TIDMSAIN
RNS Number : 9914T
Scottish American Investment Co PLC
28 July 2022
RNS Announcement
The Scottish American Investment Company P.L.C. (SAINTS)
Legal Entity Identifier: 549300NF03XVC5IFB447
Regulated Information Classification: Interim Financial
Report.
The following is the unaudited Interim Financial Report for the
six months to 30 June 2022 which was approved by the Board on 27
July 2022.
Results for the six months to 30 June 2022
3/4 SAINTS' assets have shown marked resilience against an
uncertain backdrop over the first six months of 2022, holding up
better than equities generally: SAINTS' net asset value total
return (borrowings at fair value) was -7.6% over the first six
months of 2022, whilst global equities* returned -10.5% over the
same period.
3/4 Over the past five years the Company has outperformed both
global equities and its sector, delivering a net asset value total
return (borrowings at fair value) of 65.6% against the market's*
total return of 53.4% and the sector's unweighted average net asset
value total return of 38.2%.
3/4 The Company has declared a second interim dividend of 3.40p.
The second interim dividend is 10.6% higher than the equivalent
dividend last year, growing ahead of UK CPI inflation which in June
reached 9.4%.
3/4 SAINTS' revenues per share over the period were 7.78p
compared to 6.74p for the equivalent period last year. The growth
of the Company's revenues in another challenging period has been
helped by the Manager's emphasis on dependability and growth, and
the robust underlying dividend growth of the Company's
holdings.
3/4 The property portfolio delivered a 5.9% return, with a
significant contribution from the realisation of a property above
its most recent valuation.
3/4 The Company's GBP80m debenture, which bore a coupon of 8%,
was refinanced on previously agreed terms in April. The overall
cost of the Company's borrowings is now just below 3% per
annum.
3/4 To satisfy market demand the Company issued GBP4m of shares
over the period at a premium to Net Asset Value.
3/4 The Board and the Managers are optimistic about SAINTS' long
term prospects for resilient dividend growth.
* FTSE All-World Index (in sterling terms)
Source: Morningstar/Baillie Gifford and relevant underlying
service providers. See disclaimer at end of this announcement.
Interim Management Report
SAINTS' assets have shown marked resilience against an uncertain
backdrop over the first six months of 2022, holding up better than
equities generally in a period in which the invasion of Ukraine by
Russia, combined with rising inflation and interest rates, has led
to a rapid decline in share prices as investors' risk appetite
sharply reduced. SAINTS' net asset value total return (with
borrowings at fair value) for the first six months of 2022 was
-7.6%. This was ahead of the total return on global equities
(-10.5%) as measured by the FTSE All-World Index. The share price
total return was -13.0%, as the Company's share price moved from a
premium to a modest discount to net asset value towards the end of
the period.
The world economy still faces a great deal of uncertainty. It is
at times like this that it is helpful to look back at the
longer-term performance of the Company's portfolio to put this in
context, and to look forward with confidence in the future growth
prospects of the Company's equity holdings. During the past five
years, we have seen the sharpest recession in the history of the
world economy, rising political uncertainty and extensive business
and travel shutdowns. Despite those challenges, the equity holdings
in the Company's portfolio have delivered average compound annual
growth in earnings per share of 9% per annum, well ahead of
inflation over the same five-year period. Dividends from these
equity holdings have also grown ahead of inflation.
Russia's invasion of Ukraine has triggered a large and sudden
increase in energy and food prices. Combined with persistent supply
chain issues and a still elevated demand in developed markets, this
has led inflation to accelerate further and hit levels not seen for
a very long time. With persistent, and accelerating inflation,
Central Banks around the world have moved into tightening mode and
raised interest rates faster than investors expected just a few
months ago.
Leading the charge is the US Federal Reserve, which raised its
benchmark rate by 75bp in June and hinted at further increases
later this year. This was the largest increase in interest rates
since 1994 and further evidence of a new era in Central Banking.
The credibility of Central Banks, so essential to keep inflation
expectations in check, is at stake.
In turn, investors have started to anticipate a sharp slowdown
in economic growth, if not a recession, in the coming months. This
is not a supportive background for financial markets in general,
and both global equity and bond markets fell in the period.
The Company's equity portfolio showed negative returns but
outperformed global equity markets. In relative performance terms,
the absence of oil and gas producers from the portfolio - companies
whose long-term outlook we are convinced remains poor - was a
headwind, but it was more than offset by the strong performance of
individual holdings.
Danish pharmaceutical company Novo Nordisk was a strong
contributor to performance as its obesity drug remains in high
demand in the US. This led the company to raise its revenue
guidance for the year after the publication of its first quarter
results. To make matters better, trial results released recently
showed positive trial data for a once-weekly insulin product. If
confirmed by further studies, the convenience provided by this new
product would be the first real innovation in this market for
nearly two decades.
Deutsche Boerse was another strong contributor as it benefited
from increased market volatility and the associated volume growth
in derivatives trading, a core business for the company. With large
cash reserves in their settlement operations, rising interest rates
are also a tailwind for the company.
