TIDMINV
RNS Number : 1945N
Investment Company PLC
23 September 2019
The Investment Company Plc
Annual Results Announcement
for the year ended 30 June 2019
STRATEGIC REPORT
SUMMARY OF RESULTS At 30 June 2019 At 30 June 2018 Change %
---------------------------- --------------- --------------- --------
Equity shareholders' funds 16,620,311 17,334,093 (4.12)%
Number of ordinary shares
in issue 4,772,049 4,772,049 -
Net asset value ("NAV") per
ordinary share 348.28p 363.24p (4.12)%
Ordinary share price (mid) 298.00p 331.00p (9.97)%
Discount to NAV 14.44% 8.88% -
---------------------------- --------------- --------------- --------
At 30 June 2019 At 30 June 2018
---------------------------- --------------- --------------- --------
Total return per ordinary
share* 3.24p 12.27p
Dividends paid/declared per
ordinary share 16.25p 20.70p
---------------------------- --------------- --------------- --------
* The total return per ordinary share is based on total
comprehensive income after taxation as detailed in the Consolidated
Statement of Comprehensive Income and in note 6 and is shown to
enable comparison with other investment trust companies.
FINANCIAL CALAR
November Payment of quarterly interim dividend.
December Annual General Meeting.
February Payment of quarterly interim dividend.
February/March Announcement of Half-Yearly Financial Report.
May Payment of quarterly interim dividend.
August Payment of quarterly interim dividend.
October Announcement of Annual Results.
CHAIRMAN'S STATEMENT
This statement covers the year to 30 June 2019.
Following a change of Investment Manager in February 2018, and
changes to the composition of the Board in July 2018, there has now
been substantially a full year of the Company under new management.
In this period there have been several substantive changes in
portfolio, costs and dividends.
Overall impact on NAV
I am mindful of the fact that I am reporting a decline in both
the net asset value ("NAV") and share price over the last
year.
Between 30 June 2018 and 30 June 2019 the FTSE All Share Index
fell by 3.5%. During the same period, the Company's portfolio
outturn was also a fall of 3.45%.
Year to Year to
June 2019 June 2018
Pence per % Pence %
share per share
Opening net
assets 363.24 100.00 371.68 100.00
Portfolio outturn (12.53) -3.45 2.11 0.57
Investment
income 24.19 6.66 20.04 5.39
Expenses paid (8.63) -2.37 (9.89) -2.66
Dividends paid (17.99) -4.95 (20.70) -5.57
------------------------------------------ -------------- -------------- --------------
Closing net
assets 348.28 -4.12 363.24 -2.27
------------------------------------------ -------------- -------------- --------------
The NAV, which has a portfolio invested in both fixed income and
equities, was 4.12% lower within that period.
During the year the Company's share price discount to NAV varied
between 8.88% and 14.44%. Your board has considered the
appropriateness of the Company buying back its shares, but having
taken advice does not believe this is currently in the best
interests of the Company and its shareholders. Your board will
continue to keep this matter under review.
Portfolio Changes
Almost a year ago we, as your new board, set out what we
expected of our investment managers. Your investment manager has
broadened the number of investments and has invested in a number of
new stocks in keeping with the mandate changes initiated earlier in
the financial year. There is still much to be done on the legacy
portfolio. The creation of wealth through these and other
initiatives is taking some time to feed through to our NAV.
The Investment Manager's review of the portfolio is set out
fully in the Investment Manager's Report.
Portfolio investments were previously reported as being divided
between Investments available for sale, and Investments held at
fair value through profit and loss. Your Board has taken advantage
of IFRS 9 to now report all Portfolio investments as being held at
fair value through profit and loss. We believe that this results in
a clearer Statement of Comprehensive Income.
Costs
Total operating costs have reduced from GBP466,471 in the prior
year to GBP401,168 in the year under review. This is against a
background of continuing increasing regulatory and associated
costs. Although one can expect costs to rise in the next year, your
board continues to pay close attention to minimising such a drag on
performance.
Dividends
As highlighted in last year's annual report, your new board is,
after consultation with larger shareholders, pursuing a more
prudent approach to dividend payments. Our target is to have
dividends covered by income net of operating costs. In terms of
implementation, the first two dividends paid out during the year
were made under the 'old' stance with the result that the total
payout during the year to June 2019 was GBP868,000, being 18.2p per
share (June 2018: 20.7p).
Overall, the surplus of income over expenses was GBP752,636 in
the year, which was GBP115,877 short of covering the dividend paid.
The current run rate of 3.75p per quarterly payout amounts to 15p
in a full year which would equate to a total of GBP775,458. Our
target is to get portfolio income up to the point where the costs
and this dividend are covered.
