Half Yearly Report

RNS Number : 2943F
City of London Investment Trust PLC
19 February 2015
 



 

THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year Ended 31 December 2014

 

This announcement contains regulated information

 

Performance Highlights

 

Dividend yields

As at

31 December 2014

As at

30 June 2014

The City of London Investment Trust plc

4.0%

3.9%

AIC UK Equity Income Sector (Benchmark)

3.6%

3.5%

FTSE All-Share Index

3.4%

3.3%

UK Equity Income OEIC Sector

4.5%

4.4%

 

 

 

As at

31 December 2014

As at

30 June 2014

Net asset value per ordinary share

378.5p

377.5p

Premium

0.2%

0.9%

Net asset value per ordinary share (debt at market value)

374.5p

373.7p

Premium (debt at market value)

1.3%

1.9%

Share price

379.4p

380.8p

Gearing (at par value)

8.1%

7.1%

                       

 

Total return performance (including dividends reinvested and excluding transaction costs)

 

 

 

6 months

%

 

 

 

 1 year

%

 

 

 

3 years
%

 

 

 

5 years
%

 

 

 

10 years

%

Net asset value per ordinary share1

2.1

5.1

54.0

85.3

140.1

AIC UK Equity Income sector average - net asset value2

1.2

3.8

55.7

84.9

132.8

Ordinary share price

1.6

4.4

51.2

92.6

167.5

FTSE All-Share Index

-0.4

1.2

37.3

51.8

107.6

UK Equity Income OEIC sector average3

1.6

3.2

47.5

64.2

100.3

 

 

Sources: Morningstar for the AIC, Henderson, Datastream

 

1. Using cum income fair value NAV for 6 months, one, three and five years and capital NAV plus income reinvested for 10 years.

2. AIC UK Equity Income sector size weighted average NAV total return (shareholders funds).

3. The IMA peer group average is based on mid-day NAV whereas the returns of the investment trust are calculated using close of business NAV.

 

 

 

 

INTERIM MANAGEMENT REPORT

 

Chairman's Statement

 

Net Asset Value Total Return

City of London's net asset value total return was 2.1% which was ahead of the averages for the UK Equity Income Investment Trust sector (1.2%) and OEIC sector (1.6%) and also ahead of the FTSE All Share Index (-0.4%). The key contributors to performance were the below average exposure to the oil and mining sectors which were adversely affected by the weakness of oil and other commodity prices.  Among the biggest stock contributors held in the portfolio were Phoenix (in the life assurance sector), Croda (in chemicals) and Land Securities (in Real Estate Investment Trusts).

 

During the second half of 2014, the UK equity market produced a negative total return of 0.4%, as measured by the FTSE All-Share Index, similar to the sideways move of the first half of the year.  The news from the domestic economy was good with growth back to trend and inflation falling to below 1% helped by a 47% fall in the oil price. Overseas, growth in the US was robust but Europe disappointed and Emerging Markets remained mixed. The lacklustre returns from UK equities in 2014 should be considered in the context of the previous two years when returns were more than 25% and share prices had risen further than earnings per share.

                                                                                            

Earnings and Dividends

City of London's earnings per share increased by 13.6%, partly reflecting the underlying dividend growth from investments but also the rise in the US dollar compared with sterling of 9.7% over the six months, enhancing the sterling value of dividend payments from those UK companies that declare their dividends in US dollars.  In addition, special dividends rose from £90,000 to £459,000 compared with the same period last year. So far this financial year, City of London has declared two interim dividends of 3.75p each.  The quarterly rate will be reviewed by the Board before the third interim is declared in April 2015.

 

Expenses

The ongoing charges ratio ("OCR") which represents the investment management fee and other non-interest bearing expenses as a percentage of shareholders' funds, remains low compared with most other equity products.  The OCR for the six months indicates a full year rate of 0.42% of net assets.

 

Material Events and Transactions during the period

A total of 16,075,000 new shares were issued in the six months to 31 December 2014 at a premium to net asset value.  A further 1,650,000 shares have been issued since the period end. 

