Half Yearly Report

RNS Number : 7205L

Troy Income & Growth Trust Plc

05 May 2015

 



TROY INCOME & GROWTH TRUST PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 31 MARCH 2015

The principal objective of Troy Income & Growth Trust is to provide shareholders with an attractive income yield and the prospect of income and capital growth through investing in a portfolio of predominantly UK equities.

Financial Highlights
	31 March 2015	30 September 2014	% Change
Equity shareholders' funds (£'000)	173,038	153,391	+12.8
Net asset value per share	69.21p	64.05p	+8.1
Share price (mid-market)	70.50p	64.25p	+9.7
Premium to net asset value	1.9%	0.3%

Total Returns*		6 months ended 31 March 2015	12 months ended 31 March 2015	36 months ended 31 March 2015	60 months ended 31 March 2015
Share price		+11.7%	+14.0%	+44.6%	+76.2%
Net asset value  per share		+10.3%	+13.4%	+43.4%	+72.7%
FTSE All-Share Index		+5.3%	+6.6%	+35.4%	+49.3%
	* Total return includes reinvesting the net dividend in the month that the share price goes ex-dividend.

INTERIM BOARD REPORT AS AT 31 MARCH 2015

Performance

The Company delivered a Net Asset Value (NAV) total return of +10.3% over the six months to 31 March 2015.  The share price total return of +11.7% reflected a small increase in the premium to NAV, while the FTSE All-Share Index produced a total return of +5.3% over the same period.  Over one and three years to 31 March 2015 the NAV total returns of +13.4% and +43.4% respectively compared favourably to that of the FTSE All-Share Index which returned +6.6% and +35.4%.  During the closing three months of 2014 the Company's NAV (+5.4%) outstripped a fairly muted market move (+0.6%).  However, in what was a much stronger first quarter of 2015 for the broader equity market, the Trust's defensive portfolio unusually performed almost exactly in line with the index (+4.7%). The Company increased the aggregate of the first and second interim dividends by +4.5% to 1.15p (a quarterly rate of 0.575p) when compared to the equivalent dividends in the previous year.

Overall the performance of your Company in the period under review was positive and reflected the continued attractions of quality companies with attractive dividend growth prospects.

Background

For the two years up to the end of September 2014 US quantitative easing allowed investors to participate in equity markets whilst remaining largely insulated from the vagaries of the underlying economy. The capricious animal spirits that govern equity markets became dependable creatures of habit, happy to participate as long as the Federal Reserve kept printing.   The fall in the oil price from a summer high of $107 per barrel to below $45 coincided with evidence of weakening demand to create concerns that a deflationary environment could become entrenched in Europe in particular.  This coincided with the tapering of additional US monetary support, which finally ceased completely in October.  As this panacea was removed investors were forced to consider economic reality and equity market volatility increased in the run up to the year end. 

Part of the market's weakness in the final quarter of 2014 can also be attributed to the re-emergence of concerns relating to Greece's political and fiscal instability.  It was a reminder that many of the acute risks that emerged in the teeth of the global financial crisis and the subsequent turmoil have not been properly resolved.  Instead they have merely become chronic in nature and so still have the capacity to unsettle equity markets dramatically.  In the face of these combined economic and political threats the ECB, continuing in the vein of its 2012 pledge to "do whatever it takes" to save the euro,  joined the Bank of Japan in taking up the baton of monetary stimulus and announced its own €60bn per month asset purchase programme in late January.

Bond yields moved sharply to price in this new monetary backdrop and in particular the spectre of a possible increase in US interest rates in the coming quarters.  The UK 10-year gilt yield, which had ended January at close to 1.3%, reversed its steady multi-year decline with a sharp rise to nearer 2% by March.  This re-pricing of defensive assets meant that the Trust gave up some of the very strong relative performance it had generated in the prior months.   As the dust settled and investors were again able to take comfort from the wider impact of QE, the broad UK equity market resumed its upwards progress, with the FTSE 100 Index breaking through the historical ceiling of 7000 in late March.