Outlook and Recommendation
The Company remains small relative to its fixed cost base, and
its viability is dependent not just upon performance but also its
ability to grow by attracting further capital. My board colleagues
and I are wholly committed to exploring all appropriate
opportunities that are likely to enhance long term shareholder
returns. We remain fully cognisant of the risks to capital in what
are proving to be testing markets.
As a board we firmly believe that continuation would be in the
best interests of all shareholders as it will enable your new board
to continue to explore with confidence new options for the growth
of the Company. The Company has put forward an ordinary resolution
for the continuation of the Company, and accordingly, your
Directors recommend that members vote in favour of
continuation.
AGM
The AGM will be held at the offices of Stephenson Harwood LLP, 1
Finsbury Circus, London EC2M 7SH on 21 November
2019 at 11.30am. I encourage all shareholders to attend.
Finally, your board is grateful for the continued support of our
shareholder base as we seek a prosperous future for your
Company.
Yours faithfully,
I. R. Dighé
Chairman
20 September 2019
INVESTMENT MANAGER'S REPORT
Performance
The twelve months under review was most certainly a year of two
halves. The first, from mid-May 2018 to December 2018, was a
difficult time for global equity markets with the sell-off reaching
fever pitch in the fourth quarter. Weakening global economic
growth, the perceived upward trajectory of US interest rates, the
trade tariff dispute between the US and China and the ongoing
Brexit negotiations all contributed to a period of heightened
negative investor sentiment.
December 2018 was recorded as the worst December for global
equity markets since 1988. Further still 2018 as a whole became the
worst year for equities since the financial crisis of 2008. In
January 2019 however, investor sentiment for risk assets changed
abruptly. In response to the deterioration in the global economic
outlook, the Federal Reserve changed their hawkish position on
interest rates to a far more dovish one, hinting at interest rate
cuts. This was particularly surprising as in the fourth quarter of
2018 the Federal Reserve had indicated that three separate
increases in rates may be required in 2019. This dramatic
about-turn provided equity markets with the oxygen required to
recover and rise strongly in the first quarter of 2019. Such was
the strength of the rally that it all but reversed the losses of
the fourth quarter.
During the year to 30 June 2019 the NAV of the Company fell by
4.12% whilst the share price fell by 9.97%. This was the first full
reporting year in which Fiske has managed the portfolio and we are
largely pleased with the relative progress made in restructuring
the portfolio. Over 90% of the combined costs of running the
company and paying the dividends are now covered by forecast income
receipts. Work remains ongoing to fully cover these costs in the
current year.
Portfolio
We introduced a new holding in Standard Life Aberdeen (SLA)
which we believe is a deep value situation for patient investors.
SLA owns 29% of HDFC Life and the value to SLA of exiting this
investment at close to prevailing values would be approximately
GBP2.4 billion or 98 pence per share. It would be likely that a
significant proportion of this cash would be returned to
shareholders which would subsequently improve the dividend cover.
Assets under management are currently GBP572 billion with plenty of
scope to support growing funds and take cost out of mature parts of
the fund estate. While we wait for the business restructuring
process to be concluded, the shareholders are currently receiving
an attractive dividend which, at the time we invested, was
equivalent to a yield of around 9%.
Greene King continues to make steady progress and recently
announced the arrival of a new Chief Executive, Nick Mackenzie,
from Merlin Entertainments. We recently met with the company and
believe that they are taking the necessary steps in the evolution
of the customer proposition. The shares continue to trade at a
significant discount to the NAV, have a yield of over 5%, and are
supported by a progressive dividend policy. We believe that with
his customer focused experience at Merlin, Nick will drive the
digital and consumer focused strategy of the business forward. We
are pleased to note that post the end of the period under review,
an agreed offer for Greene King plc at 850p per share has been
recommended by the Board. This is substantially above the price at
which we made the investment in Greene King plc for the
Company.
We are encouraged by the progress Emma Walmsley is making at
GlaxoSmithKline as she continues to push the company towards
becoming a science-led global healthcare company. The aim is to
deliver growth and improve shareholder returns through the
development of innovative pharmaceutical, vaccine and consumer
healthcare products. Zejula, the ovarian cancer treatment, is
showing promise and recent comments suggest that it could be used
on far more patients than initially anticipated. Furthermore Zejula
is also being trialled for the treatment other cancers.
As mentioned in the interim report, the largest corporate
exposure in the portfolio is Aggregated Micro Power Holdings
ordinary shares. These shares were received following the
conversion of our previous holding in Aggregated Micro Power
Holdings 8% 2021 Convertible Loan Note. We have started to sell
down the holding in Aggregated Micro Power as following the
conversion of the preference shares into ordinary shares this
holding is not paying a dividend.
