Murray Income Trust PLC
Half Yearly Report 31 December
2023
An investment trust founded in 1923 aiming for
high and growing income with capital growth.
Investment Objective
The Company aims for a high and
growing income combined with capital growth through investment in a
portfolio principally of UK equities
Performance Highlights
Net asset value total
returnAB
|
|
Share price total returnA
|
Six months ended 31 December 2023
|
|
|
Six months ended 31 December 2023
|
|
+4.5%
|
|
+6.2%
|
Year ended 30 June 2023
|
+8.8%
|
|
Year ended 30 June 2023
|
+4.9%
|
|
|
|
|
|
Benchmark total return
|
|
|
Ongoing chargesA
|
|
Six months ended 31 December 2023
|
|
|
Forecast year to 30 June 2024
|
|
+5.2%
|
|
0.51%
|
Year ended 30 June 2023
|
+7.9%
|
|
Year ended 30 June 2023
|
0.50%
|
|
|
|
|
|
Earnings per share (revenue)
|
|
|
Dividend per Ordinary share
|
|
Six months ended 31 December 2023
|
|
|
Year ended 30 June 2023
|
|
14.2p
|
|
37.50p
|
Six months ended 31 December 2022
|
16.3p
|
|
Year ended 30 June 2022
|
36.00p
|
|
|
|
|
|
Discount to net asset
valueAB
|
|
|
Dividend yieldA
|
|
As at 31 December 2023
|
|
|
As at 31 December 2023
|
|
6.9%
|
|
4.3%
|
As at 30 June 2023
|
8.2%
|
|
As at 30 June 2023
|
4.5%
|
A Considered to be an Alternative
Performance Measure.
|
B With debt at fair value.
|
|
Net asset value per share
B
At 30 June (*31 December) -
pence
2019
|
887.8
|
2020
|
807.7
|
2021
|
935.7
|
2022
|
871.0
|
2023
|
911.7
|
2023*
|
929.4
|
Dividends per share
Year ended 30 June - pence
2019
|
34.00
|
2020
|
34.25
|
2021
|
34.50
|
2022
|
36.00
|
2023
|
37.50
|
Mid-Market price per share
At 30 June (*31 December) -
pence
2019
|
850.0
|
2020
|
768.0
|
2021
|
871.0
|
2022
|
832.0
|
2023
|
837.0
|
2023*
|
865.0
|
Financial Calendar, Dividends and Highlights
Financial Calendar
Payment dates of quarterly dividends
|
March, June, September, December
|
Financial year end
|
30 June
|
Expected announcement date of annual
results
|
September
|
Annual General Meeting (London)
|
5 November 2024
|
Dividends
|
Rate
|
Ex-dividend date
|
Record date
|
Payment date
|
First interim
|
9.50p
|
16 Nov 2023
|
17 Nov 2023
|
14 Dec 2023
|
Second interim
|
9.50p
|
15 Feb 2024
|
16 Feb 2024
|
14 Mar 2024
|
Third interim
|
9.50p
|
16 May 2024
|
17 May 2024
|
13 Jun 2024
|
Chair's Statement
"The
Company has prospered over the years through multiple economic,
social and political crises. There are many good reasons to
believe that it will continue to thrive in the years to
come."
Peter Tait, Chair
Having taken over as Chair of Murray Income
Trust plc (the "Company") at the Centenary Annual General Meeting
("AGM") in November 2023, I am delighted to present my first
Half-Yearly Report for the Company for the six months ended 31
December 2023 (the "Period"). Last year was historic for the
Company. Not only did it celebrate its centenary, it also increased
its annual dividend for the 50th consecutive year, giving it one of
the longest records of progressive dividend growth in the
investment trust sector. Our aim is to continue the trend of
capital and income growth which we have seen over many years - and
a dividend yield of 4.5% at 31 December 2023 is a good place to
start. The Board also welcomed the announcement by
abrdn plc, in December 2023, that it had commenced a programme
whereby it would purchase shares in the Company equivalent to six
months' management fees.
Performance
The Company's net asset value
("NAV") per share (with debt at fair value) increased by 4.5% over
the Period, as compared to the rise of 5.2% in the FTSE All-Share
Index (the "Benchmark"), both figures in total return
terms. The fair value of the
Company's long-term debt was adversely affected by interest rate
movements during the Period, which weighed on the Company's NAV
return. The share price total return was
6.2% following a narrowing of the discount from 8.2% to
6.9%.
|
Year ended
|
3 years ended
|
5 years ended
|
|
31 December 2023
|
31 December 2023
|
31 December 2023
|
Cumulative Performance (total return)
|
%
|
%
|
%
|
Share price
|
7.3
|
17.4
|
47.1
|
Net asset value per Ordinary
shareA
|
8.9
|
21.6
|
46.0
|
FTSE All-Share Index
|
7.9
|
28.1
|
37.7
|
A With debt at fair value
Investment Team
abrdn is our appointed investment
management company. Charles Luke has been our lead portfolio
manager since 2006 and works alongside co-manager Iain Pyle and
Rhona Millar as part of abrdn's Developed Markets Equities
team.
Investment Process
Our Manager's investment process is
best summarised as a search for good quality companies at
attractive valuations. The Manager defines a quality company as one
capable of strong and predictable cash generation, sustainably high
returns on capital and with attractive growth opportunities over
the longer term. These typically result from a sound business
model, a robust balance sheet, good management and strong
environmental, social and governance characteristics.
Annual General Meeting ("AGM")
The 2023 AGM for the Company was held in Glasgow on 7
November 2023, celebrating the centenary of its launch in that city
in 1923. The Company was initially called "The Second
Scottish Western Investment Company", changing its name to Murray
Income Trust plc in 1984, at which time it also altered its remit
to invest for a high and growing income from a portfolio of
predominantly UK equities. It was encouraging to see such a strong
and enthusiastic turn-out for this special event.
A further centenary event for the Company was held in
December 2023 when I, as Chair, had the pleasure of officiating at
the closing ceremony of the London Stock Exchange, where I was
joined by most of the Board, representatives from abrdn and our
corporate broker, as well as the three most recent former
Chairs.
Board
Following the retirement of Neil Rogan and
resignation of Merryn Somerset Webb at the conclusion of the 2023
AGM, the Board was delighted to announce the appointment of Angus
Franklin as a new non-executive director from 1 January 2024. Angus
joined the Board following a distinguished career in various senior
investment roles with Bailie Gifford & Co. Having, myself,
assumed the role as Chair, my former position as Senior Independent
Director is now held by Alan Giles who has been a Board member for
three years. The other members of the Board are Stephanie Eastment,
as Chair of the Audit Committee, and Nandita Sahgal Tully, who
specialises in investment and ESG matters.
Dividend
The dividend for the year ended 30
June 2023 was increased by 4.2% to 37.5p per share, giving a
year-end historic yield for the Company of 4.5%. Whilst intending
to maintain the Company's progressive dividend policy for the year
to 30 June 2024, the Board also decided to rebalance the quarterly
dividend pay-outs, allowing shareholders to access more quickly and
more evenly their dividend income throughout the year. As announced
in November 2023, the first three dividend payments for the year
ended 30 June 2024 are 9.5p per share (previously 8.25p per
share). As a result, the fourth interim dividend will be
lower than that for last year but it is anticipated to be not less
than 9.5p per share, giving an expected total for the year of a
minimum of 38.0p per share.
Share Capital
The Board constantly monitors the level of the
share price discount to NAV and buys back shares when market
conditions suggest that this may reduce discount volatility. In
addition, all share buybacks are at a discount to NAV and are
accretive to the Company. To that end, the Company bought back
3,686,219 Ordinary shares of 25p into treasury during the Period,
representing 3.3% of shares in issue at 30 June 2023. As a result,
at 31 December 2023, the Company had 108,033,782 Ordinary shares of
25p in issue with voting rights and an additional 11,495,750 shares
held in treasury.
