Half Yearly Results

RNS Number : 3420F

JPMorgan Mid Cap Invest Trust PLC

19 February 2015

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN MID CAP INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST DECEMBER 2014

Chairman's Statement

Performance

I am pleased to report that the Company has delivered another strong performance in the six months to 31st December 2014, following on from the excellent results posted over the previous two financial years. Although the UK Mid Cap market has cooled somewhat, the Company's total return on net assets was 9.6%, significantly ahead of the benchmark, the FTSE 250 Index (excluding investment trusts), which returned 3.2%. The return to shareholders amounted to 9.2%, reflecting a small widening of the Company's discount. A review of the Company's performance for the first six months and the outlook for the remainder of the year is provided in the Investment Managers' Report.

Revenue and Dividends

Net revenue after taxation for the six months to 31st December 2014 was £3,225,000 (2013: £2,608,000) and earnings per share, calculated on the weighted average number of shares in issue, were 13.44p (2013: 10.86p). This improvement over the prior year's earnings at the half year stage reflects both an increase in base dividends paid by the underlying investments and the continued payment of special dividends. Furthermore, as the portfolio currently stands, a revenue estimate for the full year indicates that earnings will be more than in 2014. While special dividends continue to be paid by companies, as the Board has indicated in the past, the payment of special dividends may not be a permanent feature of the investment portfolio.

In respect of the half year period, the Board has decided to pay an interim dividend of 8.0p (2013: 5.5p) to be paid on 9th April 2015 to shareholders on the register at the close of business on 6th March 2015. The increase in the interim dividend is partly due to the additional income received for the period but also to the Board's desire to re-balance the two dividend payments. Consequently, shareholders should note that the 45% increase in the interim dividend does not signal a proportional increase in the final dividend.

Loan Facilities and Gearing

The level of gearing within the portfolio has reduced from the levels employed by the Company in 2014. However, it has continued to assist performance. The Board has determined that in normal circumstances the Company's overall gearing range is (5%) net cash to 25% geared. Within this range, after due consideration at each Board meeting, the Board sets a narrower, short term gearing range for the ensuing period. Changes in these guidelines between meetings may be undertaken after consultation with the Board.

At the time of writing the Company was 7.8% geared. The Company has three loan facilities in place, all with varying maturities and totaling £55 million with an average interest rate of 1.47%.

Share Buybacks

At the half year stage last year, I was able to report to shareholders that the Company's discount had narrowed significantly to 6.7%. Frustratingly, despite the Company's continuing good performance, the discount has remained stubbornly wide and finished the reporting period at 12%. The Board's objective remains to use the share repurchase authority only when deemed necessary to assist in managing any imbalance between supply and demand for the Company's shares, thereby reducing the volatility of the discount. The Company will only repurchase shares at a discount to their prevailing net asset value, and issue shares when they trade at a premium to their net asset value, so as not to prejudice existing shareholders. The Company did not repurchase or issue any shares over the reporting period.

Board of Directors

Following the appointment of Richard Huntingford to the Board on 1st December 2013, John Emly retired from the Board on 28th October 2014, at the conclusion of the Company's 2014 Annual General Meeting. Mr Emly made an outstanding contribution to the Board during his 18 year tenure and we wish him well for the future.

Prospects

We share our Investment Managers' optimism for the UK economy and corporate prospects. Interest rates should now stay lower for longer which should be some support for the stock market. We are encouraged that our Investment Managers continue to identify attractive investment opportunities in the mid cap sector. The results of individual companies and their ability to operate in a challenging environment are highly impressive. Our main concerns for the stock market are the uncertainty surrounding the General Election here, the West's conflict with Russia and the ongoing issues over Greek Eurozone membership, certain outcomes to which could lead to a marked change in investor sentiment.

Andrew Barker

Chairman                                                                                                                                        

19th February 2015

Investment Managers' Report

Performance and Market Background

Your Company enjoyed a good start to its financial year providing a total return on net assets of 9.6%. This was significantly ahead of the Company's benchmark, the FTSE 250 Index (excluding investment trusts), which returned 3.2%.

While the UK stock market was broadly flat in the period, with the FTSE 100 down marginally and the FTSE 250 (excluding investment trusts), or Mid Cap Index, up a little, these numbers hide significant volatility over the autumn. The Mid Cap Index, (and indeed the broad FTSE All Share Index), fell over 10% from September to mid October, mainly on concerns over the Scottish elections, and the Russia/Ukraine situation. The bounce back was equally dramatic with the Mid Cap Index rising into the year end by over 10%.

Portfolio

The key contributors to performance, in terms of sectors, were support services (our positions in Ashtead and Howden Joinery in particular), oils and general retailers. We were underweight, i.e. under-represented, in oils, and this was positive for your Company as the oil price declined dramatically and share prices suffered accordingly. We have been overweight general retailers for some time, and a number of our holdings produced strong performance, including Dixons Carphone and Card Factory, an IPO that we bought earlier in the year.

