Half Yearly Report

RNS Number : 2819L

Troy Income & Growth Trust Plc

04 May 2010

 



04 May 2010

 

TROY INCOME & GROWTH TRUST PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 31 MARCH 2010

The principal objective of Troy Income & Growth Trust PLC is to provide shareholders with a high level of income and to obtain growth in both income and capital over the longer term.

INTERIM BOARD REPORT AS AT 31 MARCH 2010

Background

The main feature of the six months to March 2010 was that markets continued to rally in anticipation of global economic recovery from the deepest recession since World War Two.

The huge coordinated stimulus, which authorities around the world had put in place following the collapse of Lehman Brothers, finally bore fruit as the major economies moved out of recession. In the UK the recovery has been relatively muted with economic growth in Q4 2009 now revised to +0.4% while initial estimates for the first quarter of 2010 amounted to +0.2%. The forthcoming General Election is currently preoccupying UK markets. Whatever government is formed faces the daunting task of addressing the massive structural deficit and in achieving the sensitive balance between spending cuts and tax increases in the quest for a return to sustainable growth. It is important to remember that the UK equity market represents far more than the UK economy and many of the Company's holdings generate as much as 80% of their revenues and profits from overseas markets. This provides investors with both currency diversification away from sterling as well as access to economies in the Far East and other emerging markets where economic growth rates are significantly faster than in the developed world.

The FTSE All Share Index produced a total return of +12.2% over the six months under review - a less dramatic rise than in the previous six months when the market rose by +36%.

The rally broadened out from stocks and sectors which were most leveraged and distressed and into higher quality companies with good dividend growth prospects which had been left behind in the earlier rally. This benefited the Company as many of the holdings purchased when the portfolio was restructured in August and September were in this second category.

Company Changes

As indicated in the last Annual Report a continuation vote, together with a proposal to change the name of the Company, were approved by shareholders at the AGM in January. We are now Troy Income & Growth Trust. This completed a sequence of events which began with the appointment of Troy Asset Management in July 2009 and involved the removal of structural gearing, the rebasing of the dividend and the adoption of an Income and Growth strategy.

As also indicated, the Board has made a strong commitment to minimising the discount to net asset value by adopting a discount control mechanism. Since this was activated in mid-January I am pleased to say that the discount has closed from 6.9% and the Company's shares now trade at or close to Net Asset Value. As we expected the Company has repurchased a significant number of shares, representing just under 5% of the total shares in issue, to be held in treasury.

Recent demand for shares has allowed us to start to reissue shares from treasury.

Performance

The NAV total return of +11.4% in the period was slightly behind the total return of the FTSE All Share Index which was +12.2%. The narrowing of the discount enhanced the share price total return which amounted to +17.5%.

As Troy generally adopt a cautious investment strategy shareholders should be prepared for the possibility that performance may lag in markets where valuations become increasingly stretched. It is an associated feature of Troy managed funds that they normally experience lower volatility than the market and other similar funds. There will therefore be times when the returns will differ quite markedly from the comparator index over short periods of extreme market movements both positive and negative.

Gearing

As I indicated in the last annual report the Company no longer has a commitment to structural gearing. A credit facility to borrow up to £5m is in place with HSBC but at current market levels the Board does not consider that it would be appropriate to draw down any of this. The Board reviews the gearing strategy at each quarterly board meeting.

Dividends

The quarterly dividend rate has been rebased to 0.45p and the second quarterly dividend went ex on April 7th 2010. It is the Board's intention that the third and fourth quarterly dividends will also be 0.45p making a total dividend of 1.8p for the year ending 30 September 2010.

Outlook

Equity markets have benefited from the flight of capital from low yielding cash deposits but we are concerned that valuations, particularly in mid-sized and smaller companies, have more than discounted the likely extent of earnings recovery. Given the significant recent rises and the economic outlook we believe that this is a good time to be lowering risk within the portfolio and any transactions will have this in mind.

R G Hanna

Chairman

4 May 2010

Principal Risks and Uncertainties

The main risks the Company faces from its financial instruments are (i) market price risk (comprising interest rate risk, foreign currency risk and other price risk), (ii) liquidity risk and (iii) credit risk. A proportion of the Company's investment portfolio is invested in overseas securities and the income and capital value can be affected by movements in exchange rates. Exchange gains or losses may arise as a result  of the movement in exchange rates between the date of the transaction denominated in a currency other than sterling and its settlement. Information on each of these areas is found in the Directors' Report within the Annual Report and Accounts for the year ended 30 September 2009. The Company has no borrowing currently.

Directors' Responsibility Statement

The Directors are responsible for preparing the half-yearly financial report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

-       the condensed set of interim financial statements contained within the half yearly financial report have been prepared in accordance with IFRS 34; and,

-       the Interim Board Report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.