 

The proceeds have been invested in existing holdings as well as three new holdings.  In the house building sector, a new investment was made in Taylor Wimpey which has a land bank for new homes of over five years.  In retailing, a new holding was purchased in N. Brown, the online, catalogue and stores clothing retailer, but Tesco was sold given the competitive conditions in the supermarket area.  A new holding was also bought in Capita which has steady growth prospects in business process outsourcing. Exposure to the oil sector was reduced through sales of the holdings in ENI and Statoil.  Pennon, the water utility and waste management company, was also sold. 

 

Gearing started the period at 7.1%, was increased in October during the market correction to 9.4% and ended the period at 8.1%.

 

Outlook for the six months to 30 June 2015

The outlook for the UK economy remains positive with a combination of steady growth and low inflation.  In particular, the low oil price should continue to help household disposable income as well as putting downward pressure on inflation.  Overseas consumers of oil will also benefit from its lower price and the belated action by the European Central Bank to start purchasing sovereign debt may improve growth on the Continent.

 

There is heightened uncertainty in the UK political climate leading up to the election. City of London's portfolio is, however, well diversified with the profits from its UK listed companies predominantly coming from overseas markets as well as having 10.1% invested in overseas listed companies.  The dividend yield on the portfolio remains attractive relative to the alternatives in fixed interest and bank deposits.

 

Philip Remnant CBE

Chairman

18 February 2015

 

 

 

 

Principal Risks and Uncertainties

The principal risks and uncertainties associated with the Company's business can be divided into the following main areas:

 

·        Portfolio and market price

·        Investment activity, gearing and performance

·        Tax and regulatory

·        Operational

 

Information on these risks and how they are managed are given in the 2014 Annual Report.  In the view of the Board these principal risks and uncertainties are as applicable to the remaining six months of the financial year as they were to the six months under review.

 

 

Directors' Responsibility Statement

 

The Directors confirm that, to the best of their knowledge:

 

a)  the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement "Half-Yearly Financial Reports";

 

b)  the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

 

c)  the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

 

 

 

For and on behalf of the Board

Philip Remnant CBE

Chairman

18 February 2015



 

 Income Statement

 


(Unaudited)

Half year ended

31 December 2014

(Unaudited)

Half year ended

31 December 2013

(Audited)

Year ended

30 June 2014


Revenue

return

£'000

Capital

return

£'000

 

Total

£'000

Revenue

return

£'000

Capital

return

£'000

 

Total

£'000

Revenue

return

£'000

Capital

return

£'000

 

Total

£'000











Gains on investments held at fair value through profit or loss

-

9,170

9,170

-

87,313

87,313

-

93,811

93,811











Income from investments held at fair value through profit or loss

21,673

-

21,673

17,223

-

17,223

44,972

-

44,972











Other interest receivable and similar income

140

-

140

282

-

282

605

-

605


--------

--------

--------

--------

--------

--------

---------

----------

----------

Gross revenue and

capital gains

21,813

9,170

30,983

17,505

87,313

104,818

45,577

93,811

139,388











Management fees

(603)

(1,409)

(2,012)

(538)

(1,254)

(1,792)

(1,115)

(2,602)

(3,717)

 

Other administrative expenses

(307)

-

(307)

(358)

-

(358)

(601)

-

(601)


--------

--------

--------

--------

--------

--------

---------

----------

----------

Net return on ordinary activities before finance charges and taxation

20,903

7,761

28,664

16,609

86,059

102,668

43,861

91,209

135,070











Finance charges

(970)

(2,078)

(3,048)

(789)

(1,657)

(2,446)

(1,735)

(3,681)

(5,416)


--------

--------

--------

--------

--------

--------

---------

----------

----------

Net return on ordinary activities before taxation

19,933

5,683

25,616

15,820

84,402

100,222

42,126

87,528

129,654











Taxation on net return on ordinary activities

(178)

-

(178)

(68)

-

(68)

(428)

-

(428)


