TIDMLTI
5 December 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
The Lindsell Train Investment Trust plc (the "Company")
Unaudited Half-Year Results for the six months ended
30 September 2023
This Announcement is not the Company's Half-year Report & Accounts. It is an
abridged version of the Company's full Half-year Report & Accounts for the six
months ended 30 September 2023. The full Half-year Report & Accounts together
with a copy of this announcement, will shortly be available on the Company's
website at www.ltit.co.uk where up to date information on the Company, including
NAV, share prices and monthly updates, can also be found.
The Company's Half-year Report & Accounts for the six months ended 30 September
2023 has been submitted to the UK Listing Authority, and will shortly be
available for inspection on the National Storage Mechanism (NSM) at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Financial Highlights
Six months to Year to
Performance comparisons 30 September 2023 31 March 2023
Net asset value total -3.6% -0.4%
return per Ordinary
Share*^
Share price total return -11.3% -0.7%
per Ordinary Share*^
Discount of Share price 8.5% 0.4%
to Net Asset Value
MSCI World Index total +4.5% -1.0%
return (Sterling)
UK RPI Inflation (all +3.1% +13.5%
items)
*The net asset value and the share price at 30 September 2023 have been adjusted
to include the ordinary dividend of £51.50 per share paid on 12September 2023,
with the associated ex-dividend date of 10 August 2023.
^Alternative Performance Measure ("APM"). See Glossary of Terms and Alternative
Performance Measures.
Source: Morningstar and Bloomberg.
Investment Objective
The objective of the Company is to maximise long-term total returns with a
minimum objective to maintain the real purchasing power of Sterling capital.
Investment Policy
The Investment Policy of the Company is to invest:
(i)in a wide range of financial assets including equities, unlisted equities,
bonds, funds, cash and other financial investments globally with no limitations
on the markets and sectors in which investment may be made, although there is
likely to be a bias towards equities and Sterling assets, consistent with a
Sterling-dominated investment objective. The Directors expect that the
flexibility implicit in these powers will assist in the achievement of the
investment objective;
(ii)in Lindsell Train managed fund products, subject to Board approval, up to
25% of its gross assets; and
(iii)in LTL and to retain a holding, currently 24.1%, in order to benefit from
the growth of the business of the Company's Manager.
The Company does not envisage any changes to its objective, its investment
policy, or its management for the foreseeable future. The current composition of
the portfolio as at 30 September 2023, which may be changed at any time
(excluding investments in LTL and LTL managed funds) at the discretion of the
Investment Manager within the confines of the policy stated above.
Diversification
The Company expects to invest in a concentrated portfolio of securities with the
number of equity investments averaging fifteen companies. The Company will not
make investments for the purpose of exercising control or management and will
not invest in the securities of, or lend to, any one company (or other members
of its group) more than 15% by value of its gross assets at the time of
investment.
The Company will not invest more than 15% of gross assets in other closed-ended
investment funds.
Gearing
The Directors have discretion to permit borrowings up to 50% of the Net Asset
Value. However, the Directors have decided that it is in the Company's best
interests not to use gearing. This is in part a reflection of the increasing
size and risk associated with the Company's unlisted investment in LTL, but also
in response to the additional administrative burden required to adhere to the
full scope regime of the AIFMD.
Dividends
The Directors' policy is to pay annual dividends consistent with retaining the
maximum permitted earnings in accordance with investment trust regulations,
thereby building revenue reserves.
In a year when this policy would imply a reduction in the ordinary dividend, the
Directors may choose to maintain the dividend by increasing the percentage of
revenue paid out or by drawing down on revenue reserves. Revenue reserves on 31
March 2023 were twice the annual 2023 ordinary dividend paid on 12 September
2023.
All dividends have been distributed from revenue or revenue reserves.
Chairman's Statement
Over the six months to 30 September 2023 the Company's net asset value per share
("NAV") fell 8.3% (from £1,056.95 to £968.75), with the NAV total return down
3.6%, once the payment of the dividend of £51.50 is added back. The share price
total return fell more, by 11.3%, primarily on account of the share price
discount to NAV widening from 0.4% at 31March 2023 to 8.5% at 30 September 2023.
This should be seen in the context of sharply widening discounts across the
whole Investment Trust sector recently. These returns compared with a positive
MSCI World index total return (Sterling) of 4.5% over the same six month period.
The half-yearly results of the Company were impacted by two interlinked causes.
One was the performance of the Company's 24.1% holding in LTL, the Company's
Investment Manager, which accounted for 38.6% of NAV on 30September 2023. LTL's
valuation fell by 11.9% over the six months reflecting the fall in its funds
under management ("FUM") from £18.6bn to £16.4bn but the total return from the
investment was down less, 6.0%, thanks to the payment of a half-year dividend.
The fall in FUM extended a trend from early 2021, partly in reaction to
deteriorating relative performance from LTL's fund range but exacerbated by a
gruelling environment for the fund management industry. In2022 UK investors
redeemed £26bn from retail funds making it the worst year on record for the
industry and the only year that has recorded an annual outflow, according to
data from the Investment Association. All of LTL's strategies have
underperformed over the last three years, which was as much a consequence of its
consistent approach to investment as of any isolated investment misjudgments.
LTL portfolios exhibit a bias towards consumer franchises where share prices
have fallen or stagnated recently and all have a limited number of investments
in technology and no exposure to energy and leveraged financials, which are the
areas that have driven the performance of LTL's funds' benchmarks in recent
years. Another cause of the Company's underperformance has been the lack of any
investments in the seven large UScompanies (Apple, Amazon, Alphabet, Tesla,
Nvidia, Microsoft and Meta) that have led the performance of the MSCIWorld index
this year and in the recent past to such an extent that they now make up 17% of
the index. Both causes are related, as LTL's funds also have minimal investments
in these leading index performers, which in turn has contributed to their
underperformance.
