Interim Results

RNS Number : 2164U

F&C Capital & Income Inv Tst PLC

12 May 2008

 



Date:    12 May 2008

Contact:    Julian Cane    

                     F&C Management Limited    

                     020 7628 8000    

F&C Capital and Income Investment Trust PLC

Unaudited Statement of Results

for the half-year ended 31 March 2008

HIGHLIGHTS

• Net asset value per share down 11.5% compared to a fall in the benchmark, the FTSE All-Share index, of 11.8%;

• Dividends for the first six months total 3.6 pence per share, an increase of 12.5% on the same period last year:

• Dividend growth of 32.1% over the three years to 31 March 2008;

• Revenue return per share rose 9.8%;

• At the end of March the shares were trading at a discount of 5.2% having started the financial year at 6.0%.

	31 March 2008	30 September 2007	% Change
Net assets	£179.14m	£204.13m	-12.2
Net asset value per share	229.00p	258.76p	-11.5
Share price	217.00p	243.25p	-10.8
	Half-year ended 31 March 2008	Half-year ended 31 March 2007	% Change
Revenue return per share	4.04p	3.68p	+9.8
Dividends per share
First interim dividend in respect of year ending     30 September 2008	* 1.80p	-
30 September 2007	-	1.60p
Second interim dividend in respect of year ending     30 September 2008	** 1.80p	-
30 September 2007	-	1.60p
Total dividends relating to the period	3.60p	3.20p	+12.5

*     Paid on 31 March 2008.

**    Payable on 30 June 2008 to shareholders registered on 23 May 2008.

  The Chairman, commenting on the results, said:

From 1 October 2007 to 31 March 2008, the UK stock market, as measured by the FTSE All-Share index, fell by 11.8% as the global credit crisis began to affect not just financial markets but the underlying economies as well. Over the same period, your Company's share price and net asset value (NAV) per share decreased by 10.8% and 11.5% respectively.

The second interim dividend for the period from 1 January 2008 to 31 March 2008 is 1.8 pence per share, which together with the first interim dividend, also of 1.8 pence, gives a total of 3.6 pence per share in respect of the first six months of the current year, an increase of 12.5% on the same period last year.

Capital performance

The financial crisis that started last summer continued to develop over the course of the last six months, becoming more intense and significant in terms of impact. It has now spread far beyond the point of its initiation, namely residential mortgages made to US citizens with only limited ability to repay. Losses stemming directly from this, and the uncertainty that has resulted, have brought about a liquidity crisis and a credit crunch, as banks have actively sought to reduce their exposures and conserve cash. Against this background, and despite two cuts in interest rates from the recent peak of 5.75% to 5.25%, the UK stock market fell, in common with nearly all other stock markets.

The three largest positive contributors to investment performance were Mining, Tobacco and Banks. The portfolio's holding in Rio Tinto gave a return of more than 24% as metal prices were firm and as BHP Billiton approached it to try to merge the two companies. Tobacco shares continued to perform well during a period of economic and financial uncertainty. Despite their ostensibly high yields, we have taken a relatively cautious view of the prospects of the banking sector where the decision to underweight banks with a high domestic mortgage exposure has benefited performance.  

The biggest disappointments came from the Oil sector; although the oil price rose from $80 per barrel to $100, the share prices of both the oil majors, BP and Royal Dutch Shell, in which the portfolio has considerable investments, fell. Companies exposed to leisure spending in the UK, such as the pub owners Marstons and Punch, and nightclub operator Luminar, also performed poorly.

Revenue and dividend

Companies in the UK stock market have grown their dividends at a good rate over the last year and the increases from the stocks in your Company's portfolio have resulted in a 4.2% increase in income. The elimination of VAT on the management fee helped to bring about a reduction in overall expenses and this, together with a lower amount of interest payable following a reduction in borrowing levels, led to a 6.9% increase in pre-tax return.

Although no shares were bought back during the latest quarter, the impact of previous repurchases had a positive effect on the return per ordinary share, which rose by 9.8% to 4.04p. The first two interim dividends, each of 1.8p, to give a half year total of 3.6p represent a 12.5% increase on the same period last year; taking account of the previous dividend increases this results in dividend growth of 32.1% over the three years to 31 March 2008.  

Recovery of VAT

In our last annual report we described the prospects for recovery of VAT wrongly paid in the past on management fees. Your Board continues to take this forward but we still lack certainty on the amount and the timing of any reclaims.  

Gearing

Your Company started the new financial year with borrowings of £10 million and this was reduced to £4 million by the end of March. Given the fall in markets over the period the use of gearing has not been profitable, but because of the small amounts borrowed relative to the level of net assets, the overall impact has not been significant.

  Discount to NAV and share buy-backs

The Company has maintained its active share buy-back programme with the intention of ensuring that the Company's share price does not trade at a material discount to NAV. The shares started the year trading at a discount of 6.0% and more than 500,000 shares were bought during the first quarter at an average discount to NAV of 8.8% as the discount widened. At the end of March the discount had narrowed to 5.2% and, as already stated, no further shares were bought back in the last quarter.