The half yearly financial report for the six months to 31 March 2010 comprises the Interim Board Report, the

Directors' Responsibility Statement and a condensed set of financial statements.

For and on behalf of the Board

R G Hanna

Chairman

4 May 2010

CONSOLIDATED INCOME STATEMENT

FOR THE HALF YEAR ENDED 31 MARCH 2010

		Six months ended			Six months ended
		31 March 2010			31 March 2009
		(unaudited)			(unaudited)
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments held at fair value		-	4,982	4,982	-	(25,128)	(25,128)
Currency losses		-	-	-	-	-	-
Income	2	1,280	-	1,280	3,064	-	3,064
Investment management fees		(53)	(53)	(106)	(83)	(83)	(166)
VAT recoverable on investment management fees		-	-	-	175	175	350
Other administrative expenses		(218)	-	(218)	(127)	-	(127)
Finance costs of borrowing		(7)	(8)	(15)	-	-	-
Zero coupon finance costs		-	-	-	-	(4,347)	(4,347)
		______	______	______	______	______	______
Profit/(loss) before taxation		1,002	4,921	5,923	3,029	(29,383)	(26,354)
Taxation		(12)	-	(12)	(504)	(26)	(530)
		______	______	______	______	______	______
Profit/(loss) attributable to equity holders of the Company		990	4,921	5,911	2,525	(29,409)	(26,884)
		______	______	______	______	______	______
Earnings per Ordinary share (pence)		0.83	4.10	4.93	2.08	(24.22)	(22.14)
		______	______	______	______	______	______

The total column of this statement represents the Income Statement of the Group, prepared in accordance with International Financial Reporting Standards ("IFRS"). The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations.

CONSOLIDATED INCOME STATEMENT

(CONTINUED)

		Year ended
		30 September 2009
		(audited)
		Revenue	Capital	Total
	Note	£'000	£'000	£'000
Gains/(losses) on investments held at fair value		-	(7,952)	(7,952)
Currency losses		-	(18)	(18)
Income	2	4,870	14	4,884
Investment management fees		(172)	(172)	(344)
VAT recoverable on investment management fees		250	216	466
Other administrative expenses		(411)	-	(411)
Finance costs of borrowing		(1)	(1)	(2)
Zero coupon finance costs		-	(5,061)	(5,061)
		________	________	________
Profit/(loss) before taxation		4,536	(12,974)	(8,438)
Taxation		(579)	(12)	(591)
		________	________	________
Profit/(loss) attributable to equity holders of the Company		3,957	(12,986)	(9,029)
		________	________	________
Earnings per Ordinary share (pence)		3.26	(10.70)	(7.44)
		________	________	________
All items in the above statement derive from continuing operations.

CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2010

	As at	As at	As at
	31 March	31 March	30 September
	2010	2009	2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Non-current assets
Ordinary shares	52,165	41,316	49,633
Convertibles	236	455	238
Corporate bonds	-	17,821	-
Other fixed interest	2,291	2,390	1,975
	________	________	________
Investments held at fair value through profit or loss	54,692	61,982	51,846
Zero coupon finance derivatives at fair value	-	12,279	-
	________	________	________
	54,692	74,261	51,846
	________	________	________
Current assets
Trade and other receivables	256	697	-
Accrued income and prepayments	11	1,091	232
VAT recoverable on investment management fees	-	-	466
Interest due on recoverable VAT on investment management fees	-	-	72
Cash and cash equivalents	1,212	13,086	1,896
Zero coupon finance derivatives at fair value	-	13,702	-
	________	________	________
Total current assets	1,479	28,576	2,666
	________	________	________
Total assets	56,171	102,837	54,512
Current liabilities
Trade and other payables	(412)	(658)	(297)
Corporation tax payable	-	-	(223)
Zero coupon finance derivatives at fair value	-	(35,498)	-
	________	________	________
Total current liabilities	(412)	(36,156)	(520)
Non-current liabilities	________	________	________
Zero coupon finance derivatives at fair value	-	(28,723)	-
	________	________	________
Total liabilities	(412)	(64,879)	(520)
	________	________	________
Net assets	55,759	37,958	53,992
	________	________	________
Issued capital and reserves attributable to equity holders of the parent
Called-up share capital	30,486	30,486	30,486
Share premium account	53,204	53,204	53,204
Special reserve	1,969	4,658	4,658
Capital reserve	(32,322)	(53,666)	(37,243)
Revenue reserve	2,422	3,276	2,887
	________	________	________
Equity shareholders' funds	55,759	37,958	53,992
	________	________	________
Net asset value per Ordinary share (pence)	48.25	31.26	44.47
	________	________	________

