TIDMRCP
RNS Number : 1472H
RIT Capital Partners PLC
02 August 2021
Please click here to view the Company's Report and Accounts
http://www.rns-pdf.londonstockexchange.com/rns/1472H_1-2021-7-30.pdf
2 August 2021
RIT Capital Partners plc
Results for the half year ended 30 June 2021
RIT Capital Partners plc today published its results for the
half year ended 30 June 2021.
Financial Highlights:
-- Net asset value per share (NAV) total return of 19.1%
for the period
-- NAV per share of 2,711 pence at 30 June 2021; a new
all-time high
-- Share price total return of 18.5% for the period
-- Total net assets in excess of GBP4.2 billion at 30
June 2021
-- Growth in net assets of GBP700 million (before distributions)
for the period
Performance Highlights:
-- Emphasis on capital preservation and long-term capital
growth
-- Diversified approach successfully produced distinctive
sources of return with positive contributions from
the majority of asset classes
-- Strong contribution from the private investment portfolio
(both the direct and fund holdings) underpinned by
the successful IPO of Coupang
-- Our quoted equity category contributed positively,
led by cyclical positions buoyed by increased
economic activity as well as some strong single stock
picks
-- The absolute return and credit book continued to provide
steady and largely uncorrelated returns, in particular
from distressed debt managers
-- The main detractor to performance in absolute terms
was the FX translation impact from an appreciating
Sterling
Dividends and Buybacks:
-- Dividend paid in April of 17.625 pence per share
-- The Board has declared a dividend of 17.625 pence per
share for October
-- This represents an increase of 0.7% over the previous
year's dividend
-- The Company bought back shares when they were trading
on a high single-digit discount; and intends to continue
to selectively purchase shares in the market when viewed
as beneficial
Summary:
-- Over the last five years, net assets have grown in
excess of GBP2 billion (before dividends)
-- Since inception, RIT has now participated in 74% of
market upside but only 38% of market declines
-- Over the same period, the total shareholder return
has compounded at 12.1% per annum compared to the ACWI
of 7.6%
-- GBP10,000 invested in RIT at inception in 1988 would
be worth GBP434,000 today (with dividends reinvested)
compared to the same amount invested in the ACWI which
would be worth GBP111,000
Commenting, Sir James Leigh-Pemberton, Chairman of RIT Capital
Partners plc, said:
" I am pleased to report that your Company's net asset value at
the end of June increased to 2,711 pence per share, representing a
total return (with dividends reinvested) of 19.1% over the half
year. For the same period, the total shareholder return was 18.5%,
with the share price on 30 June having increased to 2,430
pence.
The first six months of the year appeared to be a relatively
benign time for equity markets, with many developed markets posting
low double-digit gains, despite continuing Covid-19 concerns and
notably higher inflation figures. However, beneath the surface, the
situation was far more volatile, with material rotations between
market-leading sectors, regions and themes ... All this resulted in
a wide dispersion of underlying asset returns; the first half of
the year reminding us again that decisions over where exposure is
held, and not just how much, is the key to achieving our Corporate
Objective.
Our focus continued to be on ensuring the investment approach
remained disciplined, but with the right amount of agility that
these market conditions require.
The two principal KPIs we use for investment performance, the
ACWI and RPI+3%, measured 12.2% and 3.4% respectively over the half
year, resulting in your Company experiencing healthy outperformance
... we saw positive contributions across the majority of your
Company's asset categories, with private investments in particular
producing strong returns...
Our long-term approach allows us to integrate these private
investments with carefully considered allocations to stocks, equity
and hedge funds, absolute return and credit, and currencies ... We
continue to believe this differentiated approach offers something
truly distinct from many other offerings in both the investment
trust and wider fund universe.
... my Board colleagues and I remain very grateful for the
continuing exceptional efforts of our colleagues in JRCM, our
suppliers and counterparties, which allow your Company to operate
as normal."
Commenting, Francesco Goedhuis, Chairman and Chief Executive
Officer of the Company's Manager, J. Rothschild Capital Management
Limited (JRCM), and Ron Tabbouche, Chief Investment Officer of
JRCM, said:
"While the results so far this year, and over recent years, are
pleasing, we nevertheless remain vigilant, and will not hesitate to
adjust the portfolio should the need arise ... As we emerge from
the most serious public health crisis in modern times, with
systemic market uncertainties remaining, this is not the time to
relax. And rest assured that we will not.
With a strong team around us, we are confident that our dynamic
asset allocation and strong security selection
skills, together with global deal sourcing and integrated risk
management, will provide us with the best platform
to continue to deliver equity-type returns with less risk."
ENQUIRIES:
Brunswick Group LLP:
Tom Burns: +44 (0) 207 404 5959
About RIT Capital Partners plc:
RIT Capital Partners plc is an investment company listed on the
London Stock Exchange. Its net assets have grown from GBP280
million on listing in 1988 to over GBP4.2 billion as at 30 June
2021. Lord Rothschild and his immediate family interests retain a
significant holding.
www.ritcap.com
A description of all terms used above, including further
information on the calculation of Alternative Performance Measures
(APMs) is set out in the Glossary and APMs section at the end of
this RNS.
THE FOLLOWING IS EXTRACTED FROM THE COMPANY'S HALF-YEARLY
FINANCIAL REPORT
Performance for the period 30 June 2021
------------------------------------ ------------
NAV per share total return 19.1%
Share price total return 18.5%
RPI plus 3.0% per annum 3.4%
MSCI All Country World Index (ACWI) 12.2%
------------------------------------ ------------
Key data 30 June 2021 31 December 2020 Change
---------------------------------------- ---------------- ---------------- ---------
NAV per share 2,711 pence 2,292 pence 18.3%
Share price 2,430 pence 2,065 pence 17.7%
Premium/(discount) -10.4% -9.9% -0.5% pts
Net assets GBP4,263 million GBP3,590 million 18.7%
Gearing 9.8% 4.4% 5.4% pts
Average net quoted equity exposure
for the period 46% 43% 3% pts
First interim dividend paid 17.625 pence 17.5 pence 0.7%
Second interim dividend declared/paid 17.625 pence 17.5 pence 0.7%
---------------------------------------- ---------------- ---------------- ---------
Total dividend in year 35.250 pence 35.0 pence 0.7%
---------------------------------------- ---------------- ---------------- ---------
Performance history 1 Year 3 Years 5 Years 10 Years
---------------------------- ------ ------- ------- --------
NAV per share total return 41.6% 51.7% 83.4% 156.3%
Share price total return 38.4% 23.9% 60.9% 125.8%
RPI plus 3.0% per annum 6.9% 17.7% 33.4% 72.4%
ACWI 30.2% 43.8% 88.2% 184.9%
---------------------------- ------ ------- ------- --------
CHAIRMAN'S STATEMENT
I am pleased to report that your Company's net asset value at
the end of June increased to 2,711 pence per share, representing a
total return (with dividends reinvested) of 19.1% over the half
year. For the same period, the total shareholder return was 18.5%,
with the share price on 30 June having increased to 2,430
pence.