Outlook

At the time of writing, there is still a great deal of uncertainty in financial markets, but following interest rate cuts and a substantial injection of liquidity into the financial system by the Bank of England, it appears that the risk is receding of bank failures or a systemic collapse. This is undoubtedly good news, but as the financial system is forced to repair its balance sheet and reduce leverage, there are adverse implications for the rest of the economy. Credit, including mortgages, will almost certainly be more expensive and difficult to arrange which in turn will have adverse implications for asset prices and retail sales, particularly as the levels of personal and government debt are very high.  To add to this somewhat dismal picture, strong oil, commodity and food prices are squeezing the disposable income of most households.

Notwithstanding the immediate gloomy environment, it should be remembered that the stock market is a discounting mechanism and seeks to anticipate future events. This helps to explain why share prices have already fallen considerably, even before the credit and liquidity crisis has had much of an impact on the real economy, and why, with an historic price/earnings ratio of under 12 times on the FTSE All-Share index and a yield of more than 3.6%, valuations appear attractive. Corporate profits will clearly be under pressure from the economic slow-down and from cost pressures, and dividends in the banking sector in particular remain under threat. However, the weakness of sterling should help export recovery and the overseas earnings of UK companies in sterling terms. At some stage, probably before the clouds lift, but not necessarily this year, it will be right to take a more aggressive view, and at that stage we will look to reposition the portfolio accordingly in terms of stock selection and gearing.

Pen Kent                        

May 2008

Principal Risks and Uncertainties

The Company's assets consist mainly of listed securities and its principal risks are therefore market related. The Company may, from time to time, invest in leading overseas companies and so is exposed to currency risk in respect of these investments. Other key risks faced by the Company include investment strategy, management resources, regulatory, operational and financial risks. These risks, and the way in which they are managed, are described in more detail under the heading "principal risks and risk management" within the business review in the Company's annual report for the year ended 30 September 2007. The Company's principal risks and uncertainties have not changed materially since the date of that report.

Statement of Directors' Responsibilities in Respect of the Half-Yearly Financial Report

We confirm that to the best of our knowledge: 

• the condensed set of financial statements have been prepared in accordance with the  statement "Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and give a true and fair view of the assets, liabilities, financial position and return of the Company as required by the Disclosure and Transparency Rules ("DTR") 4.2.4R;

• the Chairman's Statement (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

• the Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and 

• the financial statements include a fair review of the information required by DTR 4.2.8R regarding related party transactions. 

On behalf of the Board

Pen Kent

Chairman

12 May 2008

Unaudited Income Statement

Half-year ended 31 March 2008

Half-year ended 31 March 2007

Note		Revenue	Capital	Total	Revenue	Capital	Total
		£000s	£'000s	£'000s	£'000s	£'000s	£'000s
	(Losses)/gains on investments	-	(22,995)	(22,995)	-	13,071	13,071
	Exchange gains on currency balances	1	17	18	-	1	1
	Income	3,745	-	3,745	3,594	-	3,594
	Management fee	(180)	(180)	(360)	(255)	(255)	(510)
	Other expenses	(284)	(6)	(290)	(254)	(1)	(255)
	Net return before finance costs and      taxation	3,282	(23,164)	(19,882)	3,085	12,816	15,901
	Interest payable and similar charges	(113)	(113)	(226)	(121)	(121)	(242)
	Net return on ordinary activities before      taxation	3,169	(23,277)	(20,108)	2,964	12,695	15,659
	Taxation on ordinary activities	(1)	-	(1)	(4)	-	(4)
	Net return attributable to equity      shareholders	3,168	(23,277)	(20,109)	2,960	12,695	15,655
3	Return per share - pence	4.04	(29.68)	(25.64)	3.68	15.78	19.46

    The total column is the profit and loss account of the Company.

    All revenue and capital items in the above statement derive from continuing operations.

    A statement of total recognised gains and losses is not required as all gains and losses of the Company have been reflected in the above

    statement.