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 31 MARCH 2010

Six months ended 31 March 2010 (unaudited)
		Share
	Share	Premium	Special	Capital	Revenue
	Capital	Account	Reserve	Reserve	Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2009	30,486	53,204	4,658	(37,243)	2,887	53,992
Profit after tax	-	-	-	4,921	990	5,911
Share buybacks	-	-	(2,689)	-	-	(2,689)
Equity dividends	-	-	-	-	(1,455)	(1,455)
	_______	_______	_______	_______	_______	_______
Balance at 31 March 2010	30,486	53,204	1,969	(32,322)	2,422	55,759
	_______	_______	_______	_______	_______	_______
Six months ended 31 March 2009 (unaudited)
		Share
	Share	Premium	Special	Capital	Revenue
	Capital	Account	Reserve	Reserve	Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2008	30,486	53,204	4,658	(24,257)	3,952	68,043
(Loss)/profit after tax	-	-	-	(29,409)	2,525	(26,884)
Equity dividends	-	-	-	-	(3,201)	(3,201)
	_______	_______	_______	_______	_______	_______
Balance at 31 March 2009	30,486	53,204	4,658	(53,666)	3,276	37,958
	_______	_______	_______	_______	_______	_______
Year ended 30 September 2009 (audited)
		Share
	Share	Premium	Special	Capital	Revenue
	Capital	Account	Reserve	Reserve	Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2008	30,486	53,204	4,658	(24,257)	3,952	68,043
(Loss)/profit after tax	-	-	-	(12,986)	3,957	(9,029)
Equity dividends	-	-	-	-	(5,022)	(5,022)
	_______	_______	_______	_______	_______	_______
Balance at 30 September 2009	30,486	53,204	4,658	(37,243)	2,887	53,992
	_______	_______	_______	_______	_______	_______

GROUP CASH FLOW STATEMENT

FOR THE HALF YEAR ENDED 31 MARCH 2010

	Six months	Six months	Year
	ended	ended	ended
	31 March	31 March	30 September
	2010	2009	2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Cash flows from operating activities
Investment income received	1,237	2,950	5,389
Deposit interest received	-	278	293
Underwriting income received	2	18	41
Other cash receipts	538	549	605
Administrative expenses paid	(332)	(570)	(806)
	_________	_________	_________
Cash generated from operations	1,445	3,225	5,522
Interest paid	(15)	-	(2)
Taxation	(235)	(429)	(753)
	_________	_________	_________
Net cash inflows from operating activities	1,195	2,796	4,767
	_________	_________	_________
Cash flows from investing activities
Purchases of investments	(4,484)	(13,301)	(31,937)
Sales of investments	6,620	38,166	84,434
Zero coupon finance repaid	-	(28,442)	(67,396)
	_________	_________	_________
Net cash inflow/(outflow) from investing activities	2,136	(3,577)	(14,899)
	_________	_________	_________
Net cash inflow/(outflow) before financing	3,331	(781)	(10,132)
Financing activities
Buyback of Ordinary shares	(2,560)	-	-
Dividends paid	(1,455)	(3,201)	(5,022)
	_________	_________	_________
Net cash outflow before management of liquid resources	(684)	(3,982)	(15,154)
Management of liquid resources
Purchase of AAA money market funds	-	(1,141)	(1,141)
Sale of AAA money market funds	-	7,479	7,479
	_________	_________	_________
Net cash inflow from management of liquid resources	-	6,338	6,338
	_________	_________	_________
Net (decrease)/increase in cash and short term deposits	(684)	2,356	(8,816)
Cash and short term deposits at the start of the period	1,896	10,730	10,730
Effect of foreign exchange rate changes	-	-	(18)
	_________	_________	_________
Cash and short term deposits at the end of the period	1,212	13,086	1,896
	_________	_________	_________

DISTRIBUTION OF ASSETS

	Valuation at					Valuation at
	30 September				Appreciation/	31 March
	2009		Purchases	Sales	(depreciation)	2010
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	49,633	91.9	4,209	(6,620)	4,943	52,165	93.6
Convertibles	238	0.4	-	-	(2)	236	0.4
Other fixed interest	1,975	3.7	275	-	41	2,291	4.1
	_______	_____	_______	_______	_______	_______	_____
	51,846	96.0	4,484	(6,620)	4,982	54,692	98.1
	_______	_____	_______	_______	_______	_______	_____
Current assets	2,666	4.9				1,479	2.6
Current liabilities	(520)	(0.9)				(412)	(0.7)
	_______	_____				_______	_____
Net assets	53,992	100.0				55,759	100.0
	_______	_____				_______	_____
Net asset value per share	44.47p					48.25p
	_______					_______

NOTES TO THE ACCOUNTS

1.	Accounting policies
	(a)	Basis of accounting
		The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) 34 - 'Interim Financial Reporting', as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). They have also been prepared using the same accounting policies applied for the year ended 30 September 2009 financial statements, which received an unqualified audit report.
	(b)	Dividends payable
		Dividends are recognised in the period in which they are paid.