The first six months of the year appeared to be a relatively
benign time for equity markets, with many developed markets posting
low double-digit gains, despite continuing Covid-19 concerns and
notably higher inflation figures. However, beneath the surface, the
situation was far more volatile, with material rotations between
market-leading sectors, regions and themes. Central banks continued
to influence market sentiment, as investors sought and reacted to
signs of policy initiatives to address higher inflation. The
10-year US treasury yield rose sharply to a peak of 1.77% in March
before steadily declining over the remainder of the period. And we
saw volatility spike in several well-publicised stocks, driven by
the increasing influence of retail shareholders. All this resulted
in a wide dispersion of underlying asset returns; the first half of
the year reminding us again that decisions over where exposure is
held, and not just how much, is the key to achieving our Corporate
Objective. Our focus continued to be on ensuring the investment
approach remained disciplined, but with the right amount of
agility that these market conditions require.
The two principal KPIs we use for investment performance, the
ACWI and RPI+3%, measured 12.2% and 3.4% respectively over the half
year, resulting in your Company experiencing healthy
outperformance. As the JRCM Manager's Report explains, we saw
positive contributions across the majority of your Company's asset
categories, with private investments in particular producing strong
returns. This asset class has always been a key part of our
strategy, with the strength and breadth of JRCM's network providing
the ability to source and invest in high-quality deals, which would
otherwise be difficult for shareholders to access. Our long-term
approach allows us to integrate these private investments with
carefully considered allocations to stocks, equity and hedge funds,
absolute return and credit, and currencies. These diversified asset
categories are combined using sophisticated and dynamic portfolio
construction, overlaid with the intelligent use of hedges. We
continue to believe this differentiated approach offers something
truly distinct from many other offerings in both the investment
trust and wider fund universe.
With our Corporate Objective focused on long-term capital growth
and preservation, performance over a six--month period, while
desirable, is not our main aim. We seek to ensure that our approach
produces a high--quality return through market cycles. Looking at
recent years, it is gratifying to see continued strong performance,
with a three-year NAV return of 51.7%, and five-year of 83.4%.
However, it is equally important that we target these equity-type
returns with considerably less risk than if we were fully invested
in equity markets, aiming for reasonable participation in up
markets and to protect shareholders from the worst excesses of
market declines. Here, I am therefore also pleased that we compare
favourably, with monthly NAV volatility over five years at 8.3%
compared to the ACWI of 12.3%.
Share capital and dividend
The NAV performance is what we task our Manager with producing,
but we recognise that ultimately the return to shareholders is
through share price growth and dividends. As I have commented on
previously, the Board monitors the share price closely, with the
aim of minimising where possible the volatility for shareholders,
allowing the NAV to drive the share price. In this regard, we
bought back approximately 59,000 shares over March and June at a
cost of GBP1.4m, when we saw the shares trading on a high
single-digit discount. As a result, we now hold some 175,000 shares
in treasury, and we intend to continue to selectively purchase
shares in the market when we believe that it is beneficial to do
so.
We paid a first interim dividend of 17.625 pence per share in
April, and, in line with my comments in March, have declared a
second interim dividend of the same amount. This will be paid on 29
October to shareholders registered on 1 October, providing
shareholders with a total dividend in 2021 of 35.25 pence per
share, a modest increase over 2020.
Governance
We remain committed to the highest governance standards and
continue to spend time with shareholders, ensuring we understand
their views and resolve any concerns. We fully support the moves
towards greater diversity on Boards, and I will be outlining our
policy in this regard in the next Annual Report. In addition, we
are continuing to refine our approach in relation to ESG matters,
investing time with employees, managers and advisers to ensure that
our policy and our behaviour are consistent. We will also report to
shareholders in greater detail on this topic early next year.
I highlighted in March the extraordinary efforts and resilience
of our employees and counterparties over recent times. In the UK at
least, the relative success of the vaccine programme has meant that
things are beginning to ease even as cases rise. However, we have,
of course, not yet seen a return to normality in our day-to-day
lives, and my Board colleagues and I remain very grateful for the
continuing exceptional efforts of our colleagues in JRCM, our
suppliers and counterparties, which allow your Company to operate
as normal.
Outlook
Stock markets are often characterised as reflecting expectations
of the future. And yet, with some countries still experiencing
extraordinary challenges from the pandemic, economies impacted by
output constraints, and the risk of a sustained resurgence of
inflation and higher interest rates, the medium-term outcome could
be very different to the relatively benign one suggested by
markets. We remain temperamentally disinclined to chase short-term
liquidity-fuelled rallies and especially in periods of such
uncertainty. However, with the dedicated support of Board
colleagues and a highly skilled and effective team in our Manager,
I remain confident we have the right approach to continue to
deliver attractive returns to our shareholders.
Sir James Leigh-Pemberton
Chairman
30 July 2021
MANAGER'S REPORT
Overview
The first half of the year saw the gradual easing of Covid-19
restrictions following the successful deployment of vaccination
campaigns. Those nations that fared better in terms of speed and
uptake experienced an improvement in growth, but also the highest
inflation numbers for decades.
Global equity markets responded positively, as the spectre of
short-term interest rate rises was seemingly discounted. The
consensus appeared to view the inflation jump as transitory, with
central banks comfortable overshooting their targets in the short
term. Nonetheless inflation fears and the possibility of an end to
the era of cheap money will continue to be a source of concern.
While equity markets were generally positive, there was a wide
dispersion across sectors, styles and regions. The rotation from so
called 'long-duration' to 'short-duration' stocks, which began in
the last quarter of 2020, continued this year with value stocks
outperforming growth stocks for much of the period. On a regional
basis, many Western markets saw low double-digit returns, with
slower vaccination rates weighing on Japanese equities, and the
Chinese market under pressure from policy and, more importantly,
regulatory tightening.
The fixed income market had a difficult start as yields pushed
higher, particularly on long-dated bonds. With a recent more
hawkish stance on rates from the US Federal Reserve, there has been
a material shift in the shape of the curve with longer-term yields
declining, while yields at the shorter end increased. This
flattening of the curve dented the positive momentum of many
reflationary assets.
Sterling outperformed most major currencies over the last six
months, fuelled by a successful vaccination programme and a Bank of
England that remains resolute in addressing the potential rise of
inflation. The US dollar was on the back foot as US real rates
declined meaningfully, although the currency started to gain
momentum in the second quarter.
Performance highlights
The portfolio produced a NAV total return of 19.1%,
outperforming both our reference hurdles which measured 12.2% for
the ACWI and 3.4% for RPI+3%.
Key drivers of the performance:
-- A strong contribution from the private investment portfolio,
underpinned by the successful IPO of Coupang and supported
by gains across the direct and fund books;
-- Our quoted equity category contributed positively, led
by cyclical positions buoyed by increased economic activity
as well as some strong single stock picks;
-- The absolute return and credit book continued to provide
steady and largely uncorrelated returns, in particular
from distressed debt managers; and
-- In terms of headwinds, the relative strength of sterling
was the main detractor to performance in absolute terms.
In terms of portfolio allocation, our average net quoted equity
exposure was 46%, a slight increase over 2020. The exposure
continues to be largely dominated by our structural themes and in
particular Asian equities where we continue to see a long-term
potential for growth and excess returns. Just under a quarter of
the quoted book was allocated towards what we characterise as value
or cyclical stocks, targeting the gradual re-opening of economies
as the vaccine efficacy and rollout continued. Over the first six
months, we increased our allocation to quality defensive names such
as Unilever and Reckitt Benckiser, which we considered were
disproportionately punished by the rise in bond yields. Other
themes captured in the quoted equity book include biotech, quality
growth and companies benefiting from energy transition trends.
A core feature of our approach to portfolio construction is the
use of hedging. Here we focus both on macro positions (such as
broad equity market exposures or currencies) as well as individual
stocks, funds or themes, where we might decide to moderate the
exposure without having to sell the underlying positions. To help
protect the portfolio in downturns, we may also deploy various
types of 'tail hedges' designed to reduce the impact of such
negative volatility.