Environmental, Social and Governance
("ESG")
ESG considerations are deeply embedded into the
company analysis carried out by our Manager with the aim of
mitigating risk and enhancing returns. There is frequent dialogue
with investee companies, focused on ensuring that the companies in
the portfolio are acting in the best long-term interests of both
their shareholders and society at large. By way of example, the
Investment Manager's Report describes engagement during the Period
with Standard
Chartered, National
Grid and London Stock Exchange
Group.
It is important to note that the policy pursued
by our Manager on our behalf is dynamic rather than static. ESG
conclusions can evolve if the inputs change: for example, one might
reassess Russia's invasion of Ukraine or the conflict in the Middle
East and conclude that the social factor of national security and
safety is more important now than previously considered.
Update
At 29 February 2024 (the latest
practicable date prior to approval of this Report), the net asset
value per share (with debt at fair value) and share price were
906.98p and 821.00p, respectively. Accordingly, for the period from
31 December 2023 to 29 February 2024, the net asset value total
return (with debt at fair value) and share price total return were
-1.4% and -4.0%, respectively, while the Benchmark total return was
-1.1%.
Outlook
The previous calendar year (2023) was a mixed
bag for equity markets with a strong recovery in technology stocks,
resulting in a 25% gain in the US S&P index, but a more modest
7.9% increase in the UK FTSE All-Share Index, the Company's own
benchmark. With other non-UK markets also performing well during
the year, the portfolio benefited from its near 20% exposure to
overseas stocks including Accton
Technology, Novo
Nordisk and VAT
Group, which each rose by more than 20% in the six
months ended 31 December 2023.
As we turn our attention to 2024, one question I
am asking myself is why has the UK market been a laggard and what
might cause the situation to improve in the months and years
ahead? There is, of course, never one definitive reason for
market performance, but such reasons could include higher than
anticipated inflation and interest rates, the impact of the Ukraine
war on energy supply and utility bills, a lack of technology stocks
in the Benchmark, a continuing Brexit hangover (dissuading foreign
investors from the market) and the sharp reduction in equity
exposure, particularly UK equity exposure, by UK Defined Benefit
pension schemes. Information published by the Pensions and Lifetime
Savings Association shows that, 20 years ago, UK Defined Benefit
pension schemes invested about half of their assets in UK equities,
but that this had fallen to only about 3% by 2023.
As a result, as noted in the Investment
Manager's Report, the UK market now looks very cheap compared to
its own history and to international markets. Of course,
there will be headwinds along the way, but interest rate trends are
usually very important for equity market movements. The
anticipation of falling UK interest rates later this calendar year
could attract the attention of potential investors, particularly
given the appealing combination of a market dividend yield of 4.0%
and forecast dividend and earnings growth in 2024, according to a
Bloomberg consensus of estimates in January, of 9.2% and 10.1%,
respectively, despite the lacklustre outlook for overall economic
growth.
From a Murray Income shareholder perspective,
your starting point is a higher yield of 4.6%, and the shares
standing on a 9.5% discount to net asset value (as at the date of
this Report, with debt at fair value). The potential, therefore,
for positive returns from owning the Company's shares is
encouraging, with a good yield and the capacity for earnings
growth, together with a discount to net asset value at present.
Markets can be blown off-course by many exogenous factors, and
there remain significant risks in the current geo-political
situation, emanating from the continuing Russian war in Ukraine,
the current Middle East crisis, and tensions between China and both
Taiwan and the USA, not to mention the fact that nearly half of the
world's population will be participating in general elections
during the course of 2024. But the Company has prospered over
the years through multiple economic, social and political
crises. There are many good reasons to believe that it will
continue to thrive in the years to come.
For a more detailed review of the UK market and
the outlook for the Company's portfolio, please see the Investment
Manager's Report.
Peter
Tait
Chair
5 March 2024
Investment Manager's Report
The Company generated a positive Net Asset Value
("NAV") per share (with debt at fair value) return of 4.5% for the
six months ended 31 December 2023 (the "Period"). This
underperformed the Company's Benchmark (the FTSE All-Share Index )
which returned 5.2% (both figures calculated on a total
return basis).
From a style perspective, the portfolio's
Quality bias continued to be a headwind to performance (albeit to a
lesser extent than during the first half of the calendar year) as
the Value factor outperformed. In sector terms, the portfolio's
overweight position in the Consumer Discretionary sector and
underweight exposure to the Financials sector benefited
performance. In contrast, the overweight position in the
Industrials sector detracted from relative performance, as did the
underweight exposure to the Basic Materials sector. The holdings
in Sage, TotalEnergies and Vistry were the most beneficial to relative
returns while the holdings in Rentokil
Initial and Diageo
detracted the greatest, relatively. Not holding
Shell and Rolls-Royce also detracted from
performance.
Two new holdings were purchased for the
portfolio during the Period. The first addition was the leading
global actuator business, Rotork, which has strong quality characteristics
and under-appreciated growth opportunities. Drivers of growth
include their electric actuator product which is used to reduce
methane emissions in the Oil & Gas sector, which is
increasingly a priority as the industry looks to meet emission
reduction targets. The second new entrant was US-listed
Mastercard, which we see as having
attractive quality characteristics, including strong competitive
positioning and high barriers to entry, as well as having multiple
long-term growth opportunities. The Company's ability to own
overseas holdings allows the portfolio to access an industry not
available through the UK market. Further information on
Rotork and Mastercard may be found in the case
studies..
Three holdings were sold during the
Period: Croda, where our
conviction in the long-term strategy deteriorated, while the
valuation remains high; Marshalls, where we had concerns around the
trading environment and potential implications for the company's
balance sheet; and Drax, due
to increasing uncertainty around the long-term business
model.
Other trading related to managing position
sizes, reflecting conviction levels. In the utilities
sector, National Grid was
added to while SSE was
reduced. In healthcare, we reduced Smith
& Nephew and added to ConvaTec. In the mining sector, the position
in BHP was reduced and
proceeds reinvested in Anglo
American. The holding in Mondi, which reached an agreement to sell its
Russian business in September, was added to. The holdings in
Rentokil Initial and
Games Workshop were added to
following trading statements which led to weakness in the shares,
as we remain more positive on the longer-term outlooks for both
companies. The holding in VAT Group
was trimmed following strong share price performance, which
made the valuation less attractive. The position in
Vistry was reduced given it appears
there is a low likelihood of dividend payments, with the company
instead favouring buybacks. Further trades included adding
to bp, Diageo, Intermediate
Capital, L'Oréal, Oxford
Instruments, Oversea-Chinese
Banking Corp and RS
Group while trimming AstraZeneca, Coca-Cola
HBC, Inchcape, Novo
Nordisk, RELX
and Safestore.
We continued our measured option-writing
programme which is based on our fundamental analysis of holdings in
the portfolio. We believe that the option-writing strategy, which
we have now employed for well over a decade, is of benefit to the
Company by diversifying and modestly increasing the level of income
generated and providing headroom to invest in companies with lower
starting yields but better dividend and capital growth prospects.
The Company also bought back shares, representing 3.3% of the
shares in issue, during the Period.
One of the tenets of our investment philosophy
is the belief that in order to grow dividends over the long term a
company needs to grow its earnings and that high quality companies
are best placed to do that. We believe that the portfolio is well
positioned to do just this. Looking at the portfolio from a
quantitative perspective at 31 December 2023, typical measures of
portfolio quality such as returns measures and earnings stability
were high in absolute terms and considerably better than the
Benchmark (for example, in aggregate, the return on equity and
return on assets of the portfolio holdings was 20.7% and 7.5%
respectively, compared to the Benchmark at 15.8% and 5.3%,
respectively). Furthermore, the portfolio generates a dividend
yield approximately in line with the Benchmark. At 31 December
2023, the portfolio traded on a forward P/E multiple of 14.5x
compared to the Benchmark on 11.5x: more expensive but to our minds
a reasonable price to pay for a considerably better quality
portfolio and one still very attractively valued in absolute
terms.