During the six month period, a number of our investments were promoted into the FTSE 100. The money we raised from selling down and/or out of these companies was re-invested. A large proportion went into the real estate sector and into companies exposed to the UK consumer. As the likelihood of interest rate rises eased, we increased our positions in London-focused real estate companies, adding to our holdings in Great Portland and Shaftsbury, as well as buying a new position in Workspace. Within the retail sector we established new positions in Greggs (the baker) and JD Sports. We participated in one IPO during the period, SSP, which operates food outlets in travel hubs. In addition we benefited from the merger of Dixons and Carphone Warehouse (both existing holdings), and the proposed takeover of CSR.

Outlook

The UK economy remains one of the fastest growing in the Western World, expanding at 2.6% in 2014, and forecast by the Bank of England to grow at 2.9% in 2015. Inflation is low and continues to fall due to the oil price collapse. This decline in inflation supports the case for keeping interest rates lower for longer - the market is now expecting the first rate rise in early 2016 and even this may prove premature. Unemployment continues to fall faster than all expectations, and (finally) UK take home pay has begun to increase in real terms, for the first time since 2009. In the last quarter of 2014 it rose 2% versus 2013, and should continue to rise and support consumer confidence as low inflation persists.

As the Eurozone remains the UK's principal trading partner, it is likely that the economic outlook for the UK will be further improved by the ECB's Euro 1.1 trillion stimulus plan and a suitable solution to the Greek crisis. While we expect the UK general election and the possibility of another coalition government to cause uncertainty and market volatility in the first half of 2015, it remains the fact that corporate fundamentals are healthy, as demonstrated by continuing growth in dividends. Business investment intentions are at record highs and we except growth in corporate earnings will drive markets higher through the remainder of the year.

Georgina Brittain

Katen Patel

Investment Managers                                                                                                                               

19th February 2015

Interim Management Report

The Company is required to make the following disclosures in its half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company have not changed and fall into the following broad categories: investment and strategy; financial; accounting, legal and regulatory; corporate governance and shareholder relations and operational. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th June 2014.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the period.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is sufficient evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)    the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half Yearly Financial Reports' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st December 2014, as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; and

(ii)   the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•   select suitable accounting policies and then apply them consistently;

•   make judgements and accounting estimates that are reasonable and prudent;

•   state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•   prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Andrew Barker 

Chairman                                                                                                                                             

19th February 2015

Income Statement

for the six months ended 31st December 2014

	(Unaudited)			(Unaudited)				(Audited)
	Six months ended			Six months ended				Year ended
	31st December 2014			31st December 2013				30th June 2014
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue		Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000		£'000	£'000
Gains on investments held at fair
value through profit or loss	-	16,180	16,180	-	30,432	30,432	-		27,495	27,495
Net foreign currency losses	-	(1)	(1)	-	-	-	-		-	-
Income from investments	3,760	-	3,760	3,146	-	3,146	6,274		-	6,274
Other interest receivable and
similar income	10	-	10	10	-	10	30		-	30
Gross return	3,770	16,179	19,949	3,156	30,432	33,588	6,304		27,495	33,799
Management fee	(210)	(489)	(699)	(203)	(473)	(676)	(432)		(1,008)	(1,440)
Other administrative expenses	(264)	-	(264)	(260)	-	(260)	(480)		-	(480)
Net return on ordinary activities
before finance costs and
taxation	3,296	15,690	18,986	2,693	29,959	32,652	5,392		26,487	31,879
Finance costs	(58)	(136)	(194)	(81)	(190)	(271)	(180)		(420)	(600)
Net return on ordinary activities
before taxation	3,238	15,554	18,792	2,612	29,769	32,381	5,212		26,067	31,279
Taxation	(13)	-	(13)	(4)	-	(4)	(12)		-	(12)
Net return on ordinary activities
after taxation	3,225	15,554	18,779	2,608	29,769	32,377	5,200		26,067	31,267
Return per share (note 4)	13.44p	64.82p	78.26p	10.86p	124.05p	134.91p	21.67p		108.62p	130.29p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The Total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses ('STRGL'). For this reason a STRGL has not been presented.

Reconciliation of Movements in Shareholders' Funds

	Called up	Capital
Six months ended	share	redemption	Capital	Revenue
31st December 2014	capital	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2014	6,350	3,650	182,227	6,862	199,089
Net return on ordinary activities	-	-	15,554	3,225	18,779
Dividends appropriated in the period	-	-	-	(3,000)	(3,000)
At 31st December 2014	6,350	3,650	197,781	7,087	214,868
	Called up	Capital
Six months ended	share	redemption	Capital	Revenue
31st December 2013	capital	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2013	6,350	3,650	156,160	5,982	172,142
Net return on ordinary activities	-	-	29,769	2,608	32,377
Dividends appropriated in the period	-	-	-	(3,000)	(3,000)
At 31st December 2013	6,350	3,650	185,929	5,590	201,519
	Called up	Capital
Year ended	share	redemption	Capital	Revenue
30th June 2014	capital	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2013	6,350	3,650	156,160	5,982	172,142
Net return on ordinary activities	-	-	26,067	5,200	31,267
Dividends appropriated in the year	-	-	-	(4,320)	(4,320)
At 30th June 2014	6,350	3,650	182,227	6,862	199,089