It was a strong period for our private investments. The
successful IPO of Coupang, the South Korean e--commerce giant,
contributed 5.5% in our private investments book at the IPO price
of $35.00. It was then transferred to the quoted portfolio, and the
share price ended June at $41.82. The remainder of the direct book
also saw widespread gains, reflecting positive company performance,
new investment rounds, as well as interest from special purpose
acquisition companies (SPACs).
Several new investments were made in the direct portfolio
including GBP21 million in Epic Systems, the largest healthcare
digital record platform in the US. We also invested GBP50 million
in Webull and GBP29 million in Robinhood, two financial technology
platforms disrupting the traditional retail trading ecosystem. As
part of a broad strategy seeking targeted exposure to disruptive
technologies, we made smaller investments totalling some GBP54
million, in promising companies.
The private funds book continued to benefit from strong
performance, with many of our core partners' funds seeing healthy
uplifts, helped by the portfolio tilt towards technology - one of
our structural themes. As normal, the valuation lag for this
industry means the majority of our funds are included at their 31
March valuations. Since the start of the year, we have made GBP173
million of commitments to new funds.
A key feature of our differentiated approach to portfolio
diversification is the absolute return and credit book. This saw
continued steady returns, with the strongest performance from those
managers focusing on distressed debt and special situations. Our
merger arbitrage funds also delivered pleasing returns. With credit
spreads tightening back to pre-pandemic levels, we have adopted a
more cautious approach to direct credit investments.
We continue to hold gold as a portfolio diversifier, especially
in a low interest rate environment and, viewing the US dollar as
again having the potential to provide a safe haven in times of
stress, we increased our allocation here.
While the results so far this year, and over recent years, are
pleasing, we nevertheless remain vigilant, and will not hesitate to
adjust the portfolio should the need arise. Experience suggests
that when there is a widespread consensus, investors can often get
trapped in a false sense of security and let their guard down. As
we emerge from the most serious public health crisis in modern
times, with systemic market uncertainties remaining, this is not
the time to relax. And rest assured that we will not.
With a strong team around us, we are confident that our dynamic
asset allocation and strong security selection skills, together
with global deal sourcing and integrated risk management, will
provide us with the best platform to continue to deliver
equity-type returns with less risk.
Francesco Goedhuis Ron Tabbouche
Chairman and Chief Executive Chief Investment Officer
Officer
J. Rothschild Capital Management J. Rothschild Capital Management
Limited Limited
Asset Allocation and Portfolio Contribution, six months to 30
June 2021
30 June 2021 Contribution
Asset category % NAV %
-------------------------------------- ------------ ------------
Quoted equity 52.1% 6.1%(1)
Private investments 28.9% 13.0%
Absolute return and credit 19.9% 1.6%
Real assets 1.3% -0.1%
Government bonds and rates 0.1% 0.2%
Currency -0.8% -1.2%(2)
------------ ------------
Total investments 101.5% 19.6%
Liquidity, borrowings and other -1.5% -0.5%(3)
-------------------------------------- ------------ ------------
Total 100.0% 19.1%
-------------------------------------- ------------ ------------
Average net quoted equity exposure(1) 46%
-------------------------------------- ------------ ------------
The quoted equity contribution reflects the profits from
(1) the net quoted equity exposure held during the period.
The exposure can differ from the % NAV as the former reflects
notional exposure through derivatives as well as estimated
adjustments for derivatives and/or liquidity held by managers.
Currency exposure is managed centrally on an overlay basis,
(2) with the translation impact and the results of the currency
hedging and overlay activity included in this category's
contribution.
This category's contribution includes interest, mark-to-market
(3) movements in the fixed interest notes and expenses.
ASSET CATEGORY (% OF NAV)
30 June 2021 31 December 2020
Asset category % NAV % NAV
---------------------------- --------------- --------------------
Quoted equity(1) 52% 48%
Private investments 29% 26%
Absolute return and
credit 20% 23%
Real assets 1% 2%
Government bonds and
rates 0% 0%
Currency -1% 1%
Liquidity, borrowings
and other -1% 0%
---------------------------- --------------- --------------------
Net assets 100% 100%
---------------------------- --------------- --------------------
Note: This table excludes exposure from derivatives.
(1) For the period ending 30 June 2021, the underlying net
quoted equity exposure averaged 46% (31 December 2020: 43%).
CURRENCY EXPOSURE (% OF NAV)
30 June 2021 31 December 2020
Currency % NAV % NAV
------------------- ------------------ ----------------------
US dollar 33% 18%
Sterling 49% 59%
Euro 2% 3%
Japanese yen 4% 6%
Other 12% 14%
------------------- ------------------ ----------------------
Net assets 100% 100%
------------------- ------------------ ----------------------
Note: This table excludes exposure from currency options.
REGULATORY DISCLOSURES
Statement of Directors' responsibilities
In accordance with the Disclosure and Transparency Rules 4.2.4R,
4.2.7R and 4.2.8R, we confirm that to the best of our
knowledge:
(a) The condensed set of financial statements has been prepared
in accordance with IAS 34, Interim Financial Reporting,
as contained in UK adopted international accounting standards,
as required by the Disclosure and Transparency Rule 4.2.4R;
(b) The Interim Review includes a fair review of the information
required to be disclosed under the Disclosure and Transparency
Rule 4.2.7R in an interim management report. This includes
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 presented
in the Half-Yearly Financial Report. A further description
of the principal risks and uncertainties for the remaining
six months of the financial year is set out below; and
(c) In addition, in accordance with the disclosures required
under the Disclosure and Transparency Rule 4.2.8R, there
were no transactions with related parties in the first
six months of the current financial year that have had
a material effect on the financial position or performance
of the Group, or any changes to related party transactions
described in the Group's Report and Accounts for the year
ended 31 December 2020 that could do so.
Principal risks and uncertainties
The principal risk categories facing the Group for the second
half of the financial year are unchanged from those described in
the Report and Accounts for the year ended 31 December 2020. While
we are seeing some easing of restrictions in the UK, cases remain
elevated and the Covid-19 pandemic and the responses to it, are
continuing to influence many of the underlying risks. The principal
risks we identify comprise:
-- Investment strategy risk;
-- Market risk;
-- Liquidity risk;
-- Credit risk;
-- Key person dependency;
-- Legal and regulatory risk; and
-- Operational risk.
As an investment company, the most significant risk is
considered to be market risk. Many equity market indices saw
positive returns over the period, albeit with significant
variations in underlying stock performance. As economies continue
to experience differing levels of success with their response to
the pandemic, and investors also try to price the risks of a
sustained return of higher inflation and higher interest rates, we
may well see elevated levels of uncertainty and volatility over the
second half of the year.
From an operational risk perspective, the Manager has continued
to operate successfully on a predominantly remote basis, and we
remain satisfied with the effectiveness of the Group's internal
control environment. We have also actively monitored, and are
comfortable with, the measures put in place to ensure the health
and well--being of our employees, supported by the continuing
efforts of our many counterparties.
Going concern
The key factors likely to affect the Group's ability to continue
as a going concern were set out in the Report and Accounts for the
year ended 31 December 2020. While the pandemic continues to impact
daily lives, the Group's NAV has proven to be robust with healthy
growth over the period. As a result, the Company remains in a
strong position in relation to its ability to continue to operate.
