New Star Investment Trust PLC (NSI)
New Star Investment Trust PLC: Half Year Results of the six months ended
31st December 2019
20-March-2020 / 16:53 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
NEW STAR INVESTMENT TRUST PLC
HALF YEAR RESULTS FOR THE SIX MONTHSED 31st DECEMBER 2019
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVE
The Company's objective is to achieve long-term capital growth.
31st December 30th June %
2019
2019 Change
PERFORMANCE
Net assets (GBP '000) 117,559 113,971 3.1
Net asset value per 165.52p 160.47p 3.1
Ordinary share
Mid-market price per 117.00p 111.00p 5.4
Ordinary share
Discount of price to 29.31% 30.83% n/a
net asset value
Six months ended Six months ended
31st December 31st December
2019 2018
Total Return* 4.02% -4.63% n/a
IA Mixed Investment 4.41% -6.62% n/a
40-85% Shares (total
return)
MSCI AC World Index 4.89% -5.47% n/a
(total return,
sterling adjusted)
MSCI UK Index (total 3.03% -10.04% n/a
return)
Six months ended Six months ended
31st December 31st December
2019 2018
REVENUE
Return (GBP'000) 792 607
Return per Ordinary share 1.1p 0.85p
Proposed dividend per Ordinary - -
share
Dividend paid per Ordinary 1.40p 1.00p
share
TOTAL RETURN
Return (GBP'000) 4,582 (5,154)
Net assets 3.1% -5.3%
Net assets (dividend added 4.0% -4.6%
back)
* The total return figure for the Group represents the revenue and capital
return shown in the consolidated statement of comprehensive income plus
dividends paid (the alternative performance measure).
INTERIM REPORT
CHAIRMAN'S STATEMENT
PERFORMANCE
Your Company generated a positive total return of 4.02% over the six months
to 31st December 2019, taking the net asset value (NAV) per ordinary share
to 165.52p. By comparison, the Investment Association's Mixed Investment
40-85% Shares Index rose 4.41%. The MSCI AC World Total Return Index rose
4.89% while the MSCI UK Total Return Index rose 3.03%. Over the same period,
UK government bonds returned 2.05%. Further information is provided in the
investment manager's report.
Your Company made a revenue profit for the six months of GBP792,000 (2018:
GBP607,000).
GEARING AND DIVIDS
Your Company has no borrowings and ended the period under review with cash
representing 14.28% of its NAV. Your Company has small retained revenue
reserves and your Directors do not recommend the payment of an interim
dividend (2018: nil). Your Company paid a dividend of 1.4p per share (2018:
1.0p) in November 2019 in respect of the previous financial year.
DISCOUNT
During the period, your Company's shares continued to trade at a significant
discount to their NAV. The Board keeps this issue under review.
PERFORMANCE FEE
In November 2019, your Company announced that the current performance fee
arrangement was not appropriate in a low interest rate environment. The
current performance fee arrangements ceased from 1 January 2020. A
performance fee of GBP622,000 (2018: GBPnil) was payable in respect of the
period under review.
OUTLOOK
Risky assets fell sharply in the early spring of 2020 as the Covid-19 virus
spread. Equity markets bore the brunt but corporate bonds and property also
registered declines. Central Banks have responded with unprecedented
interest rate reductions, increased quantitative easing and measures to
stimulate lending.
Monetary policy alone, however, is unlikely to be sufficient to address the
downturn because the virus impact is a supply-side shock, causing work place
closures and supply chain disruption. As a result, governments have moved to
alleviate the impact on businesses and families to shield the economy from
serious long-term harm.
Risky assets are likely to remain weak and volatile until the Covid-19
outbreak moderates. Your Company, however, entered this difficult period
with substantial cash holdings. Over the coming weeks, your Company's
defensive assets may provide some capital protection. There should also be
opportunities for your Company to deploy cash in investments with attractive
long-term potential, including in equity markets.
NET ASSET VALUE
Your Company's unaudited NAV per share at 29th February 2020 was 156.62p.
Your Company's unaudited NAV per share at 19th March 2020 was 136.12p.
Geoffrey Howard-Spink
Chairman
20th March 2020
INVESTMENT MANAGER'S REPORT
MARKET REVIEW
Global equities rose 4.89% and bonds fell 2.77% in sterling over the six
months to 31st December 2019 as central banks maintained policies of
monetary easing. Returns in overseas stock markets were stronger but
sterling investors were adversely affected as the pound rose against the
euro, yen and dollar by 5.60%, 4.99% and 4.09% respectively.
