TIDMICTA
RNS Number : 3389Q
Investors Capital Trust PLC
28 November 2016
To: RNS
From: Investors Capital Trust plc
Date: 28 November 2016
Interim Results
The Board of Investors Capital Trust plc announces the unaudited
interim results of the Company for the six month period to 30
September 2016.
Highlights
-- Net asset value total return per share for the six months of
13.4 per cent, compared to the FTSE All-Share Capped 5% Index total
return of 12.7 per cent.
-- Expected distribution yield of 4.8 per cent on A shares and
4.9 per cent on B shares at 30 September 2016, based on expected
dividends for the year ended 31 March 2017. This compares with the
yield on the FTSE All-Share Capped Index of 3.4 per cent.
-- Distributions paid quarterly. Interim dividends in respect of
the period increased by 2.6 per cent compared to the prior
year.
Chairman's Statement
Introduction
The decision of the UK to vote in favour of leaving the European
Union, was contrary to investor expectations and as a consequence,
resulted in sharp falls in both the UK equity market and Sterling.
In contrast, gilts rallied as investors sought-out safe haven
assets. This initial market weakness proved to be short-lived as
investors began to consider the beneficial impact of the
devaluation of Sterling on the predominantly overseas earnings base
of the UK market. The majority of UK equity market revenues come
from overseas, making the UK one of the most internationally
diversified of the developed stock markets. Markets were also
reassured by comments from Mark Carney, Governor of the Bank of
England that the central bank would consider additional monetary
stimulus in the event of any near-term impact on the UK economy.
Indeed, in early August, the Bank of England reduced interest rates
for the first time in seven years to a record low level of 0.25%
and at the same time announced it would restart its asset
purchasing, quantitative easing programme. Against this background
the UK equity market quickly regained its composure and went on to
end the period under review at close to record high levels, with
the more internationally diversified large cap stocks outpacing
their more domestically orientated mid and small cap
counterparts.
Investment Objective and Policy
The Company's investment objective is to provide an attractive
return to shareholders in the form of dividends and/or capital
distributions, together with prospects for capital growth.
As at 30 September 2016, 85.3 per cent. of total assets was
allocated to the Equities Portfolio and 8.1 per cent. to the Higher
Yield Portfolio. The remaining 6.6 per cent. was held as cash and
cash equivalents.
Investment Performance
Returns from the Equities Portfolio and the Higher Yield
Portfolio, combined with the effect of borrowings, resulted in the
net asset value total return for the A shares and B shares of 13.4
per cent. over the six months to 30 September 2016. This return was
ahead of the 12.7 per cent. total return for the benchmark FTSE
All-Share Capped 5% Index. Since the Company's launch in March
2007, the net asset value total return for the A shares and B
shares has been 82.0 per cent. which exceeds the 70.5 per cent.
return from the benchmark index and reflects strong outperformance
from the Equities Portfolio.
During the six months to 30 September 2016, the Company's
Equities Portfolio produced a total return of 12.5 per cent. The
Higher Yield Portfolio is invested in predominantly investment
grade corporate bonds and returned 3.6 per cent. in total return
terms for the six months to 30 September 2016.
Earnings, Dividends and Capital Distributions
The Company earned total revenue income of GBP2.9m for the six
months. The yield on the Equities Portfolio was 3.8 per cent. as at
30 September 2016, compared to the yield on the FTSE All-Share
Capped 5% Index of 3.4 per cent.
Income from the Equities Portfolio rose by 4.6% compared with
the same six month period last year which was in part due to the
weakening of sterling relative to the US dollar. In total, special
dividends added GBP76,000 to the revenue account during the period
compared with GBP57,000 during the same period in the prior
year.
Movements in the Sterling exchange rate, most notably against
the US dollar, have an important influence on the Company's revenue
as over a third of the Company's equity income comes from UK-listed
companies that declare dividends in US dollars. Over the past year,
the US dollar has risen in value by over 15% against Sterling,
which benefits the Company's revenue when such receipts are
translated back to Sterling. This welcome boost to the Company's
revenue comes at a time when the outlook for UK dividends as a
whole had deteriorated. As a result of the anaemic global economic
growth backdrop and weak commodity prices many of the UK's larger,
more mature businesses had seen profitability come under pressure
and dividend cover erode. The mining sector has perhaps seen the
highest profile dividend cuts with both Rio Tinto and BHP Billiton
abandoning their progressive dividend policies earlier this year.