Environmental, Social and Governance
("ESG")
ESG issues are discussed as part of our regular
engagement with portfolio companies' management. However, we
also engage on a variety of specific issues outside our regular
meetings cycle. It should be noted that given the Quality threshold
inherent in the portfolio, these meetings are rarely about issues
for which we hold significant concerns. To provide some examples of
the variety of engagements during the Period: firstly, we met with
the Head of Sustainable Finance at Standard
Chartered to discuss the steps the bank is taking to
reach its sustainable finance targets. Secondly, we engaged
with National Grid to discuss
their approach to securing public consent among those communities
that are likely to be affected by the construction of new
infrastructure required to meet the electricity needs in a net-zero
economy. Thirdly, we met with London Stock
Exchange Group to discuss proposed changes to its
remuneration policy.
Market and Economic Background
The UK equity market, as measured by the
Benchmark, rose by 5.2% on a total return basis over the Period.
The start was characterised by wavering optimism that signs of
declines in inflation would bring an end to the rate hiking cycle
which has been ongoing since 2022, while on the other hand concerns
that the strength of economic data in the US would lead to further
rate increases remained. In November 2023, confidence began to
build that interest rates across major economies had peaked,
leading to an end of year rally for equity
markets.
Performance at a sector level was
mixed. Aerospace & defence and housebuilding companies
performed well but some retail companies struggled.
The more domestically focused FTSE 250 Index outperformed
the FTSE 100 Index over the Period.
Domestic economic data was generally weak. UK
economic activity continued to stagnate with GDP falling by 0.4% in
the three months to December 2023, following a 0.1% decline in the
three months to September 2023. Consumer confidence strengthened
from historically low levels over the Period; conversely,
employment data weakened with wage growth slowing and vacancies
falling.
Inflation continued to decline from a peak of
11% in 2022, no longer looking like a significant international
outlier. This led to a slowing in the pace of rate hikes over the
Period, with the Bank of England ("BoE") raising rates by 0.25% in
August 2023 but holding at 5.25% at each of the subsequent
meetings. Despite the falls in inflation, the BoE Governor, Andrew
Bailey, was quick to stress that rates would not be cut in the near
future, reiterating the Bank's commitment to bring inflation back
within its 2% target.
These inflation trends have been similar in the
US and the Eurozone, where inflation fell more quickly than was
expected. Central banks in those regions have also held rates flat
since late summer. Economic growth in the US has been particularly
robust, which led to increased optimism of a soft landing and a
strong end to the Period for US markets, with the 'Magnificent 7'
technology companies continuing to be strong. In China, economic
activity data showed signs of bottoming and monetary and fiscal
policy is expected to ease further. Energy prices ended the Period
slightly higher, rising strongly on OPEC production cuts and
following the Israel-Hamas conflict, but then falling back on
concerns about slowing global growth.
Outlook
We expect the sharp monetary policy tightening
over the past 18 months to lead to a slowdown in global economic
growth in 2024. For the UK, we currently forecast zero GDP growth
in 2024. Inflation is expected to continue to trend downwards but
still remains higher than BoE targets and a key focus for markets
will be on interest rate cutting cycles and when and how quickly
they get under way. The most recent Consumer Prices Index data for
the 12 months to January 2024 indicated a reading of 4.2%. At
its January 2024 meeting, six members of the BoE's 9-strong
Monetary Policy Committee voted to maintain interest rates
unchanged, at 5.25%. abrdn's economists expect the BoE to start
cutting rates in mid-2024.
Political risk, with a number of significant
likely elections including the US and UK this calendar year, and
geopolitical risk with, in particular, increased tensions in the
Middle East, are likely to remain elevated.
The portfolio is full of high quality,
predominantly global businesses capable of delivering appealing
long term earnings and dividend growth at a modest valuation. Our
focus on quality companies should provide protection through a
downturn: those companies with pricing power, high margins and
strong balance sheets are better placed to navigate a more
challenging economic environment and emerge in a strong position.
Furthermore, these quality characteristics are helpful in
underpinning the portfolio's income generation.
The valuations of UK-listed companies remain
attractive on a relative and absolute basis. Apart from the global
financial crisis in 2008/2009 the UK's price/earnings multiple of
10.4x is near its lowest point for 30 years. The UK stockmarket is
cheap in absolute terms, relative to history and also relative to
global equities. Investors are earning global income at a
knock-down price. Moreover, the dividend yield of the UK market
remains at an appealing premium to other regional equity
markets.
In summary, we feel optimistic that our
long-term focus on investments in high quality companies with
robust competitive positions and strong balance sheets, which are
led by experienced management teams, will be capable of delivering
premium earnings and dividend growth.
Charles Luke and Iain Pyle,
abrdn Investments Limited
5 March 2024
Ten Largest Investments
As at 31 December 2023
Relx
|
|
AstraZeneca
|
Relx is a global provider of information and
analytics for professionals and businesses across a number of
industries including scientific, technical, medical and law.
The company offers resilient earnings combined with long term
structural growth opportunities.
|
|
AstraZeneca researches, develops, produces and
markets pharmaceutical products. With a significant focus on
oncology and rare diseases the company offers appealing growth
potential over the medium term.
|
|
|
|
Unilever
|
|
Diageo
|
Unilever is a global consumer goods company
supplying food, home and personal care products. The company has a
portfolio of strong brands including Dove, Knorr, Axe and Persil.
Over half of the company's sales are to developing and emerging
markets.
|
|
Diageo produces, distills and markets alcoholic
beverages including vodkas, whiskies, tequilas, gins and beer. The
company should benefit from attractive long term drivers such as
population and income growth, and premiumisation. The company has a
variety of very strong brands and faces very limited private label
competition.
|
|
|
|
TotalEnergies
|
|
bp
|
TotalEnergies is a broad energy company that
produces and markets fuels, natural gas and electricity. It is a
leader in the sector's energy transition with an attractive
pipeline of renewable assets.
|
|
bp is a fully integrated energy company
involved in exploration, production, refining, transportation and
marketing of oil and natural gas. The company provides an
attractive dividend yield and is well placed for the energy
transition.
|
|
|
|
Sage
|
|
London Stock Exchange
|
Sage is a market leading software business
focused on accounting, payroll and payments. The company has a
strong product suite and is well placed to benefit from the
software automation of its small and mid-sized customers over the
medium term.
|
|
London Stock Exchange is a diversified global
financial markets infrastructure and data business. The company is
highly cash generative and very well placed to benefit from
increased spend on data services.
|
|
|
|
BHP
|
|
Experian
|
BHP Group (formerly BHP Billiton) is a
diversified resources group with a global portfolio of high quality
assets particularly iron ore and copper. The company combines an
appealing dividend yield combined with a strong balance
sheet.
|
|
Experian is a market leader in the provision of
credit and marketing services. It maintains one of the
largest credit bureaus and offers specialist analytical solutions
for credit scoring, risk management and application processing
across a number of different markets including financial services,
health, retail and government.