In falling equity markets, consumer staples companies tend to be
more resilient and the first half of 2022 was no exception. Pepsico
and Coca Cola are two holdings whose share prices rose in the
period, on the back of strong results. Both are a good illustration
of what is happening with many companies in the portfolio: input
costs are rising but the companies are able to raise prices without
affecting demand much. Often price increases are achieved by
managing their portfolio of products rather than raising the price
of every product. And this is where innovation comes into play: by
promoting new and healthier snacks at higher prices, Pepsico can
raise the average price of its portfolio of products. This has led
to some strong revenue growth rates for staples companies, with
Pepsico and Coca Cola publishing organic growth rates of,
respectively, 7% and 15%. Demand for their products is relatively
insensitive to the economic cycle, which is precisely what makes
them resilient holdings.
Some of the more cyclical companies in the portfolio, however,
had a difficult first half. The Swiss alternative asset manager
Partners Group is a good example: with market volatility and
interest rates rising, investors were quick to assume lower demand
for less liquid asset classes like the private equity funds that
the group manages. Partners is an outstanding company with a
long-term investment horizon and a very impressive track-record.
Volatility may reduce demand for their products, but it will also
create good investment opportunities for managers like Partners who
are willing to take the long view.
Shares in the UK drinks company Fevertree declined after the
company announced half-year results showing continued pressure on
its operating margins due to rising input costs. Swedish industrial
company Atlas Copco was another detractor as investors paid more
attention to the negative impact of supply chain issues than to the
very strong order book. In both cases we remain confident in their
long-term growth prospects.
Portfolio Activity
In terms of key transactions in the first half of the year, we
purchased new holdings in the US-listed software company Intuit and
the French-listed beauty products company L'Oréal. These new
purchases were funded by the sale of Kimberly-Clark de M é xico and
UK insurer Hiscox.
L'Oréal is a global leader in the beauty industry. We are
longstanding admirers of its management, who have an impressive
track record of continued innovation, and the company has an anchor
shareholder who helps the management remain focused on long-term
success. We expect the company to continue compounding its revenue
and earnings for many years, underpinned by market growth, market
share gains and steady margin improvement. The shares have recently
fallen significantly on macro-economic concerns, which has provided
us with an opportunity to invest in the shares at an attractive
valuation.
The other new holding, the software company Intuit, has two
well-established products in the US: QuickBooks, an online
accounting service for small businesses, and TurboTax, an online
tax service for consumers. Over the next decade, we expect Intuit's
online services to add more functionality, and with more and more
insight into their customers, to develop these services into a core
financial platform for their customers. We expect this to lead to
strong revenue and profit growth for several years to come. With
strong prospects for a resilient dividend thanks to the healthy
cashflows generated, we believe that the company is a good fit for
the Company's portfolio.
These new purchases were funded by the sale of Kimberly-Clark of
México and Hiscox.
Kimberly-Clark de México is the leading manufacturer of nappies,
tissues and other sanitary products in Mexico. Our investment case
was based on the assumption that rising household incomes in Mexico
would drive growth in spending on the company's products, both in
volume terms and through increased pricing power. In practice,
however, the company has struggled to grow its earnings due to
sustained pressure on its input costs, limited success in gaining
market share and the depreciation of the Mexican currency. With
little prospect that these headwinds will reverse and better
opportunities elsewhere in the portfolio, we have sold out of the
company.
More recently, we have sold out of UK insurer Hiscox, as we have
come to the conclusion that it is no longer an ideal fit for the
Company's portfolio. The most challenging aspect is the volatility
of Hiscox's dividend, which tends to be correlated with periods of
economic stress. By investing the proceeds into some of the more
robust companies mentioned above, we have upgraded the overall
dividend resilience of the Company's equity portfolio.
Beyond equities
One advantage of being an investment trust is the ability to add
a prudent amount of long-dated borrowings at fixed rates. The
Company uses these borrowings to invest in a diverse portfolio of
commercial properties, infrastructure companies and fixed income
securities, with the goal of generating returns above the cost of
borrowing, to the benefit of shareholders.
This task has become considerably easier, as in April new
long-term private placement debt of GBP80m replaced SAINTS previous
debenture, which had borne a coupon of 8%. The overall cost of the
Company's borrowings, including the further GBP15m of private
placement debt which was added in April 2021, has now fallen to
just below 3%. The opportunity set of potential investments which
would yield more than the Company's cost of borrowings has
therefore increased significantly.
During the first half of the year the property portfolio
delivered a total return above 5%. One property was sold during the
period, being the industrial warehouse in Basingstoke at a price
more than 20% above the valuation at the end of 2021. Through the
remainder of this year, the property manager is anticipating a
difficult backdrop for commercial property valuations due to rising
interest rates and slowing economic growth, and has been
strengthening the portfolio accordingly. Inflation linkages in the
portfolio's rental contracts remain strong, and the portfolio
continues to have no voids.
The infrastructure companies delivered a total return above 6%.
In a slowing economy with rising inflation, the value of
infrastructure assets such as those managed by Terna, the Italian
grid network, was increasingly evident to investors and this
supported valuations. The dividend yield of the Company's
infrastructure investments continues to exceed the Company's cost
of borrowings.
