Perpetual Income and Growth Investment Trust plc
Half-Yearly Financial Report for the Six Months to 30 September 2019
Key Facts
Perpetual Income and Growth Investment Trust plc (the ‘Company’)
is an investment trust company listed on The London Stock
Exchange.
Investment Objective of the Company
The Company’s investment objective is to provide shareholders
with capital growth and real growth in dividends over the medium to
long term from a portfolio of securities listed mainly in the UK
equity market.
Performance Statistics
|
SIX MONTHS
ENDED
30 SEPTEMBER
2019 |
|
|
Total Return(1)(2)(3) (all dividends
reinvested): |
|
|
|
Net asset value (NAV) – debt at
market value |
(1.2)% |
|
|
Share price |
(1.0)% |
|
|
FTSE All-Share Index(4) |
4.6% |
|
|
|
|
|
|
|
SIX
MONTHS ENDED |
|
30 SEPTEMBER
2019 |
30 SEPTEMBER
2018 |
%
CHANGE |
Revenue |
|
|
|
Basic revenue return per ordinary
share |
|
|
|
– including
special dividends |
9.65p |
8.28p |
+16.5 |
– excluding
special dividends |
9.39p |
8.28p |
+13.4 |
|
|
|
|
Dividends – first interim |
3.40p |
3.25p |
|
Dividends – second interim |
3.40p |
3.25p |
|
Dividends – total |
6.80p |
6.50p |
+4.6 |
|
|
|
|
|
AT
30 SEPTEMBER
2019 |
AT
31 MARCH
2019 |
%
CHANGE |
Shareholders’ funds |
|
|
|
Net assets (£’000)(5) |
805,430 |
881,546 |
(8.6) |
NAV per share – debt at market
value |
351.9p |
363.2p |
(3.1) |
Share price and discount |
|
|
|
Share price(1) |
312.0p |
323.5p |
(3.6) |
Discount to NAV(6) – debt at market
value |
(11.3)% |
(10.9)% |
|
Gearing (debt at market value): |
|
|
|
– gross gearing(7) |
18.7% |
17.3% |
|
– net gearing(8) |
18.7% |
17.3% |
|
(1) Source: Refinitiv.
(2) See Glossary of Terms and Alternative Performance Measures
(APM) on pages 66 to 68 of the 2019 annual financial report for the
explanation and calculation of APMs.
(3) The combined effect of any dividends paid, together with the
rise or fall in the share price or NAV. Any dividends received by a
shareholder are assumed to have been reinvested in either
additional shares (i.e. share price total return) or in the
Company’s assets (i.e. NAV total return).
(4) The Benchmark index of the Company.
(5) Includes 14,741,342 shares bought back at an average price
of 304.9p.
(6) Discount to NAV – debt at market value: (share price less
NAV per share with debt at market value) ÷ NAV per share with debt
at market value.
(7) Gross gearing: borrowings ÷ shareholders’ funds.
(8) Net gearing: borrowing less cash ÷ shareholders’ funds.
.
Chairman’s Statement
Performance
I am disappointed to report that the net asset value (NAV) total
return performance in the six months to 30
September 2019, with dividends reinvested, was –1.2%,
compared with +4.6% for our benchmark FTSE All-Share Index. The
share price total return was –1.0% for the period. In contrast to
the NAV and share price performance, revenue has remained
strong.
The portfolio experienced mixed results. The pall over UK
focused stocks from the uncertainty around Brexit continued, and
the period also saw other setbacks including a short seller attack
on Burford Capital and negative market sentiment towards tobacco
stocks. In contrast, a number of other holdings, including in
particular some focused around UK domestic opportunities, did well.
Further details can be found in the Manager’s Report.
The Board is very sensitive to shareholder concerns about the
continued weak results. We engage regularly with the portfolio
manager, Mark Barnett, who continues
to apply his consistent valuation based investment approach. We
have also had a number of discussions with Invesco management about
the continuing poor performance and about processes around
individual portfolio managers. We note the recent appointment of a
new Chief Investment Officer, Stephanie
Butcher, and have met with her to discuss new initiatives to
be put in place with the aim to improve portfolio performance. We
will be closely monitoring progress.
Share price discount
The share price discount to NAV ranged between 10.5% and 15.0%
during the period. We have ramped up the programme of share
buybacks, instituted last year. Through these we are seeking to
stabilise the discount, to provide liquidity to take out overhangs
in the market and to accrue value to remaining shareholders through
realising the discount on the shares bought back. During the period
the Company bought back 14.7 million shares at an average discount
to NAV of 12.5%. However, reiterating my previous statements,
improved portfolio performance and consequent demand for the shares
will be the main driver to reduce the discount level.
