Half Yearly Financial Report

RNS Number : 4837R

Value and Income Trust plc

04 November 2011

 



VALUE AND INCOME TRUST PLC

UNAUDITED HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011

SUMMARY

	30 September 2011	31 March 2011	30 September 2010
Net asset value per share	205.88p	233.67p	215.48p
(valuing debt at market)
Net asset value per share	231.36p	249.10p	235.86p
(valuing debt at par)
Share price (mid)	176.00p	186.00p	163.00p
Dividend per share	3.90p	7.80p	3.80p
	(interim)	(total)	(interim)

Value and Income Trust ('VIT') is a specialist investment trust whose shares are traded on the London Stock Exchange. VIT invests in higher yielding, less fashionable areas of the UK commercial property and equity markets, particularly in medium and smaller sized companies. VIT aims for long term real growth in dividends and capital values without undue risk. Figures for net asset values and net current assets shown in the tables above and below are calculated after deducting dividends declared but not yet paid, as in previous years.

Over the six months ended 30 September 2011, VIT's share price fell by 5.4% while the net asset value, valuing debt at par, decreased by 7.1%. The FTSE All-Share Index fell by 13.5% over the half-year. VIT's property portfolio was revalued independently at 30 September 2011.

An interim dividend of 3.90p per share has been declared payable on 6 January 2012 to those shareholders on the register on 9 December 2011. The ex-dividend date will be 7 December 2011.

Summary of Portfolio
	30 September 2011		31 March 2011		30 September 2010
	£m	%	£m	%	£m	%
UK Equities	90.0	64	99.4	66	91.7	65
UK Property	48.7	34	49.8	33	47.6	33
Cash	2.6	2	0.2	1	2.4	2
	________	________	________	________	________	________
	141.3	100	149.4	100	141.7	100
	________	________	________	________	________	________

ENQUIRIES:

Matthew Oakeshott / Angela Lascelles OLIM Limited, Investment Managers Tel:  [phone] / Fax:  [phone] Website: www.olim.co.uk

INTERIM BOARD REPORT

Risks and Uncertainties

The Board regularly reviews, and agrees policies for managing, each of the principal risks and uncertainties which it has identified as affecting the Company's business. These risks and uncertainties are summarised below and are considered equally applicable to the second half of the financial year as for the period under review.

·      Discount volatility risk: The Company's shares may trade at a price which represents a discount to its underlying net asset value. The Board reviews regularly the level of the discount and considers what action, if any, to take in relation to minimising the discount.

·      Regulatory risk: The Company operates in a complex regulatory environment and therefore faces a number of regulatory risks. Breaches of regulations, such as Sections 1158 - 1159 of the Corporation Tax Act 2010, the UKLA Listing Rules or the Companies Act, could lead to a number of detrimental outcomes and reputational damage.

·      Market price risk: The fair value of, or future cash flows from, a financial instrument held by the Company may fluctuate because of changes in market prices. This market price risk comprises three elements - price risk, interest rate risk and currency risk.

Price risk: Price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the Company's investments. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. Asset allocation and stock selection both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on the UK Stock Exchange and all investment properties are commercial properties located in UK with long strong income streams.

Interest rate risk: Interest rate movements may affect the fair value of the investments in property and the level of income receivable on cash deposits. The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise debenture stock, providing secure long term funding. It is the Board's policy to maintain a gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of between 25% and 40%.

Currency risk: A small proportion of the investment portfolio is invested in securities whose fair value and dividend stream are affected by movements in foreign exchange rates. It is not the Board's policy to hedge this risk.

·      Liquidity risk: This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company's assets comprise of readily realisable securities which can be sold to meet commitments if required and investment properties which, by their nature, are less readily realisable.

·      Credit risk: This is the failure of a counterparty to a transaction to discharge its obligations under that transaction which could result in the Company suffering a loss.

The risk is not significant and is managed as follows:

-       investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Manager and limits are set on the amount that may be due from any one broker;

-       the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a daily basis. In addition, a stock reconciliation to third party administrators' records is carried out on a daily basis which ensures that discrepancies are picked up on a timely fashion. The Manager's Compliance Officer carries out periodic reviews of the Custodian's operations and reports its findings to the Manager's Risk Management Committee. This review will also include checks on the maintenance and security of investments held; and

-       cash is held only with reputable banks with high quality external credit ratings.

None of the Company's assets are secured by collateral or other credit enhancements.