The return from the fixed income portfolio was very slightly
positive during the first half of 2022. The most notable
contributions came from the early redemptions of two bond holdings,
issued by Cogent Communications and First Quantum. Both redeemed at
prices above par. We continue to look for opportunities to generate
attractive returns from bonds where the risk is low because the
underlying issuer is, in our view, well-managed and cash
generative, much like these two companies.
Outlook
Since the start of 2022, we have seen a number of SAINTS' equity
holdings announce quarterly results. So far we have seen little to
suggest that SAINTS' holdings are being de-railed by the war in
Ukraine, or the rise in inflation rates, or the increase in central
bank rates, or the collapse of cryptocurrencies. The Company's
holdings have been selected in part because we believe their
resilience is unusually strong, for example with debt ratios far
lower than the average company, cash flows that tend to be less
volatile, and growth prospects that are significantly stronger than
the average company.
We remain optimistic that over the long term the future of the
Company's holdings, and the potential for inflation-beating growth
in their earnings, remains strong. Underpinned by this earnings
growth, the Board and the Managers remain confident in SAINTS' long
term prospects for resilient dividend growth.
Baillie Gifford & Co
27 July 2022
* See disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
Responsibility Statement
We confirm that to the best of our knowledge:
a) the condensed set of Financial Statements has been prepared
in accordance with FRS 104 'Interim Financial Reporting';
b) the Interim Management Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.7R (indication of important events during the first six months,
their impact on the Financial Statements and a description of
principal risks and uncertainties for the remaining six months of
the year); and
c) the Interim Financial Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.8R (disclosure of related party transactions and changes
therein).
By order of the Board
Lord Macpherson of Earl's Court
Chairman
27 July 2022
Income Statement (unaudited)
For the six months ended For the six months ended For the year ended
30 June 2022 30 June 2021 31 December 2021 (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
======================= ======== ========= ========= ======== ======== ======== ========= ========= =========
Gains on sales of
investments -
securities - 1,586 1,586 - 9,989 9,989 - 30,487 30,487
Gains on sales of
investments - property - 607 607 - 7,419 7,419 - 7,419 7,419
Changes in fair value
of investments -
securities - (105,210) (105,210) - 54,848 54,848 - 97,486 97,486
Changes in fair value
of investments -
property - 1,543 1,543 - 860 860 - 6,260 6,260
Currency gains/(losses) - 71 71 - 64 64 - (21) (21)
Income - dividends and
interest 14,486 - 14,486 11,963 - 11,963 23,059 - 23,059
Income - rent and other 2,412 - 2,412 2,677 - 2,677 4,921 - 4,921
Management fees (note
3) (494) (1,481) (1,975) (465) (1,394) (1,859) (973) (2,920) (3,893)
Other administrative
expenses (574) - (574) (737) - (737) (1,252) - (1,252)
======================= ======== ========= ========= ======== ======== ======== ========= ========= =========
Net return before
finance costs and
taxation 15,830 (102,884) (87,054) 13,438 71,786 85,224 25,755 138,711 164,466
======================= ======== ========= ========= ======== ======== ======== ========= ========= =========
Finance costs of
borrowings (565) (1,695) (2,260) (692) (2,076) (2,768) (1,426) (4,278) (5,704)
======================= ======== ========= ========= ======== ======== ======== ========= ========= =========
Net return on ordinary
activities before
taxation 15,265 (104,579) (89,314) 12,746 69,710 82,456 24,329 134,433 158,762
======================= ======== ========= ========= ======== ======== ======== ========= ========= =========
Tax on ordinary
activities (1,562) 429 (1,133) (1,473) 415 (1,058) (2,509) 732 (1,777)
======================= ======== ========= ========= ======== ======== ======== ========= ========= =========
Net return on ordinary
activities after
taxation 13,703 (104,150) (90,447) 11,273 70,125 81,398 21,820 135,165 156,985
======================= ======== ========= ========= ======== ======== ======== ========= ========= =========
Net return per ordinary
share (note 4) 7.78p (59.16p) (51.38p) 6.74p 41.94p 48.68p 12.79p 79.20p 91.99p
======================= ======== ========= ========= ======== ======== ======== ========= ========= =========
Note:
Dividends paid and
payable per share
(note 5) 6.65p 6.125p 12.675p
======================= ======== ========= ========= ======== ======== ======== ========= ========= =========
The accompanying notes below are an integral part of the
Financial Statements.
The total column of this statement is the profit and loss
account of the Company. The supplementary revenue and capital
columns are prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in the above statements derive
from continuing operations.
A Statement of Comprehensive Income is not required as all gains
and losses of the Company have been reflected in the above
statement.