The integrated oil companies, Royal Dutch Shell and BP, two of the
largest dividend payers in the UK have so far chosen to maintain
their dividends, however notwithstanding the modest recovery in the
oil price since January, these payments remain under pressure. The
majority of investee companies have continued to generate
reasonable growth in both earnings and dividends.
There has been a further reduction in assets allocated to the
Higher Yield Portfolio in light of the low level of yields
available on corporate bonds, particularly on higher quality,
investment grade corporate bonds. Income from the Higher Yield
Portfolio has consequently decreased, compared to the same period
in the prior year. At the time of writing, the Higher Yield
Portfolio accounts for 2.4% of the Company's total assets.
The Company's dividend for the year ending 31 March 2017 is
estimated, barring unforeseen circumstances, to be 4.72p per share
which represents an increase of 2.6 per cent compared to the prior
year (2016: 4.60p per share). The first three quarterly dividends
will be paid in equal instalments of 1.17p per share and a fourth
quarterly dividend of approximately 1.21p is expected to be paid to
A shareholders. B Shareholders will receive capital repayments of
the same amount per share at the same time as dividends are
received by A shareholders.
The expected annual distribution level represents a yield for A
shareholders of 4.8 per cent and B shareholders of 4.9 per cent.
based on share prices as at 30 September 2016. For those
shareholders that hold units (each comprising three A shares and
one B share) the distribution yield on this unit holding would be
4.8 per cent. These yields compare favourably with the yield on the
FTSE All-Share Capped 5% Index of 3.4 per cent. at that date.
Dividends to A shareholders and capital repayments to B
shareholders are paid quarterly in August, November, February and
May each year.
After providing for the second quarter dividend, the Company had
revenue reserves of GBP4.7m (approximately 5.37p per A share) at 30
September 2016.
Discount and buy backs
The Company's A share price and B share price stood at a
discount of 8.1 per cent. and 9.1 per cent respectively at 30
September 2016. Over the six month period, the price of the
Company's A shares traded at an average discount to net asset value
per share of 7.8 per cent. and the Company's B shares traded at an
average discount of 7.4 per cent.
During the six month period, the Company bought back 750,000 A
shares and 200,000 B shares at average discounts of 8.3 per cent
and 8.9 per cent respectively to be held in treasury.
Outlook
The pace of global economic recovery has improved little over
recent years with the pattern of growth remaining fragile and
uneven. Against a background of elevated geopolitical tensions and
a rising tide of populism and protectionism, as evidenced by the
outcome of the EU Referendum in the UK and the United States
Presidential election, it is difficult to see a marked improvement
in economic prospects for the year ahead. While global monetary
conditions remain supportive for financial markets there is
evidence that in the absence of broader structural reforms,
monetary policy alone may not be sufficient to address the
challenges of weak economic growth and low inflation. When viewed
in the context of exceptionally low bond yields, equity valuations
are not unreasonable and corporate sector fundamentals remain
sound. The recent weakness in Sterling aside, the more challenging
outlook for corporate earnings and dividends suggests stock
selection will remain especially important in the year ahead.
Iain McLaren
Chairman
28 November 2016
Condensed Unaudited Consolidated Statement of Comprehensive
Income
For the six month period to 30 September 2016
Six months to 30 September
2016
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Gains on investments held
at fair value - 13,674 13,674
Exchange differences - (377) (377)
Investment income 2,911 - 2,911
Investment management fee (140) (328) (468)
Other expenses (153) - (153)
--------- --------- ---------
Profit before finance costs
and taxation 2,618 12,969 15,587
Net finance costs
Interest on bank loan (89) (208) (297)
Total finance costs (89) (208) (297)
--------- --------- ---------
Profit before tax 2,529 12,761 15,290
Tax on ordinary activities - - -
--------- --------- ---------
Profit for the period 2,529 12,761 15,290
--------- --------- ---------
Total comprehensive income
for the period 2,529 12,761 15,290
--------- --------- ---------
Earnings per share 2.10p 10.59p 12.69p
All of the profit and comprehensive income for the period is
attributable to the owners of the Company.