·      Property risk: The Company's commercial property portfolio is subject to both market and specific property risk. Since the UK commercial property market has been markedly cyclical for many years, it is prudent to expect that to continue. The price and availability of credit, real economic growth and the constraints on the development of new property are the main influences on the property investment market. Against that background, the specific risks to the income from the portfolio are tenants being unable to pay their rents and other charges, or leaving their properties at the end of their leases. All leases are on full repairing and insuring terms, with upward only rent reviews. None of the Company's financial assets is past due or impaired.

Statement of Directors' Responsibilities

The Directors confirm that to the best of their knowledge:

·      the condensed set of financial statements within the Half-Yearly Financial Report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'; and

·      the Interim Board Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.

For and on behalf of the Board of Value and Income Trust PLC

James Ferguson

Chairman

3 November 2011

VALUE AND INCOME TRUST PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011

		6 months ended			6 months ended			Year ended
		30 September 2011			30 September 2010			31 March 2011
		(Unaudited)			(Unaudited)			(Audited)
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
	Notes
INVESTMENT INCOME
Dividend income		2,690	-	2,690	2,309	-	2,309	3,823	-	3,823
OTHER OPERATING INCOME	2	1,769	-	1,769	1,765	-	1,765	3,575	-	3,575
OTHER COMPREHENSIVE INCOME
Unrealised losses on investment properties			(540)	(540)	-	(176)	(176)	-	(58)	(58)
		_______	_______	_______	_______	_______	_______	_______	_______	_______
		4,459	(540)	3,919	4,074	(176)	3,898	7,398	(58)	7,340
GAINS AND LOSSES ON INVESTMENTS
Realised (losses)/gains on held-at-fair-value investments		-	(822)	(822)	-	2,744	2,744	-	3,090	3,090
Unrealised (losses)/gains on held-at-fair-value investments		-	(6,919)	(6,919)	-	(712)	(712)	-	5,743	5,743
		_______	_______	_______	_______	_______	_______	_______	_______	_______
TOTAL INCOME		4,459	(8,281)	(3,822)	4,074	1,856	5,930	7,398	8,775	16,173
		_______	_______	_______	_______	_______	_______	_______	_______	_______
EXPENSES
Investment management fees		(151)	(353)	(504)	(137)	(319)	(456)	(290)	(786)	(1,076)
Other operating expenses		(212)	-	(212)	(174)	-	(174)	(457)	-	(457)
FINANCE COSTS		(1,751)	-	(1,751)	(1,751)	-	(1,751)	(3,501)	-	(3,501)
		_______	_______	_______	_______	_______	_______	_______	_______	_______
TOTAL EXPENSES		(2,114)	(353)	(2,467)	(2,062)	(319)	(2,381)	(4,248)	(786)	(5,034)
		_______	_______	_______	_______	_______	_______	_______	_______	_______
(LOSS)/PROFIT BEFORE TAX		2,345	(8,634)	(6,289)	2,012	1,537	3,549	3,150	7,989	11,139
TAXATION		-	27	27	-	51	51	-	221	221
		_______	_______	_______	_______	_______	_______	_______	_______	_______
(LOSS)/PROFIT FOR THE PERIOD		2,345	(8,607)	(6,262)	2,012	1,588	3,600	3,150	8,210	11,360
		_______	_______	_______	_______	_______	_______	_______	_______	_______
EARNINGS PER ORDINARY SHARE (Pence)	3	5.15	(18.90)	(13.75)	4.42	3.48	7.90	6.92	18.02	24.94
		_______	_______	_______	_______	_______	_______	_______	_______	_______
The total column of this statement represents the Group's Income Statement prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance issued by the Association of Investment Companies. All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of the parent company. There are no minority interests.

VALUE AND INCOME TRUST PLC

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011

Group		6 months ended 30 September 2011				Year ended 31 March 2011
		(Unaudited)				(Audited)
		Share	Share	Retained		Share	Share	Retained
		capital	premium	earnings	Total	capital	premium	earnings	Total
	Notes	£000	£000	£000	£000	£000	£000	£000	£000
Net assets at 31 March 2011		4,555	18,446	90,462	113,463	4,555	18,446	82,564	105,565
Net (loss)/profit for the period		-	-	(6,262)	(6,262)	-	-	11,360	11,360
Dividends paid	4	-	-	(1,818)	(1,818)	-	-	(3,462)	(3,462)
		________	_______	_______	_______	_______	_______	_______	_______
NET ASSETS AT 30 SEPTEMBER 2011		4,555	18,446	82,382	105,383	4,555	18,446	90,462	113,463
		________	_______	_______	_______	_______	_______	_______	_______