Balance Sheet

at 31st December 2014

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	2014	2013	2014
	£'000	£'000	£'000
Fixed assets
Equity investments held at fair value through profit or loss	228,691	222,978	212,570
Investments in liquidity funds held at fair value through
profit or loss	8,385	3,670	10,000
Total investments	237,076	226,648	222,570
Current assets
Debtors	1,164	2,452	4,992
Cash and short term deposits	888	253	1,362
	2,052	2,705	6,354
Creditors: amounts falling due within one year	(5,260)	(13,334)	(14,835)
Net current liabilities	(3,208)	(10,629)	(8,481)
Total assets less current liabilities	233,868	216,019	214,089
Creditors: amounts falling due after more than one year	(19,000)	(14,500)	(15,000)
Net assets	214,868	201,519	199,089
Capital and reserves
Called up share capital	6,350	6,350	6,350
Capital redemption reserve	3,650	3,650	3,650
Capital reserves	197,781	185,929	182,227
Revenue reserve	7,087	5,590	6,862
Total equity shareholders' funds	214,868	201,519	199,089
Net asset value per share (note 5)	895.4p	839.8p	829.6p

Company registration number: 1047690.

Cash Flow Statement

for the six months ended 31st December 2014

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December	31st December	30th June
	2014	2013	2014
	£'000	£'000	£'000
Net cash inflow from operating activities (note 6)	2,600	2,218	4,387
Net cash outflow from returns on investments
and servicing of finance	(236)	(260)	(575)
Tax recovered	-	-	3
Net cash inflow/(outflow) from capital expenditure and
financial investment	4,663	(2,777)	(2,205)
Dividends paid	(3,000)	(3,000)	(4,320)
Net cash (outflow)/inflow from financing	(4,500)	3,500	3.500
(Decrease)/increase in cash for the period	(473)	(319)	790
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash for the period	(473)	(319)	790
Net loans repaid/(drawn down)	4,500	(3,500)	(3,500)
Exchange movements	(1)	-	-
Changes in net fund/(debt) arising from cash flows	4,026	(3,819)	(2,710)
Net debt at the beginning of the period	(26,138)	(23,428)	(23,428)
Net debt at the end of the period	(22,112)	(27,247)	(26,138)
Represented by:
Cash and short term deposits	888	253	1,362
Debt falling due within one year	(4,000)	(13,000)	(12,500)
Debt falling due after more than one year	(19,000)	(14,500)	(15,000)
Net debt at the end of the period	(22,112)	(27,247)	(26,138)

Notes to the Accounts

for the six months ended 31st December 2014

1.    Financial statements

      The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's auditors.

      The figures and financial information for the year ended 30th June 2014 are extracted from the latest published accounts of the Company and do not constitute statutory accounts for that year. Those accounts 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 either section 498(2) or 498(3) of the Companies Act 2006.

2.   Accounting policies

      The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in January 2009.

      All of the Company's operations are of a continuing nature.

      The accounting policies applied to these interim accounts are consistent with those applied in the accounts for the year ended 30th June 2014.

3.   Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2014	31st December 2013	30th June 2014
	£'000	£'000	£'000
2014 Final dividend of 12.5p (2013: 11.5p)	3,000	2,760	2,760
2013 Special dividend of 1.0p	-	240	240
2014 Interim dividend of 5.5p	-	-	1,320
	3,000	3,000	4,320

4.   Return per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2014	31st December 2013	30th June 2014
	£'000	£'000	£'000
Return per share is based on the following:
Revenue return	3,225	2,608	5,200
Capital return	15,554	29,769	26,067
Total return	18,779	32,377	31,267
Weighted average number of shares in issue
(excluding shares held in Treasury)	23,997,180	23,997,180	23,997,180
Revenue return per share	13.44p	10.86p	21.67p
Capital return per share	64.82p	124.05p	108.62p
Total return per share	78.26p	134.91p	130.29p

5.   Net asset value per share

      Net asset value per share is calculated by dividing shareholders' funds by the number of shares in issue at 31st December 2014 of 23,997,180 (31st December 2013: 23,997,180 and 30th June 2014: 23,997,180), excluding shares held in Treasury.

6.   Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow from operating activities

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2014	31st December 2013	30th June 2014
	£'000	£'000	£'000
Net return on ordinary activities before finance costs
and taxation	18,986	32,652	31,879
Less capital return before finance costs and taxation	(15,690)	(29,959)	(26,487)
Scrip dividends received as income	(58)	-	(25)
Changes in net debtors and accrued income	(101)	38	85
Changes in accrued expenses	(30)	(36)	(2)
Tax on unfranked investment income	(18)	(4)	(55)
Management fee charged to capital	(489)	(473)	(1,008)
Net cash inflow from operating activities	2,600	2,218	4,387

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 incorporatedinto, or forms part of, this announcement.

JPMORGAN FUNDS LIMITED

ENDS

A copy of the Half Year Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM

The Half Year Report will also shortly be available on the Company's website at www.jpmmidcap.co.uk  where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

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