Balance Sheet (unaudited)
At 31 December
At 30 June 2021
2022 (audited)
GBP'000 GBP'000
========================================= ============================ ======================
Non-current assets
Investments - securities 836,691 938,357
Investments - property 81,700 74,900
Deferred expenses - 207
========================================= ============================ ======================
918,391 1,013,464
========================================= ============================ ======================
Current assets
Debtors 3,846 3,710
Cash and deposits 6,935 11,263
========================================= ============================ ======================
10,781 14,973
========================================= ============================ ======================
Creditors
Amounts falling due within one year:
Debenture stock (note 7) - (80,236)
Other creditors and accruals (2,784) (3,091)
========================================= ============================ ======================
(2,784) (83,327)
========================================= ============================ ======================
Net current assets/(liabilities) 7,997 (68,354)
========================================= ============================ ======================
Total assets less current liabilities 926,388 945,110
========================================= ============================ ======================
Creditors
Amounts falling due after more than one
year: Loan notes (note 7) (94,707) (14,925)
========================================= ============================ ======================
Net assets 831,681 930,185
========================================= ============================ ======================
Capital and reserves
Share capital 44,075 43,900
Share premium account 176,010 172,576
Capital redemption reserve 22,781 22,781
Capital reserve 569,590 673,740
Revenue reserve 19,225 17,188
========================================= ============================ ======================
Shareholders' funds 831,681 930,185
========================================= ============================ ======================
Net asset value per ordinary share * 471.7p 529.7p
========================================= ============================ ======================
Ordinary shares in issue (note 8) 176,300,943 175,600,943
========================================= ============================ ======================
* See Glossary of Terms and Alternative Performance Measures at
the end of this announcement.
The accompanying notes below are an integral part of the
Financial Statements.
Statement of Changes in Equity (unaudited)
For the six months ended 30 June 2022
Share Capital
Share premium redemption Capital Revenue Shareholders'
capital account reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 * GBP'000 GBP'000
GBP'000
================ ================ =============== ================ ================ ============ ===============
Shareholders'
funds at 1
January
2022 43,900 172,576 22,781 673,740 17,188 930,185
Shares issued 175 3,434 - - - 3,609
Net return on
ordinary
activities
after taxation - - - (104,150) 13,703 (90,447)
Dividends paid
(note 5) - - - - (11,666) (11,666)
================ ================ =============== ================ ================ ============ ===============
Shareholders'
funds at 30
June
2022 44,075 176,010 22,781 569,590 19,225 831,681
================ ================ =============== ================ ================ ============ ===============
For the six months ended 30 June 2021
Share Capital
Share premium redemption Capital Revenue Shareholders'
capital account reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 * GBP'000 GBP'000
GBP'000
================ ================ =============== ================ ================ ============ ===============
Shareholders'
funds at 1
January
2021 40,649 112,751 22,781 538,575 16,406 731,162
Shares issued 2,297 41,125 - - - 43,422
Net return on
ordinary
activities
after taxation - - - 70,125 11,273 81,398
Dividends paid
(note 5) - - - - (10,169) (10,169)
================ ================ =============== ================ ================ ============ ===============
Shareholders'
funds at 30
June
2021 42,946 153,876 22,781 608,700 17,510 845,813
================ ================ =============== ================ ================ ============ ===============
* The Capital Reserve balance at 30 June 2022 includes
investment holding gains of GBP276,512,000 (30 June 2021 - gains of
GBP332,141,000).
The accompanying notes below are an integral part of the
Financial Statements.
Cash Flow Statement (unaudited)
Six months Six months
to to
30 June 30 June
2022 2021
GBP'000 GBP'000
==================================================== ========== ==========
Cash flows from operating activities
Net return on ordinary activities before taxation (89,314) 82,456
Net losses/(gains) on investments - securities 103,624 (64,837)
Net gains on investments - property (2,150) (8,279)
Currency gains (71) (64)
Finance costs of borrowings 2,260 2,768
Overseas withholding tax (1,140) (1,004)
Changes in debtors and creditors 441 (1,661)
Other non-cash changes 120 106
==================================================== ========== ==========
Cash from operations 13,770 9,485
Interest paid (3,368) (3,200)
==================================================== ========== ==========
Net cash inflow from operating activities 10,402 6,285
==================================================== ========== ==========
Cash flows from investing activities
Acquisitions of investments (46,491) (81,333)
Disposals of investments 39,763 39,574
==================================================== ========== ==========
Net cash outflow from investing activities (6,728) (41,759)
==================================================== ========== ==========
Cash flows from financing activities
Equity dividends paid (11,666) (10,169)
Shares issued 3,609 43,423
Loan notes drawn down 80,000 15,000
Debenture stock repaid (80,000) -
Costs of issuance of debt (16) -
==================================================== ========== ==========
Net cash (outflow)/inflow from financing activities (8,073) 48,254
==================================================== ========== ==========
(Decrease)/increase in cash and cash equivalents (4,399) 12,780
Exchange movements 71 64
Cash and cash equivalents at start of period * 11,263 9,701
==================================================== ========== ==========
Cash and cash equivalents at end of period * 6,935 22,545
==================================================== ========== ==========
* Cash and cash equivalents represent cash at bank and short
term money market deposits repayable on demand.
The accompanying notes below are an integral part of the
Financial Statements.
Performance Attribution for the Six Months to 30 June 2022
(unaudited)
Average allocation Average allocation Total Total
SAINTS Benchmark return return
Portfolio breakdown % % SAINTS Benchmark
% %
===================== ================== ===================== ==================== =============================
Global Equities 95.5 100.0 (10.2) (10.5)
Bonds 5.5 0.2
Direct Property 9.4 5.9
Deposits 0.6 -
Borrowings at book
value (11.0) 2.4
===================== ================== ===================== ==================== =============================
Portfolio Total Return (borrowings at book value) (9.5) (10.5)
Other items * (0.2)
================================================================ ==================== =============================
Fund Total Return (borrowings at book value) (9.7)
=============================
Adjustment for change in fair value of borrowings 2.1
================================================================ ==================== =============================
Fund Total Return (borrowings at fair value) (7.6) (10.5)
================================================================ ==================== =============================
The above returns are calculated on a total returns basis with
net income reinvested.