--------

--------

--------

--------

--------

--------

---------

----------

----------

Net return on ordinary activities after taxation

19,755

5,683

25,438

15,752

84,402

100,154

41,698

87,528

129,226


=====

=====

======

=====

=====

======

======

======

======








 

 



Return per ordinary share - basic and diluted (note 2)

6.76p

1.95p

8.71p

5.95p

31.86p

37.81p

15.33p

32.19p

47.52p


=====

=====

=====

=====

=====

=====

======

======

======

 

 

The total columns of this statement represent the Income Statement of the Company.    All revenue and capital items derive from continuing operations.  No operations were acquired or discontinued during the year.  The Company has no recognised gains or losses other than those recognised in the Income Statement and the Reconciliation of Movements in Shareholders' Funds.

 

The accompanying notes are an integral part of these financial statements.

 

 



 

Reconciliation of Movements in Shareholders' Funds

 

 

Half  year ended 31 December 2014 (unaudited)

Called-up share capital

£'000

Share premium account

£'000

Capital redemption reserve

£'000

Other

capital reserves

£'000

 

Revenue reserve £'000

 

 

Total

£'000








At 1 July 2014

71,202

265,004

2,707

703,217

33,120

1,075,250

Net return on ordinary activities after taxation

-

-

-

5,683

19,755

25,438

Issue of  16,075,000 new ordinary shares

4,019

55,860

-

-

-

59,879

Fourth interim dividend (3.75p per share) for year ended 30 June 2014 paid

29 August 2014

-

-

-

-

(10,763)

(10,763)

First interim dividend (3.75p per share) for year ended 30 June 2015 paid

28 November 2014

-

-

-

-

(11,014)

(11,014)

Unclaimed dividends over 12 years old

-

-

-

-

48

48


-----------

------------

-----------

------------

-----------

 -------------

At 31 December 2014

75,221

320,864

2,707

708,900

31,146

1,138,838


======

=======

======

=======

======

========








 

Half  year ended 31 December 2013 (unaudited)

Called-up share capital

£'000

Share premium account

£'000

Capital redemption reserve

£'000

Other

capital reserves

£'000

 

Revenue reserve £'000

 

 

Total

£'000

At 1 July 2013

64,496

172,471

2,707

615,689

31,034

886,397

Net return on ordinary activities after taxation

-

-

-

84,402

15,752

100,154

Issue of  14,625,000 new ordinary shares

3,656

49,712

-

-

-

53,368

Fourth interim dividend (3.63p per share) for year ended 30 June 2013 paid

31 August 2013

-

-

-

-

(9,423)

(9,423)

First interim dividend (3.63p per share) for year ended 30 June 2014 paid

29 November 2013

-

-

-

-

(9,713)

(9,713)

Unclaimed dividends over 12 years old

-

-

-

-

17

17


-----------

------------

-----------

------------

-----------

--------------

At 31 December 2013

68,152

222,183

2,707

700,091

27,667

1,020,800


======

=======

======

=======

======

========








 

 

Year ended 30 June 2014 (Audited)

Called-up share capital

£'000

Share premium account

£'000

Capital redemption reserve

£'000

Other

capital reserves

£'000

 

Revenue reserve £'000

 

 

Total

£'000








At 1 July 2013

64,496

172,471

2,707

615,689

31,034

886,397

Net return on ordinary activities after taxation

-

-

-

87,528

41,698

129,226

Issue of 26,825,000 new ordinary shares

6,706

92,533

-

-

-

99,239

Fourth interim dividend (3.63p per share) for year ended 30 June 2013 paid 30 August 2013

-

-

-

-

(9,423)

(9,423)

First interim dividend (3.63p per share) for year ended 30 June 2014 paid

29 November 2013

-

-

-

-

(9,713)

(9,713)

Second interim dividend (3.63p per share) for year ended 30 June 2014 paid

28 February 2014

-

-

-

-

(9,942)

(9,942)

Third interim dividend (3.75p per share) for year ended 30 June 2014 paid 30 May 2014

-

-

-

-

(10,551)

(10,551)

Unclaimed dividends over 12 years old

-

-

-

-

17

17


-----------

------------

------------

------------

-----------

--------------

At 30 June 2014

71,202

265,004

2,707

703,217

33,120

1,075,250


======

======

======

======

======

=======

 

The accompanying notes are an integral part of these financial statements.

