Final Results
Investors Capital Trust PLC
09 May 2008
To: RNS
From: Investors Capital Trust plc
Date: 9 May 2008
Results for the period ended 31 March 2008
• Total distributions for the period to 31 March 2008 of 5.35p per share
• Dividend yield of 6.4 per cent at 31 March 2008, compared to the FTSE
All-Share Capped 5% Index of 3.7 per cent
• Net asset value total return per share for the period was minus 3.1
per cent, compared to the FTSE All-Share Capped 5% Index total return of
minus 4.7 per cent
Chairman's Statement as follows:
Introduction
This is the Company's first Annual Report following the launch of the Company on
1 March 2007 as the successor vehicle to the original Investors Capital Trust
plc. I would like to thank shareholders for their continued support, which
resulted in one of the most successful rollovers of its type. I am also pleased
to report that the Company has had a relatively successful inaugural period
despite a challenging backdrop for financial markets; investment performance was
better than the Index, and distributions of 5.35p per share represented a yield
of 6.4 per cent. at 31 March 2008.
Investment Objective and Policy
The Company's investment objective is to provide an attractive return to
shareholders in the form of dividends and/or capital distributions, together
with prospects for capital growth.
The Company's investment portfolio is managed in two parts. The first part
comprises investments in UK equities and equity related securities (the Equities
Portfolio) and the second part comprises investments in fixed interest and other
higher yielding stocks and securities (the Higher Yield Portfolio). At the
Company's launch, approximately 80 per cent. of the investment portfolio was
allocated to the Equities Portfolio with the balance allocated to the Higher
Yield Portfolio. This allocation will vary as a result of market movements and
circumstances.
At 31 March 2008, 57.7 per cent of total assets was allocated to the Equities
Portfolio and 22.1 per cent to the Higher Yield Portfolio. The remaining 20.2
per cent was held as cash and cash equivalents reflecting the Manager's cautious
view of markets.
Investment Performance
At the time of writing my interim report to shareholders in November last year I
cautioned that the balance of risks to global economic growth appeared to have
shifted to the downside as a result of tightening credit conditions and high oil
prices. Indeed this proved to be the case. The second half of the Company's year
came to be dominated by concerns over the extent to which difficulties within
credit markets would impact the growth of the global economy. Increased levels
of investor nervousness, together with evidence of a marked deterioration in the
prospects for the US economy, resulted in weakness in both equity and fixed
interest markets during the second half of the Company's year.
Against an increasingly uncertain background your Manager adopted a cautious
investment strategy. It is pleasing to report that this strategy together with
strong stock selection from the Equities Portfolio resulted in the Company's net
asset value substantially out-performing the average of its peer group over the
year. This is explained in more detail in the Manager's review in the Annual
Report.
During the period, the Company's Equities Portfolio produced a total return of
-0.8 per cent which was ahead of the -4.7 per cent total return of the FTSE
All-Share Capped 5% Index. The Higher Yield Portfolio returned +1.6 per cent.
The Company's net asset value total return for the A and B shares, from the
Company's launch on 1 March 2007 to 31 March 2008 was -3.1 per cent, after the
cost of finance, which compares favourably with the -4.7 per cent return for the
FTSE All-Share Capped 5% Index.
Capital Structure
The Company has two classes of shares: A shares and B shares. The net asset
value attributable to the A shares and to the B shares is the same. The rights
of each class are identical, save that only the A shares are entitled to receive
dividends, while the B shares instead receive a capital distribution at the same
time as, and in an equal amount to, each dividend. For certain shareholders
there will be tax and other advantages in receiving a capital distribution
rather than a dividend. Shares may be held and traded within units, each unit
comprising three A shares and one B share.
The dividend yield on the A shares is increased due to the existence of the B
shares. The B shares are innovative securities that provide returns in the form
of quarterly capital distributions rather than dividends. These capital
distributions fall to be taxed in accordance with rules relating to the taxation
of chargeable gains. The attractions of the B shares have been enhanced by the
changes to the UK capital gains tax regime from 6 April 2008, in particular, the
introduction of a single flat rate (18 per cent) of capital gains tax. A fact
sheet is available from the Company's website (www.investorscapital.co.uk) that
provides more details on the B shares. The 'Capital Structure' section of the
Annual Report also provides further information on the A and B shares.
The Company has the ability to borrow in pursuit of its investment objectives.
On 1 March 2007, the Company drew down an amount of £33.5m on its loan facility
with Lloyds TSB Scotland plc for a term to 28 September 2012. The Company
entered into an interest rate swap to fix the all-in rate of interest on the
loan at 5.86 per cent. per annum. During the year, the impact of this borrowing
has been partly offset by the Company's holding of cash.
