Perpetual Income and Growth Investment Trust plc
Half-Yearly Financial Report for the Six Months to 30 September 2017
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
The Benchmark index of the Company is the FTSE All-Share
Index.
|
SIX MONTHS
ENDED
30 SEPTEMBER
2017 |
Total return(1)(2) (all income
reinvested): |
|
Net asset value (NAV) |
|
– debt at market
value |
2.0% |
Share price |
3.5% |
FTSE All-Share Index |
3.6% |
|
AT
30 SEPTEMBER
2017 |
AT
31 MARCH
2017 |
%
CHANGE |
Shareholders’ funds |
|
|
|
Net assets (£’000) |
1,011,214 |
1,012,965 |
–0.2 |
NAV per share |
|
|
|
– debt at market
value |
416.3p |
416.2p |
+0.0 |
Share price and discount |
|
|
|
Share price |
381.0p |
375.8p |
+1.4 |
Discount to NAV |
|
|
|
– debt at market
value |
8.5% |
9.7% |
|
Capital return – Benchmark(1) |
|
|
+1.5 |
Gearing: |
|
|
|
– gross gearing(3) |
12.6% |
15.5% |
|
– net gearing(4) |
12.6% |
15.5% |
|
(1) Source: Thomson Reuters Datastream.
(2) 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).
(3) Gross gearing: borrowings ÷ shareholders’ funds.
(4) Net gearing: borrowing less cash and UK government bond
holdings ÷ shareholders’ funds.
|
SIX
MONTHS ENDED |
|
|
30 SEPTEMBER
2017 |
30 SEPTEMBER
2016 |
%
CHANGE |
Revenue |
|
|
|
Basic revenue return per share |
|
|
|
– including special
dividends |
8.70p |
7.61p |
+14.3 |
– excluding special
dividends |
8.08p |
7.61p |
+6.2 |
|
|
|
|
Dividends – first interim |
3.15p |
3.00p |
|
Dividends – second interim |
3.15p |
3.00p |
|
Dividends – total |
6.30p |
6.00p |
+5.0 |
|
|
|
|
|
.
INTERIM MANAGEMENT REPORT INCORPORATING THE CHAIRMAN’S
STATEMENT
Chairman’s Statement
Performance
I am pleased to report in my first statement since becoming
Chairman of the Company in July that the share price total return
for the six months ended 30 September
2017 of 3.5%, with dividends reinvested, was broadly in line
with our benchmark FTSE All-Share Index’s return of 3.6%. However,
the underlying net asset value (NAV) lagged, with total return
performance of 2.0% for the period. The more favourable share price
return reflects a narrowing of the discount at which the shares
trade relative to the NAV, from 9.7% to 8.5% over the six months.
Your portfolio manager, Mark
Barnett, provides further detail on the performance of the
portfolio in the period and his outlook in his Portfolio Manager’s
Report.
The longer term performance continues to exceed our benchmark,
with five and ten year total returns on net assets of 80.3% and
121.8%, respectively, compared with 61.2% and 75.2% for the FTSE
All-Share Index (source: Invesco, Thomson Reuters Datastream).
Dividend
The Directors are pleased to declare a second interim dividend
of 3.15p per ordinary share in respect of the three months to
30 September 2017. This dividend will
be paid on 29 December 2017 to
shareholders on the register on 8 December
2017. The shares will be marked ex-dividend on 7 December 2017.
Your Board continues to recognise the importance of dividends to
shareholders, particularly in the present low interest environment,
and is determined to maintain its policy of real dividend growth
over the medium to longer term.
Richard Laing
Chairman
24 November 2017
.
Portfolio Manager’s Report
Market Review
The period was notable for the combination of two distinct
forces – the turbulent political environment and the improving
global economy. Buoyed by the latter, the FTSE 100 Index reached a
record high in early June, led by a rally in the oil and mining
sectors, and sterling fell in response to the surprise outcome of
the UK general election. However, into the second half of the
period, growing tensions between the
United States of America and North
Korea led to nervousness in global equity markets. Renewed
strength in sterling, as Brexit negotiations saw a two-year
transitional deal suggested by the Prime Minister and the Bank of
England hinted that it would raise
interest rates in November (subsequently realised), further
dampened the progress of the UK equity market. The impact of the
opposing forces also saw increased polarisation of sector
performance in the UK stock market.