|
Investment Portfolio
As at 31 December
2023
|
|
|
|
|
Total
|
|
|
|
Valuation
|
investments
|
Investment
|
Sector
|
Country
|
£'000
|
%
|
Relx
|
Media
|
UK
|
61,004
|
5.7
|
AstraZeneca
|
Pharmaceuticals and Biotechnology
|
UK
|
55,071
|
5.1
|
Unilever
|
Personal Care Drug and Grocery
Stores
|
UK
|
52,113
|
4.8
|
Diageo
|
Beverages
|
UK
|
47,636
|
4.4
|
TotalEnergies
|
Oil, Gas and Coal
|
France
|
40,680
|
3.8
|
bp
|
Oil, Gas and Coal
|
UK
|
39,856
|
3.7
|
Sage
|
Software and Computer Services
|
UK
|
38,061
|
3.5
|
London Stock Exchange
|
Finance and Credit Services
|
UK
|
37,592
|
3.5
|
BHP
|
Industrial Metals and Mining
|
UK
|
32,470
|
3.0
|
Experian
|
Industrial Support Services
|
UK
|
31,113
|
2.9
|
Top ten investments
|
|
|
435,596
|
40.4
|
Intermediate Capital
|
Investment Banking and Brokerage
Services
|
UK
|
28,114
|
2.6
|
National Grid
|
Gas Water and Multi-utilities
|
UK
|
27,495
|
2.5
|
Oversea-Chinese Banking
|
Banks
|
Singapore
|
25,087
|
2.3
|
Anglo American
|
Industrial Metals and Mining
|
UK
|
24,210
|
2.2
|
Close Brothers
|
Banks
|
UK
|
24,050
|
2.2
|
Rentokil Initial
|
Industrial Support Services
|
UK
|
23,951
|
2.2
|
SSE
|
Electricity
|
UK
|
22,856
|
2.1
|
Howden Joinery
|
Retailers
|
UK
|
22,677
|
2.1
|
Inchcape
|
Industrial Support Services
|
UK
|
22,352
|
2.1
|
Convatec
|
Medical Equipment and Services
|
UK
|
22,209
|
2.1
|
Top twenty investments
|
|
|
678,597
|
62.8
|
Microsoft
|
Software and Computer Services
|
United States
|
19,682
|
1.8
|
Nordea Bank
|
Banks
|
Sweden
|
18,938
|
1.8
|
Safestore Holdings
|
Real Estate Investment Trusts
|
UK
|
18,767
|
1.7
|
Oxford Instruments
|
Electronic and Electrical Equipment
|
UK
|
18,653
|
1.7
|
Vistry
|
Household Goods and Home
Construction
|
UK
|
17,490
|
1.6
|
M&G
|
Investment Banking and Brokerage
Services
|
UK
|
17,269
|
1.6
|
Genus
|
Pharmaceuticals and Biotechnology
|
UK
|
16,344
|
1.5
|
Mondi
|
General Industrials
|
UK
|
15,011
|
1.4
|
Games Workshop
|
Leisure Goods
|
UK
|
14,894
|
1.4
|
Novo-Nordisk
|
Pharmaceuticals and Biotechnology
|
Denmark
|
13,987
|
1.3
|
Top thirty investments
|
|
|
849,632
|
78.6
|
OSB
|
Finance and Credit Services
|
UK
|
13,987
|
1.3
|
Hiscox
|
Non-life Insurance
|
UK
|
13,523
|
1.3
|
Nestlé
|
Food Producers
|
Switzerland
|
13,157
|
1.2
|
Kone
|
Industrial Engineering
|
Finland
|
12,983
|
1.2
|
L'Oréal
|
Personal Care Drug and Grocery
Stores
|
France
|
12,664
|
1.2
|
Direct Line Insurance
|
Non-life Insurance
|
UK
|
12,645
|
1.2
|
VAT
|
Electronic and Electrical Equipment
|
Switzerland
|
12,324
|
1.1
|
RS
|
Industrial Support Services
|
UK
|
12,245
|
1.1
|
Standard Chartered
|
Banks
|
UK
|
11,788
|
1.1
|
Genuit
|
Construction and Materials
|
UK
|
11,711
|
1.1
|
Top forty investments
|
|
|
976,659
|
90.4
|
Coca-Cola HBC
|
Beverages
|
UK
|
11,329
|
1.1
|
Rotork
|
Industrial Engineering
|
UK
|
11,142
|
1.0
|
Accton Technology
|
Telecommunications Equipment
|
Taiwan
|
10,674
|
1.0
|
LVMH
|
Personal Goods
|
France
|
10,579
|
1.0
|
Telenor
|
Telecommunications Service Providers
|
Norway
|
10,507
|
1.0
|
Roche
|
Pharmaceuticals and Biotechnology
|
Switzerland
|
9,397
|
0.9
|
Smith & Nephew
|
Medical Equipment and Services
|
UK
|
8,801
|
0.8
|
Mastercard
|
Finance and Credit Services
|
United States
|
8,231
|
0.8
|
GSK
|
Pharmaceuticals and Biotechnology
|
UK
|
8,138
|
0.8
|
Chesnara
|
Life Insurance
|
UK
|
6,901
|
0.6
|
Top fifty investments
|
|
|
1,072,358
|
99.4
|
Moonpig
|
Retailers
|
UK
|
6,185
|
0.6
|
Total investments (51)
|
|
|
1,078,543
|
100.0
|
Ordinary shares unless otherwise stated.
|
Investment Case Studies
Mastercard
Mastercard, the US-listed technology company in
the global payments industry, was added to the portfolio in the six
months ended 31 December 2023. The company has an approximate
market capitalisation of $430bn and the overseas-listed holding
adds exposure to a market segment that would be difficult for the
portfolio to access through the UK market.
Mastercard's core business is consumer payments
processing for credit and debit cards and the business model is a
beneficiary of the shift from cash to electronic payments, which
will continue to drive earnings growth. Furthermore, business to
business flows are also an attractive area for growth. In addition,
the company's value-added services business (which includes
cyber-security and analytics insights into consumer spending),
provides a further avenue for expansion.
The company has a significant competitive
advantage, driven by the 'network effect' of issuing over a billion
credit cards, accepted by millions of merchants and many financial
institutions, as well as the security capabilities enabled by the
extensive data these transactions generate. The dividend yield of
the stock is relatively modest compared to some of the other
holdings in the portfolio but we see potential for strong long-term
dividend growth supported by a share buy-back programme.
Rotork
A constituent of the FTSE 250 Index, with a
market capitalisation of approximately £2.7bn, Rotork was
introduced to the portfolio during the six months ended 31 December
2023. Rotork operates in the valve industry and is the global
leading manufacturer of actuators, selling products and services to
industries including Oil & Gas, Industrials, Chemicals, Water
and Power.
In the short term, the recovery in oil and gas
capex budgets should be a tailwind for the company. In the longer
term, the company has a part to play in the energy transition
helping to remove methane emissions in oil and gas wells while also
enabling the growth of hydrogen and carbon capture, utilisation and
storage (CCUS). Rotork is conservatively managed and has strong
quality characteristics, such as, for example, attractive margins,
a high return on capital employed, high barriers to entry (such as
strong brand resonance, certification, reliability and field
service) and a net cash balance sheet.
The company's dividend has good scope to grow as
earnings increase through a mixture of revenue growth, product mix
and operating leverage while the strong balance sheet provides an
opportunity for inorganic growth.
Interim Board Report
Principal Risks and Uncertainties
The Board regularly reviews the principal risks
and uncertainties which it has identified, together with the
delegated controls it has established to manage the risks and
address the uncertainties. These are considered to be materially
unchanged as at 31 December 2023, as compared to 30 June 2023. The
principal risks and uncertainties are set out in detail on pages 18
to 22 of the Company's Annual Report for the year ended 30 June
2023 ("Annual Report 2023") which is available on the Company's
website. The Annual Report 2023 also contains, in note 18 to the
Financial Statements, an explanation of other risks relating to the
Company's investment activities, specifically market risk,
liquidity risk and credit risk, and a note of how these risks are
managed.
Related Party Transactions
Under Generally Accepted Accounting Practice (UK
Accounting Standards and applicable law), the Company has
identified the Directors as related parties. No other related
parties have been identified. There have been no related party
transactions that have had a material effect on the financial
position of the Company.
Going Concern
The factors which have an impact on the
Company's status as a going concern are set out in the Going
Concern section of the Directors' Report on pages 42 and 43 of the
Annual Report 2023. As at 31 December 2023, there had been no
material changes to these factors.
The Board has set limits for borrowing and
regularly reviews the level of any gearing, cash flow projections
and compliance with covenants associated with the Senior Loan Notes
and bank facilities. As at 31 December 2023, in addition to the
£40m 10 year Senior Loan Notes 2027 and £60m 10 year Senior Loan
Notes 2029, £6.5m of the Company's three-year £50m multi-currency
revolving bank credit facility (the "Facility") was drawn down. On
the expiry of the Facility in October 2024, the Company would
expect to continue to access a credit facility. However,
should acceptable terms for a new credit facility not be
forthcoming at that time, any outstanding borrowing will be repaid
through the proceeds of sales of portfolio holdings.