All items in the above statement derive from continuing
operations.
Condensed Unaudited Consolidated Statement of Comprehensive
Income
For the six month period to 30 September 2015
Six months to 30 September
2015
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Losses on investments held
at fair value - (9,361) (9,361)
Exchange differences - (3) (3)
Investment income 2,851 - 2,851
Investment management fee (134) (312) (446)
Other expenses (193) - (193)
--------- --------- ---------
Profit/(loss) before finance
costs and taxation 2,524 (9,676) (7,152)
Net finance costs
Interest on bank loan (89) (208) (297)
Total finance costs (89) (208) (297)
--------- --------- ---------
Profit/(loss) before tax 2,435 (9,884) (7,449)
Tax on ordinary activities - - -
--------- --------- ---------
Profit/(loss) for the period 2,435 (9,884) (7,449)
--------- --------- ---------
Total comprehensive income
for the period 2,435 (9,884) (7,449)
--------- --------- ---------
Earnings per share 1.99p (8.08)p (6.09)p
Condensed Unaudited Consolidated Statement of Comprehensive
Income
For the year to 31 March 2016
Year to 31 March 2016*
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Losses on investments held
at fair value - (6,640) (6,640)
Exchange differences - (325) (325)
Investment income 5,424 - 5,424
Investment management fee (267) (623) (890)
Other expenses (408) - (408)
-------- -------- --------
Profit/(loss) before finance
costs and taxation 4,749 (7,588) (2,839)
Net finance costs
Interest on bank loan (178) (416) (594)
Total finance costs (178) (416) (594)
-------- -------- --------
Profit/(loss) before tax 4,571 (8,004) (3,433)
Tax on ordinary activities - - -
-------- -------- --------
Profit/(loss) for the period 4,571 (8,004) (3,433)
-------- -------- --------
Total comprehensive income
for the period 4,571 (8,004) (3,433)
-------- -------- --------
Earnings per share 3.74p (6.55)p (2.81)p
*These figures are audited
Condensed Unaudited Consolidated Balance Sheet
As at As at As at
30 Sept 30 Sept 31 March
2016 2015 2016*
GBP'000 GBP'000 GBP'000
Non-current assets
Investments held at fair value
through profit or loss 136,460 125,346 127,605
--------- ---------
136,460 125,346 127,605
--------- --------- ----------
Current assets
Receivables 640 627 1,690
Cash and cash equivalents 9,289 8,994 7,264
--------- --------- ----------
9,929 9,621 8,954
--------- --------- ----------
Total assets 146,389 134,967 136,559
--------- --------- ----------
Current liabilities
Bank loan (18,000) - -
Payables (310) (332) (2,031)
--------- ---------
(18,310) (332) (2,031)
--------- --------- ----------
Non-current liabilities
Bank loan - (18,000) (18,000)
--------- ---------
- (18,000) (18,000)
--------- ---------
Total liabilities (18,310) (18,332) (20,031)
--------- --------- ----------
Net assets 128,079 116,635 116,528
========= ========= ==========
Capital and reserves
Share capital 134 134 134
Share premium 153 153 153
Capital redemption reserve 5 5 5
Buy back reserve 84,204 86,425 85,092
Special capital reserve 20,319 21,789 21,058
Capital reserves 17,480 2,839 4,719
Revenue reserve 5,784 5,290 5,367
--------- --------- ----------
Shareholders' funds 128,079 116,635 116,528
========= ========= ==========
Net asset value per A share 106.82p 95.33p 96.42p
Net asset value per B share 106.82p 95.33p 96.42p
*These figures are audited
Condensed Unaudited Consolidated Statement of Changes in
Equity
Notes Six months Six months
to to Year to
30 Sept 30 Sept 31 March
2016 2015 2016*
GBP'000 GBP'000 GBP'000
Opening equity shareholders'
funds 116,528 126,886 126,886
Net profit/(loss)
for the period 15,290 (7,449) (3,433)
Shares bought back
for treasury 10 (888) - (1,333)
Dividends paid on
A shares 7 (2,112) (2,068) (4,126)
Capital repayments
paid on B shares 7 (739) (734) (1,466)
Closing equity shareholders'
funds 128,079 116,635 116,528
----------- ----------- ----------
*These figures are audited
Condensed Unaudited Consolidated Cash Flow Statement
Six months Six months
to to Year to
30 Sept 30 Sept 31 March
2016 2015 2016*
