Half Yearly Results

RNS Number : 1556Q

JPMorgan Mid Cap Invest Trust PLC

25 February 2016

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN MID CAP INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST DECEMBER 2015

Chairman's Statement

Performance

The excellent returns that I have been able to report to shareholders over the past few years, have continued into the first six months of the Company's current financial year. Furthermore, it was gratifying that the long term trend for the FTSE 250 outperforming the FTSE 100 was again reinforced over the period under review.

Over the six months to 31st December 2015 the Company's total return on net assets was 9.0%, 8.4 percentage points ahead of the Company's performance benchmark, the FTSE 250 Index (excluding investment trusts) which returned 0.6% on a total return basis. It was extremely pleasing that towards the end of the period the discount at which the Company's shares had traded for a number of years was eliminated. The trend has continued into 2016 with the shares trading at or around net asset value. This improved rating of the Company's shares reflects not just the improvement in performance but also the increased marketing activities driven by JPMorgan over the last year. The tightening of the discount and the move to a premium at the year end resulted in a strong return to shareholders of 25.5% in the six months. A review of the Company's performance for the period 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 2015 was £3,813,000 (2014: £3,225,000) and earnings per share, calculated on the weighted average number of shares in issue, were 15.89p (2014: 13.44p). The Board has maintained the interim dividend at 8.0p (2014: 8.0p) to be paid on 8th April 2016 to shareholders on the register at the close of business on 4th March 2016 and, in accordance with past practice, a decision on the final dividend will be taken at our Board meeting after the Company's year end.

Loan Facilities and Gearing

The level of gearing within the portfolio has been cut back from the levels employed by the Company in 2015. 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. The gearing ratio and the net asset value per share are reported daily to the London Stock Exchange and are available on the Company's website.

At the time of writing the Company was 6% geared. At the end of the reporting period, the Company had two loan facilities in place totalling £40 million.

Management of the Discount/Premium

As stated above the Company's shares have now been trading consistently around net asset value since the beginning of 2016, having traded during the reporting period between a 11.9% discount and a 1.9% premium. Given that the premium has only been a feature of the trust for a relatively short period of time, the Board has not felt it necessary to issue any shares to assist in managing any imbalance between supply and demand for the Company's shares. If and when the Board does think it would be prudent to issue shares, Treasury shares and any new Ordinary shares will only be issued at a premium to net asset value, so as not to prejudice existing shareholders. If the Company were to issue shares, the Board is aware of its responsibility not to let the discount widen significantly and whilst the Company has not repurchased shares since September 2012, the Board believes that repurchase authority remains an important tool in the management of discount volatility and powers were again sought and approved by shareholders at the Company's 2015 Annual General Meeting. The Company will only repurchase shares at a discount to their prevailing net asset value.

Board of Directors

Having held the position of Chairman since 2005, I plan to step down from the Board at the conclusion of the Company's 2016 Annual General Meeting in November and it has been agreed that the Company's Senior Independent Director, Michael Hughes will succeed me as Chairman. We also expect to appoint a new Director as part of our succession planning in the foreseeable future.

Prospects

In 2016, investors have become increasingly concerned about the outlook for global economic growth and the ability of central banks and policy makers to deal with the problems. It appears likely that we are in a period of low growth, low inflation, low interest rates and low returns although still relatively attractive in real terms. Here, in the UK, the EU referendum will cause heightened volatility throughout the stock market, although casting that uncertainty aside, the outlook for the UK is relatively favourable and we are confident that our managers, with their strong track record over recent years, can continue to outperform their peers and deliver superior returns for our shareholders.

Andrew Barker

Chairman

25th February 2016

Investment Managers' Report

Performance and Market Background

Your Company enjoyed a very strong start to its financial year, providing a total return on net assets of 9.0 %. This was significantly ahead of the Company's benchmark, the FTSE 250 Index (excluding investment trusts), which was virtually flat for the six months, returning 0.6%. During the period, the discount of the share price versus the net assets closed dramatically, leading to a share price total return of 25.5%.

While the Mid Cap Index was flat in the period, this was significantly better than the performance of the FTSE 100, the UK's largest stocks. Whilst the UK stock market suffered bouts of volatility, the domestic bias of the mid and smaller sized indices, and their much smaller exposure to oil and commodity stocks, protected them from these declines.

Portfolio

For some time now we have focussed the portfolio to benefit from the resurgence of the UK consumer, and the steady but positive economic growth being enjoyed in the UK. This stock selection was highly beneficial in the period. Notable consumer orientated companies that contributed to the outperformance were Betfair, JD Sports, WH Smith, Card Factory and Howden Joinery and our significant overweight position in the housebuilders.

Not all consumer facing companies did well, and we exited positions in Halfords and Poundland. Other disappointing performers included Interserve (on concerns over exposure to the Middle East) and TalkTalk, which we exited post the cyber security breach. New additions to the portfolio included three IPOs or new companies to the stockmarket: Worldpay (a payments company), McCarthy & Stone (builder of retirement homes) and Ibstock (brick maker). On the other side, mergers and acquisitions activity continued in the FTSE 250 space. HellermannTyton, a large position for us, was acquired for a significant premium by a large US company, and Cable & Wireless Communications, a long term holding in the portfolio, was also bid for. In addition Betfair agreed an exciting merger with Paddy Power, which will create a significant FTSE 100 company upon completion.