Portfolio Review
The Company’s net asset value, including reinvested dividends,
delivered a return of 2.0% during the period under review, compared
with one of 3.6% (total return) by the FTSE All-Share Index.
The portfolio’s holding in Provident Financial had a major
negative impact on performance, with its share price falling by
72.4% between the Company’s last financial year end and
30 September 2017. It issued a profit
warning in August, downgrading earnings forecasts for its Consumer
Credit Division from a profit of £115 million to a loss of between
£80 million and £120 million for the year to 31 December 2017. Additionally, it announced that
its Vanquis Bank subsidiary was co-operating with an FCA
investigation into its Repayment Option Plan ancillary product and
that its formerly well-regarded chief executive had resigned.
We have been in regular contact with the company, including a
visit to its head office in Bradford. This has provided reassurance that,
while the home-collected credit business has been damaged, this is
not irretrievable and there is a long term future for that
business. There is no certainty on the timing or outcome of the FCA
review of Vanquis, but it is noteworthy here that, in providing the
Vanquis credit card, Provident Financial provides a valuable
service to the under-served sub-prime segment of the
population.
The pharmaceutical sector was on the wrong side of the sector
polarisation noted above and also saw sentiment impacted by some
high profile drug test failures. This is a broad sector,
encompassing a whole range of businesses from the very largest
global, multinational pharmaceutical companies to much more niche
specialty pharma or biotechnology businesses, and the portfolio is
invested in a diverse range of these. Holdings in pharma majors
AstraZeneca, Novartis and Roche weighed on performance, while
Vectura annnounced that there was ‘low likelihood’ that it would
gain regulatory approval for a generic asthma treatment. However,
there were some notably strong performances from other small and
mid cap portfolio holdings, including Silence Therapeutics, BTG,
PureTech Health, Horizon Discovery and Motif Bio. We continue to
believe that the backdrop for the sector is positive, given the
ageing population and the demand for western-style medicines in the
emerging world. There are good grounds to believe that the new
areas of drug discovery are likely to deliver better outcomes and
that is not currently reflected in share prices.
The portfolio’s long standing holdings in the tobacco sector –
British American Tobacco (BAT), Imperial Brands and Reynolds
American – have delivered strongly positive performance over a very
long period. However, they detracted over the past six months,
despite the successful conclusion by BAT of the acquisition of
Reynolds American in a part shares, part cash deal. The combined
entity is well positioned to exploit next generation products,
particulary in the key US market. The stock market focused on plans
announced by the US FDA to launch a consultation on lowering
nicotine levels in cigarettes, but regulation may take some time to
come to fruition. This is an industry accustomed to dealing with
such headwinds. In the meantime, the companies’ combined focus on
pricing power, cash conversion and product innovation should
continue to provide a reliable source of income.
Companies particularly exposed to the fall in sterling and
perceived challenges to the UK economy had performed poorly in the
previous year in the aftermath of the Brexit referendum and US
election. Amongst these, holdings in Next, easyJet, Legal &
General, Thomas Cook and BCA
Marketplace all delivered strongly positive performances over the
most recent period, on the back of a minor improvement in the
prevailing stock market sentiment. Next commented on a ‘somewhat
less challenging’ outlook for the business, with growth of its
on-line Directory business picking up pace. EasyJet surprised the
stock market with a better-than-expected trading statement, while
Thomas Cook indicated growth across
multiple regions, with a notable rise in customer demand for
Turkey following the 2016
terrorist attacks. BCA Marketplace confirmed that its core
auction-related vehicle remarketing division had traded well, with
its vehicle buying division, led by the WeBuyAnyCar.com brand,
delivering ‘sustained double digit volume growth’.
Other holdings to perform well during the recent period included
those which have been more consistent long term performers.