The Federal Reserve reduced interest rates by three-quarters of a percentage
point to 1.5-1.75%. Jobs data were strong but inflation remained below its
2% target. The European Central Bank increased further its negative interest
rate by 10 basis points to -0.5%, said interest rates would not rise until
inflation was closer to 2% and resumed asset purchases. The Bank of England
left its bank rate unchanged. UK government and sterling corporate bonds
rose 2.05% and 3.52% respectively over the period. Gold and gold securities
rose 3.07% and 10.92% respectively in sterling as the opportunity cost of
holding this nil-yielding asset remained low.
The Conservatives won December's UK election, averting a shift to the left.
UK stocks rose 3.03% but smaller companies, typically more sensitive to
domestic conditions, outperformed, rising 13.28%. Sterling briefly rose
above $1.35 but retreated as investors decided the risk of a "no deal"
Brexit had not disappeared, with the government legislating that a trade
deal had to be agreed during 2020, setting a demanding timetable. UK assets
are likely to prove sensitive to news about the talks.
Progress in Sino-US trade talks was confirmed when an interim deal was
signed in January 2020. Equities in emerging markets and Asia excluding
Japan benefited from end-of-year optimism but still lagged, up 3.11% and
2.74% respectively in sterling. Under the deal, China will increase
purchases of US goods and improve the protection of intellectual property.
In return, December's planned tariff increases were cancelled. The thornier
issues of national security and technology are outside the deal's scope and
may never be resolved. Protectionism is likely to remain a feature of US
trade policy.
US equities outperformed, rising 6.56% in sterling, with technology stocks,
up 13.57%, leading the way. Steady US jobs data supported consumer spending
but business investment and exports were weak. The Sino-US agreement may,
however, provide a fillip to exports in the longer term. China's economy
expanded 6% year-on-year during the period, the lowest growth rate since
1992.
PORTFOLIO REVIEW
Your Company's total return over the period under review was 4.56% before
performance fees and 4.02% after performance fees. By comparison, the
Investment Association's Mixed Investment 40-85% Shares sector, comprising a
peer group of multi-asset funds that typically invest 40-85% of their assets
in global equities, rose 4.41%. The MSCI AC World Total Return Index rose
4.89% in sterling while the MSCI UK Total Return Index rose 3.03%. Your
Company benefited from investments in funds invested in UK smaller
companies, gold securities and technology stocks. The high allocation to
dollar cash, however, hurt performance as sterling strengthened.
The Aberforth Split Level Income investment trust was the portfolio's best
performer, rising 26.09%, partly as a result of the leverage provided by its
zero-dividend preference shares. The manager takes a value-oriented approach
to investing in UK smaller companies. Such companies performed strongly as
the Tories' election victory reduced domestic political risk and
strengthened the government's hand in its EU trade negotiations. Chelverton
UK Equity Income, which also invests in smaller companies, rose 14.67%. Your
Company's holding was increased in November. The Aberforth and Chelverton
funds have above-average dividend yields and their income is derived from a
broad range of sectors in contrast to the income from the FTSE 100 Index,
which is dominated by financial and resources stocks. Man GLG UK Income and
MI Brompton UK Recovery outperformed, benefitting from gains among small and
medium-sized companies. Trojan Income and Schroder Income focus on larger
companies but both outperformed, gaining 7.79% and 5.32% respectively.
BlackRock Gold & General gained 6.24%, beating the return from physical gold
but lagging the returns from gold miners. A minimum of 70% of the portfolio
is held in miners of precious metals. Miners typically offer a geared return
on gold because gold price changes are magnified in their share prices as a
result of operational gearing and financial leverage. The sector
consolidated in 2019 through mergers that will generate operational
efficiencies and scale benefits on top of any rise in the gold price. At the
period end, BlackRock Gold & General's two largest holdings were Barrick and
Newmont, which each represented about 10% of the portfolio as a result of
mergers. Regulatory reasons prevent the fund manager from increasing these
holdings yet these businesses account for a larger proportion of the sector.
This may at times lead the fund's performance to diverge from the sector.
During the period, your Company had no direct investments in US equity
funds. This hurt performance because US equities outperformed, driven by the
technology sector. Within your Company's global holdings, Polar Capital
Global Technology rose 9.73%, benefitting from its holdings in US technology
companies such as Microsoft, Alphabet, Apple and Facebook. Fundsmith Equity
underperformed, however, rising 2.79%.