This highlights a risk that I have been at pains to warn about in previous
statements. It is that our quoted investments are in general a concentrated
subset of LTL's stock selections for other LTL client portfolios. Thus the
Company's underperformance is both reflected in its quoted investments and in
the deteriorating business results of LTL partly caused by its recent
disappointing investment returns across other strategies. The Board take on this
risk and the volatility associated with it in the belief that the underlying
companies owned, either by LTL on behalf of its clients or as quoted investments
by the Company, generate superior average returns on capital at a level that
should produce satisfactory investment returns similar to the 12.9% per annum
NAV per share growth achieved since the Company's inception. Unfortunately in
the short term there can be a disconnect between what companies deliver as
businesses and the return from share prices. In the last five years the NAV per
share total return has been 7.2% per annum and over three years zero, as
compared with LTL's underlying businesses which have continued to earn an
average return on equity of more than 20% per annum. As long as LTL's equity
selections maintain these superior returns on capital, we would expect
investment returns to recover from the current depressed levels.
There is no doubt that the rapid rise in interest rates to a level not seen for
15 years is also providing stiff competition to equities in a way that has been
absent over the last unprecedented period. Less than two years ago the Bank rate
stood at 0.1% , rising 14 times since then to its present level of 5.25%. At the
same time competition from passive funds and rising costs is an ongoing
challenge for the active fund management industry. Faced with these headwinds it
is perhaps not surprising that the Company is undergoing a tough period. The
Board is reassured that the Manager's investment in durable business franchises
gives the Company the best chance to weather any financial turbulence that may
occur. In addition the Company has its direct investment in LTL, which is a
business that has a number of positive attributes including a highly
differentiated investment approach that generates repeatable and relatively high
margin revenues and has given rise to a strong balance sheet.
Whilst the valuation of LTL has declined from a peak of £18,730.17 per share on
30 June 2021 to £11,644.87 per share at 30 September 2023, its net profit margin
has remained relatively stable averaging 56%. This is partly a function of LTL's
salary and bonus cap that restricts remuneration (LTL's biggest expense) to
c.26% of revenues. The cap, together with LTL's historic 80% dividend payout
ratio, helps ensure that the Company's shareholders receive a tangible benefit
from the payment of dividends from its holding in LTL. Whilst no change to these
policies is anticipated, now that LTL's profit share scheme is also funded from
revenues set aside for remuneration, if FUM continues to fall it may be
necessary to raise the cap to help fund the scheme. The Board has agreed that
90% of LTL shareholders would need to approve such a change if proposed - a
modification from a simple Board approval that was necessary historically.
This is my final report to you after eight years as your Chairman. This period
has, in many ways, been an extraordinary time for investors. From March 2009 to
December 2021 the Bank of England base rate never exceeded 0.75%, which is an
unprecedented aberration in the long-term series. The extremely low rates were
triggered 15 years ago by the 2008 banking crisis and although they undoubtedly
stabilised economies worldwide they also created an asset bubble unparalleled in
recent times. This was exacerbated by the response of governments to the Covid
pandemic and the inflationary effects of Putin's war on Ukraine. Government
fiscal deficits rose dramatically from 2020 and after a period of sharply rising
money supply investors are now suffering the effects of an equally dramatic
contraction. Central bankers have rightly been accused of doing too little too
late. I fear this will prove to be the case in both directions. In the
short-term the current policies have had a significant negative impact on
markets worldwide. It remains to be seen whether we have reached equilibrium.
It has been an honour to chair your Company and I have been privileged to have
the support of talented and knowledgeable colleagues, including several now
retired, through these momentous times. I thank them all for their wise counsel.
Most recently we have welcomed David MacLellan as a director. David took the
chair of the Audit Committee at the time of the Annual General Meeting, having
been appointed after a formal recruitment process. He succeeded Helena
Vinnicombe, who assumed the role on an interim basis following Richard Hughes'
retirement, and who remains a valued member of the Board. I will stand down from
the Board at the end of 2023 leaving the Company in the good hands of Roger
Lambert. I wish you well for the future.
Julian Cazalet
Chairman
4 December 2023
Investment Manager's Report
There is no consolation for shareholders when an investment strategy is stuck in
a long period of underperformance, with little sign of respite. Disappointingly
this is the case for all of LTL's investment strategies, including that of your
Company.
If there is a consolation for us as the Investment Managers, it is knowing that
we have not made material changes to any of our portfolios through this period.
There are three reasons why that is a consolation to us.
First, it suggests that, notwithstanding share price performance, we are happy
with the companies we are invested in. Andthis is the case. When I review the
portfolio of direct holdings, which are all also held across other LTL accounts
(except for Laurent-Perrier), I recognise that it is not perfect and that some
of the companies are dealing with issues that have slowed their long-term growth
rates. But no portfolio is ever perfect, and every company will face such issues
at some stage in its history. Nonetheless, the Company owns businesses that
possess valuable brands or market positions which we are sure will prosper in
the future and will be rewarded by higher share prices when they do.
Second, holding on to our positions at least means we have not committed one of
the cardinal errors of active investors. This is to sell cheap and buy dear. It
sounds so easy to avoid this error, because who wants to sell at the bottom and
buy at the top? But, as we are sure some shareholders will recognise from their
own investment experience, the pressure to give up on an underperforming
investment is strong, as is the temptation to buy into what has been working
well after it has already gone up.
Third and most important, while our portfolios are underperforming, they are
becoming better value. One day we hope our shareholders will be rewarded by that
value and shares will start going up again. All the holdings in your portfolio
have excellent prospects.
Investment value can build through periods of underperformance in several ways.
Earnings can carry on rising, but for whatever reason the shares go sideways or
down and the shares suffer a derating, temporarily you hope. In your portfolio
London Stock Exchange Group is an example. Or a company is making strategic
changes that improve the prospects for the business, even if those improved
prospects are not reflected in an improved share price until actually delivered.