GBP'000 GBP'000 GBP'000
Net cash flow from operating
activities 7,124 4,753 7,079
Net cash flow from financing
activities (4,711) (3,099) (6,844)
----------- ----------- ----------
Net increase in cash
and cash equivalents 2,413 1,654 235
Currency (losses)/gains (388) 31 (280)
Net cash and cash equivalents
at beginning of period 7,264 7,309 7,309
----------- ----------- ----------
Net cash and cash equivalents
at end of period 9,289 8,994 7,264
----------- ----------- ----------
*These figures are audited
Notes to the Condensed Accounts (unaudited)
1. The condensed unaudited consolidated financial statements
have been prepared in accordance with IAS 34 Interim Financial
Reporting and the accounting policies set out in the statutory
accounts of the Group for the year ended 31 March 2016. The
condensed consolidated financial statements do not include all of
the information required for full annual financial statements and
should be read in conjunction with the consolidated financial
statements of the Group for the year ended 31 March 2016, which
were prepared under full IFRS requirements to the extent that they
have been adopted by the European Union.
2. Income for the period is derived from:
30 Sept 30 Sept 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
Equity investments 2,581 2,468 4,626
Fixed interest investments 319 372 761
Deposit interest 10 11 29
Underwriting commission
and other income 1 - 8
2,911 2,851 5,424
======== ======== =========
3. The Company's investment manager is F&C Investment
Business Limited. F&C Investment Business Limited receives an
investment management fee of 0.75 per cent per annum of the net
asset value of the Company payable quarterly in arrears.
4. The earnings per share are based on the net profit for the
period and on 120,454,847 shares (period to 30 September 2015 -
122,354,847; year to 31 March 2016 - 122,150,329), being the
weighted average number of shares in issue during the period.
5. Earnings for the six months to 30 September 2016 should not
be taken as a guide to the results of the full year.
6. The Board has considered the requirements of IFRS 8
'Operating Segments'. The Board is of the view that the Group is
engaged in a single segment of business, of investing in equity and
higher yielding securities, and that therefore the Group has only a
single operating segment. The Board of Directors, as a whole, has
been identified as constituting the chief operating decision maker
of the Group. The key measure of performance used by the Board to
assess the Group's performance is the total return on the Group's
net asset value measuring debt at fair value. The reconciliation
between the measure of profit or loss used by the Board and that
contained in the financial statements is as follows:
30 September 30 September 31 March
2016 2015 2016
Pence Pence Pence
per per per
GBP'000 share GBP'000 share GBP'000 share
---------------------- ---------- ---------- ---------- --------- ---------- ---------
Shareholders'
funds per financial
statements 128,079 106.82 116,635 95.33 116,528 96.42
Closing fair
value adjustment
on fixed-rate
term loan (171) (0.14) (123) (0.10) (156) (0.13)
---------------------- ---------- ---------- ---------- --------- ---------- ---------
Shareholders'
funds with debt
at fair value 127,908 106.68 116,512 95.23 116,372 96.29
---------------------- ---------- ---------- ---------- --------- ---------- ---------
Profit/(loss)
for the period
per financial
statements 15,290 12.69 (7,449) (6.09) (3,433) (2.81)
Movement in
fair value on
fixed-rate term
loan (15) (0.01) (20) (0.02) (53) (0.04)
---------------------- ---------- ---------- ---------- --------- ---------- ---------
Profit/(loss)
for the period
with debt at
fair value 15,275 (12.68) (7,469) (6.11) (3,486) (2.85)
---------------------- ---------- ---------- ---------- --------- ---------- ---------
7. Dividends and Capital Repayments
Six months Six months Year
to to to
30 Sept 30 Sept 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
In respect of the previous
period:
Fourth interim dividend