Amongst your Company's emerging market equity holdings, the HSBC Russia
Capped exchange-traded fund did best, rising 11.68% in line with the gain
from Russian stocks. Stewart Investors Indian Subcontinent was, however, the
weakest holding, falling 3.22% as Indian stocks fell 4.04% in sterling in
response to slower economic growth. Emerging market debt outperformed global
bonds over the period. Franklin Templeton Emerging Markets Bond lagged,
however, down 5.24% as a result of its holdings in Argentine bonds, which
fell as politics shifted to the left.
Bond market weakness held back returns within EF Brompton Global
Conservative, which returned 3.37%, while the Aquilus Inflection hedge fund
returned 0.61%.
The valuation of your Company's unquoted portfolio rose 13.59% to GBP8.39
million over the period. This was solely due to a revaluation of the
shareholding in the largest unquoted holding, Embark, to the price paid by
new external investors in a GBP45 million fundraising in November. Embark has
continued to grow its assets under administration aggressively, both
organically and through acquisition.
OUTLOOK
Risky assets fell sharply across the world in the early spring of 2020 as
the Covid-19 virus spread outside China. Equity markets bore the brunt of
the falls but other asset classes including corporate bonds and commercial
property also registered significant declines. Major Central Banks across
the developed world and in emerging markets have responded to the economic
shock with sweeping measures. These included unprecedented interest rate
reductions in the US and the UK, as official rates were cut to near zero.
Other initiatives included increased quantitative easing and measures
designed to stimulate bank lending. Monetary policy alone, however, is
unlikely to be sufficient to address the global downturn because the virus
impact is a supply-side shock, with work places closing and supply chains
disrupted. Government measures targeted at alleviating the economic impact
on businesses and families are, therefore, likely to be critical in ensuring
the economy emerges strongly once this temporary shock subsides. In the
meantime, equities and other risky assets are likely to remain weak and
volatile until the numbers of new coronavirus cases moderate across the
world. This may take some months.
Your Company entered this period of turmoil with substantial investments in
cash, in particular in dollars. Some of the defensive assets in your
Company's portfolio such as gold and lower-risk multi-asset funds may
provide some capital protection over the coming weeks. There should also be
opportunities for long-term investors such as your Company to deploy its
cash in investments with attractive long-term potential, in particular in
equity markets.
Brompton Asset Management LLP, 20th March 2020
DIRECTORS' REPORT
PERFORMANCE
In the six months to 31st December 2019 the total return per Ordinary share
was 4.0% (2018: negative 4.6%) and the NAV per ordinary share increased to
165.52p, whilst the share price increased by 5.4% to 117.00p. This compares
to an increase of 4.4% in the IA Mixed Investment 40-85% Shares Index.
INVESTMENT OBJECTIVE
The Company's investment objective is to achieve long-term capital growth.
INVESTMENT POLICY
The Company's investment policy is to allocate assets to global investment
opportunities through investment in equity, bond, commodity, real estate,
currency and other markets. The Company's assets may have significant
weightings to any one asset class or market, including cash.
The Company will invest in pooled investment vehicles, exchange traded
funds, futures, options, limited partnerships and direct investments in
relevant markets. The Company may invest up to 15% of its net assets in
direct investments in relevant markets.
The Company will not follow any index with reference to asset classes,
countries, sectors or stocks. Aggregate asset class exposure to any one of
the United States, the United Kingdom, Europe ex UK, Asia ex Japan, Japan or
Emerging Markets and to any individual industry sector will be limited to
50% of the Company's net assets, such values being assessed at the time of
investment and for funds by reference to their published investment policy
or, where appropriate, their underlying investment exposure.
The Company may invest up to 20% of its net asset value in unlisted
securities (excluding unquoted pooled investment vehicles) such values being
assessed at the time of investment. The Company will not invest more than
15% of its net assets in any single investment, such values being assessed
at the time of investment.
Derivative instruments and forward foreign exchange contracts may be used
for the purposes of efficient portfolio management and currency hedging.
Derivatives may also be used outside of efficient portfolio management to
meet the Company's investment objective. The Company may take outright short
positions in relation to up to 30% of its net assets, with a limit on short
sales of individual stocks of up to 5% of its net assets, such values being
assessed at the time of investment. The Company may borrow up to 30% of net
assets for short-term funding or long-term investment purposes. No more than
10%, in aggregate, of the value of the Company's total assets may be
invested in other closed-ended investment funds except where such funds have
themselves published investment policies to invest no more than 15% of their
total assets in other listed closed-ended investment funds.