At 30 June 2021, Group cash balances totalled GBP130 million and
there were committed but undrawn borrowings available of GBP150
million. Furthermore, the Directors have considered cash flow
forecasts for the period to 31 December 2022 as well as what the
Group considers readily realisable securities of GBP299 million,
and the substantial amounts that could be realised from the
remainder of the portfolio.
Having considered the above, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed interim financial statements.
Sir James Leigh-Pemberton
Chairman
30 July 2021
For and on behalf of the Board
CONDENSED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June
2021 2020
GBP million Notes Revenue Capital Total Revenue Capital Total
----------------------------- ----- ------- ------- ------ ------- ------- -------
Income and gains
Investment income 6.2 - 6.2 8.8 - 8.8
Other income 1.9 - 1.9 2.3 - 2.3
Gains/(losses) on fair value
investments - 710.4 710.4 - (80.2) (80.2)
Gains/(losses) on monetary
items and borrowings - 10.3 10.3 - 22.3 22.3
----------------------------- ----- ------- ------- ------ ------- ------- -------
8.1 720.7 728.8 11.1 (57.9) (46.8)
----------------------------- ----- ------- ------- ------ ------- ------- -------
Expenses
Operating expenses (14.0) (12.2) (26.2) (11.1) (2.5) (13.6)
----------------------------- ----- ------- ------- ------ ------- ------- -------
Profit/(loss) before finance
costs and tax 2 (5.9) 708.5 702.6 - (60.4) (60.4)
Finance costs (1.3) (5.2) (6.5) (1.7) (6.8) (8.5)
----------------------------- ----- ------- ------- ------ ------- ------- -------
Profit/(loss) before tax (7.2) 703.3 696.1 (1.7) (67.2) (68.9)
Taxation (0.2) (2.5) (2.7) - (0.2) (0.2)
----------------------------- ----- ------- ------- ------ ------- ------- -------
Profit/(loss) for the period (7.4) 700.8 693.4 (1.7) (67.4) (69.1)
----------------------------- ----- ------- ------- ------ ------- ------- -------
Earnings per ordinary share
- basic 3 (4.7)p 449.2p 444.5p (1.1)p (43.1)p (44.2)p
Earnings per ordinary share
- diluted 3 (4.7)p 446.4p 441.7p (1.1)p (43.1)p (44.2)p
----------------------------- ----- ------- ------- ------ ------- ------- -------
The total column of this statement represents the Group's
consolidated income statement, prepared in accordance with
international financial reporting standards (IFRS) as adopted by
the United Kingdom. The supplementary revenue return and capital
return columns are both prepared under guidance published by the
Association of Investment Companies (AIC). All items in the above
statement derive from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2021 2020
GBP million Revenue Capital Total Revenue Capital Total
--------------------------------------- ------- ------- ----- ------- ------- ------
Profit/(loss) for the period (7.4) 700.8 693.4 (1.7) (67.4) (69.1)
Revaluation gain/(loss) on property,
plant and equipment - - - - (1.0) (1.0)
Actuarial gain/(loss) in defined
benefit pension plan 3.9 - 3.9 (1.2) - (1.2)
Deferred tax (charge)/credit allocated
to actuarial gain/(loss) (1.6) - (1.6) 0.3 - 0.3
--------------------------------------- ------- ------- ----- ------- ------- ------
Total comprehensive income/(expense)
for the period (5.1) 700.8 695.7 (2.6) (68.4) (71.0)
--------------------------------------- ------- ------- ----- ------- ------- ------
The notes are an integral part of these condensed interim
financial statements.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
30 June 31 December
GBP million Notes 2021 2020
-------------------------------------- ----- ------- -----------
Non-current assets
Investments held at fair value 4,360.3 3,520.2
Investment property 38.1 37.8
Property, plant and equipment 23.4 23.6
Deferred tax asset - 2.5
Retirement benefit asset 5.1 0.7
Derivative financial instruments 5.6 0.3
-------------------------------------- ----- ------- -----------
4,432.5 3,585.1
-------------------------------------- ----- ------- -----------
Current assets
Derivative financial instruments 12.2 57.3
Other receivables 236.6 105.3
Cash at bank 130.4 296.8
-------------------------------------- ----- ------- -----------
379.2 459.4
-------------------------------------- ----- ------- -----------
Total assets 4,811.7 4,044.5
-------------------------------------- ----- ------- -----------
Current liabilities
Borrowings (236.0) (189.0)
Derivative financial instruments (50.8) (4.5)
Deferred tax liability (1.8) -
Other payables (62.7) (63.5)
Amounts owed to group undertakings (5.1) (5.3)
-------------------------------------- ----- ------- -----------
(356.4) (262.3)
-------------------------------------- ----- ------- -----------
Net current assets/(liabilities) 22.8 197.1
-------------------------------------- ----- ------- -----------
Total assets less current liabilities 4,455.3 3,782.2
-------------------------------------- ----- ------- -----------
Non-current liabilities
Borrowings (172.4) (181.5)
Derivative financial instruments (15.0) (5.4)
Provisions (0.9) (1.1)
Lease liability (3.8) (3.8)
-------------------------------------- ----- ------- -----------
(192.1) (191.8)
-------------------------------------- ----- ------- -----------
Net assets 4,263.2 3,590.4
-------------------------------------- ----- ------- -----------
Equity attributable to owners of
the Company
Share capital 156.8 156.8
Share premium 45.7 45.7
Capital redemption reserve 36.3 36.3
Own shares reserve (7.9) (15.3)
Capital reserve 4,020.6 3,350.1
Revenue reserve - 5.1
Revaluation reserve 11.7 11.7
-------------------------------------- ----- ------- -----------
Total equity 4,263.2 3,590.4
-------------------------------------- ----- ------- -----------
Net asset value per ordinary share
- basic 4 2,728p 2,303p
Net asset value per ordinary share
- diluted 4 2,711p 2,292p
-------------------------------------- ----- ------- -----------
The notes are an integral part of these condensed interim
financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Six months ended
30 June 2021 Capital Own
Share Share redemption shares Capital Revenue Revaluation Total
GBP million capital premium reserve reserve reserve reserve reserve equity
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
Balance at 1 January
2021 156.8 45.7 36.3 (15.3) 3,350.1 5.1 11.7 3,590.4
Profit/(loss) for
the year - - - - 700.8 (7.4) - 693.4
Revaluation gain/(loss)
on property, plant
and equipment - - - - - - - -
Actuarial gain/(loss)
in defined benefit
pension plan - - - - - 3.9 - 3.9
Deferred tax (charge)/credit
allocated to actuarial
gain/(loss) - - - - - (1.6) - (1.6)
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
Total comprehensive
income/(expense)
for the period - - - - 700.8 (5.1) - 695.7
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
Dividends paid (note
5) - - - - (27.5) - - (27.5)
Purchase of treasury
shares - - - - (1.4) - - (1.4)
Movement in own shares
reserve - - - 7.4 - - - 7.4
Movement in share-based
payments - - - - (1.4) - - (1.4)
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
Balance at 30 June
2021 156.8 45.7 36.3 (7.9) 4,020.6 - 11.7 4,263.2
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
Six months ended
30 June 2020 Capital Own
Share Share redemption shares Capital Revenue Revaluation Total
GBP million capital premium reserve reserve reserve reserve reserve equity
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
Balance at 1 January
2020 156.8 45.7 36.3 (7.8) 2,894.1 7.0 13.5 3,145.6
Profit/(loss) for
the year - - - - (67.4) (1.7) - (69.1)
Revaluation gain/(loss)
on property, plant
and equipment - - - - - - (1.0) (1.0)
Actuarial gain/(loss)
in defined benefit
pension plan - - - - - (1.2) - (1.2)
Deferred tax (charge)/credit
allocated to actuarial
gain/(loss) - - - - - 0.3 - 0.3
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
Total comprehensive
income/(expense)
for the period - - - - (67.4) (2.6) (1.0) (71.0)
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
Dividends paid (note
5) - - - - (27.4) - - (27.4)
Movement in own shares
reserve - - - (3.5) - - - (3.5)
Movement in share-based
payments - - - - 3.6 - - 3.6
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
Balance at 30 June
2020 156.8 45.7 36.3 (11.3) 2,802.9 4.4 12.5 3,047.3
----------------------------- -------- -------- ----------- -------- -------- -------- ----------- -------
The notes are an integral part of these condensed interim
financial statements.