Earnings
The Company achieved total revenue income of £8.3m for the period from 1 March
2007 to 31 March 2008. The yield on the Equities Portfolio was 4.1 per cent at
31 March 2008, equivalent to a yield relative to the FTSE All-Share Index of 108
per cent.
Overall revenues for the period exceeded expectations. The Company held a higher
than expected level of liquidity throughout the period reflecting the
increasingly uncertain market backdrop. Consequently deposit income was higher
than will ordinarily be the case. Despite the deterioration in the outlook for
corporate earnings during the second half of the year, the underlying rate of
dividend growth from the Company's Equities Portfolio remained robust. Income
from the Higher Yield Portfolio, which comprised predominantly investment grade
corporate bonds, was at the level anticipated.
After providing for the fourth quarter dividend, the Company had revenue
reserves of £0.9m at 31 March 2008.
Dividends and Capital Returns
Dividends to A shareholders and capital distributions to B shareholders are paid
quarterly in August, November, February and May each year. In respect of the
distributions for the Company's first three quarters, the dividends paid on the
A shares and capital distributions on the B shares were 1.325p per share for
each quarter. A fourth quarter dividend will be paid to A shareholders and
capital distribution to B shareholders of 1.375p per share on 9 May 2008. This
results in a dividend/capital distribution of 5.35p per share in respect of the
period to 31 March 2008. This represents a distribution yield for A and B
shareholders of 6.4 per cent. based on the share price of 83p as at 31 March
2008 and compares favourably with the yield on the FTSE All-Share Index of 3.8
per cent at that date. For shareholders that hold units, the estimated
distribution yield was 6.5 per cent based on a unit price of 327p as at 31 March
2008.
The Company operates a distribution reinvestment scheme, details of which are
available from the Company's Registrars, to enable B shareholders to reinvest
their capital distributions in further B shares if they wish.
Discount and buy backs
The Company's A and B share price discount to net asset value was 7.4 per cent
at 31 March 2008 and reflects a widening since launch. Over the period, the
price of the Company's A shares and B shares traded at an average discount to
net asset value per share of 4.0 per cent. and 4.2 per cent. respectively. The
Company has a stated buy back policy and, in accordance with this policy, the
Company bought back net 6.2m A shares and 4.1m B shares during the period at an
average discount of over 5 per cent. to net asset value, thereby adding value
for remaining shareholders.
Since the year end, the Company has bought back a further 300,000 A shares and
100,000 B shares. The Company is not alone among investment trusts in buying
back its own shares in the recent difficult market conditions.
In order to fund the repurchase of shares and the capital distributions paid to
B shareholders, the Company's share premium account was cancelled during the
year and a Buy Back reserve and Special Capital reserve were created on approval
by the Court of Session.
VAT
The Company will benefit from the recent ruling that management fees for
investment trusts are exempt from VAT. Future management fees will not be
subject to VAT and the Company has recovered from the Managers VAT applied to
management fees paid since the Company's launch on 1 March 2007.
Outlook
At the time of writing financial markets appear to have regained some composure
having taken encouragement from the actions of authorities on both sides of the
Atlantic to address the ongoing dislocation in credit markets. Most notably the
US fiscal and monetary response to the current crisis has been aggressive. These
actions should provide financial markets with some comfort as to the extent of
the downside risk to economic growth; however credit availability for both the
corporate and household sectors has yet to improve significantly. Against this
background, a cautious investment stance is believed to remain appropriate.
For further information, please contact:
Rodger McNair Tel: 0131 718 1000
Fund Manager to Investors Capital Trust plc
Michael Campbell
Company Secretary to Investors Capital Trust plc Tel: 0131 718 1000
The summarised consolidated income statement, balance sheet, cash flows,
consolidated statement of changes in equity and notes follow:
Consolidated Income Statement (audited)
Period from incorporation on 15
January 2007 to
31 March 2008*
£'000 £'000 £'000
Note Revenue Capital Total
Losses on investments - (8,727) (8,727)
Exchange differences - (734) (734)
Investment Income 8,314 554 8,868
Investment management fee (314) (734) (1,048)
Other expenses (418) - (418)
_______ _______ _______
Profit/(loss) before finance costs and tax 7,582 (9,641) (2,059)
Net finance costs
Interest on bank loan and interest rate swap (642) (1,497) (2,139)
_______ _______ _______
Finance costs (642) (1,497) (2,139)
_______ _______ _______
Profit/(loss) before tax 6,940 (11,138) (4,198)
Taxation (685) 670 (15)
_______ _______ _______
Profit/(loss) after tax 6,255 (10,468) (4,213)
_______ _______ _______
Earnings per share 2 4.68p (7.83p) (3.15p)