Discount Control Mechanism

In the six months to 31 March 2015, the Company issued 10.4 million shares to the market bringing the share count to above 250 million for the first time.  No shares were repurchased.   As the Trust has grown, enabled by the Discount Control Mechanism, the ongoing charges figure has steadily declined to 1.05% making the Trust's shares less expensive for all investors.  Also in March the Trust's NAV moved through £175m for the first time. Assets in excess of this level attract a lower annual management charge of 0.65% and this will further help to reduce ongoing charges.

Gearing

The Company continues to maintain an ungeared balance sheet but has the facilities in place to borrow in the event of an outstanding buying opportunity in equities. A conservative approach to gearing is one contributor to your Company being less volatile than most of its peers and the future use of borrowing would always be tactical rather than structural.

Dividends

The current quarterly dividend rate is 0.575p and the second quarterly dividend was paid on 24 April 2015.  As in previous years the Board will consider an uplift to the final quarterly dividend before the year end on 30 September.  The global nature of many of the companies that make up the UK equity market means that the strengthening dollar has been a strong tailwind for dividend growth in the first half of the Trust's financial year.  Although this trend may not persist it has, to date, provided additional support to our aspiration of steadily growing the dividend over time.

Outlook

Equity markets generally are showing considerable 'sang froid' in the face of political uncertainty in the UK, a slowing recovery in the US, stagnation in the Eurozone and a sharp slowdown in the  Chinese economy and all that means for commodity markets in particular. Equities are however a strong leading indicator and may prove many economic forecasters to have been overly pessimistic. The deferral of interest rate rises has definitely helped to buoy markets and any reversal of that consensus would be negative.  The portfolio remains well placed to withstand any such volatility and take advantage of investment opportunities that may arise.

D Warnock

Chairman

5 May 2015

Principal Risks and Uncertainties

The principal risks facing the Company relate to the Company's investment activities and include performance and market risk, resource risk and operational risk. Other risks faced by the Company include breach of regulatory rules which could lead to suspension of the Company's Stock Exchange Listing, financial penalties, or a qualified audit report. Breach of Section 1159 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains.

An explanation of these principal risks and how they are managed is contained in the Directors' Report within the Annual Report and Accounts for the year ended 30 September 2014.

The Company's principal risks and uncertainties have not changed since the date of the annual report and are not expected to change for the remaining six months of the Company's financial year.

Going Concern

The Directors believe having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibility Statement

The Directors are responsible for preparing the half yearly financial report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

-    the condensed set of interim financial statements contained within the half yearly financial report have been prepared in accordance with International Accounting Standard 34; and,

-    the Interim Board Report includes a fair review of the information required by 4.2.7R (indication of important events during the first six months of the financial year and description of principal risks and uncertainties for the remaining six months of the year) and 4.2.8R (disclosure of related party transactions and changes therein) of the FCA's Disclosure and Transparency Rules.

The half yearly financial report for the six months to 31 March 2015 comprises the Interim Board Report, the Directors' Responsibility Statement and a condensed set of financial statements.

For and on behalf of the Board

D Warnock

Chairman

5 May 2015

STATEMENT OF COMPREHENSIVE INCOME
		Six months ended 31 March 2015 (unaudited)			Six months ended 31 March 2014 (unaudited)
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value
		-	13,420	13,420	-	8,393	8,393
Currency gains/(losses)		-	10	10	-	(2)	(2)
Income	2	2,939	-	2,939	2,479	-	2,479
Investment management
fees		(219)	(407)	(626)	(192)	(358)	(550)
Other administrative
expenses		(226)	-	(226)	(214)	-	(214)
Finance costs of
borrowing		-	-	-	-	-	-
		_______	______	_______	_______	______	_______
Profit before taxation		2,494	13,023	15,517	2,073	8,033	10,106
Taxation	3	(34)	-	(34)	(34)	-	(34)
		_______	______	_______	_______	______	_______
Profit for the period		2,460	13,023	15,483	2,039	8,033	10,072
		_______	______	_______	_______	______	_______
Earnings per Ordinary
share (pence)	5	0.99	5.26	6.25	0.87	3.42	4.29
		_______	______	_______	______	_______	______

The "Profit for the period" is also the Total Comprehensive Income for the period as defined in IAS1 (revised). The total columns of this statement represents the Statement of Comprehensive Income prepared in accordance with International Financial Reporting Standards ("IFRS"). The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. No operations were acquired or discontinued during the period.

