £1,500,000, Facility B £3,870,000 (€4,500,000) and Facility C £9,464,000 (US$12,750,000) (30 September 2020: Facility A £1,500,000, Facility B £4,082,000 (€4,500,000), Facility C £9,862,000 (US$12,750,000) and Facility D £10,000,000; 31 March 2021: Facility A £1,500,000, Facility B £3,832,000 (€4,500,000) and Facility C £9,253,000 (US$12,750,000)).

Note 9:   Analysis of net debt

	(Audited) As at 31 March 2021 £000	Cash flow £000	Exchange movements £000	(Unaudited) As at 30 September 2021 £000
Cash at bank	825	1,074	-	1,899
Bank borrowings	(14,585)	-	(249)	(14,834)
	(13,760)	1,074	(249)	(12,935)

Note 10:  Fair value hierarchy

Under FRS 102, the company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:

-  Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

-  Level 2: other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments, credit risk, etc); or

-  Level 3: significant unobservable input (including the company's own assumptions in determining the fair value of investments).

The financial assets measured at fair value through profit and loss are grouped into the fair value hierarchy as follows:

	As at 30 September 2021 (Unaudited)
	Level 1	Level 2	Level 3	Total
	£000	£000	£000	£000
Financial assets at fair value through profit or loss
Quoted equities	225,854	-	-	225,854
Net fair value	225,854	-	-	225,854
	As at 30 September 2020 (Unaudited)
	Level 1	Level 2	Level 3	Total
	£000	£000	£000	£000
Financial assets at fair value through profit or loss
Quoted equities	212,195	-	-	212,195
Net fair value	212,195	-	-	212,195
	As at 31 March 2021 (Audited)
	Level 1	Level 2	Level 3	Total
	£000	£000	£000	£000
Financial assets at fair value through profit or loss
Quoted equities	221,771	-	-	221,771
Net fair value	221,771	-	-	221,771

Note 11:  Interim financial report

The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in s434 - 6 of the Companies Act 2006. The financial information for the six months ended 30 September 2021 and 30 September 2020 has not been audited or reviewed.

The information for the year ended 31 March 2021 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under s498 (2), (3) or (4) of the Companies Act 2006.

A copy of the half-year report can shortly be downloaded at www.stsplc.co.uk .

Enquiries:

Juniper Partners Limited

Company Secretary

Email: [e-mail]

 

END

 

 

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