Source: Baillie Gifford and relevant underlying index
providers.
* Includes Baillie Gifford and OLIM management fees.
See disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
Twenty Largest Equity Holdings at 30 June 2022 (unaudited)
Value % of total
Name Business GBP'000 assets *
====================== ============================================ ================= ==========
Novo Nordisk Pharmaceutical company 32,240 3.5
United Parcel Service Courier services 29,450 3.2
Procter & Gamble Household product manufacturer 26,012 2.8
Microsoft Computer software 25,494 2.8
Distribution and sales of industrial
Fastenal supplies 25,240 2.7
Taiwan Semiconductor
Manufacturing Semiconductor manufacturer 23,490 2.5
Roche Pharmaceuticals and diagnostics 23,488 2.5
Pepsico Snack and beverage company 22,771 2.5
Sonic Healthcare Laboratory testing 21,116 2.3
Distributes air conditioning, heating
Watsco and refrigeration equipment 20,454 2.2
Nestlé Food producer 20,330 2.2
Albemarle Producer of speciality and fine chemicals 19,286 2.1
Deutsche Boerse Securities exchange owner/operator 19,127 2.0
Coca Cola Beverage company 18,865 2.0
Apple Consumer technology 17,653 1.9
Anta Sports Sportswear manufacturer and retailer 16,837 1.8
Analog Devices Integrated circuits 15,730 1.7
Partners Group Asset management 15,505 1.7
Schneider Electric Electrical power products 13,956 1.5
McDonald's Fast food restaurants 13,910 1.5
====================== ============================================ ================= ==========
420,954 45.4
==================================================================== ================= ==========
* Before deduction of borrowings.
Notes to the Condensed Financial Statements (unaudited)
1 The condensed Financial Statements for the six months to 30
June 2022 comprise the statements set out above together with the
related notes below. They have been prepared in accordance with FRS
104 'Interim Financial Reporting' and the AIC's Statement of
Recommended Practice issued in November 2014 and updated in April
2021 with consequential amendments and have not been audited or
reviewed by the Auditor pursuant to the Auditing Practices Board
Guidance 'Review of Interim Financial Information'. The Financial
Statements for the six months to 30 June 2022 have been prepared on
the basis of the same accounting policies as set out in the
Company's Annual Report and Financial Statements at 31 December
2021.
Going Concern
The Directors have considered the nature of the Company's
principal risks and uncertainties, as set out below, together with
its current position. The Board has, in particular, considered the
ongoing impact of market volatility during the Covid-19 pandemic,
the hostilities in Ukraine and current economic conditions but does
not believe the Company's going concern status is affected. In
addition, the Company's investment objective and policy, its assets
and liabilities and projected income and expenditure, together with
the Company's dividend policy, have been taken into consideration
and it is the Directors' opinion that the Company has adequate
resources to continue in operational existence for the foreseeable
future. The Company's assets, the majority of which are investments
in quoted securities which are readily realisable, exceed its
liabilities significantly. All borrowings require the prior
approval of the Board. Gearing levels and compliance with borrowing
covenants are reviewed by the Board on a regular basis. The Company
has no short term borrowings. The redemption dates for the
Company's loan notes are June 2036, April 2045 and April 2049.
Accordingly, the Directors consider it appropriate to adopt the
going concern basis of accounting in preparing these Financial
Statements and confirm that they are not aware of any material
uncertainties which may affect the Company's ability to continue to
do so over a period of at least twelve months from the date of
approval of these Financial Statements.
2 The financial information contained within this Interim
Financial Report does not constitute statutory accounts as defined
in sections 434 to 436 of the Companies Act 2006. The financial
information for the year ended 31 December 2021 has been extracted
from the statutory accounts which have been filed with the
Registrar of Companies. The Auditor's Report on those accounts was
not qualified, and did not contain statements under sections 498(2)
or (3) of the Companies Act 2006.
3 Baillie Gifford & Co Limited, a wholly owned subsidiary of
Baillie Gifford & Co, has been appointed by the Company as its
Alternative Investment Fund Manager (AIFM) and Company Secretary.
The investment management function has been delegated to Baillie
Gifford & Co. The management agreement can be terminated on six
months' notice. The annual management fee, calculated quarterly, is
0.45% on the first GBP500m of total assets and 0.35% on the
remaining total assets, where 'total assets' is defined as the
total value of the assets held, excluding the value of the property
portfolio, less all liabilities (other than any liability in the
form of debt intended for investment purposes).
As AIFM, Baillie Gifford & Co Limited has delegated the
management of the property portfolio to OLIM Property Limited. OLIM
receives an annual fee from SAINTS of 0.5% of the value of the
property portfolio, subject to a minimum quarterly fee of GBP6,250.