 

Balance Sheet

 


(Unaudited)

31 December

2014

£'000

(Unaudited)

31 December

2013

£'000

(Audited)

30 June

2014

£'000





Investments held at fair value through

profit or loss




Listed at market value in the United Kingdom

1,106,853

1,004,780

1,026,603

Listed at market value overseas

123,740

93,074

124,874

Investment in subsidiary undertakings

347

347

347


-------------

-------------

--------------


1,230,940

1,098,201

1,151,824


-------------

-------------

--------------

Current assets




Debtors

3,989

4,026

7,073

Cash at bank

-

-

2,929


---------

---------

----------


3,989

4,026

10,002


---------

---------

----------

Creditors: amounts falling due within one year

(20,132)

(34,028)

(10,639)


------------

------------

-------------

Net current liabilities

(16,143)

(30,002)

(637)


------------

------------

-------------

Total assets less current liabilities

1,214,797

1,068,199

1,151,187





Creditors: amounts falling due after more

than one year

(75,959)

(47,399)

(75,937)


-------------

-------------

------------

Net assets

1,138,838

1,020,800

1,075,250


=======

=======

======

Capital and reserves




Called-up share capital (note 3)

75,221

68,152

71,202

Share premium account

320,864

222,183

265,004

Capital redemption reserve

2,707

2,707

2,707

Other capital reserves

708,900

700,091

703,217

Revenue reserve

31,146

27,667

33,120


-------------

-------------

-------------

Equity shareholders' funds

1,138,838

1,020,800

1,075,250


=======

=======

=======





Net asset value per ordinary share - basic and diluted (note 4)

378.50p

374.45p

377.53p


======

======

======

 

 

The accompanying notes are an integral part of these financial statements.

 

 

 



 

Cash Flow Statement

 


(Unaudited)

Half year ended

31 December 2014

£'000

(Unaudited)

Half year ended

31 December 2013

£'000

(Audited)

Year ended

30 June 2014

£'000





Net cash inflow from operating activities

21,207

18,021

41,303

Net cash outflow from servicing of finance

(3,030)

(2,403)

(4,711)

Net tax recovered

206

11

215

Net cash outflow from financial investment

(70,869)

(58,289)

(104,419)

Equity dividends paid

(21,729)

(19,119)

(39,612)

Net cash inflow from financing

54,817

55,087

134,564


------------

-----------

------------

(Increase)/decrease in net debt

(19,398)

(6,692)

27,340


======

======

======

Reconciliation of operating revenue to net cash inflow from operating activities

 

 

 

 

 

 

Total return before finance costs and taxation

28,664

102,668

135,070

Less: capital return before finance charges and taxation

(7,761)

(86,059)

(91,209)


-----------

-----------

-------------

Net revenue return before finance charges and taxation

20,903

16,609

43,861

Decrease in prepayments and accrued income

1,939

2,587

416

(Decrease)/increase in other creditors and accruals

(42)

157

274

Management fees taken to capital

(1,409)

(1,254)

(2,602)

Overseas withholding tax

(184)

(78)

(646)


-----------

-----------

-----=-----

Net cash inflow from operating activities

21,207

18,021

41,303


 ======

 ======

 ======

Reconciliation of net cash flow to movement in net debt




(Increase)/decrease in debt as above

(19,398)

(6,692)

27,340

Net cash outflow from repayment of debenture

6,000

-

-

Net cashflow from issue of secured notes

-

-

(34,551)

Non cash movement

(22)

-

13

Exchange movements

(28)

17

46

Net debt at beginning of the period

(79,008)

(71,856)

(71,856)


-------------

-------------

-------------

Net debt at end of the period

(92,456)

(78,531)

(79,008)


=======

=======

=======

Represented by:




Cash at bank and short term deposits less bank overdrafts

(16,497)

(31,132)

(3,071)

Debt falling due after more than one year

(75,959)

(47,399)

(75,937)


-------------

-------------

-------------


(92,456)

(78,531)

(79,008)


=======

=======

=======





 

The accompanying notes are an integral part of these financial statements.