Dividend
The Directors are pleased to have declared a second interim
dividend of 3.4p per ordinary share in respect of the three months
to 30 September 2019. This dividend
will be paid on 30 December 2019 to
shareholders on the register on 29 November
2019. The shares will be marked ex-dividend on 28 November 2019.
Richard
Laing
Chairman
20 November 2019
.
Portfolio Manager’s Report
Market Review
The UK equity market posted a positive return over the six-month
period to 30 September 2019. However, as has tended to be the
case in recent reporting periods, this headline return masks
periods of underlying volatility. Global markets were driven by
persistent concerns of a slowdown in economic growth and the
fluctuation of US-Sino trade tensions. Meanwhile a trend noted in
previous periods continued; internationally orientated sectors
within the FTSE 100 continued to lead market performance.
Political uncertainty surrounding negotiations for the exit from
the European Union (EU) dominated the domestic agenda. During the
period sterling served as the bellwether for the perceived
likelihood of a “no-deal” exit. The value of sterling versus
international currencies remained weak, with the prorogation of
Parliament in August pushing the pound to just US$1.20.
Amid this persistent domestic uncertainty, the Bank of England’s
Monetary Policy Committee voted unanimously on four occasions to
hold the UK base interest rate at 0.75%. Latterly, officials
signalled the potential for a future interest rate cut following
the UK’s exit from the EU. Economic data released during the
period, showed a slowdown in economic growth during the first half
of 2019, a result of weaker business investment and slowing global
economic growth. The UK economy expanded in the third quarter,
avoiding recession. Employment data remained robust, with the
unemployment rate below 4% and more than 800,000 labour market
vacancies.
Portfolio Review
The Company’s investments have continued to generate meaningful
growth in income that has supported the growth in dividends.
However, the capital returns have been disappointing as a
consequence of the challenging backdrop facing UK domestically
orientated companies, some particular stock specific challenges,
and also the consequences of a large forced seller in the UK equity
market. The Company’s net asset value, including reinvested
dividends, provided a total return of –1.2% over the period under
review, compared with a total return of +4.6% by the FTSE All-Share
Index.
The portfolio’s core themes of UK domestic value, international
growth opportunities, tobacco and non-correlated financials have
remained consistent over the past six months. The tilt towards UK
domestic companies has been maintained, as persistent negativity
towards domestic sectors continues to present compelling
opportunities. Exposure to selective global industries, namely oil
and tobacco, remains prominent whilst a significant proportion of
the portfolio is also invested in non-correlated financials. The
low correlation of investments held by the Company with the FTSE
All-Share Index affords two important benefits to the portfolio;
business risk diversification and income diversification. This is
especially important given the concentration of dividend income in
the UK stock market.
The portfolio’s UK domestic opportunities theme continued to
provide some positive returns over the period. BCA Marketplace,
KCOM and Next were the standout contributors within this theme.
Both KCOM and BCA Marketplace received private equity bids during
the period. KCOM’s Board of Directors recommended a bid in April,
but later abandoned it in favour of an enhanced all cash offer from
a European infrastructure fund. Meanwhile, BCA Marketplace
confirmed in June that it was in advanced discussions with a
private equity firm, following an all cash offer for the company.
Elsewhere within the portfolio’s domestic theme, Next released a
strong trading statement in July, which confirmed
better-than-expected full price sales for the second quarter.
Half-year results released in September confirmed double-digit
growth in online sales, whilst management reaffirmed its full year
guidance.
The portfolio’s absolute performance was also supported by its
exposure to international growth opportunities. Stock selection
within this theme proved decisive, as holdings in BAE Systems and
HomeServe were amongst the portfolio’s best performing stocks over
the period. HomeServe released full year results in May, which were
ahead of market expectations. The company delivered another year of
strong organic revenue growth and confirmed a double digit increase
in the annual dividend. Meanwhile, BAE Systems traded well over
much of the period. The company released supportive half-year
results in July that showed double digit profit growth, fuelled by
an increase in US defence spending.
Relative performance also benefitted from the portfolio’s zero
weighting in the metals & mining sector, which proved highly
volatile amid geopolitical tensions. Conversely, the non-inclusion
of several highly rated, internationally focussed FTSE 100
stocks proved to be a drag on relative performance.