The Directors are mindful of the principal risks
and uncertainties disclosed above and, having reviewed forecasts
detailing revenue and liabilities, they believe that the Company
has adequate financial resources to continue its operational
existence for the foreseeable future. Accordingly, the
Directors believe that it is appropriate to continue to adopt the
going concern basis of accounting in preparing the Financial
Statements.
US Executive Order No. 14032
The Board confirms that the Company has not and
does not intend to invest in any of the companies designated as
"Chinese Military-Industrial Complex Companies" by the US Executive
Order No. 14032.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the
Half-Yearly Financial Report in accordance with applicable law and
regulations. The Directors confirm that to the best of their
knowledge:
· the condensed
set of Financial Statements has been prepared in accordance with
Financial Reporting Standard 104 (Interim Financial
Reporting);
· the Half-Yearly
Board Report includes a fair review of the information required by
rule 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 financial year); and
· the Half-Yearly
Board Report includes a fair review of the information required by
4.2.8R (being related party transactions that have taken place
during the first six months of the financial year and that have
materially affected the financial position of the Company during
that period; and any changes in the related party transactions
described in the last Annual Report that could do so).
The Half-Yearly Financial Report for the six
months ended 31 December 2023 comprises the Half-Yearly Board
Report, the Directors' Responsibility Statement and the condensed
set of Financial Statements.
For and on behalf of the Board
Peter Tait
Chair
5 March 2024
Condensed Statement of Comprehensive Income
(unaudited)
|
|
Six months
ended
|
Six months
ended
|
|
|
31 December
2023
|
31 December
2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Gains on investments
|
|
-
|
32,687
|
32,687
|
-
|
22,014
|
22,014
|
Currency (losses)/gains
|
|
-
|
(59)
|
(59)
|
-
|
626
|
626
|
Income
|
2
|
17,364
|
-
|
17,364
|
20,869
|
-
|
20,869
|
Investment management fees
|
4, 13
|
(551)
|
(1,287)
|
(1,838)
|
(566)
|
(1,321)
|
(1,887)
|
Administrative expenses
|
|
(683)
|
-
|
(683)
|
(718)
|
-
|
(718)
|
Net return before finance costs and
taxation
|
|
16,130
|
31,341
|
47,471
|
19,585
|
21,319
|
40,904
|
Finance costs
|
|
(385)
|
(897)
|
(1,282)
|
(359)
|
(837)
|
(1,196)
|
Net return before taxation
|
|
15,745
|
30,444
|
46,189
|
19,226
|
20,482
|
39,708
|
Taxation
|
5
|
(191)
|
-
|
(191)
|
(259)
|
-
|
(259)
|
Net return after taxation
|
|
15,554
|
30,444
|
45,998
|
18,967
|
20,482
|
39,449
|
|
|
|
|
|
|
|
|
Return per Ordinary share
|
6
|
14.2p
|
27.7p
|
41.9p
|
16.3p
|
17.6p
|
33.9p
|
|
|
|
|
|
|
|
|
The total column of this statement represents
the profit and loss account of the Company prepared in accordance
with FRS 102. The 'Revenue' and 'Capital' columns represent
supplementary information prepared under guidance issued by the
Association of Investment Companies.
|
All revenue and capital items in the above
statement derive from continuing operations.
|
No operations were acquired or discontinued in
the period.
|
The accompanying notes are an integral part of
the condensed financial statements.
|
Condensed Statement of Financial Position
(unaudited)
|
|
As at
|
As at
|
|
|
31 December 2023
|
30 June 2023
|
|
Notes
|
£'000
|
£'000
|
Fixed assets
|
|
|
|
Investments at fair value through profit or
loss
|
|
1,078,543
|
1,098,311
|
|
|
|
|
Current assets
|
|
|
|
Other debtors and receivables
|
|
5,900
|
7,274
|
Cash and cash equivalents
|
|
24,568
|
15,115
|
|
|
30,468
|
22,389
|
|
|
|
|
Creditors: amounts falling due within one
year
|
|
|
|
Derivative financial instruments
|
|
(1,371)
|
-
|
Other payables
|
|
(2,578)
|
(5,997)
|
Bank loans
|
7
|
(6,497)
|
(6,378)
|
|
|
(10,446)
|
(12,375)
|
Net current assets
|
|
20,022
|
10,014
|
Total assets less current
liabilities
|
|
1,098,565
|
1,108,325
|
|
|
|
|
Creditors: amounts falling due after one
year
|
|
|
|
2.51% Senior Loan Notes 2027
|
7
|
(39,948)
|
(39,941)
|
4.37% Senior Loan Notes 2029
|
7
|
(68,409)
|
(69,200)
|
|
|
(108,357)
|
(109,141)
|
Net assets
|
|
990,208
|
999,184
|
|
|
|
|
Capital and reserves
|
|
|
|
Share capital
|
8
|
29,882
|
29,882
|
Share premium account
|
|
438,213
|
438,213
|
Capital redemption reserve
|
|
4,997
|
4,997
|
Capital reserve
|
|
489,332
|
489,428
|
Revenue reserve
|
|
27,784
|
36,664
|
Total Shareholders' funds
|
|
990,208
|
999,184
|
|
|
|
|
Net asset value per Ordinary share
|
9
|
|
|
Debt at fair value
|
|
929.4p
|
911.7p
|
Debt at par value
|
|
916.6p
|
894.4p
|
|
|
|
|
The accompanying notes are an integral part of
the condensed financial statements.
|
Condensed Statement of Changes in Equity
(unaudited)
Six months ended 31 December
2023
|
|
|
|
Share
|
Capital
|
|
|
|
|
|
Share
|
premium
|
redemption
|
Capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserve
|
reserve
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 1 July 2023
|
|
29,882
|
438,213
|
4,997
|
489,428
|
36,664
|
999,184
|
Net return after tax
|
|
-
|
-
|
-
|
30,444
|
15,554
|
45,998
|
Buyback of Ordinary shares for
treasury
|
8
|
-
|
-
|
-
|
(30,540)
|
-
|
(30,540)
|
Dividends paid
|
3
|
-
|
-
|
-
|
-
|
(24,434)
|
(24,434)
|
Balance at 31 December 2023
|
|
29,882
|
438,213
|
4,997
|
489,332
|
27,784
|
990,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended 31 December 2022
|
|
|
|
Share
|
Capital
|
|
|
|
|
|
Share
|
premium
|
redemption
|
Capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserve
|
reserve
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance at 1 July 2022
|
|
29,882
|
438,213
|
4,997
|
502,672
|
33,491
|
1,009,255
|
Net return after tax
|
|
-
|
-
|
-
|
20,482
|
18,967
|
39,449
|
Buyback of Ordinary shares for
treasury
|
8
|
-
|
-
|
-
|
(9,296)
|
-
|
(9,296)
|
Dividends paid
|
3
|
-
|
-
|
-
|
-
|
(22,614)
|
(22,614)
|
Balance at 31 December 2022
|
|
29,882
|
438,213
|
4,997
|
513,858
|
29,844
|
1,016,794
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of
the condensed financial statements.