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
Six months ended 30 June 30 June
GBP million 2021 2020
--------------------------------------------------------- ------- -------
Cash flows from operating activities:
Cash inflow/(outflow) before taxation and interest (173.6) (53.9)
Interest paid (6.4) (8.5)
--------------------------------------------------------- ------- -------
Net cash inflow/(outflow) from operating activities (180.0) (62.4)
--------------------------------------------------------- ------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (0.1) (0.2)
--------------------------------------------------------- ------- -------
Net cash inflow/(outflow) from investing activities (0.1) (0.2)
--------------------------------------------------------- ------- -------
Cash flows from financing activities:
Repayment of borrowings (185.0) -
Proceeds of borrowings 235.0 335.0
Purchase of ordinary shares by employee benefit trust(1) (5.4) (6.0)
Purchase of ordinary shares into treasury (1.4) -
Equity dividends paid (27.5) (27.4)
--------------------------------------------------------- ------- -------
Net cash inflow/(outflow) from financing activities 15.7 301.6
--------------------------------------------------------- ------- -------
Increase/(decrease) in cash in the period (164.4) 239.0
--------------------------------------------------------- ------- -------
Cash at the start of the period 296.8 61.1
--------------------------------------------------------- ------- -------
Effect of foreign exchange rate changes on cash (2.0) 8.0
--------------------------------------------------------- ------- -------
Cash at the period end 130.4 308.1
--------------------------------------------------------- ------- -------
(1) Shares are disclosed in the own shares reserve on the
consolidated balance sheet (unaudited).
The notes are an integral part of these condensed interim
financial statements.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of accounting
These condensed financial statements are the half-yearly
consolidated financial statements of RIT Capital Partners plc (RIT
or the Company) and its subsidiaries (together, the Group) for the
six months ended 30 June 2021. They are prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority, and with International Accounting Standard (IAS) 34,
Interim Financial Reporting, as adopted by the United Kingdom, and
were approved on 30 July 2021. These half-yearly consolidated
financial statements should be read in conjunction with the Report
and Accounts for the year ended 31 December 2020, which were
prepared in accordance with IFRS, as adopted by the European Union,
as they provide an update of previously reported information.
The half-yearly consolidated financial statements have been
prepared in accordance with the accounting policies set out in the
notes to the consolidated financial statements for the year ended
31 December 2020.
Critical accounting assumptions and judgements
As further described in the Report and Accounts for the year
ended 31 December 2020, areas requiring a higher degree of
judgement or complexity and areas where assumptions and estimates
are significant to the consolidated financial statements, are in
relation to the valuation of private investments and property.
Direct private investments are valued at the Manager's best
estimate of fair value in accordance with IFRS, having regard to
International Private Equity and Venture Capital Valuation
Guidelines as recommended by the British Private Equity &
Venture Capital Association. The inputs into the valuation
methodologies adopted include observable historical data such as
earnings or cash flow as well as more subjective data such as
earnings forecasts or discount rates. As a result of this, the
determination of fair value requires significant judgement.
2. Business and geographical segments
For both the six months ended 30 June 2021 and the six months
ended 30 June 2020, the Group is considered to have three principal
operating segments, all based in the UK, as follows:
AUM(1)
Segment Business GBP million Employees(1)
-------- ---------------------------------- ----------- ------------
RIT Investment trust - -
JRCM(2) Investment manager/administration 4,263 42
SHL(3) Events/premises management - 12
-------- ---------------------------------- ----------- ------------
(1) At 30 June 2021.
(2) J. Rothschild Capital Management Limited.
(3) Spencer House Limited.
Key financial information for the six months ending 30 June 2021
is as follows:
Net Income/ Operating Profit/
GBP million assets gains(1) expenses(1) (loss)(2)
--------------- ------- -------- ----------- ---------
RIT 4,152.6 729.2 (37.0) 692.2
JRCM 116.9 34.3 (23.7) 10.6
SHL 0.6 0.9 (1.1) (0.2)
Adjustments(3) (6.9) (35.6) 35.6 -
--------------- ------- -------- ----------- ---------
Total 4,263.2 728.8 (26.2) 702.6
--------------- ------- -------- ----------- ---------
Key financial information for the six months ending 30 June 2020
is as follows:
Net Income/ Operating Profit/
GBP million assets gains(1) expenses(1) (loss)(2)
--------------- ------- -------- ----------- ---------
RIT 2,961.0 (46.6) (21.0) (67.6)
JRCM 93.0 18.4 (11.0) 7.4
SHL 1.0 0.9 (1.1) (0.2)
Adjustments(3) (7.7) (19.5) 19.5 -
--------------- ------- -------- ----------- ---------
Total 3,047.3 (46.8) (13.6) (60.4)
--------------- ------- -------- ----------- ---------
(1) Includes intra-group income and expenses.
(2) Profit/(loss) before finance costs and tax.
(3) Consolidation adjustments in accordance with IFRS 10
Consolidated Financial Statements.
3. Earnings/(loss) per ordinary share - basic and diluted
The basic earnings per ordinary share for the six months ended
30 June 2021 is based on the profit of GBP693.4 million (six months
ended 30 June 2020: loss of GBP69.1 million) and the weighted
average number of ordinary shares in issue during the period of
156.8 million (six months ended 30 June 2020: 156.8 million). The
weighted average number of shares is adjusted for shares held in
the employee benefit trust (EBT) and in treasury in accordance with
IAS 33.
Six months Six months
ended 30 June ended 30 June
GBP million 2021 2020
----------------------------------- -------------- ---------------
Net revenue profit/(loss) (7.4) (1.7)
Net capital profit/(loss) 700.8 (67.4)
----------------------------------- -------------- ---------------
Total profit/(loss) for the period 693.4 (69.1)
----------------------------------- -------------- ---------------
Six months Six months
ended 30 June ended 30 June
Pence 2021 2020
----------------------------------------------- -------------- ---------------
Revenue profit/(loss) per ordinary share
- basic (4.7) (1.1)
Capital profit/(loss) per ordinary share
- basic 449.2 (43.1)
----------------------------------------------- -------------- ---------------
Total earnings/(loss) per ordinary share-basic 444.5 (44.2)
----------------------------------------------- -------------- ---------------
The diluted earnings per ordinary share for the period is based
on the weighted average number of ordinary shares in issue during
the period, adjusted for shares held in the EBT and treasury, and
the weighted average dilutive effect of share-based payment awards
at the average market price for the period.