HomeServe confirmed it was successfully expanding its home
emergency and repair services business from its core UK market into
the high growth potential of the US. London Stock Exchange shrugged
off a brief share price fall on the feared impact of Brexit and the
failure of its proposed merger with Deutsche Borse and delivered
strong organic growth, benefiting from inflows into passive
products and rising demand for benchmarking, data and analytics.
Compass’ dominant global position in contract catering saw it
growing fast in the still relatively untapped US market. Rentokil
Initial’s shares continued to rise as the company focuses on the
structural growth opportunites in its highly profitable pest
control division.
In terms of portfolio activity during the period, as previously
mentioned, the holding in Reynolds American was taken over by
British American Tobacco, for a mix of shares and cash. New
investments were made in Altria, Eddie Stobart Logistics and
Royal Dutch Shell ‘A’. The holdings
in Game Digital, N Brown and SSE were sold.
Outlook
The performance of the UK stock market continues to be dominated
by the countervailing forces of better than expected global
economic growth and ongoing UK domestic political concerns. A sense
of complacency may now exist over the global growth outlook, which
has led to narrow but rising market levels, low volumes of shares
traded and little volatility in share prices. This positive
backdrop has also led to a renewed belief in a so called
‘goldilocks’ environment, where the key economic variables of
growth, inflation and interest rates are set up to sustain a
perfect environment for rising stock markets. This may prove to be
the case over the near-term, and is certainly illustrated by the
further fall in market volatility, but this kind of stock market
status quo does not tend to last too long. It is also worth
remembering that a combination of high valuations in certain
sectors, shifting monetary policy and a volatile geopolitical
environment may still provide a catalyst which alters this bullish
global outlook.
By contrast, the market seems unwilling to look beyond the
uncertainty of the Brexit negotiations when it comes to valuing
sterling assets which, by historic standards, are now heavily
discounted. Again, this seems unlikely to persist for long.
The best performing sectors this year have been those most
exposed to this bullish global scenario, which has created
opportunties to invest within the more domestically exposed sectors
that have performed poorly and which look undervalued. The focus of
the portfolio has been steered towards these sectors over recent
months. As previously mentioned, there is an apparent strong
consensus pessimism about the outlook for the UK economy, despite
recent data points indicating a continuation of current growth
trends. Although a materially improved domestic outlook may be
unlikely, there should be some respite from the pressure on real
incomes as elevated inflation levels decline next year and wages
continue to grow. This gives us confidence that an excessively
bearish view is already reflected in domestic share prices.
If we proceed cautiously through employing a well-tested
investment process based on fundamental company analysis and a
prudent approach to valuation, there are opportunities for
profitable investment in this market which provide a rising flow of
dividend income and should protect capital in the event of more
volatile market conditions.
Mark
Barnett
Portfolio
Manager
24
November 2017
.
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. 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 both
share repurchase and issuance facilities 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
Perpetual UK Equities team.