That is so for Unilever, we believe. Or companies take advantage of their
underperforming shares to buy them back for cancellation, which increases per
share value for shareholders who don't sell. Nearly 90% by value of the direct
holdings in your portfolio have bought back shares in recent years.
I propose to write a few lines about each of the holdings in your portfolio,
because doing so allows me to highlight the latent value in each and in the
portfolio overall.
A.G. Barr
The shares now trade on 15 times prospective earnings. Revenues and forecast
earnings are at record highs, while the shares are barely half the level they
reached in 2019. With a cash-rich balance sheet A.G. Barr has made a series of
useful acquisitions that have pushed recent sales growth up to 10% p.a.
underlying. If that growth continues the share price will follow.
Diageo
Since the period end Diageo has unpleasantly surprised investors with a profit
-warning, caused by a sudden contraction in its Latin American business (11% of
group revenues). The result has been a further fall in its share price, which is
currently down nearly 25% year-to-date. This seems excessive, given the company
can demonstrate that the other 89%of its business is growing. We have added to
the holding since the warning, believing that buying into Diageo's current 3%
prospective dividend yield is attractive. That dividend yield is supported by
the growing cash flows of the world's biggest alcoholic beverage company.
Heineken
Heineken has bought back shares in 2023, as well as closing a material
acquisition in southern Africa - both sensible actions. The shares trade 22%
below their 2019 highs leaving them valued at 15 times earnings. When input
costs fall and consumer confidence recovers that should look very good value. We
hope that will be the case in 2024, or sooner.
Laurent-Perrier
13 times earnings seems a modest price to pay to access the earnings power of
Laurent-Perrier's brands. Shares are down 12% in 2023, having hit an all-time
high in May. As with our other beverage investments, they could be much more
highly valued once consumers feel wealthier.
London Stock Exchange Group ("LSEG")
This is the biggest quoted holding not only in your portfolio but across all
LTL's strategies and it is also one of our better recent performers, with the
shares up 16% over the first nine months of 2023. Nonetheless, they still sit
16% below their 2021 high. Earnings are forecast to be c.£3.30 for 2023/4,
double those of 2021/2 - showing the extent of the derating of the shares since
then. You have to pay 25 times to own them, but to us this looks attractive
relative to the growth LSEG is set to deliver from its merger with Refinitiv and
joint venture with Microsoft. LSEG has bought back shares in 2023 as well.
Mondelez
Shares are down 17% from their all-time highs, set in May 2023. Earnings and
dividends have grown to all-time highs this year too. On 20 times earnings the
company clearly regards its equity as undervalued, because it continues to
retire shares at a rate of 1-2%pa. Since 2009 and the Great Financial Crisis,
Mondelez' shares have steadily climbed, from c.$15 to $65, as the company has
demonstrated its ability to generate growing cash flows from its iconic global
brands. Why shouldn't that continue?
Nintendo
Shares are up 13% in 2023, but sit c.8% below the highs of 2021. Earnings are
forecast to be down this year, as the company invests for the launch of its next
gaming device. The previous console, Switch, has been one of the most successful
in the history of the video gaming industry and since its introduction, in March
2017, Nintendo's shares have nearly trebled. On 17 times prospective earnings it
appears to us investors don't believe the company can repeat that success. The
seven-fold gain (in Sterling) of Nintendo's share price over the last 30 years
is reassuring for long-term investors, suggesting the company's proprietary
devices and gaming franchises do indeed create long-term value.
PayPal
On 10 times prospective earnings, PayPal's shares are deeply out of favour.
Having met recently with the new CEO and considering the size and value of its
customer base, 428m active global accounts, and its participation in the still
growing trend toward online payments, we remain holders of PayPal. The company
has bought back nearly 4% of its equity over the lastyear.
RELX
These shares have done well in 2023, up 22% to end September and are now on 25
times prospective earnings. This follows their near quintupling over the last
decade. As a result, RELX is currently the largest holding in LTL's UK strategy.
It is the fourth biggest direct holding in your portfolio, behind LSEG, Nintendo
and Diageo. RELX has consistently found new ways to make its proprietary data
more useful to its customers in the global scientific community, the legal
professions and insurance industry.
Advances in technology, notably Artificial Intelligence, mean that RELX's data
should become even more valuable to its clientele. At the same time, RELX's
continued buyback of its own shares makes us believe they still offer good long
-term value.
Unilever
The shares are down c.3% in 2023 to end September and this is disappointing
after several years of mediocre business and poor share price performance. The
shares stand 22% below their 2019 peak. Objectively, considering Unilever's
household name brands and advantaged position in the Emerging Markets, we'd have
hoped for better. And this disappointment seems to be shared by Unilever's
board, because in short order there is to be a new Chair, CEO and CFO. We expect
them to be motivated to improve business performance or risk the undoubted value
of Unilever being realised by a break-up. The company has continued to buy back
its own shares, which is rational, in our opinion, given the discount between
the value stock market investors currently place on the company and that of its
constituent parts. The shares trade on 17 times earnings.
Reviewing your portfolio of direct holdings in its entirety, we note it is split
almost exactly 50%/50%. The split is between, first, owners of long-established
and successful consumer brands, where there seems reason to believe those brands
will continue to be successful; and, next, companies with Intellectual Property
(data or entertainment), with an opportunity to exploit technology change to
make their IP more valuable. To us this seems like an attractive combination of
predictability and steady growth potential. On a weighted average basis the
portfolio is valued on just under 20 times prospective earnings. That equates to
an earnings yield of c.5%, which is roughly where yields sit for long-dated,
fixed interest UKgovernment bonds. History suggests that owning sound common
stocks beats fixed interest over time and, given the calibre of the companies we
have invested in for you and their current valuations, we certainly hope that
will be the case for your portfolio.
Nick Train
Lindsell Train Limited
Investment Manager
4 December 2023
Portfolio Holdings at 30 September 2023
(All ordinary shares unless otherwise stated)
Look-
through
Fair % of basis:
value net % of total
Holding Security £'000 assets assets?