*The Company was incorporated on 15 January 2007 and commenced business on
1 March 2007.
Consolidated Balance Sheet (audited)
Note As at
31 March
2008
£ '000
Non-current assets
Investments held at fair value through profit or 119,368
loss
Current assets
Other receivables 3,207
Cash and cash equivalents 29,623
32,830
Total assets 152,198
Current liabilities
Other payables (2,730)
Non-current liabilities
Bank loan and interest rate swap (34,213)
Total liabilities (36,943)
Net assets 115,255
Share capital 138
Share premium 22
Capital redemption reserve 1
Buy back reserve 91,306
Special capital reserve 32,809
Capital reserve - realised 220
Capital reserve - unrealised (11,504)
Revenue reserve 2,263
Equity shareholders' funds 115,255
Net asset value per A share 5 89.62p
Net asset value per B share 5 89.62p
Condensed Consolidated Statement of Cash Flows (audited)
Period from
incorporation on 15
January 2007 to 31
March 2008*
£'000
Net cash ouflow from operating activities (121,355)
Net cash inflow from financing activities 151,542
Net increase in cash and cash equivalents 30,187
Currency losses (564)
Opening cash and cash equivalents -
Closing cash and cash equivalents 29,623
*The Company was incorporated on 15 January 2007 and commenced business on
1 March 2007.
Consolidated Statement of Changes in Equity (audited)
Period from incorporation on 15 January 2007 to 31 March 2008*
Capital Buy Back Special Capital Capital
Redemption Reserve Capital Reserve - Reserve -
Share Share Reserve Reserve Realised Unrealised Revenue
Capital Premium reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Shares issued, net of costs 139 135,086 - 1,444 - (72) - - 136,597
Gain/(loss) for the period - - - - - 292 (10,760) 6,255 (4,213)
Dividends paid on A shares - - - - - - - (3,992) (3,992)
Capital returns paid on B - - - - (1,304) - - - (1,304)
shares
Shares bought back (1) - 1 (11,089) - - - - (11,089)
(including costs)
Court conversion - (135,064) - 100,951 34,113 - - - -
Unrealised loss on - - - - - - (744) - (744)
revaluation of interest
rate swap
138 22 1 91,306 32,809 220 (11,504) 2,263 115,255
*The Company was incorporated on 15 January 2007 and commenced business on
1 March 2007.
Notes
1. The financial statements of the Group, which are the
responsibility of, and were approved by the Board on 8 May 2008, have been
prepared in accordance with International Financial Reporting Standards (''
IFRS''), which comprise standards and interpretations approved by the
International Accounting Standards Board (''IASB''), and International
Accounting Standards and Standing Interpretations Committee interpretations
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.
Where presentational guidance set out in the Statement of Recommended Practice
(''SORP'') for investment trusts issued by the Association of Investment
Companies (''AIC'') in December 2005 is consistent with the requirements of
IFRS, the Directors have sought to prepare the results on a basis compliant with
the recommendations of the SORP.
2. The earnings per share are based on the loss for the period of £4,213,000
and on 100,626,875 A shares and 33,111,660 B shares, being the weighted average
number of shares in issue of each share class during the period.
3. The Group results comprise those of the Company and those of Investors
Securities Company Limited, a wholly owned subsidiary which deals in securities.
4. The fourth interim dividend of 1.375p per A share, will be paid on 9 May
2008 to A shareholders on the Register on 4 April 2008, having an ex-dividend
date of 2 April 2008. The fourth capital distribution of 1.375p per B share will
be paid on 9 May 2008 to B shareholders on the register on 4 April 2008.
5. Net asset value per share is based on the equity shareholders' funds of
£115,255,000 and on 128,604,847 equity shares (consisting of 97,963,144 A shares
and 30,641,703 B shares), being the number of shares in issue at the period end.
The Company's shares may also be traded as units, each unit consisting of three
A shares and one B share. The net asset value per unit as at 31 March 2008 was
therefore 358.48p.
The Company's treasury net asset value per share, incorporating the 6,161,296 A
shares and 3,238,432 B shares held in treasury at the period end, was 89.31p.
The Company's treasury net asset value per unit at the end of the period was
357.24p.
6. These are not full statutory accounts in terms of Section 240 of the
Companies Act 1985. The first full annual report and accounts for the period
ended 31 March 2008 will be finalised and sent to shareholders in May 2008 and
will be available for inspection at 80 George Street, Edinburgh, the registered
office of the Company. The full annual report and accounts will be available on
the Company's website www.investorscapital.co.uk.
The audited accounts for the period to 31 March 2008 will be lodged with the
Registrar of Companies following the Annual General Meeting on 25 June 2008.
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