		Six months ended	Six months ended	Year ended
		31 March 2010	31 March 2009	30 September 2009
2.	Income	£'000	£'000	£'000
	Income from listed investments
	UK dividend income	997	1,341	2,548
	Overseas dividend income	281	-	-
	Interest income from investments	-	991	1,371
	Stock dividend	-	-	47
		_________	_________	_________
		1,278	2,332	3,966
		_________	_________	_________
	Other income from investment activity
	Underwriting income	2	18	41
	Deposit interest	-	211	242
	AAA money market funds interest	-	43	43
	Interest on recoverable VAT on management fees	-	-	72
	Traded option premiums	-	460	506
		_________	_________	_________
		2	732	904
		_________	_________	_________
		1,280	3,064	4,870
		_________	_________	_________

3.	Taxation
	Following changes in the Finance Bill 2009 dividends and other distributions from foreign companies received on or after 1 July 2009 have largely been exempt from UK corporation tax. However, the Company continues to be subject to irrecoverable US withholding tax of 15% on income received from US portfolio holdings.

4.	The following table shows the revenue for each period less the dividends declared in respect of the financial period to which they relate.
		Six months ended	Six months ended	Year ended
		31 March  2010{A}	31 March 2009 {B}	30 September 2009{C}
		£'000	£'000	£'000
	Revenue	990	2,525	3,957
	Dividends declared	(1,066)	(1,821)	(3,643)
		_________	_________	_________
		(76)	704	314
		_________	_________	_________
	{A}    Dividends declared relate to first two interim dividends (both 0.45p each) declared in respect of the financial year 2009/10.
	{B}    Dividends declared relate to first two interim dividends (both 0.75p each) declared in respect of the financial year 2008/09.
	{C}    Dividends declared relate to the four interim dividends declared in respect of the financial year 2008/09 totalling 3.00p.

		Six months ended	Six  months ended	Year ended
		31 March 2010	31 March 2009	30 September 2009
5.	Return and net asset value per share	p	p	p
	Revenue return	0.83	2.08	3.26
	Capital return	4.10	(24.22)	(10.70)
		_________	_________	_________
	Total return	4.93	(22.14)	(7.44)
		_________	_________	_________
	The figures above are based on the following attributable assets:
		£'000	£'000	£'000
	Revenue return	990	2,525	3,957
	Capital return	4,921	(29,409)	(12,986)
		_________	_________	_________
	Total return	5,911	(26,884)	(9,029)
		_________	_________	_________
	Weighted average number of Ordinary shares in issue	119,943,077	121,413,532	121,413,532
		_________	_________	_________
	The net asset value per share is based on net assets attributable to shareholders of £55,759,000 (31 March 2009 - £37,958,000; 30 September 2009 - £53,992,000) and on 115,551,182 (31 March 2009 - 121,413,532; 30 September 2009 - 121,413,532) Ordinary shares in issue at the period end.

6.	Capital reserve
	The capital reserve reflected in the Balance Sheet at 31 March 2010 includes gains of £6,522,000 (31 March 2009 - losses of £35,119,000; 30 September 2009 - gains of £427,000) which relate to the revaluation of investments held at the reporting date.

7.	Transaction costs
	During the period expenses were incurred in acquiring or disposing of investments classified as fair value though profit or loss. These have been expensed through capital and are included within gains/(losses) on investments in the Consolidated Income Statement. The total costs were as follows:
		Six months ended	Six months ended	Year ended
		31 March 2010	31 March 2009	30 September 2009
		£'000	£'000	£'000
	Purchases	24	45	128
	Sales	9	27	57
		_________	_________	_________
		33	72	185
		_________	_________	_________

8.	Publication of non-statutory accounts
	The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 31 March 2010 and 31 March 2009 has not been audited.
	The information for the year ended 30 September 2009 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.

9.       This Half Yearly Financial Report was approved by the Board on 4 May 2010.

10.    This Half Yearly Financial Report will shortly be available on the Company's website (www.glasgowincometrust.co.uk) and will be posted to shareholders in May 2010.

The report will also be available on the Manager's website (www.taml.co.uk)

For Troy Income & Growth Trust PLC

Aberdeen Asset Management PLC

Secretaries

4 May 2010

 

END

 

 

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