Half Yearly Report

RNS Number : 3707Q

Value and Income Trust plc

06 November 2012

 



VALUE AND INCOME TRUST PLC

UNAUDITED HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012

SUMMARY

	30 September 2012	31 March 2012	30 September 2011
Net asset value per share	231.80p	227.58p	205.88p
(valuing debt at market)
Net asset value per share	262.26p	253.78p	231.36p
(valuing debt at par)
Share price (mid)	181.50p	181.50p	176.00p
Dividend per share	4.00p	8.05p	3.90p
	(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 2012, VIT's share price was unchanged while the net asset value per share, valuing debt at par, increased by 3.3%. The FTSE All-Share Index (the "Index") was unchanged over the half-year. VIT's property portfolio was revalued independently at 30 September 2012.

Over the half-year, the capital value of VIT's equity portfolio rose by 4.3% compared to the very marginal fall in the Index and the total return on the portfolio was +7.0% compared to the Index return of +1.9%. The capital value of VIT's property portfolio fell by 2% and the total return was +1%, in line with the IPD Index.

An interim dividend of 4.00p per share has been declared payable on 4 January 2013 to those shareholders on the register on 7 December 2012. The ex-dividend date will be 5 December 2012.

Summary of Portfolio
	30 September 2012		31 March 2012		30 September 2011
	£m	%	£m	%	£m	%
UK Equities	106.0	68	101.2	67	90.0	64
UK Property	47.2	31	48.2	32	48.7	34
Net current assets	1.8	1	1.9	1	2.6	2
	________	________	________	________	________	________
	155.0	100	151.3	100	141.3	100
	________	________	________	________	________	________

ENQUIRIES:

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

PRINCIPAL 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: The Company's shares may trade at a price which represents a discount to its underlying net asset value.

•        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 2006, 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. For equities, asset allocation and stock selection both act to reduce market risk. The Managers actively monitor market prices throughout the year and report to the Board, which meets regularly in order to review investment strategy. The investments held by the Group are listed on the UK Stock Exchange and all investment properties are commercial properties located in UK with full repairing and insuring terms, with upward only rent reviews.

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 Group's 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 Group will encounter difficulty in meeting obligations associated with financial liabilities. The Group'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 Group 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 Managers 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 performed on a daily basis which ensures that discrepancies are picked up in a timely fashion. The Managers' Compliance Officers carry out periodic reviews of the Custodian's operations and reports its findings to the respective 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 Group'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 Group's financial assets is past due or impaired.

GOING CONCERN

In compliance with the UKLA's Listing Rules and with reference to the Financial Reporting Council's guidance on Going Concern and Liquidity Risk issued in October 2009, the Directors can report that, based on the Company's valuations of assets and liabilities, budgets and financial projections, they have satisfied themselves that the Company is a going concern. The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and, accordingly, that it remains appropriate to adopt the going concern basis in preparing the accounts.

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

5 November 2012

VALUE AND INCOME TRUST PLC

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2012

		As at		As at		As at
		30 September 2012		31 March 2012		30 September 2011
		(Unaudited)		(Audited)		(Unaudited)
		£'000	£'000	£'000	£'000	£'000	£'000
ASSETS	Notes
NON CURRENT ASSETS
Investments held at fair value through profit or loss			105,989		101,197		90,020
Investment properties held at fair value through profit or loss			47,225		48,250		48,675
			_________		_________		_________
			153,214		149,447		138,695
CURRENT ASSETS
Cash and cash equivalents		2,908		3,726		3,737
Other receivables		500		277		444
		_________		_________		_________
			3,408		4,003		4,181
			_________		_________		_________
TOTAL ASSETS			156,622		153,450		142,876
CURRENT LIABILITIES
Other payables			(1,617)		(2,114)		(1,587)
			_________		_________		_________
			155,005		151,336		141,289
NON-CURRENT LIABILITIES
Debenture stock		(35,337)		(35,349)		(35,361)
Deferred tax		(209)		(390)		(545)
		_________		_________		_________
			(35,546)		(35,739)		(35,906)
			_________		_________		_________
			119,459		115,597		105,383
			_________		_________		_________
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		96,458		92,596		82,382
			_________		_________		_________
			119,459		115,597		105,383
			_________		_________		_________
NET ASSET VALUE PER ORDINARY SHARE			262.26p		253.78p		231.36p