INCOME STATEMENT (CONTINUED)		Year ended 30 September 2014 (audited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains on investments held at fair value		-	9,585	9,585
Currency (losses)		-	(4)	(4)
Income	2	6,194	-	6,194
Investment management fees		(392)	(728)	(1,120)
Other administrative expenses		(403)	-	(403)
Finance costs of borrowing		(5)	(10)	(15)
		______	_______	______
Profit before taxation		5,394	8,843	14,237
Taxation	3	(86)	-	(86)
		______	_______	______
Profit for the period		5,308	8,843	14,151
		______	_______	______
Earnings per Ordinary share (pence)	5	2.25	3.75	6.00
		______	_______	______

BALANCE SHEET
	As at 31 March 2015 (unaudited) £'000	As at 31 March 2014 (unaudited) £'000	As at 30 September 2014 (audited) £'000
Non-current assets
Ordinary shares	164,450	145,042	150,656
	______	______	______
Investments held at fair value through profit or loss	164,450	145,042	150,656
	______	______	______
Current assets
Accrued income and prepayments	873	755	690
Trade and other receivables	246	-	737
Cash and cash equivalents	7,887	2,413	2,755
	______	______	______
Total current assets	9,006	3,168	4,182
	______	______	______
Total assets	173,456	148,210	154,838
Current liabilities
Trade and other payables	(418)	(403)	(1,447)
	______	______	______
Total current liabilities	(418)	(403)	(1,447)
	______	______	______
Net assets	173,038	147,807	153,391
	______	______	______
Issued capital and reserves attributable to
equity holders
Called-up share capital	62,504	60,514	60,514
Share premium account	3,480	36,419	86
Special reserves	63,504	52,755	61,924
Capital reserve	40,209	(4,867)	27,186
Revenue reserve	3,341	2,986	3,681
	______	______	______
Equity shareholders' funds	173,038	147,807	153,391
	______	______	______
Net asset value per Ordinary share (pence)	69.21	63.37	64.05
	______	______	______

STATEMENT OF CHANGES IN EQUITY
Six months ended 31 March 2015 (unaudited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserves	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2014	60,514	86	61,924	27,186	3,681	153,391
Total comprehensive income for the period	-	-	-	13,023	2,460	15,483
Equity dividends	-	-	-	-	(2,800)	(2,800)
Costs of cancellation of share premium account	-	-	(4)	-	-	(4)
Shares bought back into treasury	-	-	-	-	-	-
Shares issued from treasury	-	18	1,584	-	-	1,602
New shares issued	1,990	3,376	-	-	-	5,366
	______	_______	______	______	_______	______
Balance at 31 March 2015	62,504	3,480	63,504	40,209	3,341	173,038
	______	_______	______	______	_______	______
Six months ended 31 March 2014 (unaudited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2013	60,514	36,432	58,163	(12,900)	3,569	145,778
Total comprehensive income for the period	-	-	-	8,033	2,039	10,072
Equity dividends	-	-	-	-	(2,622)	(2,622)
Costs of cancellation of share premium account	-	-	(20)	-	-	(20)
Shares bought back into treasury	-	-	(5,722)	-	-	(5,722)
Shares issued from treasury	-	(13)	334	-	-	321
	______	_______	______	______	_______	______
Balance at 31 March 2014	60,514	36,419	52,755	(4,867)	2,986	147,807
	______	_______	______	______	_______	______
Year ended 30 September 2014 (audited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserves	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2013	60,514	36,432	58,163	(12,900)	3,569	145,778
Total comprehensive income for the year	-	-	-	8,843	5,308	14,151
Equity dividends	-	-	-	-	(5,196)	(5,196)
Cancellation of share premium account	-	(36,621)	36,621	-	-	-
Transfer to Capital Reserve	-	-	(31,243)	31,243	-	-
Costs of cancellation of share premium account	-	-	(31)	-	-	(31)
Shares bought back into treasury	-	-	(7,002)	-	-	(7,002)
Shares issued from treasury	-	275	5,416	-	-	5,691
	______	_______	______	______	_______	______
Balance at 30 September 2014	60,514	86	61,924	27,186	3,681	153,391
	______	_______	______	______	_______	______