 



 

Notes

 

1.


Accounting Policy - Basis of Preparation



The condensed set of financial statements has been prepared using the same accounting policies as are set out in the Company's Annual Report for the year ended 30 June 2014.

 

The condensed set of financial statements has not been audited or reviewed by the Company's auditors.







2.


Return per Ordinary Share









(Unaudited)

Half year ended

31 December 2014

£'000


(Unaudited)

Half year ended

31 December

2013

£'000


(Audited)

Year ended

30 June 2014 £'000



The return per ordinary share is based on the following figures:








Revenue return

19,755


15,752


41,698



Capital return

5,683


84,402


87,528




----------


----------


----------



Total

25,438


100,154


129,226




======


======


======



Weighted average number of ordinary shares in issue for each period

292,028,481


264,871,961


271,915,690











Revenue return per ordinary share

6.76p


5.95p


15.33p



Capital return per ordinary share

1.95p


31.86p


32.19p




----------


----------


----------



Total return per Ordinary share

8.71p


37.81p


47.52p




======


======


======



The Company does not have any dilutive securities, therefore, the basic and diluted returns per share are the same.









3.


Share Capital



During the half year ended 31 December 2014, 16,075,000 ordinary shares were issued for total proceeds of £59,879,000 (half year ended 31 December 2013: 14,625,000 ordinary shares issued for total proceeds of £53,368,000; year ended 30 June 2014: 26,825,000 ordinary shares issued for total proceeds of £99,239,000).  The number of ordinary shares in issue at 31 December 2014 was 300,884,868.




4.


Net Asset Value per Ordinary Share



The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £1,138,838,000 (31 December 2013: £1,020,800,000; 30 June 2014: £1,075,250,000) and on 300,884,868 ordinary shares (31 December 2013: 272,609,868; 30 June 2014: 284,809,868) being the number of ordinary shares in issue at the end of the period.

 

5.         Transaction Costs

Purchase transaction costs for the half year ended 31 December 2014 were £648,000 (half year ended 31 December 2013: £264,000; year ended 30 June 2014: £644,000). These comprise mainly stamp duty and commissions. Sale transaction costs for the half year ended 31 December 2014 were £55,000 (half year ended 31 December 2013: £25,000; year ended 30 June 2014: £48,000).

 

 

6.         Dividends

A first interim dividend of 3.75p was paid on 28 November 2014. The second interim dividend of 3.75p (declared on 9 December 2014) will be paid on 27 February 2015 to shareholders on the register on 23 January 2015.  The Company's shares went ex-dividend on 22 January 2015.

 

7.         Management Arrangements and Related Party Transactions

Other than the relationship between the Company and its Directors, the provision of services by Henderson is the only related party arrangement currently in place. Other than fees payable by the Company in the ordinary course of business and the provision of marketing services, there have been no material transactions with this related party affecting the financial position or performance of the Company during the period under review. 

 

8.         Going Concern

The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements.  The assets of the Company consist mainly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.

 

9.         Financial Information

The financial information contained in this half year report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

 

The figures and financial information for the year ended 30 June 2014 have been extracted from the latest published audited financial statements of the Company. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors, which was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

 

10.       Investment Objective

The Company's objective is to provide long-term growth in income and capital, principally by investment in equities listed on the London Stock Exchange. The Board continues to recognise the importance of dividend income to shareholders.