VALUE AND INCOME TRUST PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012

		6 months ended			6 months ended			Year ended
		30 September 2012			30 September 2011			31 March 2012
		(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		2,913	-	2,913	2,690	-	2,690	4,459	-	4,459
OTHER OPERATING INCOME	2	1,748	-	1,748	1,769	-	1,769	3,399	-	3,399
OTHER COMPREHENSIVE INCOME
Unrealised losses on investment properties		-	(1,289)	(1,289)	-	(540)	(540)	-	(798)	(798)
		_______	_______	_______	_______	_______	_______	_______	_______	_______
		4,661	(1,289)	3,372	4,459	(540)	3,919	7,858	(798)	7,060
GAINS AND LOSSES ON INVESTMENTS
Realised gains/(losses) on held-at-fair-value investments		-	905	905	-	(822)	(822)	-	105	105
Unrealised gains/(losses) on held-at-fair-value investments		-	3,883	3,883	-	(6,919)	(6,919)	-	3,782	3,782
		_______	_______	_______	_______	_______	_______	_______	_______	_______
TOTAL INCOME		4,661	3,499	8,160	4,459	(8,281)	(3,822)	7,858	3,089	10,947
		_______	_______	_______	_______	_______	_______	_______	_______	_______
EXPENSES
Investment management fees		(153)	(358)	(511)	(151)	(353)	(504)	(292)	(1,184)	(1,476)
Other operating expenses		(326)	-	(326)	(212)	-	(212)	(421)	-	(421)
FINANCE COSTS		(1,751)	-	(1,751)	(1,751)	-	(1,751)	(3,505)	-	(3,505)
		_______	_______	_______	_______	_______	_______	_______	_______	_______
TOTAL EXPENSES		(2,230)	(358)	(2,588)	(2,114)	(353)	(2,467)	(4,218)	(1,184)	(5,402)
		_______	_______	_______	_______	_______	_______	_______	_______	_______
(LOSS)/PROFIT BEFORE TAX		2,431	3,141	5,572	2,345	(8,634)	(6,289)	3,640	1,905	5,545
TAXATION		-	180	180	-	27	27	-	182	182
		_______	_______	_______	_______	_______	_______	_______	_______	_______
PROFIT/(LOSS) FOR THE PERIOD		2,431	3,321	5,752	2,345	(8,607)	(6,262)	3,640	2,087	5,727
		_______	_______	_______	_______	_______	_______	_______	_______	_______
EARNINGS PER ORDINARY SHARE (Pence)	3	5.34	7.29	12.63	5.15	(18.90)	(13.75)	7.99	4.58	12.57
		_______	_______	_______	_______	_______	_______	_______	_______	_______
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 2012

Group		6 months ended 30 September 2012				Year ended 31 March 2012
		(Unaudited)				(Audited)
		Share	Share	Retained	Total	Share	Share	Retained	Total
		capital	premium	earnings		capital	premium	earnings
	Notes	£000	£000	£000	£000	£000	£000	£000	£000
Net assets at 31 March 2012		4,555	18,446	92,596	115,597	4,555	18,446	90,462	113,463
Net profit/(loss) for the period		-	-	5,752	5,752	-	-	5,727	5,727
Dividends paid	4	-	-	(1,890)	(1,890)	-	-	(3,593)	(3,593)
		_______	_______	_______	_______	_______	_______	_______	_______
NET ASSETS AT 30 SEPTEMBER 2012		4,555	18,446	96,458	119,459	4,555	18,446	92,596	115,597
		_______	_______	_______	_______	_______	_______	_______	_______