6,421 Lindsell Train Limited 74,772 38.6% 38.6%
235,000 London Stock Exchange 19,345 10.0% 10.2%
Group
12,500,000 WS Lindsell Train 17,296 8.9% 0.0%
North American Equity
Fund*
410,000 Nintendo 14,022 7.2% 7.2%
420,500 Diageo 12,758 6.6% 6.8%
363,000 RELX 10,074 5.2% 5.4%
222,000 Unilever 9,017 4.7% 4.9%
149,980 Mondelez International 8,527 4.4% 4.7%
1,263,393 A.G. Barr 6,203 3.2% 3.2%
89,000 Heineken 5,508 2.9% 2.9%
97,400 PayPal 4,665 2.4% 2.9%
39,099 Laurent-Perrier 4,053 2.1% 2.1%
420,000 Finsbury Growth & 3,574 1.8% 0.0%
Income Trust*
Indirect Holdings - - 8.9%
Total Investments 189,814 98.0% 97.8%
Net Current Assets 3,936 2.0% 2.2%
Net Assets 193,750 100.0% 100.0%
?Look-through basis: Percentages held in each security is adjusted upwards by
the amount of securities held by LTL managed funds. Adownward adjustment is
applied to the fund's holdings to take into account the underlying holdings of
these funds. It provides shareholders with a measure of stock specific risk by
aggregating the direct holdings of the Company with the indirect holdings held
within LTL funds.
*LTL managed funds.
Leverage
We detail below the equity exposure of the Funds managed by LTL as at 30
September 2023:
Net equity
exposure
WS Lindsell Train North American Equity Fund Acc 97.9%
Finsbury Growth & Income Trust PLC 100.8%
Analysis of Investment Portfolio at 30 September 2023
Breakdown by Location of Listing
(look-through basis)^
UK* 70%
USA 16%
Japan 7%
Europe excluding UK 5%
Cash and Equivalents 2%
100%
Breakdown by Location of Underlying Company Revenues
(look-through basis)^
USA^^ 30%
Europe excluding UK^^ 27%
UK^^ 26%
Rest of the World^^ 12%
Japan 3%
Cash and Equivalents 2%
100%
Breakdown by Sector
(look-through basis)^
Financials* 55%
Consumer Staples 26%
Communication Services 9%
Industrials 6%
Cash and Equivalents 2%
Information Technology 2%
100%
^Look-through basis: this adjusts the percentages held in each asset class,
country or currency by the amount held by LTL managed funds. Itprovides
Shareholders with a more accurate measure of country and currency exposure by
aggregating the direct holdings of the Company with the indirect holdings held
by the LTL funds.
*LTL accounts for 38.6% and is not listed.
^^LTL accounts for 16 percentage points of the Europe figure, 17 percentage
points of the UK figure, 5 percentage points of the USA figures and 0percentage
point of the RoW figure.
Income Statement
Six Six
months months
ended ended
30 30
September September
2023 2022
Unaudited Unaudited
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Losses on - (13,047) (13,047) - (13,047)
(13,047)
investments
held at
fair value
through profit
or
loss
Exchange - (4) (4) - (10) (10)
losses on
currency
Income 2 6,687 - 6,687 7,793 - 7,793
Investment 3 (530) - (530) (586) - (586)
management
fees
Other expenses 4 (385) - (385) (371) - (371)
Return/(loss) 5,772 (13,051) (7,279) 6,836 (13,057) (6,221)
before
taxation
Taxation 5 (61) - (61) (57) - (57)
Return/(loss) 5,711 (13,051) (7,340) 6,779 (13,057) (6,278)
after taxation
for the
financial
period
Return/(loss) 6 £28.56 £(65.26) £(36.70) £33.90 £(65.29)
£(31.39)
per Ordinary
Share
All revenue and capital items in the above statement derive from continuing
operations.
The total columns of this statement represent the profit and loss accounts of
the Company. The revenue and capital columns are supplementary to this and are
prepared under the guidance published by the Association of Investment
Companies.
The Company does not have any other recognised gains or losses. The net loss for
the period disclosed above represents the Company's total comprehensive income.
No operations were acquired or discontinued during the period.
Statement of Changes in Equity
Share Special Capital Revenue
capital reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000
For the six months ended 30
September 2023 (unaudited)
At 31 March 2023 150 19,850 168,000 23,390 211,390
(Loss)/return after tax for - - (13,051) 5,711 (7,340)
the financial period
Dividend paid - - - (10,300) (10,300)
At 30 September 2023 150 19,850 154,949 18,801 193,750
Share Special Capital Revenue
capital reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000
For the six months ended 30
September 2022 (unaudited)
At 31 March 2022 150 19,850 180,982 21,779 222,761
(Loss)/return after tax for - - (13,057) 6,779 (6,278)
the financial period
Dividends paid - - - (10,600) (10,600)
At 30 September 2022 150 19,850 167,925 17,958 205,883
Statement of Financial Position
30 September 31 March
2023 2023
Unaudited Audited
Note £'000 £'000
Fixed assets
Investments held at fair 189,814 203,128
value through profit or
loss
Current assets
Other receivables 461 491
Cash at bank 3,750 8,010
4,211 8,501
Creditors: amounts falling
due within one year
Other payables (275) (239)
(275) (239)
Net current assets 3,936 8,262
Net assets 193,750 211,390
Capital and reserves
Called up share capital 150 150
Special reserve 19,850 19,850
20,000 20,000
Capital reserve 154,949 168,000
Revenue reserve 18,801 23,390
Equity shareholders' funds 193,750 211,390
Net asset value per 7 £968.75 £1,056.95
Ordinary Share
Cash Flow Statement
Six months ended Six months ended
30 September 30 September
2023 2022
Unaudited Unaudited
£'000 £'000
Net loss before finance (7,279) (6,221)
costs and tax
Losses on investments 13,047 13,047
held at fair value
Losses on exchange 4 10
movements
Decrease in other 67 13
receivables
(Increase)/decrease in (25) 33
accrued income
Increase/(decrease) in 36 (35)
other payables
Taxation on investment (73) (50)
income
Net cash inflow from 5,777 6,797
operating activities
Purchase of investments (86) (56)
held at fair value
Sale of investments held 353 -
at fair value
Net cash inflow/(outflow) 267 (56)
from investing activities
Equity dividends paid (10,300) (10,600)
Net cash outflow from (10,300) (10,600)
financing activities
Decrease in cash and cash (4,256) (3,859)
equivalents
Cash and cash equivalents 8,010 6,708
at beginning of period
Losses on exchange (4) (10)
movements
Cash and cash equivalents 3,750 2,839
at end of period
Notes to the Financial Statements
1 Accounting policies
The financial statements of the Company have been prepared under the historical
cost convention modified to include the revaluation of investments and in
accordance with FRS 104 "Interim Financial Reporting" and with the Statement of
Recommended Practice ("SORP") "Financial Statements of Investment Trust
Companies and Venture Capital Trusts", issued by the Association of Investment
Companies updated in July 2022 and the Companies Act 2006.