|
Condensed Statement of Cash Flows (unaudited)
|
|
Six months ended
|
Six months ended
|
|
|
31 December 2023
|
31 December 2022
|
|
Notes
|
£'000
|
£'000
|
Operating activities
|
|
|
|
Net return before finance costs and
taxation
|
|
47,471
|
40,904
|
Adjustments for
|
|
|
|
Increase in accrued expenses
|
|
115
|
1,114
|
Overseas withholding tax
|
|
(201)
|
(244)
|
Decrease in dividend income
receivable
|
|
1,830
|
1,600
|
Increase in interest income
receivable
|
|
(28)
|
(47)
|
Interest paid
|
|
(1,508)
|
(1,177)
|
Gains on investments
|
|
(32,687)
|
(22,014)
|
Amortisation of loan note expenses
|
|
7
|
6
|
Accretion of loan note book cost
|
|
(791)
|
(791)
|
Foreign exchange losses/(gains)
|
|
59
|
(626)
|
Increase in other debtors
|
|
(417)
|
(342)
|
Net cash inflow from operating
activities
|
|
13,850
|
18,383
|
|
|
|
|
Investing activities
|
|
|
|
Purchases of investments
|
|
(62,488)
|
(112,528)
|
Sales of investments
|
|
113,005
|
135,999
|
Net cash inflow from investing
activities
|
|
50,517
|
23,471
|
|
|
|
|
Financing activities
|
|
|
|
Dividends paid
|
3
|
(24,434)
|
(22,614)
|
Buyback of Ordinary shares for
treasury
|
8
|
(30,540)
|
(9,296)
|
Repayment of bank loans
|
|
-
|
(6,755)
|
Draw down of bank loans
|
|
-
|
6,664
|
Net cash outflow from financing
activities
|
|
(54,974)
|
(32,001)
|
Increase in cash
|
|
9,393
|
9,853
|
|
|
|
|
Analysis of changes in cash during the
period
|
|
|
|
Opening balance
|
|
15,115
|
20,131
|
Effect of exchange rate fluctuations on cash
held
|
|
60
|
875
|
Increase in cash as above
|
|
9,393
|
9,853
|
Closing balance
|
|
24,568
|
30,859
|
|
|
|
|
Represented by:
|
|
|
|
Cash at bank and in hand
|
|
4,675
|
4,786
|
Money market funds
|
|
19,893
|
26,073
|
|
|
24,568
|
30,859
|
|
|
|
|
The accompanying notes are an integral part of
the condensed financial statements.
|
Notes to the Financial Statements
For the six months ended 31 December
2023
1.
|
Accounting policies
|
|
Basis of preparation.
The condensed financial statements have been prepared in
accordance with Financial Reporting Standard ("FRS") 104 (Interim
Financial Reporting) and with the Statement of Recommended Practice
for 'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' issued in July 2022. They have also been prepared
on a going concern basis and on the assumption that approval as an
investment trust will continue to be granted.
|
|
The condensed financial statements have been
prepared using the same accounting policies as the preceding annual
financial statements.
|
2.
|
Income
|
|
|
|
|
Six months ended
|
Six months ended
|
|
|
31 December 2023
|
31 December 2022
|
|
|
£'000
|
£'000
|
|
Investment income
|
|
|
|
UK dividends
|
11,738
|
15,006
|
|
Overseas dividends
|
3,109
|
3,693
|
|
Property income dividends
|
252
|
634
|
|
|
15,099
|
19,333
|
|
Other income
|
|
|
|
Deposit interest
|
25
|
13
|
|
Money Market interest
|
538
|
318
|
|
Traded option premiums
|
1,695
|
1,205
|
|
Interest on tax reclaim
|
7
|
-
|
|
|
2,265
|
1,536
|
|
Total income
|
17,364
|
20,869
|
3.
|
Dividends
|
|
|
|
Dividends paid on Ordinary shares deducted from
the revenue reserve:
|
|
|
|
|
|
|
|
|
Six months ended
|
Six months ended
|
|
|
31 December 2023
|
31 December 2022
|
|
|
£'000
|
£'000
|
|
2022 fourth interim dividend -
11.25p
|
-
|
13,127
|
|
2023 first interim dividend - 8.25p
|
-
|
9,556
|
|
2023 fourth interim dividend -
12.75p
|
14,100
|
-
|
|
2024 first interim dividend - 9.50p
|
10,334
|
-
|
|
Return of unclaimed dividends
|
-
|
(69)
|
|
|
24,434
|
22,614
|
|
|
|
|
|
The first interim dividend for 2024 of 9.50p
(2023 - 8.25p) was paid on 14 December 2023 to shareholders on the
register on 17 November 2023. The ex-dividend date was 16 November
2023.
|
|
A second interim dividend for 2024 of 9.50p
(2023 - 8.25p) will be paid on 14 March 2024 to shareholders on the
register on 16 February 2024. The ex-dividend date is 15 February
2024.
|
|
A third interim dividend for 2024 of 9.50p
(2023 - 8.25p) will be paid on 13 June 2024 to shareholders on the
register on 17 May 2024. The ex-dividend date is 16 May
2024.
|
4.
|
Management fee and finance costs
|
|
|
|
The management fee is as reported in the 2023
Annual Report, being a tiered fee based on net assets and
calculated as follows:
|
|
|
|
|
|
Fee rate
|
Net
|
|
|
per annum
|
assets
|
£'million
|
|
0.55%
|
up to
|
350
|
|
0.45%
|
within the range
|
350-450
|
|
0.25%
|
greater than
|
450
|
|
|
|
|
|
The management fee and finance costs are
charged 30% to revenue and 70% to capital.
|
|
|
|
| |
5.
|
Taxation
|
|
The expense for taxation reflected in the
Condensed Statement of Comprehensive Income is based on the
estimated annual tax rate expected for the full financial year. The
estimated annual corporation tax rate used for the year to 30 June
2024 is an effective rate of 25% (2023 - 19%).
|
|
During the period the Company suffered
withholding tax on overseas dividend income of £191,000 (31
December 2022 - £259,000).
|
6.
|
Return per Ordinary share
|
|
|
Six months ended
|
Six months ended
|
|
|
31 December 2023
|
31 December 2022
|
|
|
£'000
|
p
|
£'000
|
p
|
|
Revenue return
|
15,554
|
14.2
|
18,967
|
16.3
|
|
Capital return
|
30,444
|
27.7
|
20,482
|
17.6
|
|
Total return
|
45,998
|
41.9
|
39,449
|
33.9
|
|
|
|
|
|
|
|
Weighted average number of Ordinary shares in
issue
|
|
109,756,794
|
|
116,250,589
|
7.
|
Senior Loan Notes and bank loans
|
|
Senior Loan Notes. The
Company has in issue:
|
|
(i) £40,000,000 of 10 year Senior Loan Notes at
a fixed rate of 2.51%, redeemable at par on 8 November 2027;
|
|
(ii) £60,000,000 of 15 year Senior Loan Notes
at a fixed rate of 4.37% redeemable at par on 8 May 2029.
|
|
The Loan Notes rank pari passu and are secured
by floating charges over the whole of the assets of the Company and
pay interest in half yearly instalments in May and November. The
Company has complied with both Note Purchase Agreements: that the
ratio of net assets to gross borrowings must be greater than 3.5:1
and that net assets must not be less than £550,000,000.
|
|
The fair value of the Loan Notes is shown in
note 9. The fair value of the 2.51% Loan Notes is calculated by
aggregating the expected future cash flows discounted at a rate
comprising the borrower's margin plus an average of market rates
applicable to loans of a similar period of time. The fair value of
the 4.37% Loan Notes is based on a comparable quoted debt security
and their amortisation is presented as a finance cost, split 70% to
capital and 30% to revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2023
|
30 June 2023
|
|
|
|
|
|
|
£'000
|
£'000
|
|
2.51% Senior Loan Notes
|
|
40,000
|
40,000
|
|
Unamortised 2.51% Senior Loan Notes issue
expenses
|
|
(52)
|
(59)
|
|
|
|
39,948
|
39,941
|
|
4.37% Senior Loan Notes at fair
value
|
|
73,344
|
73,344
|
|
Amortisation of 4.37% Senior Loan
Note
|
|
(4,935)
|
(4,144)
|
|
|
|
|
|
|
68,409
|
69,200
|
|
|
|
|
|
|
108,357
|
109,141
|
|
|
|
|
|
|
|
|
|
Bank loans. The Company
has a three year £50 million multi-currency unsecured revolving
bank credit facility with Bank of Nova Scotia Limited, committed
until 27 October 2024. At the period end the Company had drawn down
the facility as shown below:
|
|
|
|
|
|
|
|
|
|
|
31 December 2023
|
30 June 2023
|
|
|
Rate
|
Currency
|
£'000
|
Rate
|
Currency
|
£'000
|
|
Euro
|
5.04%
|
3,300,000
|
2,860
|
4.56%
|
3,300,000
|
2,832
|
|
Swiss Franc
|
3.05%
|
1,200,000
|
1,118
|
2.80%
|
1,200,000
|
1,055
|
|
US Dollar
|
6.65%
|
1,570,000
|
1,232
|
6.31%
|
1,570,000
|
1,235
|
|
Danish Krona
|
5.07%
|
6,850,000
|
796
|
4.56%
|
6,850,000
|
789
|
|
Norwegian Krone
|
5.77%
|
6,360,000
|
491
|
5.11%
|
6,360,000
|
467
|
|
|
|
|
6,497
|
|
|
6,378
|
|
|
|
|
|
|
|
|
| |
8.