SHARE CAPITAL
The Company's share capital comprises 305,000,000 Ordinary shares of 1p
each, of which 71,023,695 (2018: 71,023,695) have been issued and fully
paid. No Ordinary shares are held in treasury, and none were bought back or
issued during the six months to 31st December 2019.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks identified by the Board, and the steps the Board takes
to mitigate them, are as follows:
Investment strategy: Inappropriate long-term strategy, asset allocation and
fund selection could lead to underperformance. The Board discusses
investment performance at each of its meetings and the Directors receive
reports detailing asset allocation, investment selection and performance.
Business conditions and general economy: The Company's future performance is
heavily dependent on the performance of different equity and currency
markets. The Board cannot mitigate the risks arising from adverse market
movements. However, diversification within the portfolio will reduce the
impact. Further information is given in portfolio risks below.
Portfolio risks - market price, foreign currency and interest rate risks:
The twenty largest investments are listed above. Investment returns will be
influenced by interest rates, inflation, investor sentiment,
availability/cost of credit and general economic conditions in the UK and
globally. A proportion of the portfolio is in investments denominated in
foreign currencies and movements in exchange rates could significantly
affect their sterling value. The Investment Manager takes all these factors
into account when making investment decisions but the Company does not
normally hedge against foreign currency movements. The Board's policy is to
hold a spread of investments in order to reduce the impact of the risks
arising from the above factors by investing in a spread of asset classes and
geographic regions.
Net asset value discount: The discount in the price at which the Company's
shares trade to net asset value means that shareholders cannot realise the
real underlying value of their investment. For a number of years the
Company's share price has been at a significant discount to the Company's
net asset value. The Directors review regularly the level of discount,
however given the investor base of the Company, the Board is very restricted
in its ability to influence the discount to net asset value.
Investment Manager: The quality of the team employed by the Investment
Manager is an important factor in delivering good performance and the loss
of key staff could adversely affect returns. A representative of the
Investment Manager attends each Board meeting and the Board is informed if
any changes to the investment team employed by the Investment Manager are
proposed.
Tax and regulatory risks: A breach of The Investment Trust (Approved
Company) (Tax) Regulations 2011 (the 'Regulations') could lead to capital
gains realised within the portfolio becoming subject to UK capital gains
tax. A breach of the UKLA Listing Rules could result in suspension of the
Company's shares, while a breach of company law could lead to criminal
proceedings, financial and/or reputational damage. The Board employs
Brompton Asset Management LLP as Investment Manager, and Maitland
Administration Services Limited as Secretary and Administrator, to help
manage the Company's legal and regulatory obligations.
Operational: Disruption to, or failure of, the Investment Manager's or
Administrator's accounting, dealing or payment systems or the Custodian's
records could prevent the accurate reporting and monitoring of the Company's
financial position. The Company is also exposed to the operational risk that
one or more of its suppliers may not provide the required level of service.
The Company receives regular reports from its contracted third parties.
INVESTMENT MANAGEMENT ARRANGEMENT AND RELATED PARTY TRANSACTIONS
In common with most investment trusts the Company does not have any
executive directors or employees. The day-to-day management and
administration of the Company, including investment management, accounting
and company secretarial matters, and custodian arrangements are delegated to
specialist third party service providers.
Details of related party transactions are contained in the Annual Report.
There have been no unusual material transactions with related parties during
the period which have had a significant impact on the performance of the
Company.
GOING CONCERN AND VIABILITY
The Directors believe that it is appropriate to continue to adopt the going
concern basis in preparing the accounts as the assets of the Company consist
mainly of securities that are readily realisable or cash and it has no
significant liabilities. Investment income exceeds annual expenditure and
current liquid net assets cover current annual expenses for many years.
Accordingly, the Company is of the opinion that it has adequate financial
resources to continue in operational existence for the foreseeable future
which is considered to be in excess of five years. Five years is considered
a reasonable time for investors when making their investment decisions. In
reaching this view the Directors reviewed the anticipated level of annual
expenditure against the cash and liquid assets within the portfolio. The
Directors have also considered the risks the Company faces.
AUDITORS
The half year financial report has been reviewed, but not audited, by Ernst
& Young LLP pursuant to the Auditing Practices Board guidance on the Review
of Interim Financial Information.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
- The financial statements contained within the half year financial report
to 31st December 2019 has been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting';
- The Chairman's statement, Directors' report or the Investment Manager's
report include a fair review of important events that have occurred during
the first six months of the financial year and their impact on the financial
statements;
- The Chairman's statement, Directors' report or the Investment Manager's
report include a fair review of the potential risks and uncertainties for
the remaining six months of the year; and
- The Director's report and note 8 to the half year financial report include
a fair review of the information concerning transactions with the investment
manager and changes since the last annual report.