The accounting policies followed in this Half-year Report are consistent with
the policies adopted in the audited financial statements for the year ended 31
March 2023.
2 Income
Six months ended Six months ended
30 September 30 September
2023 2022
Unaudited Unaudited
£'000 £'000
Income from investments
Overseas dividends 530 493
UK dividends
- Lindsell Train Limited 4,954 6,288
- Other UK dividends 1,082 1,006
- Deposit interest 121 6
6,687 7,793
3 Investment management fees
Six months ended Six months ended
30 September 30 September
2023 2022
Unaudited Unaudited
£'000 £'000
Investment management fee 591 644
Rebate of investment management fee (61) (58)
Net management fees 530 586
4 Other expenses
Six months ended Six months ended
30 September 30 September
2023 2022
Unaudited Unaudited
£'000 £'000
Directors' emoluments 91 61
Company Secretarial & Administration fee 96 99
Auditor's remuneration?* 24 30
Tax compliance fee 3 2
Other** 171 179
385 371
?Remuneration for the audit of the Financial Statements of the Company.
*Excluding VAT.
**Includes registrar's fees, printing fees, marketing fees, safe custody fees,
London Stock Exchange/FCA fees, Key Man and Directors' and Officers' liability
insurance, Employer's National Insurance and legal fees.
5 Effective rate of tax
The effective rate of tax reported in the revenue column of the income statement
for the six months ended 30 September 2023 is 1.06% (six months ended 30
September 2022: 0.83%), based on revenue profit before tax of £5,772,000
(sixmonths ended 30 September 2022: £6,836,000). This differs from the standard
rate of tax, 25% (six months ended 30September 2022: 19%) as a result of revenue
not taxable for Corporation Tax purposes.
6 Total loss per Ordinary Share
Six months ended Six months ended
30 September 30 September
2023 2022
Unaudited Unaudited
Total loss £(7,340,000) £(6,278,000)
Weighted average number of 200,000 200,000
Ordinary Shares in issue during
the period
Total loss per Ordinary Share £(36.70) £(31.39)
The total loss per Ordinary Share detailed above can be further analysed between
revenue and capital, as below:
Revenue return per Ordinary Share
Revenue return £5,711,000 £6,779,000
Weighted average number of 200,000 200,000
Ordinary Shares in issue during
the period
Revenue return per Ordinary Share £28.56 £33.90
Capital loss per Ordinary Share
Capital loss £(13,051,000) £(13,057,000)
Weighted average number of 200,000 200,000
Ordinary Shares in issue during
the period
Capital loss per Ordinary Share £(65.26) £(65.29)
7 Net asset value per Ordinary Share
Six months ended Year ended
30 September 31 March
2023 2023
Unaudited Audited
Net assets attributable £193,750,000 £211,390,000
Ordinary Shares in issue at the period/year end 200,000 200,000
Net asset value per Ordinary Share £968.75 £1,056.95
8 Valuation of financial instruments
The Company's investments and derivative financial instruments as disclosed in
the Statement of Financial Position are valued at fair value.
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making the
measurements. Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair value
measurement of the relevant asset as follows:
· Level 1 - The unadjusted quoted price in an active market for identical
assets or liabilities that the entity can access at the measurement date.
· Level 2 - Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or liability, either
directly or indirectly.
· Level 3 - Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
The tables below set out fair value measurements of financial instruments as at
the year end by the level in the fair value hierarchy into which the fair value
measurement is categorised.
Financial assets/liabilities at fair value through profit or loss
Level 1 Level 2 Level 3 Total
At 30 September 2023 £'000 £'000 £'000 £'000
Investments 97,746 17,296 74,772 189,814
Level 1 Level 2 Level 3 Total
At 31 March 2023 £'000 £'000 £'000 £'000
Investments 100,547 17,361 85,220 203,128
Note: Within the above tables, level 1 comprises all the Company's ordinary
investments, level 2 represents the investment in WS Lindsell Train North
American Equity Fund and level 3 represents the investment in LTL.
During the year ended 31 March 2022 the Board appointed J.P. Morgan Cazenove Ltd
to undertake an independent review of the Company's valuation methodology
applied to its unlisted investment in LTL. The methodology was adopted and
applied to monthly valuations from 31 March 2022 onwards.
This methodology has a single component based on a percentage of LTL's funds
under management ("FUM"), with the percentage applied being reviewed monthly and
adjusted to reflect the ongoing profitability of LTL. At the end of each month
the ratio of LTL's notional annualised net profits* to LTL's FUM is calculated
and, depending on the result, the percentage of FUM is adjusted according to the
table shown in Appendix 2.
The valuation methodology was formally reviewed previously in March 2018 and
March 2020.
The Board reserves the right to vary its valuation methodology at its
discretion.
