Half Yearly Report

RNS Number : 1677S

Value and Income Trust plc

05 November 2013

 

VALUE AND INCOME TRUST PLC

UNAUDITED HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

SUMMARY

	30 September 2013	31 March 2013	30 September 2012
Net asset value per share	287.72p	269.78p	231.80p
(valuing debt at market)
Net asset value per share	309.48p	298.23p	262.26p
(valuing debt at par)
Share price (mid)	255.00p	210.75p	181.50p
Dividend per share	4.10p	8.30p	4.00p
	(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 2013, VIT's share price rose by 21% while the net asset value per share, valuing debt at par, increased by 3.8%. The FTSE All-Share Index (the "Index") rose by 1.9% over the half-year. VIT's property portfolio was revalued independently at 30 September 2013.

Over the half-year, the capital value of VIT's equity portfolio rose by 3.3% compared to a rise of 1.9% in the Index. The capital value of VIT's property portfolio rose by 0.4%.

An interim dividend of 4.10p per share has been declared payable on 3 January 2014 to those shareholders on the register on 6 December 2013. The ex-dividend date will be 4 December 2013.

Summary of Portfolio
	30 September 2013		31 March 2013		30 September 2012
	£m	%	£m	%	£m	%
UK Equities	126.4	72	123.8	72	106.0	68
UK Property	46.4	26	46.2	27	47.2	31
Net current assets	3.5	2	1.2	1	1.8	1
	________	________	________	________	________	_______
	176.3	100	171.2	100	155.0	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. A breach of S1158 would result in the Company being subject to Capital gains tax on portfolio investments.  Breaches of other regulations, including the Companies Act 2006, the UKLA Listing Rules or the UK Disclosure and Transparency Rules, could lead to a number of detrimental outcomes and reputational damage.  Breaches of controls by service providers to the Company could also lead to reputational damage or loss.  There is also a further regulatory risk in the form of the Alternative Investment Fund Managers Directive ("AIFMD") which came into force in July 2011 and is due to be fully implemented by 22 July 2014.  The AIFMD introduces a new authorisation and supervisory regime for all investment trust fund managers in the European Union.  This is likely to create some additional regulatory costs for the Company.

•        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 FCA's Disclosure and Transparency Rules.

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

James Ferguson

Chairman

4 November 2013

VALUE AND INCOME TRUST PLC

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2013

		As at		As at		As at
		30 September 2013		31 March 2013		30 September 2012
		(Unaudited)		(Audited)		(Unaudited)
		£'000	£'000	£'000	£'000	£'000	£'000
ASSETS	Notes
NON CURRENT ASSETS
Investments held at fair value through profit or loss			126,395		123,815		105,989
Investment properties held at fair value through profit or loss			46,400		46,225		47,225
			________		________		_________
			172,795		170,040		153,214
CURRENT ASSETS
Cash and cash equivalents		4,219		2,140		2,908
Other receivables		762		689		500
		________		________		_________
			4,981		2,829		3,408
			________		________		_________
TOTAL ASSETS			177,776		172,869		156,622
CURRENT LIABILITIES
Other payables			(1,497)		(1,701)		(1,617)
			________		________		_________
			176,279		171,168		155,005
NON-CURRENT LIABILITIES
Debenture stock		(35,313)		(35,325)		(35,337)
Deferred tax		_		_		(209)
		________		________		_________
			(35,313)		(35,325)		(35,546)
			________		________		_________
			140,966		135,843		119,459
			________		________		_________
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		117,965		112,842		96,458
			________		________		_________
			140,966		135,843		119,459
			________		________		_________
NET ASSET VALUE PER ORDINARY SHARE			309.48p		298.23p		262.26p