 

11.       Company Status

The City of London Investment Trust plc is registered in England and Wales, No 34871, has its registered office at 201 Bishopsgate, London EC2M 3AE and is listed on the London and New Zealand Stock Exchanges. The SEDOL/ISIN number is GB0001990497. The London Stock Exchange (EPIC) Code is CTY. The Company's Global Intermediary Identification Number (GIIN) is S55HF7.99999.SL.826 and its Legal Entity Identifier number is 213800F3NOTF47H6AO55.

 

12.       Directors and Secretary

The Directors of the Company are Philip Remnant CBE (Chairman), Richard Hextall (Chairman of the Audit Committee), Simon Barratt, David Brief and Martin Morgan. The Corporate Secretary is Henderson Secretarial Services Limited, represented by Rachel Peat ACIS.

 

13.       Details of the Company's share price and net asset value, together with general information about the Company, monthly fact sheets and data, copies of announcements, reports and details of general meetings can be found at www.cityinvestmenttrust.com

 

14.       Half Year Report

An update extracted from the Company's report for the half year ended 31 December 2014 will be posted to shareholders in February 2015.  Copies of the half year announcement and the half year update will be available on the website www.cityinvestmenttrust.com.  Copies can also be requested thereafter from the Corporate Secretary at the Registered Office, 201 Bishopsgate, London EC2M 3AE.

 

Largest Investments

The sixty largest investments at 31 December 2014, convertibles and all classes of equity in any one company being treated as one investment, were as follows:

 

Market value

Company                                   31 December 2014

£'000


Market value

Company                  31 December 2014

£'000

                                                                                                                                                                           

Royal Dutch Shell

58,307


Provident Financial

12,925

HSBC

56,295


Phoenix Group

12,872

British American Tobacco

52,500


Schroders

12,450

Vodafone

36,960


Taylor Wimpey

12,402

BP

33,907


Berkeley

12,400

GlaxoSmithKline

33,024


Croda

12,245

Diageo

32,349


United Utilities

11,450

Unilever

28,361


Amlin

11,238

National Grid

27,543


Compass

11,010

AstraZeneca

27,333


Whitbread

10,733

Scottish & Southern Energy (SSE)

21,897


IMI

10,499

Reed Elsevier

21,770


Marks and Spencer

10,494

Verizon Communications

19,827


Munich Re

9,665

Prudential

19,396


Britvic

9,443

Land Securities

19,090


Next

9,207

Legal & General

18,645


Hiscox

8,952

Imperial Tobacco

17,583


Greene King

8,940

BAE Systems

17,464


Zurich Insurance

8,852

BT

17,264


Old Mutual

8,668

Rio Tinto

16,500


Kingfisher

8,513

British Land

16,240


Capita

8,486

Standard Life

15,695


Swire Pacific

8,336

Centrica

14,787


TUI

8,248

Barclays

14,610


Nationwide Building Society

8,222

Pearson

14,280


Merck

8,013

BHP Billiton

13,885


Segro

7,406

Reckitt Benckiser

13,880


ITV

7,317

Novartis

13,106


Nestlé

7,058

Sky

13,035


Connect

7,029

Persimmon

13,018


Severn Trent

7,021

 

These investments total £1,008,645,000 or 81.96% of the portfolio.


 

As a percentage of the investment portfolio excluding cash


%

Financials                             

 24.7

Consumer Goods                         

 17.1

Consumer Services                      

 13.4

Industrials                            

 10.4

Oil & Gas                              

 7.7

Utilities                              

 7.2

Telecommunications                     

 7.0

Health Care                            

 6.6

Basic Materials                        

 4.6

Technology                             

 1.3


--------

Total

100.0


=====

 

 

 

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

 

 

For further information please contact:

 

Job Curtis

Fund Manager, The City of London Investment Trust plc

Telephone: 020 7818 4367

 

James de Sausmarez

Director and Head of Investment Trusts, Henderson Global Investors

Telephone: 020 7818 3349

 

Sarah Gibbons-Cook

Investor Relations and PR Manager, Henderson Global Investors

Telephone: 020 7818 3198

 

 

-     ENDS    -


This information is provided by RNS
The company news service from the London Stock Exchange
 
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