*LTL's notional net profits are calculated by applying a fee rate (averaged over
the last six months) to the most recent end-month FUM to produce annualised fee
revenues excluding performance fees. Notional staff costs of 45% of revenues,
annualised fixed costs and tax are deducted from revenues to then produce
notional annualised net profits.
9 Sections 1158/1159 of the Corporation Tax Act 2010
It is the intention of the Directors to conduct the affairs of the Company so
that the Company satisfies the conditions for approval as an Investment Trust
Company set out in Sections 1158/1159 of the Corporation Tax Act 2010.
10 Going Concern
The Directors believe, having considered the Company's investment objective,
risk management policies, capital management policies and procedures, and the
nature of the portfolio and the 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, and, more specifically, that there are no material uncertainties
relating to the Company that would prevent its ability to continue in such
operational existence for at least twelve months from the date of the approval
of this Half-year Report. For these reasons, they consider there is reasonable
evidence to continue to adopt the going concern basis in preparing the financial
statements. In reviewing the position as at the date of this Report, the Board
has considered the guidance on this matter issued by the Financial Reporting
Council.
As part of their assessment, the Directors have given careful consideration to
the consequences for the Company of continuing uncertainty in the global
economy. As previously reported, stress testing was also carried out in April
2023 to establish the impact of a significant and prolonged decline in the
Company's performance and prospects. This included a range of plausible downside
scenarios such as reviewing the effects of substantial falls in investment
values and the impact of the Company's ongoing charges ratio.
11 2023 Accounts
The figures and financial information for the year to 31 March 2023 are
extracted from the latest published accounts of the Company and do not
constitute statutory accounts for the year.
Those accounts have been delivered to the Registrar of Companies and included
the Report of the Company's auditor which was unqualified and did not contain a
reference to any matters to which the Company's auditor drew attention by way of
emphasis without qualifying the report, and did not contain a statement under
section 498 of the Companies Act 2006.
Interim Management Report
The Directors are required to provide an Interim Management Report in accordance
with the UK Listing Authority's Disclosure and Transparency Rules. They consider
that the Chairman's Statement and the Investment Manager's Report, the following
statements and the Directors' Responsibility Statement below together constitute
the Interim Management Report for the Company for the six months ended 30
September 2023.
Principal Risks and Uncertainties
The Directors continue to review the key risk register for the Company which
identifies the risks that the Company is exposed to, the controls in place and
the actions being taken to mitigate them. This is set against the backdrop of
increased risk levels within the global economy created by ongoing global supply
chain disruption, rising levels of inflation and interest rates, together with
the consequences of the wars in Ukraine and the Middle East and the subsequent
long-term effects on economies and international relations. The Directors have
considered the impact of the continued uncertainty on the Company's financial
position and, based on the information available to them at the date of this
Report, have concluded that no adjustments are required to the accounts as at 30
September 2023.
A review of the half-year and the outlook for the Company can be found in the
Chairman's Statement and in the Investment Manager's Review. The principal risks
and uncertainties faced by the Company include the following:
· The Board may have to reduce the Company's dividend.
· The Company's share price total return may differ materially from the NAV
per share total return.
· The departure of a key individual at the Investment Manager may affect the
Company's performance.
· The investment strategy adopted by the Investment Manager, including the
high degree of concentration of the investment portfolio, may lead to an
investment return that is materially lower than the Company's comparator
benchmark index, and/or a possible failure to achieve the Company's investment
objective.
· The adverse impact of climate change on the portfolio companies' operational
performance.
· The investment in LTL becomes an even greater proportion of the overall
value of the Company's portfolio.
· Adverse reputational impact of one or more of the Company's key service
providers which, by association, causes the Company reputational damage.
· Fraud (including unauthorised payments and cyber-fraud) occurs leading to a
loss.
· The Company is exposed to credit risk.
· The Company is exposed to market price risk.
· The Company and/or the Directors fail(s) to comply with its legal
requirement with any applicable regulations.
· The regulatory environment in which the Company operates changes, affecting
the Company's business model.
· The Company's valuation of its investment in LTL is materially misstated.
The Audit Committee identified the following emerging risks to be included in
the risk register.
Geopolitical conflicts and macroeconomic developments, whether they be
political, economic or military, introduce new risks and exacerbate existing
risks. These include:
· Disruptions to supply chains, operations and markets for investee companies
both as a direct result of conflict and as result of economic sanctions;
· Increased inflation, leading policy makers to increase interest rates. This
in turn may dampen economic activity and raise unemployment;
· Increased market volatility and reduced investor risk appetites; and
· Increased threat of state sponsored cyberattacks.
While presenting investment opportunities, the rapid development of new
technologies, such as artificial intelligence, may disrupt the markets and
operating models of the companies in which we invest, damaging their potential
investment returns.
Information on principal risks is given in the Annual Report for the year ended
31 March 2023. Further information of the emerging risks will be included in the
Annual Report for the year ended 31 March 2024.
In the view of the Board, there have not been any material changes to the
fundamental nature of these risks and they are applicable to the remainder of
the financial year.
Related Party 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.
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-year
Report have been prepared in accordance with applicable UK Accounting Standards;
and
(ii)the interim management report includes a true and fair review of the
information required by:
(a)DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, 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 financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b)DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, 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 entity during that period; and any changes in the related
party transactions described in the last Annual Report that could do so.
The Half-year Report has not been audited by the Company's auditors.
This Half-year Report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the information
available to them up to the date of this report and such statements should be
treated with caution due to the inherent uncertainties, including both economic
and business risk factors, underlying any such forward-looking information.