Tobacco remains a prominent theme, with investments in Altria,
British American Tobacco and Imperial Brands. These holdings have
previously delivered exceptional returns for shareholders, however
more recent performance has continued to prove challenging.
Investor sentiment towards the tobacco sector was affected by
revived fears around regulation, whilst the release of
underwhelming sales data for Imperial Brands’ next generation
technology reignited concerns around the outlook for future
revenues. The portfolio’s significant weighting in the sector
adversely affected relative performance, with negative returns from
non-UK index stock Altria being a significant detractor. Despite
these persistent concerns, the outlook for the sector remains
positive, particularly as the headwinds outlined are reflected in
depressed valuations across the sector.
The portfolio’s final theme proved the most substantial driver
of weakness during the period. Having been a strong contributor to
fund performance over many years, Burford Capital provided the
portfolio’s largest negative return over the period. In
August 2019, the litigation financer
was the subject of a highly critical report from a US firm that
specialises in publishing research for short-sellers. This caused a
very material fall in the company’s share price. Burford Capital
robustly defended itself against the accusations and later
announced a series of corporate governance enhancements. Whilst the
share price recovered some losses during September, the value of
this holding still remained significantly lower at period end.
Elsewhere within the non-correlated financials holdings, Amigo
also provided a negative contribution to returns, as concerns grew
around the regulatory focus for the guarantor backed loan sector.
The share price fell sharply at the end of August on the release of
results for the first quarter, when the company cut its full year
guidance and announced a change in lending strategy, to prioritise
new customer lending over repeat customer lending. Despite these
specific challenges, there were a number of holdings in this area
that performed well over the period. Most notable was AJ Bell,
which has traded very well following the initial public offering
(IPO) in December 2018. In April, the
company released a strong trading update for the second quarter,
which supported positive momentum in the shares. AJ Bell has been a
very successful holding for the Company. Initially held as a
private, unquoted company, we were extremely supportive of the IPO,
which saw significant gains realised for the portfolio.
Other notable contributors within the wider portfolio included
PureTech Health. The company’s share price performed very well over
the period, supported by positive developments from a number of the
firm’s underlying companies. News that PureTech Health is exploring
a listing on the US Nasdaq exchange was also well received by the
market.
A final comment on performance drivers is that a small number of
portfolio holdings experienced notably weak price performance due
to challenges facing other shareholders rather than issues with the
businesses themselves. While this short-term share price disruption
was not isolated to this portfolio, it has been a source of some
frustration. We maintain the view that the long-term outlook and
inherent value of those companies impacted are unchanged.
Portfolio Manager Outlook
The performance of the UK stock market is likely to be
determined by the same macroeconomic and political forces that have
dominated sentiment for the past few years. The political
uncertainty in many regions has been especially difficult to
navigate recently and has been a major headwind to portfolio
performance given the extreme polarisation of company valuations
that has emerged. I have commented previously that this
differential between highly rated global non-cyclical stocks and
depressed domestic economically sensitive shares is substantial.
This differential sits at a multi-year high and offers the most
glaring opportunities within the UK stock market. The portfolio is
positioned to take advantage of this perceived mispricing and
retains large portfolio weightings in insurance, real estate,
retail and support services.
The extent of this mispricing is perhaps most clearly
highlighted by the spread between dividend yields and corporate
bond yields over the past ten years. Over this period, dividend
yields have remained broadly flat, whilst corporate bond yields
have declined markedly. A 650bp (6.5%) shift in the yield
differential over the period is notable and represents another
strong endorsement of the attraction of equities to an asset
neutral investor at the moment. It is also very likely a
significant factor behind the strong re-emergence of merger and
acquisition activity in recent months. The range and breadth of
deals witnessed from industrial and especially financial buyers is
clear evidence that there is value available in UK listed companies
that can be exploited with finance from accessing the debt markets
at very attractive yields. The portfolio has been a beneficiary of
two such deals (BCA Marketplace and KCOM) that have been announced
since the year end.
In recent weeks sentiment within the market has been extremely
volatile as perceptions around a political deal have shifted. This
has resulted in a marked change in the composition of the stock and
sector leadership, which has favoured the current positioning
within the portfolio. Clarity regarding the outcome of the
negotiations with Brussels would
clearly benefit the performance of the UK stock market and
especially this portfolio. The level of pessimism which is
discounted in the valuations of many holdings is anticipated to
result in material revaluation opportunities from current levels as
and when the political fog clears.
Mark Barnett
Portfolio Manager
20 November 2019
.