The agreement can be terminated on three months' notice.
4 Net Return per Ordinary Share
Six months Six months
to 30 June to 30 June
2022 2021
GBP'000 GBP'000
====================================================== ================ ===================
Revenue return on ordinary activities after taxation
Capital return on ordinary activities after taxation 13,703 11,273
(104,150) 70,125
====================================================== ================ ===================
Total net return (90,447) 81,398
====================================================== ================ ===================
Weighted average number of ordinary shares in issue 176,051,800 167,223,429
====================================================== ================ ===================
5 Dividends
Six months Six months
to 30 June to 30 June
2022 2021
GBP'000 GBP'000
===================================================== ================ ================
Amounts recognised as distributions in the period:
Previous year's final of 3.375p (2021 - 3.00p), paid
8 April 2022 5,936 4,965
First interim of 3.25p (2021 - 3.05p), paid 22 June
2022 5,730 5,204
===================================================== ================ ================
11,666 10,169
===================================================== ================ ================
Amounts paid and payable in respect of the period:
First interim of 3.25p (2021 - 3.05p), paid 22 June
2022 5,730 5,204
Second interim of 3.40p (2021 - 3.075p) 5,994 5,308
===================================================== ================ ================
11,724 10,512
===================================================== ================ ================
The second interim dividend was declared after the period end
date and therefore has not been included as a liability in the
Balance Sheet. It is payable on 20 September 2022 to shareholders
on the register at the close of business on 12 August 2022. The
ex-dividend date is 11 August 2022. The Company's Registrar offers
a Dividend Reinvestment Plan and the final date for elections for
this dividend is 30 August 2022.
6 Fair Value Hierarchy
The fair value hierarchy used to analyse the basis on which the
fair values of financial instruments held at fair value through the
profit or loss account are measured is described below. Fair value
measurements are categorised on the basis of the lowest level input
that is significant to the fair value measurement.
Level 1 - using unadjusted quoted prices for identical
instruments in an active market;
Level 2 - using inputs, other than quoted prices included within
Level 1, that are directly or indirectly observable (based on
market data); and
Level 3 - using inputs that are unobservable (for which market
data is unavailable).
An analysis of the Company's financial asset investments based
on the fair value hierarchy described above is shown below.
Level 1 Level 2 Level 3 Total
As at 30 June 2022 GBP'000 GBP'000 GBP'000 GBP'000
================================== ======== ======== ======== ================
Securities
Listed equities/funds 797,279 - - 797,279
Bonds 10,559 28,853 - 39,412
Property
Freehold - - 81,700 81,700
================================== ======== ======== ======== ================
Total financial asset investments 807,838 28,853 81,700 918,391
================================== ======== ======== ======== ================
Level 1 Level 2 Level Total
3
As at 31 December 2021 GBP'000 GBP'000 GBP'000 GBP'000
================================== ========= ======= ======== =========
Securities
Listed equities/funds 889,142 - 265 889,407
Bonds 11,984 36,966 - 48,950
Property
Freehold - - 74,900 74,900
================================== ========= ======= ======== =========
Total financial asset investments 901,126 36,966 75,165 1,013,257
================================== ========= ======= ======== =========
There have been no transfers between levels of the fair value
hierarchy during the period. The fair value of listed investments
is bid value or, in the case of holdings on certain recognised
overseas exchanges, last traded price. They are categorised as
Level 1 if they are valued using unadjusted quoted prices for
identical instruments in an active market and Level 2 if they do
not meet all these criteria but are, nonetheless, valued using
market data. The fair value of unlisted investments is determined
using valuation techniques, determined by the Directors, based upon
observable and/or non-observable data such as latest dealing
prices, stockbroker valuations, net asset values and other
information, as appropriate. The Company's holdings in unlisted
investments are categorised as Level 3 as the valuation techniques
applied include the use of non-observable data.
7 At 30 June 2022, the book value of the borrowings was
GBP94,707,000 (31 December 2021 - GBP95,161,000) and the fair value
was GBP77,331,000 (31 December 2021 - GBP97,422,000). The debt
comprises long-term private placement loan notes: GBP15 million
with a coupon of 2.23% issued during 2021; and GBP80 million with a
coupon of 3.12% issued to refinance the 8% Debenture Stock which
matured on 10 April 2022.
8 At 30 June 2022, the Company had the authority to buy back
26,367,551 ordinary shares and to issue 17,190,094 ordinary shares
without application of pre-emption rights in accordance with the
authorities granted at the AGM in April 2022. During the six months
to 30 June 2022, 700,000 (31 December 2021 - 13,005,000) shares
were issued at a premium to net asset value raising proceeds of
GBP3,609,000 (31 December 2021 - GBP63,076,000). No further shares
were issued between 1 July 2022. No shares were bought back (31
December 2021 - nil).
9 During the period, transaction costs on purchases amounted to
GBP534,000 (30 June 2021 - GBP77,000) and on sales GBP52,000 (30
June 2021 - GBP253,000). Of these transaction costs, GBP489,000
related to the purchase of property (30 June 2021 - nil) and
GBP36,000 related to the sale of property (30 June 2021 -
GBP240,000).