For and on behalf of the Board
Julian Cazalet
Chairman
4 December 2023
Appendix 1
Half-year review of Lindsell Train Limited ("LTL") the Investment Manager of The
Lindsell Train Investment Trust plc ("LTIT") as at 31 July 2023
Funds under Management
Jul 2023 Jan 2023 Jul 2022
FUM by Strategy £m £m £m
UK 7,456 7,690 8,099
Global 9,798 10,352 10,810
Japan 216 554 624
North America 35 30 29
Total 17,505 18,626 19,562
Largest Client Accounts
Jul 2023 Jan 2023 Jul 2022
% of FUM % of FUM % of FUM
Largest Pooled Fund Asset 30% 30% 30%
Largest Segregated Account 11% 10% 10%
Financials
Unaudited
Jul 2023 Jul 2022 %
Profit & Loss £'000 £'000 Change
Fee Revenue
Investment Management Fees 45,240 49,259 -8%
Performance Fees 0 0 0%
Interest 433 38
45,673 49,297
Staff Remuneration * (13,542) (15,101) -10%
Fixed Overheads (2,352) (2,228) 6%
Operating Profit 29,779 31,968 -7%
FX Currency Translation Gain/(loss) (853) 3,005
Investment Unrealised Gain/(loss) 217 (14)
Gilts/Bonds Gain/(loss) 840 0
Profit before taxation 29,983 34,959
Taxation (6,857) (6,202)
Net Profit 23,126 28,757 -20%
Dividends (20,465) (25,879)
Retained profit 2,661 2,878
Balance Sheet
Fixed Assets 75 133
Investments 62,113 6,900
Current Assets (Inc cash at bank) 50,674 94,206
Liabilities (12,311) (7,267)
Net Assets 100,551 93,972
Capital & Reserves
Called up Share Capital 266 266
Treasury Shares (437) (1,794)
Profit & Loss Account 100,722 95,500
Shareholders' Funds 100,551 93,972
*Staff costs include permanent staff remuneration, social security, temporary
apprentice levy, introduction fees and other staff related costs. Nomore than
25% of fees (other than LTIT) can be paid as permanent staff remuneration.
Five Year History
Unaudited
Jul 2023 Jul 2022 Jul 2021 Jul 2020 Jul 2019
Operating Profit 65% 65% 64% 66% 64%
Margin
Earnings per share 867 1,083 1,237 1,084 1,054
(£)
Dividends per share 768 975 1,004 949 776
(£)
Total Staff Cost as 30% 31% 33% 29% 33%
% of Revenue
Opening FUM (£m) 19,562 24,298 21,151 22,563 15,304
Changes in FUM (£m) -2,057 -4,736 3,147 -1,412 7,259
- of market movement 1,054 -1,271 3,041 -1,385 4,568
- of net fund -3,111 -3,465 106 -27 2,691
inflows/(outflows)
Closing FUM (£m) 17,505 19,562 24,298 21,151 22,563
LTL Open-ended funds 64% 66% 73% 72% 75%
as % of total
Client Relationships
- Pooled funds 5 5 5 5 4
- Segregated 15 18 17 17 17
accounts
Ownership
Jul 2023 Jan 2023 Jul 2022 Jan 2022 Jul 2021
Michael Lindsell and 9,630 9,650 9,650 9,650 9,650
spouse
Nick Train and 9,630 9,650 9,650 9,650 9,650
spouse
The Lindsell Train 6,421 6,450 6,450 6,450 6,450
Investment Trust
plc*
Other 979 893 805 778 899
Directors/employees
26,660 26,643 26,555 26,528 26,649
Treasury Shares 0 17 105 132 11
Total Shares 26,660 26,660 26,660 26,660 26,660
Board of Directors
Nick Train Chairman and Portfolio Manager
Michael Lindsell Chief Executive and Portfolio Manager
Michael Lim IT Director and Secretarial
Keith Wilson Head of Marketing & Client Services
Joss Saunders Chief Operating Officer
Jane Orr Non-Executive Director
Julian Bartlett Non-Executive Director
Rory Landman Non-Executive Director
Employees
Jul 2023 Jan 2023 Jul 2022 Jan 2022 Jul 2021
Investment Team 7 7 7 7 6
(including three
Portfolio
Managers)
Client Servicing & 8 9 7 7 6
Marketing
Operations & 12 12 12 11 8
Administration
Non-Executive 3 2 2 2 2
Directors
30 30 28 27 22
Appendix 2
LTIT Director's valuation of LTL (unaudited)
30 Sept 2023 30 Sept 2022
Notional annualised net 31,411 38,368
profits (A)* (£'000)
Funds under Management less 16,339,590 18,548,853
LTIT holdings (B) (£'000)
Normalised notional net 0.192% 0.207%
profits as % of FUM A/B = (C)
% of FUM (D) (see table below 1.90% 1.95%
to view % corresponding to C)
Valuation (E) i.e. B x D 310,452 361,703
(£'000)
Number of shares in issue 26,660 26,555
(F)?
Valuation per share in LTL £11,645 £13,621
i.e. E / F
*Notional annualised net profits are made up of:
-annualised fee revenue, based on 6-mth average fee rate applied to most recent
month-end AUM
- annualised fee revenue excludes performance fees
-annualised interest income, based on 3-mth average
- notional staff costs of 45% of annualised fee revenue
- annualised operating costs (excluding staff costs), based on 3
-mth normalised average
- notional tax at Sep '23: 25%, Sep '22: 19%
?The increase in shares in issue is accounted for by net purchases of Treasury
Shares by LTL employees.
+----------------------------------------+------------------------------------+
|Notional annualised net profits*/FUM (%)|Valuation of LTL - Percentage of FUM|
+----------------------------------------+------------------------------------+
|0.15 - 0.16 |1.70% |
+----------------------------------------+------------------------------------+
|0.16 - 0.17 |1.75% |
+----------------------------------------+------------------------------------+
|0.17 - 0.18 |1.80% |
+----------------------------------------+------------------------------------+
|0.18 - 0.19 |1.85% |
+----------------------------------------+------------------------------------+
|0.19 - 0.20 |1.90% |
+----------------------------------------+------------------------------------+
|0.20 - 0.21 |1.95% |
+----------------------------------------+------------------------------------+
|0.21 - 0.22 |2.00% |
+----------------------------------------+------------------------------------+
|0.22 - 0.23 |2.05% |
+----------------------------------------+------------------------------------+
|0.23 - 0.24 |2.10% |
+----------------------------------------+------------------------------------+
|0.24 - 0.25 |2.15% |
+----------------------------------------+------------------------------------+
|0.25 - 0.26 |2.20% |
+----------------------------------------+------------------------------------+
|0.26 - 0.27 |2.25% |
+----------------------------------------+------------------------------------+
Glossary of Terms and Alternative Performance Measures
Alternative Investment Fund Managers Directive ("AIFMD")
The Alternative Investment Fund Managers Directive (the "Directive") is a
European Union Directive that entered into force on 22 July 2013. The Directive
regulates EU fund managers that manage alternative investment funds (this
includes investment trusts).