paid at 1.18p (2015:
1.15p) per A share 1,055 1,039 1,039
Fourth capital repayment
paid at 1.18p (2015:
1.15p) per B share 371 368 368
In respect of the period
under review:
First interim dividend
paid at 1.17p (2015:
1.14p) per A share 1,057 1,029 1,029
First capital repayment
paid at 1.17p (2015:
1.14p) per B share 368 366 366
Second interim dividend
paid at 1.14p per A share - - 1,029
Second capital repayment
paid at 1.14p per B share - - 366
Third interim dividend
paid at 1.14p per A share - - 1,029
Third capital repayment
paid at 1.14p per B share - - 366
----------- ----------- ----------
2,851 2,802 5,592
=========== =========== ==========
A second interim dividend for the year to 31 March 2017, of
1.17p per A share, was paid on 4 November 2016 to A shareholders on
the register on 7 October 2016. A second quarter capital repayment
of 1.17p per B share was paid on 4 November 2016 to B shareholders
on the register on 7 October 2016. Although these payments relate
to the period ended 30 September 2016, under IFRS they will be
accounted for in the six months to 31 March 2017, being the period
during which they are paid.
8. Investments held at fair value through profit or loss
Group
(Level 1)
GBP'000
----------------------------------- -----------
Opening book cost 108,112
Opening fair value adjustment 19,493
----------------------------------- -----------
Opening valuation 127,605
Movement in the period:
Purchases at cost 7,530
Sales - proceeds (12,349)
- gains on sales 2,628
Increase in fair value adjustment 11,046
----------------------------------- -----------
Closing valuation at 30 September
2016 136,460
----------------------------------- -----------
Closing book cost at 30 September
2016 105,921
Closing fair value adjustment
at 30 September 2016 30,539
----------------------------------- -----------
Closing valuation at 30 September
2016 136,460
----------------------------------- -----------
Accounting standards recognise a hierarchy of fair value
measurements for financial instruments which gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority
to unobservable inputs (Level 3). The classification of financial
instruments depends on the lowest significant applicable input, as
follows:
-- Level 1 - quoted (unadjusted) prices in active markets for identical assets or liabilities.
-- Level 2 - other techniques for which all inputs that have a
significant effect on the recorded fair value are observable,
either directly or indirectly. The Group held no such instruments
during the period under review.
-- Level 3 - techniques that use inputs that have a significant
effect on the recorded fair value that are not based on observable
market data. The Group held no such instruments during the period
under review.
There were no transfers between levels of the fair value
hierarchy during the six months ended 30 September 2016.
9. The Company has an GBP18 million secured term loan from
JPMorgan Chase Bank. The facility has a term to 28 September 2017
and has a fixed interest rate of 3.15 per cent per annum, with an
arrangement fee payable in addition of GBP18,000 per annum.
The fair value of the GBP18 million term loan, on a
marked-to-market basis, was GBP18,171,000 at 30 September 2016 (30
September 2015 - GBP18,123,000; 31 March 2016 - GBP18,156,000).
10. The Company bought back 750,000 A shares to hold in treasury
during the period (period to 30 September 2015 - nil A shares; year
to 31 March 2016 - 850,000 A shares) and 200,000 B shares (period
to 30 September 2015 - nil B shares; year to 31 March 2016 -
650,000 B shares). The Company did not resell any A shares or B
shares from treasury (period to 30 September 2015 - nil A or B
shares; year to 31 March 2016 - nil A or B shares).
At 30 September 2016 the Company held 13,389,000 A shares and
850,000 B shares in treasury (30 September 2015 - 11,789,000 A
shares and nil B shares; 31 March 2016 - 12,639,000 A shares and
650,000 B shares).
The Company did not issue any new shares during the period
(period to 30 September 2015 - nil; year to 31 March 2016 -
nil).