10 Related Party Transactions
There have been no transactions with related parties during the
first six months of the current financial year that have materially
affected the financial position or the performance of the Company
during that period and there have been no changes in the related
party transactions described in the last Annual Report and
Financial Statements that could have had such an effect on the
Company during that period.
11 The Interim Financial Report will be available on the SAINTS
page of the Managers' website: saints-it.com ++ on or around 12
August 2022.
Principal Risks and Uncertainties
The principal risks facing the Company are financial risk,
investment strategy risk, climate and governance risk, regulatory
risk, custody and depositary risk, operational risk, discount risk,
leverage risk, political risk and emerging risks. An explanation of
these risks and how they are managed is set out on pages 7 and 8 of
the Company's Annual Report and Financial Statements for the year
to 31 December 2021 which is available on the Company's website:
saints-it.com . The principal risks and uncertainties have not
changed since the date of that report.
Glossary of Terms and Alternative Performance Measures (APM)
Total Assets
Total assets less current liabilities, before deduction of all
borrowings.
Net Asset Value
Net Asset Value (NAV) is the value of total assets less
liabilities (including borrowings). The NAV per share is calculated
by dividing this amount by the number of ordinary shares in
issue.
Net Asset Value (Borrowings at Fair Value) (APM)
Borrowings are valued at an estimate of their market worth.
Net Asset Value (Borrowings at Book Value)
Borrowings are valued at adjusted net issue proceeds. Book value
approximates amortised cost.
30 June 31 December
2022 2021
=============================================== =============== ===============
Shareholders' funds (borrowings at book value) GBP831,681,000 GBP930,185,000
Add: book value of borrowings GBP94,707,000 GBP95,161,000
Less: fair value of borrowings (GBP77,331,000) (GBP97,422,000)
=============================================== =============== ===============
Shareholders' funds (borrowings at fair value) GBP849,057,000 GBP927,924,000
=============================================== =============== ===============
Shares in issue 176,300,943 175,600,943
=============================================== =============== ===============
Net Asset Value per ordinary share (borrowings
at fair value) 481.6p 528.4p
=============================================== =============== ===============
Discount/Premium (APM)
As stockmarkets and share prices vary, an investment trust's
share price is rarely the same as its NAV. When the share price is
lower than the NAV per share it is said to be trading at a
discount. The size of the discount is calculated by subtracting the
share price from the NAV per share and is usually expressed as a
percentage of the NAV per share. If the share price is higher than
the NAV per share, this situation is called a premium.
30 June 30 June 31 December 31 December
======================
2022 2022 2021 2021
======================
NAV (book) NAV (fair) NAV (book) NAV (fair)
====================== ========== ========== =========== ===========
Closing NAV per share 471.7p 481.6p 529.7p 528.4p
Closing share price 464.0p 464.0p 541.0p 541.0p
====================== ========== ========== =========== ===========
(Discount)/premium (1.6%) (3.7%) 2.1% 2.4%
====================== ========== ========== =========== ===========
Total Return (APM)
The total return is the return to shareholders after reinvesting
the net dividend on the date that the share price goes
ex-dividend.
31 31
30 June 30 June 30 June 31 December December December
=====================================
2022 2022 2022 2021 2021 2021
=====================================
NAV (book) NAV (fair) share NAV (book) NAV (fair) share price
price
===================================== ========== ========== ========= =========== ========== ===========
Opening NAV per share/share
price (a) 529.7p 528.4p 541.0p 449.7p 446.1p 464.0p
Closing NAV per share/share
price (b) 471.7p 481.6p 464.0p 529.7p 528.4p 541.0p
Dividend adjustment factor
* (c) 1.013992 1.013704 1.014440 1.025486 1.025738 1.024954
Adjusted closing NAV per share/share
price (d = b x c) 478.3p 488.2p 470.7p 543.2p 542.0p 554.5p
===================================== ========== ========== ========= =========== ========== ===========
Total return (d ÷ a)-1 (9.7%) (7.6%) (13.0%) 20.8% 21.5% 19.5%
===================================== ========== ========== ========= =========== ========== ===========
* The dividend adjustment factor is calculated on the assumption
that the dividends paid out by the Company are reinvested into the
shares of the Company at the cum income NAV/share price, as
appropriate, at the ex-dividend date.
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the
Company as a percentage of the average net asset value (with
borrowings at fair value). The ongoing charges have been calculated
on the basis prescribed by the Association of Investment
Companies.
Performance Attribution (APM)
Analysis of how the Company achieved its performance relative to
its benchmark.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other
public company, an investment trust can borrow money to invest in
additional investments for its portfolio. The effect of the
borrowing on the shareholders' assets is called 'gearing'. If the
Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the
value of the Company's assets falls, the situation is reversed.
Gearing can therefore enhance performance in rising markets but can
adversely impact performance in falling markets.
Gearing represents borrowings at book less cash and cash
equivalents expressed as a percentage of shareholders' funds.
Potential gearing is the Company's borrowings expressed as a
percentage of shareholders' funds.
Equity gearing is the Company's borrowings adjusted for cash,
bonds and property expressed as a percentage of shareholders'
funds.