A detailed explanation of these principal risks and
uncertainties can be found on pages 12 and 13 of the 2017 annual
financial report, which is available on the Company’s section of
the Manager’s website at: www.invescoperpetual.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 2017
Ordinary shares listed in the UK unless otherwise stated
ISSUER |
SECTOR |
MARKET
VALUE
£’000 |
% OF
PORTFOLIO |
Equity investments |
|
|
|
British American Tobacco |
Tobacco |
80,990 |
7.1 |
BP |
Oil & Gas Producers |
48,490 |
4.3 |
BAE Systems |
Aerospace & Defence |
41,692 |
3.7 |
AstraZeneca |
Pharmaceuticals &
Biotechnology |
38,269 |
3.4 |
Imperial Brands |
Tobacco |
35,952 |
3.2 |
Legal & General |
Life Insurance |
35,772 |
3.1 |
Roche – Swiss common stock |
Pharmaceuticals &
Biotechnology |
29,700 |
2.6 |
RELX |
Media |
28,554 |
2.5 |
BT |
Fixed Line Telecommunications |
28,192 |
2.5 |
Next |
General Retailers |
27,390 |
2.4 |
|
|
|
|
Top Ten Holdings |
|
395,001 |
34.8 |
Hiscox |
Non-life Insurance |
26,280 |
2.3 |
Aviva |
Life Insurance |
25,858 |
2.3 |
Rentokil Initial |
Support Services |
25,296 |
2.2 |
Novartis – Swiss common stock |
Pharmaceuticals &
Biotechnology |
24,592 |
2.2 |
NewRiver REIT |
Real Estate Investment Trusts |
24,455 |
2.1 |
BTG |
Pharmaceuticals &
Biotechnology |
23,681 |
2.1 |
Royal Dutch Shell – A shares |
Oil & Gas Producers |
23,504 |
2.1 |
Compass |
Travel & Leisure |
23,087 |
2.0 |
Beazley |
Non-life Insurance |
22,799 |
2.0 |
HomeServe |
Support Services |
22,202 |
1.9 |
|
|
|
|
Top Twenty Holdings |
|
636,755 |
56.0 |
G4S |
Support Services |
21,523 |
1.9 |
Babcock International |
Support Services |
20,854 |
1.8 |
Derwent London |
Real Estate Investment Trusts |
20,452 |
1.8 |
BCA Marketplace |
Financial Services |
20,128 |
1.8 |
Shaftesbury |
Real Estate Investment Trusts |
19,817 |
1.7 |
easyJet |
Travel & Leisure |
19,433 |
1.7 |
Thomas Cook |
Travel & Leisure |
18,146 |
1.6 |
Bunzl |
Support Services |
18,091 |
1.6 |
Capita |
Support Services |
15,389 |
1.3 |
Drax |
Electricity |
14,718 |
1.3 |
|
|
|
|
Top Thirty Holdings |
|
825,306 |
72.5 |
KCOM |
Fixed Line Telecommunications |
14,467 |
1.3 |
Horizon Discovery |
Pharmaceuticals &
Biotechnology |
14,387 |
1.3 |
Motif Bio |
Pharmaceuticals &
Biotechnology |
9,056 |
|
– ADR |
|
4,508 |
1.3 |
– ADR warrants 9 Nov
2021 |
|
757 |
|
London Stock Exchange |
Financial Services |
14,289 |
1.2 |
Oxford Sciences InnovationUQ |
Financial Services |
13,875 |
1.2 |
Provident Financial |
Financial Services |
12,958 |
1.1 |
Harworth |
Real Estate Investment &
Services |
12,407 |
1.1 |
Altria – US common stock |
Tobacco |
12,341 |
1.1 |
Lancashire |
Non-life Insurance |
11,786 |
1.0 |
TalkTalk Telecom |
Fixed Line Telecommunications |
11,467 |
1.0 |
|
|
|
|
Top Forty Holdings |
|
957,604 |
84.1 |
P2P Global Investments |
Equity Investment Instruments |