Outlook

The start of 2016 has been a torrid time for stock markets around the world, including the UK. Numerous reasons are cited for the recent bout of volatility - slowing Chinese growth, currency wars, the further collapse in oil and commodity prices, fears of deflation and concerns regarding global recession, to name but a few.

While volatility in share prices has become a fact of life for investors, and one that we have frequently mentioned, it is our belief that these recent fears, and the subsequent share price falls, have been overdone. While the IMF has recently reduced its forecast for global growth, it is still predicting 3.4% for 2016, a rise from 3.1% growth seen in 2015. In a similar vein, we do not believe that the further collapse in the oil price in the last few months presages a collapse in global demand, rather, that it continues to reflect excess supply.

Turning to the UK, forecasts for GDP growth in 2016 are in the range of 2.3 to 2.5%. Imminent data should show that UK capital investment hit a new record high in 2015. This is a crucial figure, as it reflects economic confidence and has a direct causal link with future economic growth. Wage growth may have slowed recently, but household income is still rising and was up over 7% in December 2015 versus the prior year. Other positives for the UK consumer include the low oil prices mentioned, minimal inflation, unemployment at a multi-year low of almost 5%, and on-going low interest rates (now forecast to stay flat for all of 2016). It should therefore come as no surprise that January 2016 has seen a rise in consumer confidence.

From this catalogue of positive data in the UK, it can be seen that we retain our confidence in the outlook for the FTSE 250, and indeed in the positioning of the portfolio. The key headwinds that we are focussing on are the impact of stage one of the National Living Wage in April, and the EU referendum. The 23rd June 2016 has now been set for the referendum, and from now until then we foresee the likelihood of considerable stock market volatility due to the uncertainty of both the outcome and the potential implications if the UK population did vote to leave. In our portfolio we aim to own cash-generative companies with strong balance sheets that continue to grow both profits and dividends, and we expect to continue to enjoy the benefits of this growth.

Georgina Brittain

Katen Patel

Investment Managers

25th February 2016

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 2015.

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 FRS 104 'Interim Financial Reporting' 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 2015, 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

25th February 2016

statement of comprehensive income
for the six months ended 31st december 2015

	(Unaudited) Six months ended 31st December 2015			(Unaudited) Six months ended 31st December 2014			(Audited) Year ended 30th June 2015
	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	-	18,277	18,277	-	16,180	16,180	-	42,702	42,702
Net foreign currency (losses)/gains	-	(1)	(1)	-	(1)	(1)	-	1	1
Income from investments	4,390	-	4,390	3,760	-	3,760	7,972	-	7,972
Other interest receivable and similar income	-	-	-	10	-	10	78	-	78
Gross return	4,390	18,276	22,666	3,770	16,179	19,949	8,050	42,703	50,753
Management fee	(249)	(582)	(831)	(210)	(489)	(699)	(447)	(1,044)	(1,491)
Other administrative expenses	(253)	-	(253)	(264)	-	(264)	(556)	-	(556)
Net return on ordinary activities before finance costs and taxation	3,888	17,694	21,582	3,296	15,690	18,986	7,047	41,659	48,706
Finance costs	(61)	(143)	(204)	(58)	(136)	(194)	(124)	(290)	(414)
Net return on ordinary activities before taxation	3,827	17,551	21,378	3,238	15,554	18,792	6,923	41,369	48,292
Taxation	(14)	-	(14)	(13)	-	(13)	(76)	-	(76)
Net return on ordinary activities after taxation	3,813	17,551	21,364	3,225	15,554	18,779	6,847	41,369	48,216
Return per share (note 4)	15.89p	73.14p	89.03p	13.44p	64.82p	78.26p	28.53p	172.39p	200.92p

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.

statement of changes in equity

	Called up	Capital
	share	redemption	Capital	Revenue
	capital	reserve	reserves	reserve1	Total
	£'000	£'000	£'000	£'000	£'000
Six months ended 31st December 2015 (Unaudited)
At 30th June 2015	6,350	3,650	223,596	8,789	242,385
Net return on ordinary activities	-	-	17,551	3,813	21,364
Dividend appropriated in the period	-	-	-	(3,960)	(3,960)
At 31st December 2015	6,350	3,650	241,147	8,642	259,789
Six months ended 31st December 2014 (Unaudited)
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
Dividend appropriated in the period	-	-	-	(3,000)	(3,000)
At 31st December 2014	6,350	3,650	197,781	7,087	214,868
Year ended 30th June 2015 (Audited)
At 30th June 2014	6,350	3,650	182,227	6,862	199,089
Net return on ordinary activities	-	-	41,369	6,847	48,216
Dividend appropriated in the period	-	-	-	(4,920)	(4,920)
At 30th June 2015	6,350	3,650	223,596	8,789	242,385