  Unaudited Reconciliation of Movements in Shareholders' Funds

		Share	Capital				Total equity
	Share	premium	redemption	Special	Capital	Revenue	shareholders'
	capital	account	reserve	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Half-year ended 31 March 2008
Balance at 30 September 2007	20,548	76,334	3,154	6,034	93,581	4,480	204,131
Movements during the half-year      ended 31 March 2008:
Dividends paid	-	-	-	-	-	(3,285)	(3,285)
Purchase of ordinary shares held     in treasury	-	-	-	(1,600)	-	-	(1,600)
Cancellation of ordinary shares      previously held in treasury	(992)	-	992	-	-	-	-
Return attributable to equity     shareholders	-	-	-	-	(23,277)	3,168	(20,109)
Balance at 31 March 2008	19,556	76,334	4,146	4,434	70,304	4,363	179,137
Half-year ended 31 March 2007
Balance at 30 September 2006	20,548	76,334	3,154	10,313	85,648	4,758	200,755
Movements during the half-year      ended 31 March 2007:
Dividends paid	-	-	-	-	-	(4,184)	(4,184)
Purchase of ordinary shares held     in treasury	-	-	-	(989)	-	-	(989)
Return attributable to equity     shareholders	-	-	-	-	12,695	2,960	15,655
Balance at 31 March 2007	20,548	76,334	3,154	9,324	98,343	3,534	211,237
Year ended 30 September 2007
Balance at 30 September 2006	20,548	76,334	3,154	10,313	85,648	4,758	200,755
Movements during the year      ended 30 September 2007:
Dividends paid	-	-	-	-	-	(6,882)	(6,882)
Purchase of ordinary shares held     in treasury	-	-	-	(4,279)	-	-	(4,279)
Return attributable to equity     shareholders	-	-	-	-	7,933	6,604	14,537
Balance at 30 September 2007	20,548	76,334	3,154	6,034	93,581	4,480	204,131

Unaudited Balance Sheet

	31 March 2008	31 March 2007	30 September 2007
	£'000s	£'000s	£'000s
Fixed assets
Investments	181,034	220,497	213,328
Current assets
Debtors	1,717	1,731	875
Cash at bank and short-term      deposits	707	18	346
	2,424	1,749	1,221
Creditors: amounts falling   due within one year
Short-term loans	(4,000)	(9,000)	(10,000)
Other	(321)	(2,009)	(418)
	(4,321)	(11,009)	(10,418)
Net current liabilities	(1,897)	(9,260)	(9,197)
Net assets	179,137	211,237	204,131
Capital and reserves
Share capital	19,556	20,548	20,548
Share premium account	76,334	76,334	76,334
Capital redemption reserve	4,146	3,154	3,154
Special reserve	4,434	9,324	6,034
Capital reserves	70,304	98,343	93,581
Revenue reserve	4,363	3,534	4,480
Total equity shareholders'   funds	179,137	211,237	204,131
Net asset value per share -   pence	229.00	263.34	258.76

Unaudited Summary Cash Flow Statement

	Half-year ended	Half-year ended
	31 March 2008	31 March 2007
	£'000s	£'000s
Net cash inflow from operating activities	2,181	1,928
Interest paid	(243)	(234)
Total tax paid	(6)	(3)
Equity dividends paid	(3,285)	(4,184)
Net cash inflow/(outflow) from purchases and sales of   investments	9,281	(2,080)
Net cash inflow/(outflow) before use of liquid   resources and financing	7,928	(4,573)
Increase in short-term deposits	(703)	-
Net cash outflow from financing	(7,600)	(144)
Decrease in cash	(375)	(4,717)
Reconciliation of net cash flow to movement in net   debt
Decrease in cash	(375)	(4,717)
Increase in short-term deposits	703	-
Decrease/(increase) in short-term loans	6,000	(1,000)
Exchange movement on currency balances	17	1
Movement in net debt	6,345	(5,716)
Net debt brought forward	(9,654)	(4,848)
Net debt carried forward	(3,309)	(10,564)

  Notes

1    Accounting policies

These results have been prepared on the basis of the accounting policies set out in the Company's financial statements at 30 September 2007.  These accounting policies are expected to be followed throughout the year ending 30 September 2008.

2    Dividend

The second interim dividend in respect of the year ending 30 September 2008 of 1.80p will be paid on 30 June 2008 to shareholders registered on 23 May 2008. The total cost of this dividend, based on 78,224,268 shares in issue and entitled to dividend on 12 May 2008, is £1,408,000.

3    Return per share

Return per share attributable to ordinary shareholders reflects the overall performance of the Company in the period. Net revenue recognised in the first six months is not indicative of the total likely to be received in the full accounting year.

	Half-year ended 31 March 2008 £'000s	Half-year ended 31 March 2007 £'000s	Year to 30 September 2007 £'000s
Revenue return	3,168	2,960	6,604
Capital return	(23,277)	12,695	7,933
Total return	(20,109)	15,655	14,537
	Number	Number	Number
Weighted average ordinary shares in issue*	78,440,022	80,462,065	80,004,514

* Shares held in treasury have been excluded from the weighted average number of shares in issue.

4    Results

The results for the half-year ended 31 March 2008 and 31 March 2007, which are unaudited, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 September 2007; the report of the auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 September 2007 are an extract from those accounts (except as noted above).

5    Half-yearly report and accounts 

The half-yearly report and accounts will be posted to shareholders and made available on the internet at www.fandccit.com, in late May 2008. Copies may be obtained during normal business hours from the Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY.

By order of the Board

F&C Management Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

12 May 2008

 

END

 

 

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