11. The net asset value per share is based on shareholders'
funds at the period end and on 88,678,144 A shares and 31,226,703 B
shares, being the number of shares in issue at the period end (30
September 2015 - 90,278,144 A shares and 32,076,703 B shares; 31
March 2016 - 89,428,144 A shares and 31,426,703 B shares).
12. Other than the bank term loan, as disclosed in note 9, the
fair values of the Group's financial assets and liabilities are not
materially different from their carrying values in the financial
statements.
The Group's financial risk management objectives and policies
are consistent with those disclosed in the Group's consolidated
financial statements for the year ended 31 March 2016.
13. In assessing the going concern basis of accounting the
Directors have had regard to the guidance issued by the Financial
Reporting Council and have undertaken a rigorous review of the
Company's ability to continue as a going concern.
The Company's objective and policy, which is subject to regular
Board monitoring processes, is designed to ensure that the Company
is invested mainly in liquid, listed securities. The Company
retains title to all assets held by its custodian and has
agreements relating to its borrowing facilities with which it has
complied. Cash is held only with banks approved and regularly
reviewed by the Manager.
As part of the going concern review, the Directors noted that
borrowing facilities of GBP18 million are committed to the Company
until 28 September 2017.
The Directors believe, in the light of the controls and review
processes noted above and bearing in mind the nature of the
Company's business and assets, that the Company has adequate
resources to continue in operational existence for a period of at
least twelve months from the date of approval of the accounts.
Accordingly, they continue to adopt the going concern basis in
preparing the accounts.
14. The Group results consolidate those of Investors Securities
Company Limited, a wholly owned subsidiary which deals in
securities.
15. The Company's auditor, Ernst & Young LLP, has not
audited or reviewed the Interim Report to 30 September 2016
pursuant to the Auditing Practices Board guidance on 'Review of
Interim Financial Information'. These are not full statutory
accounts in terms of Section 434 of the Companies Act 2006 and are
unaudited. Statutory accounts for the year ended 31 March 2016,
which received an unqualified audit report and which did not
contain a statement under Section 498 of the Companies Act 2006,
have been lodged with the Registrar of Companies. No full statutory
accounts in respect of any period after 31 March 2016 have been
reported on by the Company's auditor or delivered to the Registrar
of Companies.
The Interim Report will be posted to shareholders during
December and will be available on the website:
www.investorscapital.co.uk
Statement of Principal Risks and Uncertainties
Most of the Company's principal risks are market related and
comparable to those of other investment trusts investing primarily
in listed securities. These risks, and the way in which they are
managed, are described under the heading 'Principal Risks and
Viability Statement' within the Strategic Report in the Group's
Annual Report for the year ended 31 March 2016. The Company's
principal risks and uncertainties have not changed materially since
the date of that report and are not expected to change materially
for the remainder of the Group's financial year. The most important
types of risk associated with financial instruments are credit
risk, market price risk, liquidity risk, interest rate risk and
foreign currency risk. Other risks faced by the Company include
investment and strategic, regulatory, operational and custody
risks.
Statement of Directors' Responsibilities in Respect of the
Interim Report
We confirm that to the best of our knowledge:
-- the condensed set of consolidated financial statements has
been prepared in accordance with IAS 34 'Interim Financial
Reporting' and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Company;
-- the Chairman's Statement (constituting the Interim Management
Report) together with the Statement of Principal Risks and
Uncertainties include a fair review of the information required by
the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of consolidated financial statements; and
-- the Chairman's Statement together with the condensed set of
consolidated financial statements include a fair review of the
information required by DTR 4.2.8R, being related party
transactions that have taken place in the first six months of the
current financial year and that have materially affected the
financial position or performance of the Company during that
period, and any changes in the related party transactions described
in the last Annual Report that could do so.
On behalf of the Board
Iain McLaren
Director
28 November 2016
For further information, please contact:
Rodger McNair, Fund Manager 0207 628 8000
Ian Ridge, Company Secretary 0207 628 8000
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EVLFLQFFXFBQ
(END) Dow Jones Newswires
November 28, 2016 10:37 ET (15:37 GMT)
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