By order of the Board
Maitland Administration Services Limited, 20th March 2020
SCHEDULE OF TOP TWENTY INVESTMENTS at 31st December 2019
Holding Investment Type Bid-market Value % of Net
Assets
GBP '000
Fundsmith Equity Investment Fund 7,952 6.76
Fund
Embark Group Unquoted 6,990 5.95
Investment
Polar Capital - Investment Fund 5,728 4.87
Global
Technology Fund
FP Crux European Investment Fund 5,267 4.48
Special
Situations Fund
Schroder Income Investment Fund 4,945 4.21
Fund
Aberforth Split Investment 4,506 3.83
Level Income Company
Trust
MI Chelverton UK Investment Fund 4,405 3.75
Equity Income
Fund
EF Brompton Investment Fund 4,355 3.70
Global
Conservative
Fund
BlackRock Investment Fund 3,926 3.34
Continental
European Income
Fund
Artemis Global Investment Fund 3,925 3.34
Income Fund
BlackRock Gold & Investment Fund 3,735 3.18
General Fund
Aquilus Investment Fund 3,721 3.17
Inflection Fund
Lindsell Train Investment Fund 3,364 2.86
Japanese Equity
Fund
EF Brompton Investment Fund 2,981 2.53
Global Equity
Fund
Man GLG UK Investment Fund 2,973 2.53
Income Fund
EF Brompton Investment Fund 2,962 2.52
Global
Opportunities
Fund
MI Brompton UK Investment Fund 2,851 2.42
Recovery Unit
Trust
EF Brompton Investment Fund 2,830 2.41
Global Growth
Fund
Liontrust Asia Investment Fund 2,758 2.35
Income Fund
First State Investment Fund 2,628 2.23
Indian
Subcontinent
Fund
82,802 70.43
Balance held in 18,716 15.92
21 investments
Total 101,518 86.35
investments
(excluding cash)
16,041 13.65
Net current
assets
(including cash) 117,559 100.00
Net Assets
The investment portfolio, excluding cash, can be further
analysed as follows:
GBP'000
Investment funds 84,023
Unquoted investments 8,390
Investment companies and exchange traded 8,086
funds
1,019
Other quoted investments
101,518
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended 31st
December 2019 (unaudited)
Six months ended
31st December 2019
(unaudited)
Revenue Return Capital Return Total
GBP '000
GBP '000 Return
GBP '000
Notes
INCOME
Investment income 1,127 - 1,127
Other operating 167 - 167
income
Total income 2 1,294 - 1,294
GAINS AND LOSSES
ON INVESTMENTS
Losses on 5 - 5,022 5,022
investments at
fair value through
profit or loss
Other exchange - (612) (612)
losses
Trail rebates - 2 2
1,294 4,412 5,706
EXPENSES
Management and 3 (364) (622) (986)
performance fees
Other expenses (138) - (138)
(502) (622) (1,124)
PROFIT /LOSS) 792 3,790 4,582
BEFORE TAX
Tax - - -
PROFIT /(LOSS) FOR 792 3,790 4,582
THE PERIOD
EARNINGS PER SHARE
Ordinary shares 4 1.11p 5.34p 6.45p
(pence)
The total return column of this statement represents the Group's profit and
loss account, prepared in accordance with IFRS. The supplementary Revenue
Return and Capital Return columns are both prepared under guidance published
by the Association of Investment Companies. All items in the above statement
derive from continuing operations. No operations were acquired or
discontinued during the period.
All income is attributable to the equity holders of the parent company.
There are no minority interests.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31st December 2018 and the year ended 30th June
2019
Six months ended Year ended
31st December 2018 30th June 2019
(unaudited) (audited)
Notes Revenue Capital Total Revenue Capital Total
Return Return Return Return Return Return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
INCOME
Investment 930 - 930 1,890 - 1,890
income
Other 147 - 147 349 - 349
operating
income
Total 2 1,077 - 1,077 2,239 - 2,239
income
GAINS AND
LOSSES ON
INVESTMENT
S
Gains on
investment
s at fair
value
through 5 - (6,168) (6,168) - 1,992 1,992
profit or
loss
Other - 405 405 - 443 443
exchange
losses
Trail - 2 2 - 5 5
rebates
1,077 (5,761) (4,684) 2,239 2,440 4,679
EXPENSES
Management 3 (339) - (339) (668) (410) (1,098
and )
performanc
e fees
Other (131) - (131) (266) - (266)
expenses
(470) - (470) (954) (410) (1,364
)
PROFIT 607 (5,761) (5,154) 1,285 2,030 3,315
BEFORE TAX
Tax - - - - - -
PROFIT FOR 607 (5,761) (5,154) 1,285 2,030 3,315
THE PERIOD
EARNINGS
PER SHARE
Ordinary 4 0.85p (8.11)p (7.26)p 1.81p 2.86p 4.67p
shares
(pence)
The total return column of this statement represents the Group's profit and
loss account, prepared in accordance with IFRS. The supplementary Revenue
Return and Capital Return columns are both prepared under guidance published
by the Association of Investment Companies. All items in the above statement
derive from continuing operations. No operations were acquired or
discontinued during the periods.