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers
(AIFM) Directive, leverage is any method which increases the
Company's exposure, including the borrowing of cash and the use of
derivatives. It is expressed as a ratio between the Company's
exposure and its net asset value and can be calculated on a gross
and a commitment method. Under the gross method, exposure
represents the sum of the Company's positions after the deduction
of sterling cash balances, without taking into account any hedging
and netting arrangements. Under the commitment method, exposure is
calculated without the deduction of sterling cash balances and
after certain hedging and netting positions are offset against each
other.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed,
is the percentage of the listed equity portfolio that differs from
its comparative index. It is calculated by deducting from 100 the
percentage of the portfolio that overlaps with the comparative
index. An active share of 100 indicates no overlap with the index
and an active share of zero indicates a portfolio that tracks the
index.
++ Neither the contents of the Managers' website nor the
contents of any website accessible from hyperlinks on the Managers'
website (or any other website) is incorporated into, or forms part
of, this announcement.
None of the views expressed in this document should be construed
as advice to buy or sell a particular investment.
SAINTS' objective is to deliver real dividend growth by
increasing capital and growing income. Its policy is to invest
mainly in equity markets, but other investments may be held from
time to time including bonds, property and other asset classes.
Baillie Gifford & Co Limited, a wholly owned subsidiary of
Baillie Gifford & Co, is appointed as investment managers and
secretaries to SAINTS. Baillie Gifford & Co, the Edinburgh
based fund management group has around GBP237 billion under
management and advice as at 27 July 2022.
Past performance is not a guide to future performance. SAINTS is
a listed UK company. As a result, the value of its shares and any
income from those shares is not guaranteed and could go down as
well as up. You may not get back the amount you invested. As SAINTS
invests in overseas securities, changes in the rates of exchange
may also cause the value of your investment (and any income it may
pay) to go down or up. You can find up to date performance
information about SAINTS on the SAINTS page of the Managers'
website saints-it.com . Neither the contents of the Company's
website nor the contents of any website accessible from hyperlinks
on the Company's website (or any other website) is incorporated
into, or forms part of, this announcement.
For further information please contact:
James Budden, Baillie Gifford & Co
Tel: 0131 275 2816
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
Third Party Data Provider Disclaimer
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express or implied, as to the accuracy, completeness or timeliness
of the data contained herewith nor as to the results to be obtained
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to any recipient of the data for any inaccuracies, errors or
omissions in the index data included in this document, regardless
of cause, or for any damages (whether direct or indirect) resulting
therefrom.
No Provider has any obligation to update, modify or amend the
data or to otherwise notify a recipient thereof in the event that
any matter stated herein changes or subsequently becomes
inaccurate.
Without limiting the foregoing, no Provider shall have any
liability whatsoever to you, whether in contract (including under
an indemnity), in tort (including negligence), under a warranty,
under statute or otherwise, in respect of any loss or damage
suffered by you as a result of or in connection with any opinions,
recommendations, forecasts, judgements, or any other conclusions,
or any course of action determined, by you or any third party,
whether or not based on the content, information or materials
contained herein.
FTSE Index Data
London Stock Exchange Group plc and its group undertakings
(collectively, the 'LSE Group'). (c)LSE Group 2022. FTSE Russell is
a trading name of certain LSE Group companies. 'FTSE(R)'
'Russell(R)', 'FTSE Russell(R)', is/are a trade mark(s) of the
relevant LSE Group companies and is/are used by any other LSE Group
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rely on any indexes or data contained in this communication. No
further distribution of data from the LSE Group is permitted
without the relevant LSE Group company's express written consent.
The LSE Group does not promote, sponsor or endorse the content of
this communication.
Sustainable Finance Disclosure Regulation ('SFDR')
Sustainable Finance Disclosure Regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does
not have a direct impact in the UK due to Brexit, however, it
applies to third-country products marketed in the EU. As The
Scottish American Investment Company P.L.C. is marketed in the EU
by the AIFM, BG & Co Limited, via the National Private
Placement Regime (NPPR) the following disclosures have been
provided to comply with the high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's Governance and
Sustainable Principles and Guidelines as its policy on integration
of sustainability risks in investment decisions.
Baillie Gifford & Co's approach to investment is based on
identifying and holding high quality growth businesses that enjoy
sustainable competitive advantages in their marketplace. To do this
it looks beyond current financial performance, undertaking
proprietary research to build an in-depth knowledge of an
individual company and a view on its long-term prospects. This
includes the consideration of sustainability factors
(environmental, social and/or governance matters) which it believes
will positively or negatively influence the financial returns of an
investment.
More detail on the Managers' approach to sustainability can be
found in the Governance and Sustainability Principles and
Guidelines document, available publicly on the Baillie Gifford
website ( bailliegifford.com ).
Taxonomy Regulation
The Taxonomy Regulation establishes an EU-wide framework of
criteria for environmentally sustainable economic activities in
respect of six environmental objectives. It builds on the
disclosure requirements under SFDR by introducing additional
disclosure obligations in respect of Alternative Investment Funds
that invest in an economic activity that contributes to an
environmental objective. The Company does not commit to make
sustainable investments as defined under SFDR. As such, the
underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities.
- ends -
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IR GZGZNNNKGZZM
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