Group		6 months ended 30 September 2010
		(Unaudited)
		Share	Share	Retained
		capital	premium	earnings	Total
	Notes	£000	£000	£000	£000
Net assets at 31 March 2011		4,555	18,446	82,564	105,565
Net profit for the period		-	-	3,600	3,600
Dividends paid	4	-	-	(1,731)	(1,731)
		________	_______	_______	_______
NET ASSETS AT 30 SEPTEMBER 2011		4,555	18,446	84,433	107,434
		________	_______	_______	_______

VALUE AND INCOME TRUST PLC

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2011

		As at		As at		As at
		30 September 2011		31 March 2011		30 September 2010
		(Unaudited)		(Audited)		(Unaudited)
		£'000	£'000	£'000	£'000	£'000	£'000
ASSETS	Notes
NON CURRENT ASSETS
Investments held at fair value through			90,020		99,431		91,658
profit or loss
Investment properties held at fair value			48,675		49,825		47,600
through profit or loss
			_________		_________		_________
			138,695		149,256		139,258
CURRENT ASSETS
Cash and cash equivalents		3,737		2,344		5,399
Other receivables		444		300		449
		_________		_________		_________
			4,181		2,644		5,848
			_________		_________		_________
TOTAL ASSETS			142,876		151,900		145,106
CURRENT LIABILITIES
Other payables			(1,587)		(2,493)		(1,545)
			_________		_________		_________
			141,289		149,407		143,561
NON-CURRENT LIABILITIES
Debenture stock		(35,361)		(35,372)		(35,385)
Deferred tax		(545)		(572)		(742)
		_________		_________		_________
			(35,906)		(35,944)		(36,127)
			_________		_________		_________
			105,383		113,463		107,434
			_________		_________		_________
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS
Ordinary called up share capital			4,555		4,555		4,555
Share premium			18,446		18,446		18,446
Retained earnings	6		82,382		90,462		84,433
			_________		_________		_________
			105,383		113,463		107,434
			_________		_________		_________
NET ASSET VALUE PER ORDINARY SHARE			231.36p		249.10p		235.86p
			_________		_________		_________

VALUE AND INCOME TRUST PLC

GROUP STATEMENT OF CASH FLOW

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011

	6 months ended		6 months ended		Year ended
	30 September 2011		30 September 2010		31 March 2011
	(Unaudited)		(Unaudited)		(Audited)
	£000	£000	£000	£000	£000	£000
CASH FLOWS FROM OPERATING ACTIVITIES
Dividend income received		2,470		2,146		3,783
Rental received		1,722		1,641		3,595
Interest received		1		139		139
Other income		-		-		-
VAT recovered on management fees		-		-		-
Operating expenses paid		(756)		(689)		(1,506)
		_________		_________		_________
NET CASH INFLOW FROM OPERATING ACTIVITIES		3,437		3,237		6,011
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments	(5,026)		(7,799)		(15,352)
Sale of investments	6,563		7,785		13,002
	_________		_________		_________
NET CASH INFLOW/(OUTFLOW) FROM
INVESTING ACTIVITIES		1,537		(14)		(2,350)
CASH FLOW FROM FINANCING ACTIVITIES
Interest paid	(1,763)		(1,763)		(3,525)
Dividends paid	(1,818)		(1,731)		(3,462)
	_________		_________		_________
NET CASH USED IN FINANCING ACTIVITIES		(3,581)		(3,494)		(6,987)
		_________		_________		_________
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		1,393		(271)		(3,326)
Cash and cash equivalents at the start of the period		2,344		5,670		5,670
		_________		_________		_________
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		3,737		5,399		2,344
		_________		_________		_________

VALUE AND INCOME TRUST PLC

NOTES TO THE FINANCIAL STATEMENTS

1	Accounting policies
	(a)	The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee (IASC) that remain in effect, and to the extent that they have been adopted by the European Union.
		The functional and reporting currency of the Group is pounds sterling because that is the currency of the primary economic environment in which the Group operates.
		The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial assets. Where presentational guidance set out in the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the SORP) issued by the Association of Investment Companies (AIC) in January 2009 is consistent with the requirements of IFRSs, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
		The Directors are of the opinion that the Group is engaged in a single segment of business, being investment business.
	(b)	Dividends payable
		Interim dividends are recognised as a liability in the period in which they are paid as no further approval is required in respect of such dividends.  Final dividends are recognised as a liability only after they have been approved by shareholders in general meeting.
	(c)	Investments
		All investments have been designated upon initial recognition as fair value though profit or loss. Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value. Subsequent to initial recognition, investments are recognised at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all FTSE 100 constituents and most liquid FTSE 250 constituents along with some other securities. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the retained earnings.
		In respect of property investments, fair value is established by a half-yearly professional valuation on an open market basis by Jones Lang LaSalle, Chartered Surveyors and Valuers and in accordance with the RICS Valuation Standards.