10,863 |
0.9 |
Real Estate Investors |
Real Estate Investment Trusts |
10,243 |
0.9 |
Touchstone Innovations |
Financial Services |
10,203 |
0.9 |
IP Group |
Financial Services |
10,018 |
0.9 |
Centrica |
Gas, Water & Multiutilities |
9,979 |
0.9 |
|
|
|
|
Secure Trust Bank |
Banks |
9,871 |
0.8 |
CLS |
Real Estate Investment &
Services |
9,364 |
0.8 |
Hadrian’s Wall Secured
Investments |
Equity Investment Instruments |
7,350 |
|
– C shares |
|
1,531 |
0.8 |
SciFluor Life SciencesUQ |
Pharmaceuticals &
Biotechnology |
|
|
– US Series A
convertible preferred |
|
8,732 |
0.8 |
Chesnara |
Life Insurance |
8,018 |
0.7 |
|
|
|
|
Top Fifty Holdings |
|
1,053,776 |
92.5 |
Eddie Stobart Logistics |
Industrial Transportation |
7,508 |
0.7 |
Macau Property Opportunities
Fund |
Real Estate Investment &
Services |
6,834 |
0.6 |
Diurnal |
Pharmaceuticals &
Biotechnology |
6,812 |
0.6 |
Marwyn Value Investors |
Equity Investment Instruments |
6,762 |
0.6 |
Silence Therapeutics |
Pharmaceuticals &
Biotechnology |
6,467 |
0.6 |
PureTech Health |
Pharmaceuticals &
Biotechnology |
6,438 |
0.6 |
Vectura |
Pharmaceuticals &
Biotechnology |
6,278 |
0.5 |
infirst HealthcareUQ |
Pharmaceuticals &
Biotechnology |
|
|
– D shares |
|
3,563 |
|
– Mar– preferred |
|
1,091 |
0.4 |
– Jan– preferred |
|
253 |
|
Doric Nimrod Air Three |
Equity Investment Instruments |
|
|
– preference shares |
|
4,885 |
0.4 |
Doric Nimrod Air Two |
Equity Investment Instruments |
|
|
– preference shares |
|
4,800 |
0.4 |
|
|
|
|
Top Sixty Holdings |
|
1,115,467 |
97.9 |
Sherborne Investors |
Financial Services |
|
|
Guernsey B – A
shares |
|
4,521 |
0.4 |
Funding Circle SME |
Equity Investment Instruments |
2,178 |
|
– C shares |
|
1,810 |
0.4 |
Circassia Pharmaceuticals |
Pharmaceuticals &
Biotechnology |
3,848 |
0.3 |
VPC Specialty Lending
Investments |
Financial Services |
3,736 |
0.3 |
MayAir |
Industrial Engineering |
3,193 |
0.3 |
Realm Therapeutics |
Health Care Equipment &
Services |
2,533 |
0.2 |
McBride |
Household Goods & Home
Construction |
1,346 |
0.1 |
Lombard Medical |
Health Care Equipment &
Services |
|
|
– US common stock |
|
620 |
0.1 |
Damille Investments II |
Equity Investment Instruments |
537 |
– |
Napo PharmaceuticalsUQ |
Pharmaceuticals &
Biotechnology |
|
|
– US common stock |
|
471 |
– |
|
|
|
|
Top Seventy Holdings |
|
1,140,260 |
100.0 |
HaloSource |
Chemicals |
71 |
– |
Nimrod Sea AssetsUQ |
Equity Investment Instruments |
48 |
– |
XTL Biopharmaceuticals - ADR |
Pharmaceuticals &
Biotechnology |
34 |
– |
Mirada |
Media |
1 |
– |
|
|
|
|
Total Equity Investments (74) |
1,140,414 |
100.0 |
|
ISSUER AND ISSUE |
Sector (moody/s&p rating) |
|
|
Barclays Bank – |
Electricity (Non-rated) |
3 |
– |
Nuclear Power Notes 28
Feb 2019 |
|
|
|
|
|
|
|
Total Investments (75) |
|
1,140,417 |
100.0 |
UQ: Unquoted
ADR: American Depositary Receipt
.