The latter adjustment is not required for the period ended 30
June 2020 as an increase in the shares in issue would reduce the
basic loss per ordinary share. As a result, there is no difference
between the basic and diluted loss per ordinary share.
Six months Six months
ended 30 June ended 30 June
Weighted average (million) 2021 2020
------------------------------------- -------------- --------------
Number of shares in issue 156.8 156.8
RIT shares held in EBT (0.7) (0.6)
RIT shares held in treasury (0.1) -
------------------------------------- -------------- --------------
Basic shares 156.0 156.2
Effect of share-based payment awards 1.0 -
------------------------------------- -------------- --------------
Diluted shares 157.0 156.2
------------------------------------- -------------- --------------
Six months Six months
ended 30 June ended 30
Pence 2021 June 2020
------------------------------------------------- -------------- ----------
Revenue profit/(loss) per ordinary share
- diluted (4.7) (1.1)
Capital profit/(loss) per ordinary share
- diluted 446.4 (43.1)
------------------------------------------------- -------------- ----------
Total earnings/(loss) per ordinary share-diluted 441.7 (44.2)
------------------------------------------------- -------------- ----------
4. Net asset value per ordinary share - basic and diluted
Net asset value per ordinary share is based on the following
data:
30 June 2021 31 Dec 2020
----------------------------------------------- ------------ -----------
Net assets (GBP million) 4,263.2 3,590.4
----------------------------------------------- ------------ -----------
Number of shares in issue (million) 156.8 156.8
RIT shares held in EBT (0.3) (0.9)
RIT shares held in treasury (0.2) -
----------------------------------------------- ------------ -----------
Basic shares (million) 156.3 155.9
Effect of share-based payment awards (million) 1.0 0.8
----------------------------------------------- ------------ -----------
Diluted shares (million) 157.3 156.7
----------------------------------------------- ------------ -----------
Pence per share 30 June 2021 31 Dec 2020
--------------------------------------------- ------------ -----------
Net asset value per ordinary share - basic 2,728 2,303
Net asset value per ordinary share - diluted 2,711 2,292
--------------------------------------------- ------------ -----------
5. Dividends
Six months Six months
ended June ended June Six months Six months
2021 2020 ended June ended June
Pence per Pence per 2021 2020
share share GBP million GBP million
------------------------- ----------- ----------- ----------- -----------
Dividends paid in period 17.625 17.5 27.5 27.4
------------------------- ----------- ----------- ----------- -----------
The Board of Directors declared an interim dividend of 17.625
pence per ordinary share (GBP27.5 million) on 1 March 2021, which
was paid on 30 April 2021. The Board has declared the payment of a
second interim dividend of 17.625 pence per ordinary share (GBP27.5
million) in respect of the year ending 31 December 2021. This will
be paid on 29 October 2021, to shareholders on the register on 1
October 2021. Both payments are funded from accumulated capital
profits.
Additional commentary may be found in the Report and Accounts
for the year ended 31 December 2020.
6. Financial instruments
IFRS 13 requires the Group to classify its financial instruments
held at fair value using a hierarchy that reflects the significance
of the inputs used in the valuation methodologies. These are as
follows:
-- Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2: Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: Inputs for the asset or liability that are not based
on observable market data (i.e. unobservable inputs).
The vast majority of the Group's financial assets and
liabilities, investment properties and property, plant and
equipment are measured at fair value on a recurring basis.
The Group's policy is to recognise transfers into and transfers
out of fair value hierarchy levels at the end of the reporting year
when they are deemed to occur.
A description of the valuation techniques used by the Group with
regards to investments categorised in each level of the fair value
hierarchy is detailed below. Where the Group invests in a fund or a
partnership, which is not itself listed on an active market, the
categorisation of such investment between levels 2 and 3 is
determined by reference to the nature of the fund or partnership's
underlying investments. If such investments are categorised across
different levels, the lowest level of the hierarchy that forms a
significant proportion of the fund or partnership exposure is used
to determine the reporting disclosure.
If the proportion of the underlying investments categorised
between levels changes during the period, these will be
reclassified to the most appropriate level.
Level 1
The fair value of financial instruments traded in active markets
is based on quoted market prices at the balance sheet date. A
market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry
group, pricing service, or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an
arm's length basis. The quoted market price used for financial
assets held by the Group is the current bid price or the last
traded price, depending on the convention of the exchange on which
the investment is quoted. Where a market price is available, but
the market is not considered active, the Group has classified these
investments as level 2.
Level 2
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques which
maximise the use of observable market data where it is available.
Specific valuation techniques used to value OTC derivatives include
quoted market prices for similar instruments, counterparty quotes
and the use of forward exchange rates to estimate the fair value of
forward foreign exchange contracts at the balance sheet date.
Investments in externally managed funds which themselves invest
primarily in listed securities are valued at the price or net asset
value released by the investment manager or fund administrator as
at the balance sheet date.
Level 3
The Group considers all private investments, whether direct or
funds, (as described in the Investment Portfolio), as level 3
assets, as the valuations of these assets are not typically based
on observable market data. Where other funds invest into illiquid
stocks, these are also considered by the Group to be level 3
assets.
Private fund investments as well as direct co-investments are
held at the most recent fair values provided by the GPs managing
those funds/co-investments, and are subject to periodic review by
the Manager. The remaining directly-held private investments are
valued on a semi-annual basis using techniques including a market
approach, income approach and/or cost approach. The valuation
process involves the investment functions of the Manager who
prepare the proposed valuations, which are then subject to review
by the finance function, with the final valuations being presented
to the independent Valuations Committee of which the Audit and Risk
Committee chair is also a member. The specific techniques used will
typically include earnings multiples, discounted cash flow
analysis, the value of recent transactions, and, where appropriate,
industry specific methodologies. The acquisition cost, if
determined to be fair value, may be used to calibrate inputs to the
valuation. The valuations will often reflect a synthesis of a
number of distinct approaches in determining the final fair value
estimate. The individual approach for each investment will vary
depending on relevant factors that a market participant would take
into account in pricing the asset. These might include the specific
industry dynamics, the company's stage of development,
profitability, growth prospects or risk as well as the rights
associated with the particular security.
Borrowings at 30 June 2021 comprise bank loans and senior loan
notes. The bank loans are revolving credit facilities paying
floating interest and are typically drawn in tranches with a
duration of three or six months. The loans are therefore short-term
in nature, and their fair value approximates their nominal value.
The loan notes were issued in 2015 with tenors of between 10 and 20
years with a weighted average of 16 years. They are valued on a
monthly basis using a discounted cash flow model where the discount
rate is derived from the yield of similar tenor UK Government
bonds, adjusted for any significant changes in either credit
spreads or the perceived credit risk of the Company.
The fair value of investments in non-consolidated subsidiaries
is considered to be the net asset value of the individual
subsidiary as at the balance sheet date. The net asset value
comprises various assets and liabilities which are fair valued on a
recurring basis and is considered to be level 3.
On a semi-annual basis, the Group engages external, independent
and qualified valuers to determine the fair value of the Group's
investment properties and property, plant and equipment held at
fair value.