All income is attributable to the equity holders of the parent company.
There are no minority interests.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31st
December 2019 (unaudited)
Share Share Special Retained
premium reserve earnings
capital Total
GBP '000 GBP '000 GBP '000
GBP '000 GBP '000
At 30th JUNE 710 21,573 56,908 34,780 113,971
2019
Total - - - 4,582 4,582
comprehensive
income for
the period
Dividend paid - - - (994) (994)
At 31st 710 21,573 56,908 38,368 117,559
DECEMBER 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31st
December 2018 (unaudited)
Share Share Special Retained
premium reserve earnings
capital Total
GBP '000 GBP '000 GBP '000
GBP '000 GBP '000
At 30th JUNE 710 21,573 56,908 32,175 111,366
2018
Total - - - (5,154) (5,154)
comprehensive
income for
the period
Dividend paid - - - (710) (710)
At 31st 710 21,573 56,908 26,311 105,502
DECEMBER 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30th June
2019 (audited)
Share Share Special Retained
premium reserve earnings
capital Total
GBP '000 GBP '000 GBP '000
GBP '000 GBP '000
At 30th JUNE 710 21,573 56,908 32,175 111,366
2018
Total - - - 3,315 3,315
comprehensive
income for
the year
Dividend paid - - - (710) (710)
At 30th JUNE 710 21,573 56,908 34,780 113,971
2019
CONSOLIDATED BALANCE SHEET at 31st December 2019
Notes 31st December 31st December 30th June
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP '000 GBP '000 GBP '000
NON-CURRENT ASSETS
Investments at fair
value through profit
or loss
5 101,518 83,561 93,782
CURRENT ASSETS
Other receivables 100 213 220
Cash and cash 16,786 21,938 20,605
equivalents
16,886 22,151 20,825
TOTAL ASSETS 118,404 105,712 114,607
CURRENT LIABILITIES
Other payables (845) (210) (636)
TOTAL ASSETS LESS
CURRENT LIABILITIES
117,559 105,502 113,971
NET ASSETS 117,559 105,502 113,971
EQUITY ATTRIBUTABLE
TO EQUITY HOLDERS
Called-up share 710 710 710
capital
Share premium 21,573 21,573 21,573
Special reserve 56,908 56,908 56,908
Retained earnings 6 38,368 26,311 34,780
TOTAL EQUITY 117,559 105,502 113,971
NET ASSET VALUE PER 7 165.52p 148.54p 160.47p
ORDINARY SHARE
(PENCE)
The interim report was approved and authorised for issue by the Board on
20th March 2020.
CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31st December 2019
Six months Six months Year
ended ended ended
31st December 31st December 30th June
2019 2018 2019
(unaudited) (unaudited) (audited)
GBP '000 GBP '000 GBP '000
NET CASH INFLOW FROM 501 644 1,334
OPERATING ACTIVITIES
INVESTING ACTIVITIES
Purchase of investments (2,722) (2,023) (4,340)
Sale of investments 8 8,595 8,851
NET CASH INFLOW/(OUTFLOW)
FROM INVESTING ACTIVITIES
(2,714) 6,572 4,511
FINANCING
Equity dividend paid (994) (710) (710)
NET CASH INFLOW/(OUTFLOW) (3,207) 6,506 5,135
AFTER FINANCING
INCREASE /(DECREASE) IN (3,207) 6,506 5,135
CASH
RECONCILIATION OF NET CASH
FLOW TO MOVEMENT IN NET
FUNDS
Increase/(Decrease) in (3,207) 6,506 5,135
cash resulting from cash
flows
Exchange movements (612) 405 443
Movement in net funds (3,819) 6,911 5,578
Net funds at start of 20,605 15,027 15,027
period/year
NET FUNDS AT OF 16,786 21,938 20,605
PERIOD/YEAR
RECONCILIATION OF
(LOSS)/PROFIT BEFORE
FINANCE COSTS AND TAXATION
TO NET CASH FLOW FROM
OPERATING ACTIVITIES
Profit/( Loss) before 4,582 (5,154) 3,315
finance costs and taxation
*
(Gains)/Loss on (5,022) 6,168 (1,992)
investments
Exchange differences 612 (405) (443)
Management fee rebates (2) (2) (5)
Revenue profit before 170 607 875
finance costs and taxation
Decrease in debtors 120 59 43
Increase/(Decrease) in 209 (24) 402