CONDENSED INCOME STATEMENT
|
SIX
MONTHS TO
30 SEPTEMBER 2017 |
SIX
MONTHS TO
30 SEPTEMBER 2016 |
|
REVENUE
£’000 |
CAPITAL
£’000 |
TOTAL
£’000 |
REVENUE
£’000 |
CAPITAL
£’000 |
TOTAL
£’000 |
|
(Losses)/gains on investments at
fair value |
— |
(10,859) |
(10,859) |
— |
31,746 |
31,746
£’000 |
|
Foreign exchange losses |
— |
(233) |
(233) |
— |
(32) |
(32) |
|
Income – note 2 |
22,886 |
11,577 |
34,463 |
20,217 |
338 |
20,555 |
|
|
22,886 |
485 |
23,371 |
20,217 |
32,052 |
52,269 |
|
Investment management fee – note
3 |
(964) |
(2,250) |
(3,214) |
(836) |
(1,950) |
(2,786) |
|
Other expenses |
(350) |
(1) |
(351) |
(341) |
— |
(341) |
|
Net return before finance costs and
taxation |
21,572 |
(1,766) |
19,806 |
19,040 |
30,102 |
49,142 |
|
Finance costs – note 3 |
(511) |
(1,192) |
(1,703) |
(576) |
(1,344) |
(1,920) |
|
Return on ordinary activities before
taxation |
21,061 |
(2,958) |
18,103 |
18,464 |
28,758 |
47,222 |
|
Tax on ordinary activities – note
4 |
(139) |
— |
(139) |
(167) |
— |
(167) |
|
Return on ordinary activities after
taxation for the financial period |
20,922 |
(2,958) |
17,964 |
18,297 |
28,758 |
47,055 |
|
|
|
|
|
|
|
|
|
Return per ordinary share –
Basic |
8.70p |
(1.23p) |
7.47p |
7.61p |
11.96p |
19.57p |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary
shares in issue |
|
|
240,432,350 |
|
|
240,432,350 |
|
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 statement of
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 03156676
|
NOTES |
AT
30 SEPTEMBER
2017
£’000 |
AT
31 MARCH
2017
£’000 |
Fixed assets |
|
|
|
Investments held at fair
value through profit or loss |
7 |
1,140,417 |
1,164,903 |
|
|
|
|
Current assets |
|
|
|
Amount due from
brokers |
|
— |
4,460 |
Tax recoverable |
|
921 |
931 |
Prepayments and accrued
income |
|
1,194 |
2,539 |
|
|
|
|
|
|
2,115 |
7,930 |
|
|
|
|
Creditors: amounts falling due
within one year |
|
|
|
Bank overdraft |
|
(67,779) |
(97,609) |
Amounts due to
brokers |
|
(1,269) |
(189) |
Accruals and deferred
income |
|
(2,765) |
(2,587) |
|
|
|
|
|
|
(71,813) |
(100,385) |
|
|
|
|
Net current liabilities |
|
(69,698) |
(92,455) |
|
|
|
|
Total assets less current
liabilities |
|
1,070,719 |
1,072,448 |
Creditors: amounts falling due after
more than one year |
|
|
|
4.37% Loan notes 8 May
2029 |
|
(59,505) |
(59,483) |
|
|
|
|
Net assets |
|
1,011,214 |
1,012,965 |
|
|
|
|
Capital and reserves |
|
|
|
Share capital |
|
24,043 |
24,043 |
Share premium |
|
265,233 |
265,233 |
Capital reserve |
|
689,337 |
692,295 |
Revenue reserve |
|
32,601 |
31,394 |
|
|
|
|
Shareholders’ funds |
|
1,011,214 |
1,012,965 |
|
|
|
|
Net asset value per ordinary share –
basic |
5 |
|
|
– debt at par |
|
420.6p |
421.3p |
– debt at market
value |
|
416.3p |
416.2p |
|
|
|
|
Number of 10p ordinary shares in
issue at the period end |
|
240,432,350 |
240,432,350 |
.
CONDENSED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
|
SHARE
CAPITAL
£’000 |
SHARE
PREMIUM
£’000 |
CAPITAL
RESERVE
£’000 |
REVENUE
RESERVE
£’000 |
TOTAL
£’000 |
FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2017 |
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2017 |
24,043 |
265,233 |
692,295 |
31,394 |
1,012,965 |
Net return on ordinary
activities |
— |
— |
(2,958) |
20,922 |
17,964 |
Dividends paid – note 6 |
— |
— |
— |
(19,715) |
(19,715) |
At 30 September 2017 |
24,043 |
265,233 |
689,337 |
32,601 |
1,011,214 |
|
|
|
|
|
|
FOR THE SIX MONTHS ENDED 30
SEPTEMBER 2016 |
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2016 |
24,043 |
265,233 |
638,346 |
32,728 |
960,350 |
Net return on ordinary
activities |
— |
— |
28,758 |
18,297 |
47,055 |
Dividends paid – note 6 |
— |
— |
— |
(22,120) |
(22,120) |
At 30 September 2016 |
24,043 |
265,233 |
667,104 |
28,905 |
985,285 |
.