Related Parties Transactions
Under UK Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law), the Company has identified the
Directors as related parties. No other related parties have been
identified. No transactions with related parties have taken place
which have materially affected the financial position or the
performance of the Company.
.
Principal Risks and Uncertainties
The Board carries out a regular review of the risk environment
in which the Company operates, including consideration of emerging
risks. The principal risks and uncertainties identified in this
review are summarised below:
• Economic Risk –
Economic risk arises from uncertainty about the future prices of
the Company’s investments. Market fluctuations, both upward and
downward, may arise from external factors which are outside the
control of the Board and the Manager.
• Investment Risk –
This is the stock specific risk that the stock selection process
may not achieve the Company’s published objectives. Poor
performance of individual portfolio investments is mitigated by
diversification and ongoing monitoring of investment
guidelines.
• Financial Risk – The
financial risks faced by the Company include market price risk
(including currency risk, interest rate risk and other price risk),
liquidity risk and credit risk, which includes counterparty and
custodial risk.
• Gearing Risk – The
use of borrowings will amplify the effect on shareholders’ funds of
portfolio gains and losses.
• Share Discount Risk
– The Company’s shares may, at times, trade at a wide discount. The
Board has put in place a share repurchase programme to help the
management of this risk.
• Operational Risk – A
failure of the systems of financial and non-financial internal
controls operated by the Company, the Manager and other external
service providers could result in loss of assets and reputational
damage as a result of fraud or material misstatement.
• Regulatory Risk –
Loss of investment trust status for tax purposes could lead to the
Company being subject to tax on the realised capital profits on the
sale of its investments. A serious breach of regulatory rules could
lead to suspension from the Official List, a fine or qualified
audit report and reputational problems.
• Other Risks – The
risk that the portfolio manager, Mark
Barnett, may become incapacitated or otherwise be
unavailable is mitigated by support available from his designated
deputy for this portfolio, Martin
Walker, and the wider Invesco UK Equities team.
A detailed explanation of these principal risks and
uncertainties can be found on pages 14 to 15 of the 2019
annual financial report, which is available on the Company’s
section of the Manager’s website at: www.invesco.co.uk/pigit. In
the view of the Board these principal risks and uncertainties are
equally applicable to the remaining six months of the financial
year as they were to the six months under review.
.
Going Concern
The condensed financial statements have been prepared on a going
concern basis. The Directors consider this is the appropriate basis
as they have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future, being at least 12 months after the approval of this
half-yearly financial report. In considering this, the Directors
took into account the diversified portfolio of readily realisable
securities which can be used to meet funding commitments, and the
ability of the Company to meet all of its liabilities and ongoing
expenses from its assets. The Directors also considered the revenue
forecasts for the year and future dividend payments.
.
INVESTMENT PORTFOLIO STATEMENT AT 30
SEPTEMBER 2019
Ordinary shares listed in the UK
unless otherwise stated
ISSUER |
SECTOR |
MARKET
VALUE
£’000 |
% OF
PORTFOLIO |
British American Tobacco |
Tobacco |
52,246 |
5.6 |
BP |
Oil & Gas Producers |
50,267 |
5.3 |
Next |
General Retailers |
34,269 |
3.6 |
Legal & General |
Life Insurance |
30,935 |
3.3 |
Royal Dutch Shell – A shares |
Oil & Gas Producers |
29,251 |
3.1 |
Tesco |
Food & Drug Retailers |
28,639 |
3.0 |
Derwent London |
Real Estate Investment Trusts |
27,217 |
2.9 |
Roche – Swiss Listed |
Pharmaceuticals &
Biotechnology |
25,891 |
2.8 |
BAE Systems |
Aerospace & Defence |
25,351 |
2.7 |
Novartis – Swiss Listed |
Pharmaceuticals &
Biotechnology |
24,096 |