VALUE AND INCOME TRUST PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

		6 months ended			6 months ended			Year ended
		30 September 2013			30 September 2012			31 March 2013
		(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		3,023	-	3,023	2,913	-	2,913	4,669	-	4,669
OTHER OPERATING INCOME	2	1,777	-	1,777	1,748	-	1,748	3,564	-	3,564
OTHER COMPREHENSIVE INCOME
Unrealised gains/(losses) on investment properties		-	175	175	-	(1,289)	(1,289)	-	(2,302)	(2,302))
		______	______	______	______	______	______	______	______	______
		4,800	175	4,975	4,661	(1,289)	3,372	8,233	(2,302)	5,931
GAINS AND LOSSES ON INVESTMENTS
Realised gains on held-at-fair-value investments		-	686	686	-	905	905	-	4,400	4,400
Unrealised gains on held-at-fair-value investments		-	4,134	4,134	-	3,883	3,883	-	18,417	18,417
		______	______	______	______	______	______	______	______	______
TOTAL INCOME		4,800	4,995	9,795	4,661	3,499	8,160	8,233	20,515	28,748
		______	______	______	______	______	______	______	______	______
EXPENSES
Investment management fees		(187)	(437)	(624)	(153)	(358)	(511)	(312)	(854)	(1,166)
Other operating expenses		(338)	-	(338)	(326)	-	(326)	(513)	-	(513)
FINANCE COSTS		(1,751)	-	(1,751)	(1,751)	-	(1,751)	(3,501)	-	(3,501)
		______	______	______	______	______	______	______	______	______
TOTAL EXPENSES		(2,276)	(437)	(2,713)	(2,230)	(358)	(2,588)	(4,326)	(854)	(5,180)
		______	______	______	______	______	______	______	______	______
PROFIT BEFORE TAX		2,524	4,558	7,082	2,431	3,141	5,572	3,907	19,661	23,568
TAXATION		-	-	-	-	180	180	-	390	390
		______	______	______	______	______	______	______	______	______
PROFIT FOR THE PERIOD		2,524	4,558	7,082	2,431	3,321	5,752	3,907	20,051	23,958
		______	______	______	______	______	______	______	______	______
EARNINGS PER ORDINARY SHARE (Pence)	3	5.54	10.01	15.55	5.34	7.29	12.63	8.58	44.02	52.60
		______	______	______	______	______	______	______	______	______
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

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

		6 months ended 30 September 2013				Year ended 31 March 2013
		(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 2013		4,555	18,446	112,842	135,843	4,555	18,446	92,596	115,597
Net profit for the period		-	-	7,082	7,082	-	-	23,958	23,958
Dividends paid	4	-	-	(1,959)	(1,959)	-	-	(3,712)	(3,712)
		_______	_______	_______	______	______	_______	_______	______
NET ASSETS AT 30 SEPTEMBER 2013		4,555	18,446	117,965	140,966	4,555	18,446	112,842	135,843
		_______	_______	_______	______	______	_______	_______	______

		6 months ended 30 September 2012
		(Unaudited)
		Share	Share	Retained
		capital	premium	earnings	Total
	Notes	£000	£000	£000	£000
Net assets at 31 March 2013		4,555	18,446	92,596	115,597
Net profit for the  period		-	-	5,752	5,752
Dividends paid	4	-	-	(1,890)	(1,890)
		_______	_______	_______	_______
		4,555	18,446	96,458	119,459
		_______	_______	_______	_______

VALUE AND INCOME TRUST PLC

GROUP CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

	6 months ended		6 months ended		Year ended
	30 September 2013		30 September 2012		31 March 2013
	(Unaudited)		(Unaudited)		(Audited)
	£000	£000	£000	£000	£000	£000
CASH FLOWS FROM OPERATING ACTIVITIES
Dividend income received		3,118		2,719		4,346
Rental received		1,428		1,347		3,427
Interest received		-		1		2
Other income		2		-		-
Operating expenses paid		(986)		(1,048)		(2,037)
Taxation paid		-		-		(9)
		________		_________		________
NET CASH INFLOW FROM OPERATING ACTIVITIES		3,562		3,019		5,729
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments	(730)		(4,206)		(12,315)
Sale of investments	2,969		4,022		12,237
	________		________		________
NET CASH INFLOW/(OUTFLOW) FROM
INVESTING ACTIVITIES		2,239		(184)		(78)
CASH FLOW FROM FINANCING ACTIVITIES
Interest paid	(1,763)		(1,763)		(3,525)
Dividends paid	(1,959)		(1,890)		(3,712)
	________		________		________
NET CASH USED IN FINANCING ACTIVITIES		(3,722)		(3,653)		(7,237)
		________		_________		________
NET INCREASE/(DECREASE)IN CASH AND CASH EQUIVALENTS		2,079		(818)		(1,586)
Cash and cash equivalents at the start of the period		2,140		3,726		3,726
		________		_________		________
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		4,219		2,908		2,140
		________		_________		________

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. The determination of fair value by Jones Lang LaSalle is supported by market evidence.  It is not more heavily based on other factors because of the nature of the properties and the availability of comparable market data.