Group		6 months ended 30 September 2011
		(Unaudited)
		Share	Share	Retained
		capital	premium	earnings	Total
	Notes	£000	£000	£000	£000
Net assets at 31 March 2012		4,555	18,446	90,462	113,463
Net profit/(loss) for the period		-	-	(6,262)	(6,262)
Dividends paid	4	-	-	(1,818)	(1,818)
		________	_______	_______	_______
		4,555	18,446	82,382	105,383
		________	_______	_______	_______

VALUE AND INCOME TRUST PLC

GROUP STATEMENT OF CASH FLOW

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012

	6 months ended		6 months ended		Year ended
	30 September 2012		30 September 2011		31 March 2012
	(Unaudited)		(Unaudited)		(Audited)
	£000	£000	£000	£000	£000	£000
CASH FLOWS FROM OPERATING ACTIVITIES
Dividend income received		2,719		2,470		4,413
Rental received		1,347		1,722		3,379
Interest received		1		1		1
Operating expenses paid		(1,048)		(756)		(1,445)
		_________		_________		_________
NET CASH INFLOW FROM OPERATING ACTIVITIES		3,019		3,437		6,348
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments	(4,206)		(5,026)		(10,416)
Sale of investments	4,022		6,563		12,571
	_________		_________		_________
NET CASH (OUTFLOW)/INFLOW FROM
INVESTING ACTIVITIES		(184)		1,537		2,155
CASH FLOW FROM FINANCING ACTIVITIES
Interest paid	(1,763)		(1,763)		(3,528)
Dividends paid	(1,890)		(1,818)		(3,593)
	_________		_________		_________
NET CASH USED IN FINANCING ACTIVITIES		(3,653)		(3,581)		(7,121)
		_________		_________		_________
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(818)		1,393		1,382
Cash and cash equivalents at the start of the period		3,726		2,344		2,344
		_________		_________		_________
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		2,908		3,737		3,726
		_________		_________		_________

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)	Going concern
		The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Interim Board Report. The assets of the Group consist mainly of securities and investment properties that are held in accordance with the Group's investment policy. Most of these securities are readily realisable, even in volatile markets. The Directors, who have reviewed carefully the Group's forecasts for the coming year, consider that the Group has adequate financial resources to enable it to continue in operational existence for the foreseeable future. Accordingly the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Group's accounts.
	(c)	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.
	(d)	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.
		The Group leases out all of its properties on operational leases. A property held under an operating lease is classified and accounted for as an investment property where the group holds it to earn rental, capital appreciation or both. Any such property leased under an operating lease is carried at fair value. Fair value is established by half-yearly professional valuation on an open market basis by Jones Lang LaSalle, Chartered Surveyors and Valuers, and in accordance with the RICS Valuation Professional Standards.

2	Other operating income
		6 months ended		6 months ended		Year ended
		September 2012		September 2011		March 2012
		Group	Company	Group	Company	Group	Company
	Rental income	1,747	655	1,768	629	3,398	1,277
	Interest receivable on short term deposits	1	-	1	-	1	-
		_________	_________	_________	_________	_________	_________
		1,748	655	1,769	629	3,399	1,277
		_________	_________	_________	_________	_________	_________

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 2012		September 2011		March 2012
		Group	Company	Group	Company	Group	Company
		£000	£000	£000	£000	£000	£000
	Revenue return	2,431	2,342	2,345	2,156	3,640	4,561
	Capital return	3,321	3,410	(8,607)	(8,418)	2,087	1,166
	Weighted average ordinary
	shares in issue	45,549,975	45,549,975	45,549,975	45,549,975	45,549,975	45,549,975
	Return per share - revenue	5.34p	5.14p	5.15p	4.73p	7.99p	10.01p
	Return per share - capital	7.29p	7.49p	(18.90)p	(18.48)p	4.58p	2.56p
		_________	_________	_________	_________	_________	_________
	Total return per share	12.63p	12.63p	(13.75)p	(13.75)p	12.57p	12.57p
		_________	_________	_________	_________	_________	_________