2.6 |
Top Ten Investments |
|
328,162 |
34.9 |
HomeServe |
Support Services |
23,236 |
2.5 |
Aviva |
Life Insurance |
20,386 |
2.2 |
Randall & QuilterAIM |
Non–life Insurance |
19,514 |
2.1 |
British Land |
Real Estate Investment Trusts |
19,319 |
2.0 |
Capita |
Support Services |
19,168 |
2.0 |
Imperial Brands |
Tobacco |
18,685 |
2.0 |
Altria – US Listed |
Tobacco |
18,621 |
2.0 |
AJ Bell |
Financial Services |
17,808 |
1.9 |
NewRiver REIT |
Real Estate Investment Trusts |
17,766 |
1.9 |
BT |
Fixed Line Telecommunications |
16,656 |
1.8 |
Top Twenty Investments |
|
519,321 |
55.3 |
easyJet |
Travel & Leisure |
16,620 |
1.8 |
Total – French Listed |
Oil & Gas Producers |
15,985 |
1.7 |
PureTech Health |
Pharmaceuticals &
Biotechnology |
15,670 |
1.7 |
Beazley |
Non-life Insurance |
15,654 |
1.6 |
Hiscox |
Non-life Insurance |
15,055 |
1.6 |
G4S |
Support Services |
14,820 |
1.6 |
Babcock International |
Aerospace & Defence |
14,492 |
1.5 |
Lancashire |
Non-life Insurance |
14,110 |
1.5 |
IAG |
Travel & Leisure |
14,094 |
1.5 |
Harworth |
Real Estate Investment &
Services |
14,071 |
1.5 |
Top Thirty Investments |
|
669,892 |
71.3 |
Provident Financial |
Financial Services |
13,996 |
1.5 |
Oxford Sciences InnovationUQ |
Financial Services |
13,875 |
1.5 |
Cranswick |
Food Producers |
13,587 |
1.5 |
Royal Bank of Scotland |
Banks |
13,346 |
1.4 |
Drax |
Electricity |
12,031 |
1.3 |
Burford CapitalAIM |
Financial Services |
11,841 |
1.3 |
CLS |
Real Estate Investment &
Services |
11,569 |
1.2 |
Urban ExposureAIM |
Financial Services |
10,679 |
1.1 |
Pollen Street Secured Lending
(formerly P2P Global Investments) |
Equity Investment Instruments |
10,669 |
1.1 |
Novo-Nordisk – B Shares |
Pharmaceuticals &
Biotechnology |
10,399 |
1.1 |
Top Forty Investments |
|
791,884 |
84.3 |
Whitbread |
Travel & Leisure |
10,347 |
1.1 |
Secure Income REITAIM |
Real Estate Investment Trusts |
9,938 |
1.1 |
Secure Trust Bank |
Banks |
9,891 |
1.1 |
Real Estate Investors |
Real Estate Investment Trusts |
9,693 |
1.0 |
IP Group |
Financial Services |
9,514 |
1.0 |
Draper EspritAIM |
Financial Services |
9,461 |
1.0 |
Chesnara |
Life Insurance |
9,269 |
1.0 |
Aquis ExchangeAIM |
Financial Services |
8,720 |
0.9 |
Plus500 |
Financial Services |
8,538 |
0.9 |
Hadrian's Wall Secured
Investments |
Equity Investment Instruments |
8,343 |
0.9 |
Top Fifty Investments |
|
885,598 |
94.3 |
Vectura |
Pharmaceuticals &
Biotechnology |
7,584 |
0.8 |
Eddie Stobart LogisticsAIM –
suspended (see note 7) |
Industrial Transportation |
6,355 |
0.7 |
TalkTalk Telecom |
Fixed Line Telecommunications |
6,087 |
0.6 |
Marwyn Value Investors |
Equity Investment Instruments |
5,768 |
0.6 |
Horizon DiscoveryAIM |
Pharmaceuticals &
Biotechnology |
4,240 |
0.4 |
Doric Nimrod Air Three – preference
shares |
Equity Investment Instruments |
4,036 |
0.4 |
VPC Specialty Lending
Investments |
Financial Services |
3,925 |
0.4 |
Doric Nimrod Air Two –
preference shares |
Equity Investment Instruments |
3,848 |
0.4 |
SME Credit Realisation (formerly
Funding Circle SME) |
Equity Investment Instruments |
3,364 |
0.4 |
McBride |
Household Goods & Home
Construction |
3,318 |
0.4 |
Top Sixty Investments |
|
934,123 |
99.4 |
Amigo |
Financial Services |
3,284 |
0.4 |
Circassia PharmaceuticalsAIM |
Pharmaceuticals &
Biotechnology |
723 |
0.1 |
infirst HealthcareUQ |
Pharmaceuticals &
Biotechnology |
|
|
– Mar – preferred |
|
273 |
|
– D shares |
|
257 |
0.1 |
– Jan – preferred |
|
63 |
|
Motif Bio |
|
|
|
– ADR |
Pharmaceuticals &
Biotechnology |
149 |
|
– AIM listed shares |
|
105 |
— |
– ADR – Warrants 9 Nov
2021 |
|
20 |
|
SciFluor Life SciencesUQ – US Series
A convertible preferred |
Pharmaceuticals &
Biotechnology |
239 |
— |
Countryside |
Household Goods & Home
Construction |
144 |
— |
EurovestechUQ |
Financial Services |
121 |
— |
XTL Biopharmaceuticals – ADR |
Pharmaceuticals &
Biotechnology |
23 |
— |
Lombard Medical – US Listed |
Health Care Equipment &
Services |
6 |
— |
MiradaAIM |
Media |
1 |
— |
Top Seventy Investments |
|
939,531 |
100.0 |
Jaguar HealthUQ – US indemnity
shares |
Pharmaceuticals &
Biotechnology |
1 |
— |
Total Investments 71 (2018: 75) |
939,532 |
100.0 |
|
AIM: Investments quoted on AIM (8.7%)
UQ: Unquoted (1.6%)
ADR: American Depositary Receipts (0.0%)
.