creditors
Taxation - - 9
Management fee rebates 2 2 5
NET CASH INFLOW FROM 501 644 1,334
OPERATING ACTIVITIES
* Includes dividends received in cash of GBP1,013,000 (30th June 2019:
GBP1,599,000) (2018: GBP788,000), accumulation income of GBP222,000 (30th June
2019: GBP278,000) (2018: GBP255,000) and interest income of GBP167,000 (30th June
2019: GBP408,000) (2018: GBP84,000)
NOTES TO THE INTERIM FINANCIAL STATEMENTS for the six months ended 31st
December 2019
1. ACCOUNTING POLICIES
The condensed consolidated interim financial statements comprise the
unaudited results of the Company and its subsidiary, JIT Securities Limited
(together "the Group"), for the six months to 31st December 2019. The
comparative information for the six months to 31st December 2018 and the
year to 30th June 2019 are a condensed set of accounts and do not constitute
statutory accounts under the Companies Act 2006. Full statutory accounts for
the year to 30th June 2019 included an unqualified audit report, did not
contain any statements under section 498 of the Companies Act 2006, and have
been filed with the Registrar of Companies.
The half year financial statements have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting', and are
presented in pounds sterling, as this is the Group's functional currency.
The same accounting policies have been followed in the interim financial
statements as applied to the accounts for the year ended 30th June 2019,
which were prepared in accordance with IFRSs as adopted by the European
Union.
No segmental reporting is provided as the Group is engaged in a single
segment.
2. TOTAL INCOME
Six months Six months Year ended 30th
ended 31st ended 31st June
December 2019 December 2018
2019
GBP'000 GBP'000
GBP'000
Income from
Investments
UK net dividend 1,045 792 1,691
income
Unfranked 82 138 199
investment income
1,127 930 1,890
Other Income
Bank interest 167 140 336
receivable
Loan interest - 7 13
income
167 147 349
Six months Six months Year ended 30th
ended 31st ended 31st June
December 2019 December 2018
2019
GBP'000 GBP'000
GBP'000
Total income
comprises
Dividends 1,127 930 1,890
Other income 167 147 349
1,294 1,077 2,239
3. MANAGEMENT FEES
Six months Six months Year ended
ended 31st ended 31st 30th June
December 2019 December 2018
2019
GBP'000 GBP'000
GBP'000
Investment 364 339 688
management fee
Performance fee 622 - 410
986 339 1,098
The Investment Manager receives a management fee, payable quarterly in
arrears, equivalent to an annual 0.75 per cent of total assets after the
deduction of the value of any investments managed by the Investment Manager
or its associates (as defined in the investment management agreement). The
Investment Manager was also entitled to a performance fee of 15% of the
growth in net assets over a hurdle of 3-month Sterling LIBOR plus 1% per
annum, payable six monthly in arrears, subject to a high water mark. The
aggregate of the Company's management fee and any performance fee is subject
to a cap of 4.99% of net assets in any financial year (with any performance
fee in excess of this cap capable of being earned in subsequent periods).
The performance fee will be charged 100% to capital, in accordance with the
Board's expectation of how any out-performance will be generated. A
performance fee of GBP622,000 was payable in respect of the period.
The Company has agreed with the Investment Manager that the existing
performance fee was not appropriate in a low interest rate environment.
Accordingly the current performance fee agreement ceased with effect from
1st January 2020.