Alternative Performance Measure ("APM")
An alternative performance measure is a financial measure of historical or
future financial performance, financial position or cash flow that is not
prescribed by the relevant accounting standards. The APMs are the discount and
premium, dividend yield, share price and NAV total returns and ongoing charges.
The Directors believe that these measures enhance the comparability of
information between reporting periods and aid investors in understanding the
Company's performance.
Benchmark
With effect from 1 April 2021 the Company's comparator benchmark is the MSCI
World Index total return in Sterling.
Discount and premium (APM)
If the share price of an investment trust is higher than the Net Asset Value
(NAV) per share, the shares are trading at a premium to NAV. In this
circumstance the price that an investor pays or receives for a share would be
more than the value attributable to it by reference to the underlying assets.
The premium is the difference between the Share Price and the NAV, expressed as
a percentage of the NAV.
A discount occurs when the share price is below the NAV. Investors would
therefore be paying less than the value attributable to the shares by reference
to the underlying assets.
A premium or discount is generally the consequence of the balance of supply and
demand for the shares on the stock market.
The discount or premium is calculated by dividing the difference between the
Share Price and the NAV by the NAV.
As at As at
30 September 31 March
2023 2023
£ £
Share Price 886.00 1,052.50
Net Asset Value per Share 968.75 1,056.95
Discount to Net Asset Value per Share 8.54% 0.42%
MSCI World Index total return in Sterling (the Company's comparator Benchmark)
The MSCI requires the Company to include the following statement in the Half
-year Report.
"The MSCI information (relating to the Benchmark) may only be used for your
internal use, may not be reproduced or redisseminated in any form and may not be
used as a basis for or a component of any financial instruments or products or
indices. None of the MSCI information is intended to constitute investment
advice or a recommendation to make (orrefrain from making) any kind of
investment decision and may not be relied on as such. Historical data and
analysis should not be taken as an indication or guarantee of any future
performance analysis, forecast or prediction. The MSCI information is provided
on an "as is" basis and the user of this information assumes the entire risk of
any use made of this information. MSCI, each of its affiliates and each other
person involved in or related to compiling, computing or creating any MSCI
information (collectively, the "MSCI Parties") expressly disclaims all
warranties (including, without limitation, any warranties of originality,
accuracy, completeness, timeliness, non-infringement, merchantability and
fitness for a particular purpose) with respect to this information. Without
limiting any of the foregoing, in no event shall any MSCI Party have any
liability for any direct, indirect, special, incidental, punitive, consequential
(including, without limitation lost profits) or any other damages.
(www.msci.com)."
Net asset value ("NAV") per Ordinary Share
The NAV is shareholders' funds expressed as an amount per individual share.
Equity shareholders' funds are the total value of all the Company's assets, at
current market value, having deducted all current and long-term liabilities and
any provision for liabilities and charges.
The NAV of the Company is published weekly and at each month end.
The figures disclosed in the Statement of Financial Position have been
calculated as shown below:
Six months
ended Year ended
30 September 31 March
2023 2023
Net Asset Value (a) £193,750,000 £211,390,000
Ordinary Shares in issue (b) 200,000 200,000
Net asset value per Ordinary Share (a) ÷ (b) £968.75 £1,056.95
Revenue return per share
The revenue return per share is the revenue return profit for the period divided
by the weighted average number of ordinary shares in issue during the period.
Share price and NAV total return (APM)
This is the return on the share price and NAV taking into account both the rise
and fall of share prices and valuations and the dividends paid to shareholders.
Any dividends received by a shareholder are assumed to have been reinvested in
either additional shares (for share price total return) or the Company's assets
(for NAV total return).
The share price and NAV total returns are calculated as the return to
shareholders after reinvesting the net dividend in additional shares on the date
that the share price goes ex-dividend.
The figures disclosed earlier in the announcement have been calculated as shown
below:
Six months ended
30 September 2023
LTIT NAV LTIT Share Price
NAV/Share Price at a £968.75 £886.0
30 September 2023
Dividend b 1.052 1.054
Adjustment Factor*
Adjusted closing c = a x b £1,018.90 £933.57
NAV/Share Price
NAV/Share Price 31 d £1,056.95 £1,052.50
March 2023
Total return [(c/d)-1] x 100 -3.6% -11.3%
*The dividend adjustment factor is calculated on the assumption that the
dividend of £51.50 paid by the Company during the year was reinvested into
shares or assets of the Company at the cum income NAV per share/share price, as
appropriate, at the ex-dividend date.
LTL total return performance
The total return performance for LTL is calculated as the return after receiving
but not reinvesting dividends received over the period.
Six months ended
30 September 2023
LTL valuation
Valuation at 31 March 2023 a £13,212
Valuation at 30 September 2023 b £11,645
Dividend per share paid during the period c £768
Total return [(b-a)+c]/a x 100 -6.0%
Treasury Shares
Shares previously issued by a company that have been bought back from
Shareholders to be held by the Company for potential sale or cancellation at a
later date. Such shares are not capable of being voted and carry no rights to
dividends.
-ENDS-
For further information please contact
Victoria Hale
Company Secretary
Frostrow Capital LLP
020 3100 8732
This information was brought to you by Cision http://news.cision.com
END
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