CONDENSED INCOME STATEMENT
|
SIX
MONTHS TO
30 SEPTEMBER 2019 |
SIX
MONTHS TO
30 SEPTEMBER 2018 |
|
REVENUE
£’000 |
CAPITAL
£’000 |
TOTAL
£’000 |
REVENUE
£’000 |
CAPITAL
£’000 |
TOTAL
£’000 |
(Losses)/gains on investments held
at fair value |
— |
(31,464) |
(31,464) |
— |
52,497 |
52,497 |
Gains/(losses) on foreign
exchange |
— |
1 |
1 |
— |
(7) |
(7) |
Income – note 2 |
24,699 |
354 |
25,053 |
21,881 |
577 |
22,458 |
|
24,699 |
(31,109) |
(6,410) |
21,881 |
53,067 |
74,948 |
Investment management fee – note
3 |
(849) |
(1,982) |
(2,831) |
(938) |
(2,190) |
(3,128) |
Other expenses |
(296) |
– |
(296) |
(333) |
— |
(333) |
Net return before finance costs
and taxation |
23,554 |
(33,091) |
(9,537) |
20,610 |
50,877 |
71,487 |
Finance costs – note 3 |
(572) |
(1,334) |
(1,906) |
(538) |
(1,255) |
(1,793) |
Return on ordinary activities
before taxation |
22,982 |
(34,425) |
(11,443) |
20,072 |
49,622 |
69,694 |
Tax on ordinary activities – note
4 |
(352) |
— |
(352) |
(178) |
— |
(178) |
Return on ordinary activities
after taxation for the financial period |
22,630 |
(34,425) |
(11,795) |
19,894 |
49,622 |
69,516 |
Return per ordinary share –
Basic |
9.65p |
(14.68)p |
(5.03)p |
8.28p |
20.65p |
28.93p |
Weighted average number of
ordinary shares in issue |
|
|
234,593,254 |
|
|
240,326,771 |
The total column of this statement represents the Company’s
profit and loss account, prepared in accordance with UK Accounting
Standards. The return on ordinary activities after taxation is the
total comprehensive income and therefore no additional statement of
other comprehensive income is presented. The supplementary revenue
and capital columns are presented for information purposes in
accordance with the Statement of Recommended Practice issued by the
Association of Investment Companies. All items in the above
statement derive from continuing operations of the Company. No
operations were acquired or discontinued in the period.
.
CONDENSED BALANCE SHEET
Registered number 3156676
|
NOTES |
AT
30 SEPTEMBER
2019
£’000 |
AT
31 MARCH
2019
£’000 |
Fixed assets |
|
|
|
Investments held at fair
value through profit or loss |
7 |
939,532 |
1,017,184 |
Current assets |
|
|
|
Amounts due from
brokers |
|
— |
1,174 |
Tax recoverable |
|
1,700 |
1,550 |
Prepayments and accrued
income |
|
2,261 |
2,572 |
|
|
3,961 |
5,296 |
Creditors: amounts falling due
within one year |
|
|
|
Bank loan |
|
(40,000) |
(45,000) |
Amounts due to
brokers |
|
(2,050) |
— |
Bank overdraft |
|
(33,094) |
(33,704) |
Share buybacks awaiting
settlement |
|
(727) |
— |
Accruals |
|
(2,602) |
(2,661) |
|
|
(78,473) |
(81,365) |
Net current liabilities |
|
(74,512) |
(76,069) |
Total assets less current
liabilities |
|
865,020 |
941,115 |
Creditors: amounts falling due after
more than one year |
|
|
|
4.37% Senior Secured
Notes due 8 May 2029 |
|
(59,590) |
(59,569) |
Net assets |
|
805,430 |
881,546 |
Capital and reserves |
|
|
|
Share capital |
6 |
24,043 |
24,043 |
Share premium |
|
265,233 |
265,233 |
Capital reserve |
|
481,706 |
561,395 |
Revenue reserve |
|
34,448 |
30,875 |
Shareholders’ funds |
|
805,430 |
881,546 |
Net asset value per ordinary
share |
8 |
|
|
Basic |
|
|
|
– debt at par value |
|
358.5p |
368.2p |
– debt at market
value |
|
351.9p |
363.2p |
Number of 10p ordinary shares in
issue at the period end |
6 |
224,671,008 |
239,412,350 |
.