1  This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.

statement of financial position
at 31st december 2015

	(Unaudited)	(Unaudited)	(Audited)
	31st December 2015	31st December 2014	30th June 2015
	£'000	£'000	£'000
Fixed assets
Equity investments held at fair value through profit or loss	273,016	228,691	264,425
Investment in liquidity fund held at fair value through profit or loss	14,473	8,385	2,869
	287,489	237,076	267,294
Current assets
Debtors	915	1,164	1,495
Cash and short term deposits	4,763	888	385
	5,678	2,052	1,880
Creditors: amounts falling due within one year	(30,378)	(5,260)	(26,789)
Net current liabilities	(24,700)	(3,208)	(24,909)
Total assets less current liabilities	262,789	233,868	242,385
Creditors: amounts falling due after more than one year	(3,000)	(19,000)	-
Net assets	259,789	214,868	242,385
Capital and reserves
Called up share capital	6,350	6,350	6,350
Capital redemption reserve	3,650	3,650	3,650
Capital reserves	241,147	197,781	223,596
Revenue reserve	8,642	7,087	8,789
Total equity shareholders' funds	259,789	214,868	242,385
Net asset value per share (note 5)	1,082.6p	895.4p	1,010.1p

Company registration number: 1047690

Notes to the financial statements
for the six months ended 31st december 2015

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 Auditor.

The figures and financial information for the year ended 30th June 2015 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the Auditor 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 financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the revised 'SORP') issued by the Association of Investment Companies in November 2014.

FRS 104 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 31st December 2015.

As a result of the first time adoption of FRS 102 and the revised SORP, comparative numbers and presentational formats have been restated where required. The Company has elected not to prepare a Statement of Cash Flows for the current period on the basis that substantially all of its investments are liquid and carried at market value.

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

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 30th June 2015 with the following exceptions and amendments:

Finance costs

Finance costs are accounted for on an accruals basis using the effective interest method and in accordance with the provisions of FRS 102.

Financial instruments

Cash and cash equivalents may comprise cash (including demand deposits which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value) as well as cash equivalents.

Taxation

Current tax is provided at the amounts expected to be received or paid.

Deferred tax is accounted for in accordance with FRS 102.

Dividends payable

In accordance with FRS 102 the final dividend is included in the accounts in the year in which it is approved by shareholders.

Repurchases of ordinary shares for cancellation

The cost of repurchasing ordinary shares including the related stamp duty and transactions costs is charged to capital reserves and dealt with in the Statement of Changes in Equity.

Repurchase of shares to hold in Treasury

The cost of repurchasing shares into Treasury, including the related stamp duty and transaction costs is charged to capital reserves and dealt with in the Statement of Changes in Equity.

Only the relevant section of the applicable policies from the last year end financial statements which have changed as a result of the application of the 2014 AIC SORP and FRS 102 have been reproduced above - all other aspects of those policies remain the same. The impact of the changes is substantially in relation to presentation and disclosure.

3.     Dividends paid¹

		(Unaudited)	(Unaudited)	(Audited)
		Six months ended	Six months ended	Year ended
		31st December 2015	31st December 2014	30th June 2015
		£'000	£'000	£'000
	2015 Final dividend of 12.0p (2014: 12.5p)	2,880	3,000	3,000
	2015 Special dividend of 4.5p (2014: nil)	1,080	-	-
	2015 Interim dividend of 8.0p	-	-	1,920
		3,960	3,000	4,920

               1  All dividends paid and declared in the period have been funded from the Revenue Reserve.

An interim dividend of 8.0p has been declared in respect of the six months ended 31st December 2015, costing £1,920,000.

4.     Return per share

		(Unaudited)	(Unaudited)	(Audited)
		Six months ended	Six months ended	Year ended
		31st December 2015	31st December 2014	30th June 2015
		£'000	£'000	£'000
	Return per share is based on the following:
	Revenue return	3,813	3,225	6,847
	Capital return	17,551	15,554	41,369
	Total return	21,364	18,779	48,216
	Weighted average number of Ordinary shares in issue (excluding shares held in Treasury)	23,997,180	23,997,180	23,997,180
	Revenue return per share	15.89p	13.44p	28.53p
	Capital return per share	73.14p	64.82p	172.39p
	Total return per share	89.03p	78.26p	200.92p

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 2015 of 23,997,180 (31st December 2014: 23,997,180 and 30th June 2015: 23,997,180), excluding shares held in Treasury.

6.     Fair valuation of investments

The fair value hierarchy analysis for investments held at fair value at the period end is as follows:

		(Unaudited) Six months ended 31st December 2015		(Unaudited) Six months ended 31st December 2014		(Audited) Year ended 30th June 2015
		Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
		£'000	£'000	£'000	£'000	£'000	£'000
	Quoted prices for identical instruments in active markets1	285,038	-	237,076	-	267,294	-
	Valuation techniques using non-observable data2	2,451	-	-	-	-	-
	Total value of investments	287,489	-	237,076	-	267,294	-

1  Includes JPMorgan Sterling Liquidity Fund.

2  Pace plc shares were suspended as at 31st December 2015 pending a takeover of the Company by Arris Group, Inc.

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.

JPMORGAN ASSET MANAGEMENT (UK) 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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