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 amended in January
2017. 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
2017.
2. Income
|
SIX MONTHS TO
30 SEPT 2017
£’000 |
SIX MONTHS TO
30 SEPT 2016
£’000 |
Income from investments |
|
|
UK – dividends |
18,469 |
17,346 |
UK – special dividends |
1,490 |
— |
Overseas – dividends |
2,370 |
2,354 |
Unfranked investment income |
478 |
428 |
|
|
|
|
22,807 |
20,128 |
Other income |
|
|
Other |
79 |
89 |
|
|
|
Total income |
22,886 |
20,217 |
Special dividends of £11,577,000 have been recognised in capital
(30 September 2016: £338,000).
3. Investment
Management Fees and Finance Costs
The base management fee and finance costs are allocated 70% to
capital and 30% to revenue. From 1 April
2017 the base fee is 0.6% on the first £900 million of
assets under management and 0.4% thereafter. (Previously 0.6% on
the first £500 million and 0.4% thereafter).
Until 31 March 2017, a
performance-related fee was recognised if the Company's performance
exceeded the FTSE All-Share Index and was wholly allocated to
capital. No performance fee was provided for the six months to
30 September 2016 and no performance
fee was earned for the year ended 31 March
2017.
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. 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 loan notes
2029 (Notes). The number of shares at both period ends was
unchanged at 240,432,350.
|
AT 30 SEPT 2017
NAV
PER SHARE
PENCE |
AT 31 MAR 2017
NAV
PER SHARE
PENCE |
NAV - debt at par |
420.6 |
421.3 |
Notes |
|
|
– debt at par, after
amortised costs |
24.7 |
24.7 |
– debt at market
value |
(29.0) |
(29.8) |
|
|
|
NAV – debt at market value |
416.3 |
416.2 |
The market value of the Notes used in the above reconciliation,
which is based on a comparable quoted debt security, is:
|
AT 30 SEPT 2017
£’000 |
AT 31 MAR 2017
£’000 |
Notes – debt at market value |
69,712 |
71,675 |
6. Dividends per
Ordinary Share
The first interim dividend of 3.15p was
paid on 29 September 2017 to
shareholders registered on 8 September
2017. The Directors have declared a second interim dividend
of 3.15p payable on 29 December 2017
to shareholders registered on 8 December
2017.
|
SIX MONTHS TO
30 SEPT 2017 |
SIX MONTHS TO
30 SEPT 2016 |
Interim dividends paid: |
|
|
Fourth (prior year) |
4.35p |
4.1p |
First (current
year) |
3.15p |
3.0p |
|
|
|
Total interims paid |
7.50p |
7.1p |
Special dividend (prior year) |
0.70p |
2.1p |
|
|
|
Total |
8.20p |
9.2p |
|
|
|
£’000 equivalent (excluding
specials) |
18,032 |
17,071 |
|
|
|
£’000 equivalent (including
specials) |
19,715 |
22,120 |
7. Fair Value
Hierarchy Disclosures
The fair value hierarchy analysis for investments held at fair
value at the period end is as follows:
|
AT 30 SEPT 2017
£’000 |
AT 31 MAR 2017
£’000 |
Level 1 – The unadjusted quoted
price in an active market for identical assets or liabilities that
the entity can access at the measurement date. |
1,112,381 |
1,136,178 |
Level 2 – Inputs other than quoted
prices included within Level 1 that are observable (ie developed
using market data) for the asset or liability, either directly or
indirectly. |
3 |
13 |
Level 3 – Inputs are unobservable
(ie for which market data is unavailable) for the asset or
liability. |
28,033 |
28,712 |
|
|
|
Total |
1,140,417 |
1,164,903 |
The unquoted investment holdings of the portfolio make up the whole
of Level 3.
8. 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 2017 and
30 September 2016 has not been
audited. The figures and financial information for the year ended
31 March 2017 are extracted and
abridged from the latest published 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
24 November 2017