The following table analyses the Group's assets and liabilities
within the fair value hierarchy, at 30 June 2021:
As at 30 June 2021
GBP million Level 1 Level 2 Level 3 Total
---------------------------------------- ------- ------- ------- -------
Financial assets at fair value through
profit or loss (FVPL):
Portfolio investments 551.0 2,283.1 1,439.8 4,273.9
Non-consolidated subsidiaries - - 86.4 86.4
---------------------------------------- ------- ------- ------- -------
Investments held at fair value 551.0 2,283.1 1,526.2 4,360.3
Derivative financial instruments 4.4 13.4 - 17.8
---------------------------------------- ------- ------- ------- -------
Total financial assets at FVPL 555.4 2,296.5 1,526.2 4,378.1
---------------------------------------- ------- ------- ------- -------
Non-financial assets measured at fair
value:
Investment property - - 38.1 38.1
Property, plant and equipment - - 23.4 23.4
---------------------------------------- ------- ------- ------- -------
Total non-financial assets measured
at fair value - - 61.5 61.5
---------------------------------------- ------- ------- ------- -------
Financial liabilities at FVPL:
Borrowings - - (408.4) (408.4)
Derivative financial instruments (11.9) (53.9) - (65.8)
---------------------------------------- ------- ------- ------- -------
Total financial liabilities at FVPL (11.9) (53.9) (408.4) (474.2)
---------------------------------------- ------- ------- ------- -------
Total net assets measured at fair value 543.5 2,242.6 1,179.3 3,965.4
---------------------------------------- ------- ------- ------- -------
Other non-current assets 5.1
Cash at bank 130.4
Other current assets 236.6
Other current liabilities (69.6)
Other non-current liabilities (4.7)
---------------------------------------- ------- ------- ------- -------
Net assets 4,263.2
---------------------------------------- ------- ------- ------- -------
Movement in level 3 assets
Period ended 30 June 2021
Investments
held at fair
GBP million value Properties Total
---------------------------------- ------------- ---------- -------
Opening balance 1,232.1 61.4 1,293.5
Purchases 261.9 - 261.9
Sales (92.3) - (92.3)
Realised gains/(losses) through
profit or loss 4.5 - 4.5
Unrealised gains/(losses) through
profit or loss 479.7 0.3 480.0
Transfer out of level 3 (359.7) - (359.7)
Other - (0.2) (0.2)
---------------------------------- ------------- ---------- -------
Closing balance 1,526.2 61.5 1,587.7
---------------------------------- ------------- ---------- -------
During the period, one direct private investment with a fair
value of GBP333.4 million was reclassified from level 3 to level 2.
This reflected the fact that, following an IPO, its underlying
investment was listed. A second direct private investment with a
fair value of GBP26.3 million was reclassified from level 3 to
level 1 following an IPO.
Level 3 assets
Further information in relation to the directly-held private
investments is set out in the following table. This summarises the
portfolio by the primary method used in fair valuing the asset. As
we seek to employ a range of valuation methods and inputs in the
valuation process, selection of a primary method is subjective, and
designed primarily to assist the subsequent sensitivity
analysis.
Primary valuation method/approach 30 June 31 December
GBP million 2021 2020
---------------------------------- ------- -----------
Recent financing round(1) 191.5 47.7
Third-party valuations 161.9 202.5
Agreed sale/offer 18.6 -
Discounted cash flow (DCF) 11.3 14.0
Other industry metrics(1) 2.0 1.0
Market multiples 0.1 48.7
---------------------------------- ------- -----------
Total 385.4 313.9
---------------------------------- ------- -----------
(1) Included within these methods are direct private investments
held within the non-consolidated subsidiaries with a total of
GBP14.3 million (2020: GBP4.0 million)
For companies with positive earnings, we seek to utilise an
earnings multiple approach, typically using EBITDA or similar. The
earnings multiple is assessed by reference to similar listed
companies or transactions involving similar companies. When an
asset is undergoing a sale and the price has been agreed but not
yet completed or an offer has been submitted, we use the agreed or
offered price, often with a final discount to reflect the risks
associated with the transaction completing or any price
adjustments. Where a company has been the subject of a recent
financing round which is viewed as representative of fair value, we
will use this transaction price. Other methods employed include
discounted cash flow analysis and industry metrics such as
multiples of assets under management or revenue, where market
participants use these approaches in pricing assets. Where we have
co--invested alongside a GP, we typically utilise the GP's
valuation, consistent with our approach to private funds.
The following table provides a sensitivity analysis of the
valuation of directly-held private investments and the impact on
net assets:
Valuation method/approach Sensitivity analysis
------------------------- ------------------------------------------------------------------
Recent financing A 5% change in the value of these assets would result
round in a GBP9.6 million or 0.22% (2020: GBP2.4 million,
0.07%) change in net assets.
------------------------- ------------------------------------------------------------------
Third-party valuations A 5% change in the value of these assets would result
in a GBP8.1 million or 0.19% (2020: GBP10.1 million,
0.28%) change in net assets.
------------------------- ------------------------------------------------------------------
Agreed sale/offer A 5% change in the value of these assets would result
in a GBP0.9 million or 0.02% (2020: GBPnil) change
in net assets.
------------------------- ------------------------------------------------------------------
Discounted cash flow Assets in this category are valued using a weighted
average cost of capital range of 8% - 20%. A 1% increase/decrease
in the underlying discount rate would result in a
decrease/increase in the net assets of GBP2.4 million
or 0.06% (2020: GBP1.4 million, 0.04%)
------------------------- ------------------------------------------------------------------
Other industry metrics A 5% change in the value of these assets would result
in a GBP0.1 million or 0.002% (2020: GBP0.1 million,
0.001%) change in net assets.
------------------------- ------------------------------------------------------------------
Market multiples Assets in this category are valued using an EV/Revenue
of 4.5x. If the multiple used for valuation purposes
is increased/decreased by 5% then the net assets
would increase/decrease by GBP0.02 million or 0.001%
(2020: GBP0.6 million, 0.02%).
------------------------- ------------------------------------------------------------------
The investment property and property, plant and equipment with
an aggregate fair value of GBP61.5 million (2020: GBP61.4 million)
were valued using a third-party valuation provided by JLL. The
properties were valued using weighted average capital values of
GBP1,655 per square foot (2020: GBP1,652) developed from rental
yields and supported by recent market transactions. A GBP100 per
square foot increase/decrease in values would result in a GBP3.3
million or 0.08% increase/decrease (2020: GBP3.3 million, 0.09%) in
net assets.
The non-consolidated subsidiaries are held at their fair value
of GBP86.4 million (2020: GBP69.5 million) representing GBP80.7
million of portfolio investments (2020: GBP63.4 million) and GBP5.7
million of remaining assets and liabilities (2020: GBP6.1 million).
A 5% change in the value of assets would result in GBP4.3 million
or 0.1% (2020: GBP3.5 million, 0.1%) change in net assets.
The remaining investments held at fair value and classified as
level 3 were valued using third-party valuations from a GP,
administrator, or fund manager totalling GBP1,068.7 million (2020:
GBP852.7 million). A 5% change in the value of these assets would
result in a GBP53.4 million or 1.25% (2020: GBP42.6 million, 1.19%)
change in net assets.
In aggregate, the sum of the direct private investments,
investment property, property, plant and equipment,
non-consolidated subsidiaries and the remaining fund investments
represents the total level 3 assets of GBP1,587.7 million (2020:
GBP1,293.5 million).