		6 months ended 30 September 2012	6 months ended 30 September 2011	Year ended 31 March 2012
4	Dividends paid	£000	£000	£000
	Ordinary dividends on equity shares deducted from reserves are as follows:-
	Dividends on ordinary shares:
	Final dividend of 4.15p per share (2011 - 4.0p)	1,890	1,822	1,822
	paid 20 July 2012
	Interim dividend of 3.9p per share (2011 - 3.8p)	-	-	1,776
	paid 6 January 2012
	Unclaimed dividends refunded by Registrar	-	(4)	(5)
		_________	_________	_________
		1,890	1,818	3,593
		_________	_________	_________

5	Interim dividend
	The Directors have declared an interim dividend of 4.0p (2012 - 3.9p) per ordinary share, payable on 4 January 2013 to shareholders registered on 7 December 2012. The shares will be quoted ex dividend on 5 December 2012.

6	Retained earnings
	The table below shows the movement in retained earnings analysed between revenue (distributable) and capital (non-distributable) items.
		Group			Company
		Revenue	Capital	Total	Revenue	Capital	Total
		£000	£000	£000	£000	£000	£000
	At 31 March 2012	3,590	89,006	92,596	2,793	89,803	92,596
	Movement during the period:-
	Profit for the period	2,431	3,321	5,752	2,342	3,410	5,752
	Dividends paid on ordinary shares	(1,890)	-	(1,890)	(1,890)	-	(1,890)
		_________	_________	_________	_________	_________	_________
	At 30 September 2012	4,131	92,327	96,458	3,245	93,213	96,458
		_________	_________	_________	_________	_________	_________

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 2012	6 months ended 30 September 2011	Year ended 31 March 2012
		£000	£000	£000
	The total costs are as follows:-
	Purchases	14	23	46
	Sales	4	9	19
		_________	_________	_________
		18	32	65
		_________	_________	_________

8	Related Party Transactions
	Angela Lascelles is a Director, and Matthew Oakeshott was a Director (until April 2012), of OLIM Limited which has an agreement with the Group to provide investment management services.  Matthew Oakeshott is a Director of OLIM Property Limited which has an agreement with the Group to provide property management services.
	As a result of a management buyout of the property management side of the Company's investment managers, OLIM Limited, the Company has agreed terms to split its investment management contract between OLIM Limited, which will continue to manage the Company's equity portfolio and OLIM Property Limited, which will manage the Group's property portfolio. The new agreements were effective from 19 April 2012 amd may be terminated by either party on giving one year's notice. There has been no change in the management team responsible for the Group's affairs or the total fees payable by the Group.
	OLIM and OLIM Property will receive an investment management fee of 2/3 of 1% of the Group's total assets, which is allocated 2/3 to OLIM and 1/3 to OLIM Property.
	OLIM and OLIM Property are also entitled to a performance fee, subject to the achievement of certain criteria. The objective is to give the Managers a performance fee of 10% of any out-performance if the VIT share price total return (VIT SPTR) over the preceding three year period (after deducting for any out- performance of the FTSE All-Share Index share price total return (FTSE SPTR) against the VIT SPTR over the period since 31 March 2011) exceeds the FTSE SPTR over the preceding three years by more than 10%.
	OLIM Limited received an investment management fee of £344,000 (half year to 30 September 2011: £504,000 and year to 31 March 2012: £1,476,000). At the period end, the balance owed by the Group to OLIM Limited was £56,000 (31 March 2012: £585,000) comprising management fees for the month of September 2012, subsequently paid in October 2012.
	OLIM Property Limited received an investment management fee of £167,000 (half year to 30 September 2011: £nil and year to 31 March 2012: £nil). At the period end, the balance owed by the Group to OLIM Property Limited was £28,000 (31 March 2012: £nil) comprising management fees for the month of September 2012, subsequently paid in October 2012.
	Audax Properties plc is a wholly owned subsidiary of the Company and accordingly the Company 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 2012 and 30 September 2011 has not been audited.
	The information for the year ended 31 March 2012 has been extracted from latest published audited financial statements which have been filed with the Registrar of Companies. The report of the Independent Auditor 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 5 November 2012.

 

END

 

 

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