2	Other operating income
		6 months ended	6 months ended	Year ended
		September 2011	September 2010	March 2011
	Rental income	1,768	1,763	3,573
	Interest receivable on short term deposits	1	2	2
		________	_______	_______
		1,769	1,765	3,575
		________	_______	_______

3	Earnings per ordinary share
	The return per ordinary share is based on the following figures:
		6 months ended	6 months ended	Year ended
		September 2011	September 2010	March 2011
		£000	£000	£000
	Revenue return	2,345	2,012	3,150
	Capital return	(8,607)	1,588	8,210
	Weighted average ordinary
	shares in issue	45,549,975	45,549,975	45,549,975
	Return per share - revenue	5.15p	4.42p	6.92p
	Return per share - capital	(18.90)p	3.48p	18.02p
		________	_______	_______
	Total return per share	(13.75)p	7.90p	24.94p
		________	_______	_______

		6 months ended 30 September 2011	6 months ended 30 September 2010	Year ended 31 March 2011
4	Dividends paid	£000	£000	£000
	Ordinary dividends on equity shares deducted from reserves are as follows:-
	Dividends on ordinary shares:
	Final dividend of 4.0p per share (2010 - 3.8p)	1,822	1,731	1,731
	paid 15 July 2011
	Interim dividend of 3.8p per share (2010 - 3.8p)	-	-	1,731
	paid 7 January 2011
	Unclaimed dividends refunded by Registrar	(4)	-	-
		________	_______	_______
		1,818	1,731	3,462
		________	_______	_______

5	Interim dividend
	The Directors have declared an interim dividend of 3.90p (2011 - 3.80p) per ordinary share, payable on 6 January 2012 to shareholders registered on 9 December 2011. The shares will be quoted ex dividend on 7 December 2011.

6	Retained earnings
	The table below shows the movement in retained earnings analysed between revenue (distributable) and capital (non-distributable) items.
					Revenue	Capital	Total
					£000	£000	£000
	At 31 March 2011				3,543	88,637	90,462
	Movement during the period:-
	Profit for the period				2,345	(8,418)	(6,262)
	Dividends paid on ordinary shares				(1,818)	-	(1,818)
					________	_______	_______
	At 30 September 2011				4,070	80,219	82,382
					________	_______	_______

7	Transaction costs
	During the period, expenses were incurred in acquiring and disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains and losses on investments in the Statement of Comprehensive Income.
		6 months ended 30 September 2011	6 months ended 30 September 2010	Year ended 31 March 2011
		£000	£000	£000
	The total costs are as follows:-
	Purchases	23	51	71
	Sales	9	6	15
		________	_______	_______
		32	57	86
		________	_______	_______

8	Related Party Transactions
	Angela Lascelles and Matthew Oakeshott, Directors of the Company, are directors of OLIM Limited ('OLIM') which has an agreement with the Group to provide investment management services. OLIM receives a quarterly fee of 1/6% of the Group's total assets less current liabilities. OLIM is also entitled to a performance fee, charged wholly to capital, if the total positive returns to shareholders from their investment in the Company exceed the total return on the FTSE All-Share Index by more than 10 percentage points in any three year period.
	OLIM received an investment management fee of £504,000 (half year to 30 September 2010: £456,000 and year to 31 March 2011: £1,076,000). At the period end, the balance owed by the Group to OLIM Limited was £84,000 (31 March 2011: £191,000) comprising management fees for the month of September 2011, subsequently paid in October 2011.
	On 27 September 2011, the Directors announced that, as a result of a management buyout of the property management side of OLIM, it had agreed terms to split its investment management contract between OLIM Limited, which will manage the Group's equity portfolio and OLIM Property Limited, which will manage the Group's property portfolio. The timing of the change in terms is subject to FSA approval.
	There will be no change in the management team responsible for the Group's affairs or the total fees payable by the Group.
	Audax Properties plc is a wholly owned subsidiary of Value and Income Trust plc and accordingly Value and Income Trust plc is the ultimate controlling party.

9	Comparative information
	The financial information contained in this report does not constitute statutory financial statements as defined in sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 September 2011 and 30 September 2010 has not been audited.
	The financial information for the year ended 31 March 2011 has been extracted from 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 under section 498 (2), (3) or (4) of the Companies Act 2006.

10	Approval
	This Half-Yearly Financial Report was approved by the Board on 3 November 2011.

 

END

 

 

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