2	Other operating income
		6 months ended		6 months ended		Year ended
		30 September 2013		30 September 2012		31 March 2013
		£000		£000		£000
	Rental income	1,775		1,747		3,562
	Interest receivable on short term deposits	2		1		2
		________		_________		_________
		1,777		1,748		3,564
		________		_________		_________

3	Earnings per ordinary share
	The return per ordinary share is based on the following figures:
		6 months ended		6 months ended		Year ended
		30 September 2013		30 September 2012		31 March 2013
		£000		£000		£000
	Revenue return	2,524		2,431		3,907
	Capital return	4,558		3,321
	Weighted average ordinary
	shares in issue	45,549,975		45,549,975		45,549,975
	Return per share - revenue	5.54p		5.34p		8.58p
	Return per share - capital	10.01p		7.29p		44.02p
		_________		_________		_________
	Total return per share	15.55p		12.63p		52.60p
		_________		_________		_________

		6 months ended 30 September 2013	6 months ended 30 September 2012	Year ended 31 March 2013
4	Dividends paid	£000	£000	£000
	Ordinary dividends on equity shares deducted from reserves are as follows:-
	Dividends on ordinary shares:
	Final dividend of 4.30p per share (2012 - 4.15p)	1,959	1,890	1,890
	paid 19 July 2013
	Interim dividend of 4.00p per share (2012 - 3.90p)
	Paid 4 January 2013	-	-	1,822
		_________	_________	_________
		1,959	1,890	3,712
		_________	_________	_________

5	Interim dividend
	The Directors have declared an interim dividend of 4.10p (2013 - 4.00p) per ordinary share, payable on 3 January 2014 to shareholders registered on 6 December 2013. The shares will be quoted ex dividend on 4 December 2013.

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 2013	3,785	109,057	112,842
	Movement during the period:-
	Profit for the period	2,524	4,558	7,082
	Dividends paid on ordinary shares	(1,959)	-	(1,959)
		________	________	________
	At 30 September 2013	4,350	113,615	117,965
		________	________	________

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 2013	6 months ended 30 September 2012	Year ended 31 March 2013
		£000	£000	£000
	The total costs are as follows:-
	Purchases	5	14	65
	Sales	5	4	19
		_________	_________	_________
		10	18	84
		_________	_________	_________

8	Related Party Transactions
	Angela Lascelles is a Director 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.
	OLIM and OLIM Property receive an investment management fee of 2/3 of 1% of the Group's total assets, which is allocated 72.5% to OLIM and 27.5% 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 FTSE All-Share Index share price total return (FTSE SPTR). The performance fee is paid annually in respect of performance over the preceding three years.  The fee is payable only if the VIT SPTR has been positive over the period and, in addition, the NAV total return has been positive and has exceeded the FTSE SPTR over the period. The maximum performance fee payable in any year is 1/3 of 1% of VIT's total assets and is allocated 72.5% to OLIM and 27.5% to OLIM Property.  The fee is charged wholly to capital.
	OLIM Limited received an investment management fee of £449,000 (half year to 30 September 2012: £344,000 and year to 31 March 2013: £780,000 including a performance fee of £83,000). At the period end, the balance owed by the Group to OLIM Limited was £69,000 (31 March 2013: £141,000) comprising management fees for the month of September 2013, subsequently paid in October 2013.
	OLIM Property Limited received an investment management fee of £175,000 (half year to 30 September 2012: £167,000 and year to 31 March 2013: £386,000 including a performance fee of £42,000). At the period end, the balance owed by the Group to OLIM Property Limited was £26,000 (31 March 2013: £71,000) comprising management fees for the month of September 2013, subsequently paid in October 2013. 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 2013 and 30 September 2012 has not been audited.
	The information for the year ended 31 March 2013 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 4 November 2013.

 

END

 

 

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