|
Share capital
|
|
|
|
|
|
|
Six months ended
|
Year ended
|
|
|
31 December 2023
|
30 June 2023
|
|
|
Shares
|
£'000
|
Shares
|
£'000
|
|
Allotted, called-up and fully paid:
|
|
|
|
|
|
Ordinary shares of 25p each: publicly
held
|
108,033,782
|
27,008
|
111,720,001
|
27,930
|
|
Ordinary shares of 25p each; held in
treasury
|
11,495,750
|
2,874
|
7,809,531
|
1,952
|
|
|
119,529,532
|
29,882
|
119,529,532
|
29,882
|
|
|
|
|
|
|
|
During the period 3,686,219 (30 June 2023 -
4,970,471) Ordinary shares were bought back for treasury at a cost
of £30,540,000 (30 June 2023 - £42,202,000). As at the date of
signing this report a further 640,000 shares have been bought back
at a cost of £5,377,000.
|
9.
|
Net asset value per Ordinary share
|
|
|
The net asset value and the net asset value
attributable to the Ordinary shares at the end of the period
follow. These were calculated using 108,033,782 (30 June 2023 -
111,720,001) Ordinary shares in issue at the period end (excluding
treasury shares).
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2023
|
|
30 June 2023
|
|
|
|
|
Net Asset Value
|
|
Net Asset Value
|
|
|
|
|
Attributable
|
|
Attributable
|
|
|
|
£'000
|
pence
|
£'000
|
pence
|
|
|
Net asset value - debt at par
|
990,208
|
916.6
|
999,184
|
894.4
|
|
|
Add: amortised cost of 2.51% Senior Loan
Notes
|
39,948
|
37.0
|
39,941
|
35.8
|
|
|
Less: fair value of 2.51% Senior Loan
Notes
|
(36,168)
|
(33.5)
|
(34,928)
|
(31.3)
|
|
|
Add: amortised cost of 4.37% Senior Loan
Notes
|
68,409
|
63.3
|
69,200
|
61.9
|
|
|
Less: fair value of 4.37% Senior Loan
Notes
|
(58,299)
|
(54.0)
|
(54,900)
|
(49.1)
|
|
|
Net asset value - debt at fair value
|
1,004,098
|
929.4
|
1,018,497
|
911.7
|
|
|
|
|
|
|
|
|
|
|
|
| |
10.
|
Transaction costs
|
|
|
|
During the period, expenses were incurred in
acquiring or disposing of investments classified at fair value
through profit or loss. These have been expensed through capital
and are included within gains on investments in the Condensed
Statement of Comprehensive Income. The total costs were as
follows:
|
|
|
|
|
|
|
Six months ended
|
Six months ended
|
|
|
31 December 2023
|
31 December 2022
|
|
|
£'000
|
£'000
|
|
PurchasesA
|
266
|
479
|
|
SalesA
|
55
|
82
|
|
|
321
|
561
|
|
A Costs associated with the
purchases and sale of portfolio investments in the normal course of
the Company's business comprising stamp duty, financial transaction
taxes and brokerage.
|
11.
|
Fair value hierarchy
|
|
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. The
fair value hierarchy has the following levels:
|
|
Level 1: unadjusted
quoted prices 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 (ie
developed using market data) for the asset or liability, either
directly or indirectly; and
|
|
Level 3: inputs are
unobservable (ie for which market data is unavailable) for the
asset or liability.
|
|
The financial assets and liabilities measured
at fair value in the Condensed Statement of Financial Position are
grouped into the fair value hierarchy at the reporting date as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
As at 31 December 2023
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Financial assets at fair value through profit
or loss
|
|
|
|
|
|
|
|
Quoted equities
|
|
a)
|
1,078,543
|
-
|
-
|
1,078,543
|
|
Financial liabilities at fair value through
profit or loss
|
|
|
|
|
|
|
|
Derivatives
|
|
b)
|
(1,165)
|
(206)
|
-
|
(1,371)
|
|
Net fair value
|
|
|
1,077,378
|
(206)
|
-
|
1,077,172
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
As at 30 June 2023
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Financial assets at fair value through profit
or loss
|
|
|
|
|
|
|
|
Quoted equities
|
|
a)
|
1,098,311
|
-
|
-
|
1,098,311
|
|
Net fair value
|
|
|
1,098,311
|
-
|
-
|
1,098,311
|
|
|
|
|
|
|
|
|
|
a)
|
Quoted equities. The
fair value of the Company's investments in quoted equities has been
determined by reference to their quoted bid prices at the reporting
date. Quoted equities included in Fair Value Level 1 are actively
traded on recognised stock exchanges.
|
|
b)
|
Derivatives. The fair
value of the Company's investments in Exchange Traded Options has
been determined using observable market inputs on an exchange
traded basis and therefore has been included in Fair Value Level
1.
|
|
|
The fair value of the Company's investments in
Over the Counter Options (where the underlying equities are also
held) has been determined using observable market inputs other than
quoted prices of the underlying equities (which are included within
Fair Value Level 1) and therefore determined as Fair Value Level
2.
|
|
|
The fair value of the 2.51% Senior Loan Notes
have been calculated as £36,168,000 (30 June 2023 - £34,928,000),
determined by aggregating the expected future cash flows for that
loan discounted at a rate comprising the borrower's margin plus an
average of market rates applicable to loans of a similar period of
time, compared to carrying amortised cost of £39,948,000 (30 June
2023 - £39,941,000).
|
|
|
The fair value of the 4.37% Senior Loan Notes,
have been calculated as £58,299,000 (30 June 2023 - £54,900,000),
the value being based on a comparable debt security, compared to
carrying amortised cost of £68,409,000 (30 June 2023 -
£69,200,000).
|
|
|
All other financial assets and liabilities of
the Company are included in the Condensed Statement of Financial
Position at their book value which in the opinion of the Directors
is not materially different from their fair value.
|
|
|
|
|
|
|
|
| |
12.
|
Analysis of changes in net debt
|
|
|
At
|
Currency
|
|
Non-cash
|
At
|
|
|
30 June 2023
|
differences
|
Cash flows
|
movements
|
31 December 2023
|
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
Cash and cash equivalents
|
15,115
|
60
|
9,393
|
-
|
24,568
|
|
Debt due within one year
|
(6,378)
|
(119)
|
-
|
-
|
(6,497)
|
|
Debt due after one year
|
(109,141)
|
-
|
-
|
784
|
(108,357)
|
|
Total
|
(100,404)
|
(59)
|
9,393
|
784
|
(90,286)
|
|
|
|
|
|
|
|
|
|
At
|
Currency
|
|
Non-cash
|
At
|
|
|
30 June 2022
|
differences
|
Cash flows
|
movements
|
31 December 2022
|
|
|
£000
|
£000
|
£000
|
£000
|
£'000
|
|
Cash and cash equivalents
|
20,131
|
875
|
9,853
|
-
|
30,859
|
|
Debt due within one year
|
(6,507)
|
(249)
|
91
|
-
|
(6,665)
|
|
Debt due after one year
|
(110,710)
|
-
|
-
|
785
|
(109,925)
|
|
|
(97,086)
|
626
|
9,944
|
785
|
(85,731)
|
|
An analysis of cash and cash equivalents
between cash at bank and in hand and money market funds is provided
in the Statement of Cash Flows.
|
|
A statement reconciling the movement in net
funds to the net cash flow has not been presented as there are no
differences from the above analysis.
|
13.