CONDENSED STATEMENT OF CHANGES IN EQUITY
|
SHARE
CAPITAL
£’000 |
SHARE
PREMIUM
£’000 |
CAPITAL
RESERVE
£’000 |
REVENUE
RESERVE
£’000 |
TOTAL
£’000 |
FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2019 |
|
|
|
|
|
At 31 March 2019 |
24,043 |
265,233 |
561,395 |
30,875 |
881,546 |
Return on ordinary activities |
— |
— |
(34,425) |
22,630 |
(11,795) |
Dividends paid - note 5 |
— |
— |
— |
(19,057) |
(19,057) |
Shares bought back and held in
treasury |
— |
— |
(45,264) |
— |
(45,264) |
At 30 September 2019 |
24,043 |
265,233 |
481,706 |
34,448 |
805,430 |
FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2018 |
|
|
|
|
|
At 31 March 2018 |
24,043 |
265,233 |
602,836 |
31,817 |
923,929 |
Return on ordinary activities |
— |
— |
49,622 |
19,894 |
69,516 |
Dividends paid - note 5 |
— |
— |
— |
(20,403) |
(20,403) |
Shares bought back and held in
treasury |
— |
— |
(2,230) |
— |
(2,230) |
At 30 September 2018 |
24,043 |
265,233 |
650,228 |
31,308 |
970,812 |
.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Accounting Policies
The condensed financial statements have been prepared in
accordance with applicable United Kingdom Accounting Standards and
applicable law (UK Generally Accepted Accounting Practice),
including FRS 102 The Financial Reporting Standard applicable in
the UK and Republic of
Ireland, FRS 104 Interim Financial Reporting and the
Statement of Recommended Practice Financial Statements of
Investment Trust Companies and Venture Capital Trusts, issued
by the Association of Investment Companies in November 2014, as updated in February 2018. The financial statements are
issued on a going concern basis.
The accounting policies applied to these condensed financial
statements are consistent with those applied in the financial
statements for the year ended 31 March
2019.
2. Income
|
SIX MONTHS
TO
30 SEPT 2019
£’000 |
SIX MONTHS TO
30 SEPT 2018
£’000 |
Income from investments |
|
|
UK dividends – ordinary |
18,879 |
18,146 |
– special |
320 |
— |
Overseas dividends – ordinary |
4,519 |
3,094 |
– special |
284 |
— |
Unfranked investment income |
528 |
516 |
Scrip dividends |
96 |
95 |
|
24,626 |
21,851 |
Other income |
|
|
Other |
73 |
30 |
Total income |
24,699 |
21,881 |
|
|
|
|
Special dividends of £354,000 have been recognised in capital
(30 September 2018: £577,000).
3. Investment Management Fees
and Finance Costs
The base management fee and finance costs are allocated 70% to
capital and 30% to revenue. The base management fee is 0.6% on the
first £900 million of assets under management and 0.4%
thereafter.
4. Investment Trust Status and
Tax
It is the intention of the Directors to conduct the affairs of
the Company so that it satisfies the conditions for approval as an
investment trust company. As such, no tax liability arises on
capital gains. The tax charge represents withholding tax suffered
on overseas income.