CASH FLOW STATEMENT
	Six months ended 31 March 2015 (unaudited) £'000	Six months ended 31 March 2014 (unaudited) £'000			Year ended 30 September 2014 (audited) £'000
Cash flows from operating activities
Investment income received	2,752	2,391			6,198
Deposit interest received	-	-			1
Administrative expenses paid	(812)	(768)			(1,537)
	______	______			______
Cash generated from operations	1,940	1,623			4,662
Finance costs paid	-	-			(15)
Taxation	(34)	(18)			(94)
	______	______			______
Net cash inflows from operating activities	1,906	1,605			4,553
	______	______			______
Cash flows from investing activities
Purchases of investments	(5,994)	(8,045)			(24,582)
Sales of investments	5,314	12,635			25,057
	______	______			______
Net cash (outflow)/inflow from investing activities	(680)	4,590			475
	______	______			______
Net cash inflow before financing	1,226	6,195			5,028
	______	______			______
Financing activities
Proceeds of issue of shares	6,726	321			5,727
Costs of share buy backs	-	(5,722)			(7,002)
Dividends paid	(2,800)	(2,622)			(5,196)
Costs incurred on cancellation of share premium account and on issue of new shares	(30)	-			(41)
	______	______			______
Net cash inflow/(outflow) from financing activities	3,896	(8,023)			(6,512)
	______	______			______
Net increase/(decrease) in cash and short term deposits	5,122	(1,828)			(1,484)
Cash and short term deposits at the start of the period	2,755	4,243			4,243
Effect of foreign exchange rate changes	10	(2)			(4)
	______	______			______
Cash and short term deposits at the end of the period	7,887	2,413			2,755
	______	_______			______
Reconciliation of operating profit to operating cash flows
Profit before taxation	15,517	10,106			14,237
Add interest payable	-	-			15
Adjustments for:
Gains on investments	(13,420)	(8,393)			(9,585)
Currency (gains)/losses	(10)	2			4
(Increase)/decrease in accrued income and prepayments	(183)	(86)			5
Increase/(decrease) in trade and other payables	36	(6)			(14)
	______	_______			______
Cash generated from operations	1,940	1,623			4,662
	______	_______			______

Distribution of Assets and Liabilities
	Valuation at 30 September 2014					Valuation at 31 March 2015
			Purchases	Sales	Appreciation/ (depreciation)
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	150,656	98.2	4,951	(4,953)	13,796	164,450	95.0
Current assets	4,182	2.7				9,006	5.2
Current liabilities	(1,447)	(0.9)				(418)	(0.2)
	______	_____				______	_____
Net assets	153,391	100.0				173,038	100.0
	______	_____				______	_____
Net asset value per share	64.05p					69.21p
	______					______

NOTES TO THE ACCOUNTS
1.	Accounting policies
	(a)	Basis of accounting
		The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) IAS 34 - 'Interim Financial Reporting', as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). They have also been prepared using the same accounting policies applied for the year ended 30 September 2013 financial statements.
	(b)	Dividends payable
		Dividends are recognised on the ex-dividend date.

2.	Income	Six months ended 31 March 2015 £'000	Six months ended 31 March 2014 £'000	Year  ended 30 September 2014 £'000
	Income from listed investments
	UK dividend income	2,717	2,256	5,618
	Overseas dividend income	222	223	575
		______	______	______
		2,939	2,479	6,193
		______	______	______
	Other income from investment activity
	Deposit interest	-	-	1
		______	______	______
	Total income	2,939	2,479	6,194
		______	______	______

3.	Taxation
	The taxation charge for the period represents withholding tax suffered on overseas dividend income.

4.	The following table shows the revenue for each period less the dividends declared in respect of the financial period to which they relate.
		Six months ended 31 March 2015* £'000	Six months ended 31 March 2014+ £'000	Year  ended  30 September 2014++ £'000
	Revenue	2,460	2,039	5,308
	Dividends declared	(2,859)	(2,575)	(5,245)
		______	______	______
		(399)	(536)	63
		______	______	______
	* Dividends declared relate to the first two interim dividends (both 0.575p each) declared in respect of the financial year 2014/2015.
	+ Dividends declared relate to the first two interim dividends (both 0.55p each) declared in respect of the financial year 2013/2014.
	++ Dividends declared relate to the four interim dividends declared in respect of the financial year 2013/2014 totalling 2.225p.