The following table analyses the Group's assets and liabilities
within the fair value hierarchy, at 31 December 2020:
As at 31 December 2020
GBP million Level 1 Level 2 Level 3 Total
------------------------------------ ------- ------- ------- -------
Financial assets at FVPL:
Portfolio investments 538.7 1,749.4 1,162.6 3,450.7
Non-consolidated subsidiaries - - 69.5 69.5
------------------------------------ ------- ------- ------- -------
Investments held at fair value 538.7 1,749.4 1,232.1 3,520.2
Derivative financial instruments 5.8 51.8 - 57.6
------------------------------------ ------- ------- ------- -------
Total financial assets at FVPL 544.5 1,801.2 1,232.1 3,577.8
------------------------------------ ------- ------- ------- -------
Non-financial assets measured
at fair value:
Investment property - - 37.8 37.8
Property, plant and equipment - - 23.6 23.6
------------------------------------ ------- ------- ------- -------
Total non-financial assets measured
at fair value - - 61.4 61.4
------------------------------------ ------- ------- ------- -------
Financial liabilities at FVPL:
Borrowings - - (370.5) (370.5)
Derivative financial instruments (0.3) (9.6) - (9.9)
------------------------------------ ------- ------- ------- -------
Total financial liabilities at
FVPL (0.3) (9.6) (370.5) (380.4)
------------------------------------ ------- ------- ------- -------
Total net assets measured at
fair value 544.2 1,791.6 923.0 3,258.8
------------------------------------ ------- ------- ------- -------
Other non-current assets 3.2
Cash at bank 296.8
Other current assets 105.3
Other current liabilities (68.8)
Other non-current liabilities (4.9)
------------------------------------ ------- ------- ------- -------
Net assets 3,590.4
------------------------------------ ------- ------- ------- -------
Movements in level 3 assets
Investments
Year ended 31 December 2020 held at fair
GBP million value Properties Total
----------------------------------------- ------------ ---------- -------
Opening balance 1,132.6 60.3 1,192.9
Purchases 279.3 3.2 282.5
Sales (347.4) - (347.4)
Realised gains/(losses) through profit
or loss 48.9 - 48.9
Unrealised gains/(losses) through profit
or loss 250.6 0.1 250.7
Unrealised gains/(losses) through other
comprehensive income - (1.8) (1.8)
Transfer out of level 3 (131.9) - (131.9)
Other - (0.4) (0.4)
----------------------------------------- ------------ ---------- -------
Closing balance 1,232.1 61.4 1,293.5
----------------------------------------- ------------ ---------- -------
During the year, a direct private investment with a fair value
of GBP91.5 million was reclassified from level 3 to level 2. This
reflected the fact that, following an IPO, its main underlying
investments were listed. Investments in funds with a fair value of
GBP40.4 million were transferred from level 3 to level 2 as a
result of new financial information received during the year in
respect of the underlying investments of the funds.
7. Comparative information
The financial information contained in this Half-Yearly
Financial Report does not constitute statutory accounts as defined
in section 434 of the Companies Act 2006. The financial information
for the half years ended 30 June 2021 and 30 June 2020 has been
neither reviewed nor audited.
The information for the year ended 31 December 2020 has been
extracted from the latest published audited financial
statements.
The audited financial statements for the year ended 31 December
2020 have been filed with the Registrar of Companies and the report
of the auditors on those accounts contained no qualification or
statement under section 498(2) or (3) of the Companies Act
2006.
GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES
Glossary
Within this Half-Yearly Financial Report, we publish certain
financial measures common to investment trusts. Where relevant,
these are prepared in accordance with guidance from the AIC, and
this glossary provides additional information in relation to
them.
Alternative performance measures (APMs): APMs are numerical
measures of the Company's current, historical or future financial
performance, financial position or cash flows, other than financial
measures defined or specified in the Company's applicable financial
framework - namely IFRS and the AIC SORP. They are denoted with an
* in this section.
Gearing*: Gearing is a measure of the level of debt deployed
within the portfolio. The ratio is calculated in accordance with
AIC guidance as total assets, net of cash, divided by net assets
and expressed as a 'net' percentage, e.g. 110% would be shown as
10%.
30 June 31 December
GBP million 2021 2020
------------- ------- -----------
Total assets 4,811.7 4,044.5
Less: cash (130.4) (296.8)
------------- ------- -----------
Sub total 4,681.3 3,747.7
------------- ------- -----------
Net assets 4,263.2 3,590.4
------------- ------- -----------
Gearing 9.8% 4.4%
------------- ------- -----------
Leverage: Leverage, as defined by the Alternative Investment
Fund Managers Directive (AIFMD), is any method which increases the
exposure of the portfolio, whether through borrowings or leverage
embedded in derivative positions or by any other means.
MSCI All Country World Index: The MSCI All Country World Index
is a total return, market capitalisation-weighted equity index
covering major developed and emerging markets. Described in this
report as the ACWI or the ACWI (50% GBP), this is one of the
Company's KPIs or reference hurdles and, since its introduction in
2013, has incorporated a 50% sterling measure. This is calculated
using 50% of the ACWI measured in sterling and therefore exposed to
translation risk from the underlying foreign currencies. The
remaining 50% uses a sterling hedged ACWI from 1 January 2015 (from
when this is readily available). This incorporates hedging costs,
which the portfolio also incurs, to protect against currency risk
and is an investable index. Prior to this date it uses the index
measured in local currencies. Before December 1998, when total
return indices were introduced, the index is measured using a
capital-only version.
Net asset value (NAV) per share: The NAV per share is calculated
by dividing the total value of all the assets of the trust less its
liabilities (net assets) by the number of shares outstanding.
Unless otherwise stated, this refers to the diluted NAV per share,
with debt held at fair value.
NAV total return*: The NAV total return for a period represents
the change in NAV per share, adjusted to reflect dividends paid
during the period. The calculation assumes that dividends are
reinvested in the NAV at the month end following the NAV going
ex-dividend. The NAV per share at 30 June 2021 was 2,711 pence, an
increase of 419 pence, or 18.3%, from 2,292 pence at the previous
year end. As dividends totalling 17.625 pence per share were paid
during the period, the effect of reinvesting the dividends in the
NAV is 0.8%, which results in a NAV total return of 19.1%.
Net quoted equity exposure: This is the estimated level of
exposure that the trust has to listed equity markets. It includes
the assets held in the quoted equity category of the portfolio
adjusted for the notional exposure from quoted equity derivatives,
as well as estimated cash balances held by externally-managed funds
and estimated exposure levels from hedge fund managers.
Notional: In relation to derivatives, this represents the
estimated exposure that is equivalent to holding the same
underlying position through a cash security.
Premium/discount: The premium or discount (or rating) is
calculated by taking the closing share price on 30 June 2021 and
dividing it by the NAV per share at 30 June 2021, expressed as a
net percentage. If the share price is above/below the NAV per
share, the shares are said to be trading at a premium/discount.
RPI: The RPI refers to the United Kingdom Retail Price Index as
calculated by the Office for National Statistics and published
monthly. It is used as a measure of inflation in one of the
Company's KPIs RPI + 3.0% per annum.
Share price total return or total shareholder return (TSR)*: The
TSR for a period represents the change in the share price adjusted
to reflect dividends paid during the period. Similar to calculating
a NAV total return, the calculation assumes the dividends are
notionally reinvested at the daily closing share price following
the shares going ex-dividend. The share price on 30 June 2021
closed at 2,430 pence, an increase of 365 pence, or 17.7%, from
2,065 pence at the previous year end. Dividends totalling 17.625
pence per share were paid during the period, and the effect of
reinvesting the dividends in the share price is 0.8% which results
in a TSR of 18.5%. The TSR is one of the Company's KPIs.
END OF HALF-YEARLY FINANCIAL REPORT EXTRACTS
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IR SDSFMSEFSELW
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