5. Dividends paid on Ordinary
Shares
|
30 SEPT
2019 |
30 SEPT
2018 |
SIX MONTHS ENDED |
PENCE |
£’000 |
PENCE |
£’000 |
Fourth (prior year) |
4.75 |
11,305 |
4.45 |
10,699 |
First (current year) |
3.40 |
7,752 |
3.25 |
7,804 |
Total (excluding special
dividends) |
8.15 |
19,057 |
7.70 |
18,503 |
Special dividend (prior year) |
— |
— |
0.8 |
1,923 |
Total (including special
dividends) |
8.15 |
19,057 |
8.50 |
20,426 |
Return of unclaimed dividends from
previous years |
— |
— |
— |
(23) |
Total paid |
8.15 |
19,057 |
8.50 |
20,403 |
The first
interim dividend of 3.40p was paid on 30
September 2019 to shareholders registered on 6 September 2019. The Directors have declared a
second interim dividend of 3.40p payable on 30 December 2019 to shareholders registered on
29 November 2019.
6. Share Capital, including
Movements
Share
capital represents the total number of shares in issue, including
treasury shares.
|
AT 30 SEPT 2019 |
AT 31 MAR 2019 |
Share capital: |
|
|
Ordinary shares of 10p each
(£’000) |
22,467 |
23,941 |
Treasury shares of 10p each
(£’000) |
1,576 |
102 |
|
24,043 |
24,043 |
Brought forward |
239,412,350 |
240,432,350 |
Shares bought back into
treasury |
(14,741,342) |
(1,020,000) |
Carried forward |
224,671,008 |
239,412,350 |
Subsequent to the period end 4,776,670 ordinary shares were
bought back into treasury at an average price of 312.66p.
7. Fair Value Hierarchy
Disclosures
FRS 102 sets out three fair value levels. These are:
Level 1 – The unadjusted quoted price in an active market
for identical assets that the entity can access at the measurement
date.
Level 2 – Inputs other than quoted prices included within
Level 1 that are observable (i.e. developed using market data) for
the asset or liability, either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market
data is unavailable) for the asset or liability.
The fair value hierarchy analysis for investments and related
forward currency contracts held at fair value at the period end is
as follows:
|
AT 30 SEPT 2019
£’000 |
AT 31 MAR 2019
£’000 |
Financial assets designated at fair
value through profit or loss: |
|
|
Level 1 |
918,348 |
1,000,337 |
Level 3 |
21,184 |
16,847 |
Total for financial assets |
939,532 |
1,017,184 |
The unquoted investment holdings of the portfolio make up the
whole of Level 3 with the exception of Eddie Stobart Logistics
which was suspended from AIM and therefore categorised as Level 3.
The holding was valued at the period end at £6,355,000
(31 March 2019: £7,409,000 and shown
in Level 1) and its value has fallen further since the period
end.
8. Net Asset Value
The following shows a reconciliation of NAV with debt at par to
NAV with debt at market value. The difference in the NAVs arises
solely from the valuation of the 4.37% senior secured notes 2029.
The number of shares at the period end was 224,671,008
(31 March 2019: 239,412,350).
|
AT 30 SEPT 2019
NAV
PER SHARE
PENCE |
AT 31 MAR 2019
NAV
PER SHARE
PENCE |
NAV – debt at par |
358.5 |
368.2 |
Notes |
|
|
– debt at par, after
amortised costs |
26.5 |
24.9 |
– debt at market
value |
(33.1) |
(29.9) |
NAV – debt at market value |
351.9 |
363.2 |
The
market value of the Notes used in the above reconciliation, which
is based on a comparable quoted debt security, is:
|
AT 30 SEPT 2019
£’000 |
AT 31 MAR 2019
£’000 |
Notes – debt at market value |
74,454 |
71,472 |
9. Status of Half-Yearly
Financial Report
The financial information contained within the financial
statements in this half-yearly financial report, does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006. The financial information for the half
years ended 30 September 2019 and
30 September 2018 has not been
audited. The figures and financial information for the year ended
31 March 2019 are extracted and
abridged from the latest audited accounts and do not constitute the
statutory accounts for that year. Those accounts have been
delivered to the Registrar of Companies and included the
Independent Auditor’s report, which was unqualified and did not
include a statement under section 498 of the Companies Act
2006.
By order of the Board
Invesco Asset Management Limited
Company Secretary
20 November 2019
.
DIRECTORS’ RESPONSIBILITY STATEMENT
in respect of the preparation of the half-yearly financial
report
The Directors are responsible for preparing the half-yearly
financial report using accounting policies consistent with
applicable law and UK Accounting Standards.
The Directors confirm that to the best of their knowledge:
– the condensed set of
financial statements contained within the half-yearly financial
report has been prepared in accordance with the FRC’s FRS 104
Interim Financial Reporting;
– the interim
management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R of the FCA’s Disclosure
Guidance and Transparency Rules; and
– the interim
management report includes a fair review of the information
required on related party transactions.
The half-yearly financial report has not been audited or
reviewed by the Company’s auditor.
Signed on behalf of the Board of Directors.
Richard
Laing
Chairman
20 November 2019