|
Transactions with the Manager
|
|
|
|
The Company has delegated the provision of
investment management, secretarial, accounting and administration
and promotional services to the Manager.
|
|
The amounts charged excluding VAT for the
period are set out below:
|
|
|
|
|
|
|
Six months ended
|
Six months ended
|
|
|
31 December 2023
|
31 December 2022
|
|
|
£'000
|
£'000
|
|
Management fees
|
1,838
|
1,887
|
|
Promotional activities
|
212
|
200
|
|
Secretarial fees
|
38
|
38
|
|
|
2,088
|
2,125
|
|
|
|
|
|
The amounts payable excluding VAT at the period
end are set out below:
|
|
|
|
|
|
|
|
|
Six months ended
|
Six months ended
|
|
|
31 December 2023
|
31 December 2022
|
|
|
£'000
|
£'000
|
|
Management fees
|
612
|
635
|
|
Promotional activities
|
212
|
100
|
|
Secretarial fees
|
19
|
19
|
|
|
843
|
754
|
|
|
|
|
|
No fees are charged in the case of investments
managed or advised by the abrdn Group. There were no commonly
managed funds held in the portfolio during the six months to 31
December 2023 (2022 - none). The management agreement may be
terminated by either party on the expiry of three months written
notice. On termination the Manager would be entitled to receive
fees which would otherwise have been due up to that date.
|
|
|
|
|
|
|
| |
14.
|
Segmental information
|
|
The Directors are of the opinion that the
Company is engaged in a single segment of business activity, being
investment business. Consequently, no business segmental analysis
is provided.
|
15.
|
The financial information in this report does
not comprise statutory accounts within the meaning of Section 434 -
436 of the Companies Act 2006. The financial information for the
year ended 30 June 2023 has been extracted from published accounts
that have been delivered to the Registrar of Companies and on which
the report of the auditors was unqualified and contained no
statement under Section 498 of the Companies Act 2006.
|
16.
|
This Half-Yearly Financial Report was approved
by the Board on 5 March 2024.
|
Alternative Performance Measures ("APMs")
Alternative performance measures are numerical
measures of the Company's current, historical or future
performance, financial position or cash flows, other than financial
measures defined or specified in the applicable financial
framework. The Company's applicable financial framework includes
FRS 102 and the AIC SORP. The Directors assess the Company's
performance against a range of criteria which are reviewed as
particularly relevant for closed-end investment
companies.
|
Discount to net asset value per Ordinary share with debt
at fair value
|
The discount is the amount by which the share
price is lower than the net asset value per share with debt at fair
value, expressed as a percentage of the net asset
value.
|
|
|
|
31 December 2023
|
30 June 2023
|
NAV per Ordinary share
|
|
a
|
929.4p
|
911.7p
|
Share price
|
|
b
|
865.0p
|
837.0p
|
Discount
|
|
(b-a)/a
|
(6.9%)
|
(8.2%)
|
|
|
|
|
|
Discount to net asset value per Ordinary share with debt
at par value
|
The discount is the amount by which the share
price is lower than the net asset value per share with debt at par
value, expressed as a percentage of the net asset
value.
|
|
|
|
31 December 2023
|
30 June 2023
|
NAV per Ordinary share
|
|
a
|
916.6p
|
894.4p
|
Share price
|
|
b
|
865.0p
|
837.0p
|
Discount
|
|
(b-a)/a
|
(5.6%)
|
(6.4%)
|
|
|
|
|
|
Dividend yield
|
|
|
|
|
The annual dividend per Ordinary share divided
by the share price, expressed as a
percentage.
|
|
|
|
|
|
|
|
|
31 December 2023
|
30 June 2023
|
Dividends per share (p)
|
|
a
|
37.50p
|
37.50p
|
Share price (p)
|
|
b
|
865.0p
|
837.0p
|
Dividend yield
|
|
a/b
|
4.3%
|
4.5%
|
The dividend used for 31 December 2023 of
37.50p is presented on a historical basis and represents the amount
paid in respect of the year ended 30 June 2023.
|
|
|
|
|
|
Net gearing
|
|
|
|
|
Net gearing measures the total borrowings less
cash and cash equivalents dividend by shareholders' funds,
expressed as a percentage. Under AIC reporting guidance cash and
cash equivalents includes amounts due to and from brokers at the
year end as well as cash and cash
equivalents.
|
|
|
|
|
|
|
|
|
31 December 2023
|
30 June 2023
|
Bank loans (£'000)
|
|
a
|
(6,497)
|
(6,378)
|
Senior Loan Notes (£'000)
|
b
|
(108,357)
|
(109,141)
|
Total borrowings (£'000)
|
|
c=a+b
|
(114,854)
|
(115,519)
|
Cash (£'000)
|
|
d
|
24,568
|
15,115
|
Amounts due to brokers (£'000)
|
e
|
(907)
|
(3,449)
|
Amounts due from brokers (£'000)
|
f
|
-
|
-
|
Shareholders' funds (£'000)
|
g
|
990,208
|
999,184
|
Net gearing
|
|
-(c+d+e+f)/g
|
9.2%
|
10.4%
|
|
|
|
|
|
Ongoing charges
|
|
|
|
|
The ongoing charges ratio has been calculated
based on the total of investment management fees and administrative
expenses less non-recurring charges and expressed as a percentage
of the averge daily net asset values with debt at fair value
published throughout the period.
|
|
|
|
|
|
|
|
|
31 December 2023
|
30 June 2023
|
Investment management feesA
(£'000)
|
a
|
3,700
|
3,804
|
Administrative expensesA
(£'000)
|
b
|
1,401
|
1,390
|
Less: non-recurring chargesB
(£'000)
|
c
|
(25)
|
(8)
|
Ongoing charges (£'000)
|
|
a+b+c
|
5,076
|
5,186
|
Average net assets (£'000)
|
d
|
994,510
|
1,036,020
|
Ongoing charges ratio
|
|
(a+b+c)/d
|
0.51%
|
0.50%
|
A 31 December 2023 represents the
annualised forecast to 30 June 2024.
|
B 31 December 2023 comprises £20,000
Directors recruitment fee, £1,500 relating to legal fees and £3,250
relating to other professional services unlikely to recur. 30 June
2023 comprises £7,000 profesisonal fees relating to discussions
with the registrar and £1,000 quick turnaround fee for electronic
filing of statutory statements.
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The ongoing charges ratio provided in the
Company's Key Information Document is calculated in line with the
PRIIPs regulations, which includes financing and transaction
costs.
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Total return
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Share price and NAV total returns show how the
NAV and share price has performed over a period of time in
percentage terms, taking into account both capital returns and
dividends paid to shareholders. Share price and NAV total returns
are monitored against open-ended and closed-ended competitors, and
the FTSE All-Share Index, respectively.
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Share
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NAV
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NAV
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Six months ended 31 December 2023
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price
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(debt at fair value)
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(debt at par)
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Opening at 1 July 2023
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a
|
837.0p
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911.7p
|
894.4p
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Closing at 31 December 2023
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b
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865.0p
|
929.4p
|
916.6p
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Price movements
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c=(b/a)-1
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3.3%
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1.9%
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2.5%
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Dividend reinvestmentA
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d
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2.9%
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2.6%
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2.7%
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Total return
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c+d
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6.2%
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4.5%
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5.2%
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Share
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NAV
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NAV
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Year ended 30 June 2023
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|
price
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(debt at fair value)
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(debt at par)
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Opening at 1 July 2022
|
a
|
832.0p
|
871.0p
|
864.9p
|
Closing at 30 June 2023
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b
|
837.0p
|
911.7p
|
894.4p
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Price movements
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c=(b/a)-1
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0.6%
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4.7%
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3.4%
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Dividend reinvestmentA
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d
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4.3%
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4.1%
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4.1%
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Total return
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c+d
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4.9%
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8.8%
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7.5%
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A Share price total return involves
reinvesting the net dividend in the share price of the Company on
the date on which that dividend goes ex-dividend. NAV total return
involves investing the net dividend in the NAV of the Company with
debt at fair value on the date on which that dividend goes
ex-dividend.
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END