4. RETURN PER ORDINARY SHARE
Six months Six months ended Year ended
ended 31st 31st December 30th June
December 2019 2018
2019
GBP'000 GBP'000
GBP'000
Revenue return 792 607 1,285
Capital return 3,790 (5,761) 2,030
Total return 4,582 (5,154) 3,315
Weighted average 71,023,695 71,023,695 71,023,695
number of
Ordinary shares
Revenue return 1.11p 0.85p 1.81p
per Ordinary
share
Capital return 5.34p (8.11)p 2.86p
per Ordinary
share
Total return per 6.45p (7.26)p 4.67p
Ordinary share
5. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
At At At
31st December 31st December 2018 30th June
2019
GBP'000 2019
GBP'000
GBP'000
GROUP AND COMPANY 101,518 83,561 93,782
ANALYSIS OF
INVESTMENT
PORTFOLIO - GROUP
AND COMPANY
Six months ended
31st December 2019
Listed* Unlisted** Total
(level 1 and 2) (level 3)
GBP'000 GBP'000 GBP'000
Opening book cost 60,372 8,448 68,820
Opening investment 26,024 (1,062) 24,962
holding
gains/(losses)
Opening valuation 86,396 7,386 93,782
Movement in
period:
Purchase at cost 2,722 - 2,722
Sales
- Proceeds (8) - (8)
- Realised gains 8 - 8
on sales
Movement in 4,010 1,004 5,014
investment holding
gains/(losses)
Closing valuation 93,128 8,390 101,518
at 31 December
2019
Closing book cost 63,094 8,448 71,542
Closing investment 30,034 (58) 29,976
holding
gains/(losses)
Closing valuation 93,128 8,390 101,518
* Listed investments include unit trust and OEIC funds which are valued at
quoted prices. Included within Listed Investments is one monthly valued
investment of GBP3,721,000 (30th June 2019: GBP3,698,000) (2018: GBP3,562,000).
** The Unlisted investments, representing just over 7% of the Company's NAV,
have been valued in accordance with IPEVC valuation guidelines. The largest
unquoted investment amounting to GBP6,990,000 (30th June 2019: GBP5,942,000)
(2018: GBP3,268,000) was valued at the latest transaction price. The second
largest investment has been valued based on cost and is in its development
phase. A 10% increase or decrease in the earnings of the largest investment
would not have a material impact on the valuation of the investment. This
investment has not reached maturity and is not valued on the basis of its
current earnings.
There were no reclassifications for assets between Level 1, 2 and 3.
Six months ended Six months ended Year
31st December 31st December ended
2019 2018
30th June
GBP'000 GBP'000
2019
GBP'000
ANALYSIS OF CAPITAL
GAINS AND LOSSES
Realised gains on 8 4,168 4,175
sales of investments
Increase in 5,014 (10,336) (2,183)
investment holding
gains/( losses)
5,022 (6,168) 1,992
6. RETAINED EARNINGS
At At At
31st December 31st December 30th
2019 2018 June
GBP'000 GBP'000 2019
GBP'000
Capital reserve - 6,769 8,339 7,977
realised
Capital reserve - 29,959 16,809 24,962
revaluation
Revenue reserve 1,640 1,163 1,841
38,368 26,311 34,780
7. NET ASSET VALUE PER ORDINARY SHARE
31st December 31st December 30th June
2019 2018
2019
GBP'000 GBP'000
GBP'000
Net assets 117,559 105,502 113,971
attributable to
Ordinary
shareholders
Ordinary shares in 71,023,695 71,023,695 71,023,69
issue at end of 5
period
Net asset value 165.52p 148.54p 160.47p
per Ordinary share
8. TRANSACTIONS WITH THE INVESTMENT MANAGER
During the period there have been no new related party transactions that
have affected the financial position or performance of the Group.
Since 1st January 2010 Brompton has acted as Investment Manager to the
Company. This relationship is governed by an agreement dated 23rd December
2009.
Mr Duffield is the senior partner of Brompton Asset Management Group LLP the
ultimate parent of Brompton. Mr Duffield owns a majority (59.14%) of the
shares in the Company.
Mr Gamble has an immaterial holding in Brompton Asset Management Group
Limited LLP.
The total investment management fee payable to Brompton for the half year
ended 31st December 2019 was GBP364,000 (30th June 2019: GBP688,000) (2018:
GBP339,000) and at the half year GBP183,000 (30th June 2019: GBP177,000) (2018:
GBP164,000) was accrued. The performance fee payable in respect of the six
months ended 31st December 2019 was GBP622,000 (30th June 2019: GBP410,000)
(2018: GBPnil). The existing performance fee arrangements ceased with effect
from 1 January 2020.
The Group's investments include seven funds managed by Brompton or its
associates valued at GBP20,551,000 (30th June 2019: GBP19,680,000) (2018:
GBP18,001,000). No investment management fees were payable directly by the
Company in respect of these investments.
9. POST BALANCE SHEET EVENTS
Coronavirus and the current pandemic has resulted in a significant fall in
the market and introduced significant market volatility. Further details are
provided in the Chairman's Statement and Investment Manager's Report above.
The Company's unaudited NAV per share was 136.12p and the share price was
95p at close of business on 19th March 2020.
ISIN: GB0002631041
Category Code: IR
TIDM: NSI
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited
reviews
Sequence No.: 53855
EQS News ID: 1003555
End of Announcement EQS News Service
(END) Dow Jones Newswires
March 20, 2020 12:53 ET (16:53 GMT)
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