		Six months ended 31 March 2015	Six months ended 31 March 2014	Year  ended 30 September 2014
5.	Return and net asset value per share	p	p	p
	Revenue return	0.99	0.87	2.25
	Capital return	5.26	3.42	3.75
		______	______	______
	Total return	6.25	4.29	6.00
		______	______	______
	The figures above are based on the following:
		£'000	£'000	£'000
	Revenue return	2,460	2,039	5,308
	Capital return	13,023	8,033	8,843
		______	______	______
	Total return	15,483	10,072	14,151
		______	______	______
	Weighted average number of Ordinary shares
	in issue	247,867,001	235,027,963	235,820,922
		__________	__________	__________
	The net asset value per share is based on net assets attributable to shareholders of £173,038,000 (31 March 2014 - £147,807,000; 30 September 2014 - £153,391,000) and on 250,017,445 (31 March 2014 - 233,248,445; 30 September 2014 - 239,488,445) Ordinary shares in issue at the period end.

		As at 31 March 2015 (unaudited)	As at 31 March 2014 (unaudited)	As at 30 September 2014 (audited)
6.	Ordinary Share Capital
	Ordinary Shares of 25p each	No. of shares	No. of shares	No. of shares
	Allotted, called up and fully paid	250,017,445	233,248,445	239,488,445
	Held in treasury	-	8,809,000	2,569,000
		__________	__________	__________
		250,017,445	242,057,445	242,057,445
		__________	__________	__________
	During the six months ended 31 March 2015 there were no Ordinary shares of 25p each repurchased by the Company. During the six months ended 31 March 2014 there were 9,359,000 Ordinary shares of 25p each repurchased at a total cost of £5,721,941 and placed in treasury. During the year to 30 September 2014 there were 11,359,000 Ordinary shares of 25p each repurchased at a total cost of £7,002,081 and placed in treasury. During the six months ended 31 March 2015 there were 2,569,000 Ordinary shares re-issued from treasury for proceeds totalling £1,620,215. During the six months ended 31 March 2014 there were 550,000 Ordinary shares re-issued from treasury for proceeds totalling £338,850. During the year ended 30 September 2014 there were 8,790,000 Ordinary shares re-issued from treasury for proceeds totalling £5,727,205. During the six months ended 31 March 2015 there were 7,960,000 new Ordinary shares of 25p each issued by the Company for cash proceeds totalling £5,374,025. During the six months ended 31 March 2014 and the year ended 30 September 2014 there were no new Ordinary shares of 25p each issued.

7.	Capital reserve
	The capital reserve shown in the Balance Sheet at 31 March 2015 includes gains of £41,717,000 (31 March 2014 - gains of £27,721,000; 30 September 2014 - gains of £27,921,000) which relate to the revaluation of investments held at the reporting date.

8.	Transaction costs
	During the period expenses were incurred in acquiring or disposing of investments classified as held at fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Statement of Comprehensive Income. The total costs were as follows:
				Six months ended 31 March 2015 £'000	Six months ended 31 March 2014 £'000		Year  ended 30 September 2014 £'000
	Purchases			25	45		105
	Sales			6	14		20
				______	______		______
				31	59		125
				______	______		______

9.	Publication of non-statutory accounts
	The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434-436 of the Companies Act 2006. The financial information for the six months ended 31 March 2015 and 31 March 2014 has not been audited.
	The information for the year ended 30 September 2014 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 Section 498 (2), (3) or (4) of the Companies Act 2006.

10.	This Half-Yearly Financial Report was approved by the Board on 5 May 2015.

.

11.	This Half-Yearly Financial Report will shortly be available for viewing on the Company's web site (www.tigt.co.uk) and will be posted to shareholders in May 2015.

For Troy Income & Growth Trust plc Steven Cowie, C.A., Secretary 5 May 2015 Enquiries: 0131 538 6610

 

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