The Company benefitted from the liquidation of the Whitnash 5%
preference share where it received GBP641,000 in cash. Moreover,
there is a possibility of a return of capital and income with
respect to the Whitnash 6.5% preference share.
In the fixed interest part of the portfolio we have added two
new names in the last six months, namely CYBG 8% Perpetual and
Punch Taverns Finance 7.75% 2025 whilst adding selectively to
existing holdings. CYBG is the combination of the Clydesdale and
Yorkshire banks. It has recently acquired Virgin Money which brings
a strong brand to the enlarged group and gives further scope to
grow market share in the retail banking sector.
Punch Taverns manages a large pub estate of over 1,000 pubs with
most of the properties owned on a freehold basis. The company is
owned by Patron Capital Partners, a private equity house with a
focus on property related investments. Information on the business
is made publicly available to bond holders and shows the business
operating well in the current economic climate.
Future Prospects
Little has changed in the world economic backdrop since our
interim report. Both bond and equity markets have continued to
respond favourably to dovish sentiment emanating from the Federal
Reserve and European Central Bank in response to a slowdown in
global growth rates.
Brexit continues to dominate the UK political commentary and its
consequential effects on sterling are apparent.
Overall, the UK market remains very attractively priced against
the rest of the world. We maintain the view that, unless a global
recession takes hold, the historically low yields on government
bonds offer very little scope for capital appreciation. A
resolution to Brexit in our opinion will remove some uncertainty
and in doing so will provide international investors more reason to
invest in UK assets.
M. Foster, J. Harrison & J. Dieppe
Fiske plc
20 September 2019
TWENTY LARGEST INVESTMENTS
At 30 June 2019
Number Book Market % of total
cost or Directors' portfolio
Stock GBP valuation
1. GlaxoSmithKline GBP
Ordinary 25p* 41,450 607,354 653,501 4.14%
2. Newcastle Building Society
3.849% sub notes 23/12/19
(variable) 600,000 405,438 596,292 3.78%
3. Phoenix Group
Ordinary 10p* 82,245 536,954 583,035 3.70%
4. 600 Group
8% cov loan notes 14/02/20 500,000 500,000 540,455 3.43%
20p Warrants 2,500,000 - 0.00%
--------- ----------------- ---------------
500,000 540,455 3.43%
5. Standard Life Aberdeen
Ordinary 13.9683p* 169,000 405,553 497,705 3.15%
6. Nationwide Building Society
10.25% core capital deferred
shares (variable) 3,100 490,536 466,218 2.95%
7. Unilever
Ordinary 3.11p* 9,500 373,118 464,978 2.95%
8. The Fishguard & Rosslare
Railways and
Harbours Company
2.45% guaranteed preference
stock 790,999 441,809 458,779 2.91%
9. National Westminster Bank
9% non-cumulative irredeemable
preference 300,000 217,752 450,600 2.86%
10. National Grid
Ordinary 11.395p* 53,900 433,101 450,496 2.86%
11. Intercede Group
8% conv loan notes 29/12/21 450,000 450,000 450,000 2.85%
12. CYBG
8% variable perpetual 450,000 415,497 437,904 2.78%
13. Restaurant Group
Ordinary 28.125p* 332,000 407,616 437,576 2.77%
14. Amalgamated Metal Corporation
5.4% cum pref GBP1 256,065 144,049 230,458 1.46%
6% cum pref GBP1 213,510 103,844 207,105 1.31%
--------- ----------------- -------------
247,893 437,563 2.77%
15. WPP
Ordinary 10p* 43,000 410,263 425,786 2.70%
16. EI Group
7.5% 15/03/24 400,000 409,099 419,060 2.66%
17. Premier Oil
6.5% 31/05/21 410,000 400,497 410,759 2.60%
18. Severn Trent
Ordinary 97.89p* 20,000 399,179 409,400 2.59%
19. Polar Capital
Ordinary 2.5p* 66,500 354,056 397,670 2.52%
20. Punch Taverns
7.75% 30/12/25 400,000 397,408 389,500 2.47%
--------- ----------------- -------------
8,303,123 9,377,277 59.44%
--------- ----------------- -------------
* Issues with unrestricted voting rights.
The Group has a total of 61 portfolio investments holdings in 55
companies.
CORPORATE SUMMARY
Business and management of the Company
The Investment Company plc (the Company) is an investment trust
company that has a premium listing on the London Stock Exchange.
Its principal activity is portfolio investment. The Company's
wholly owned subsidiaries are Abport Limited, an investment dealing
company and New Centurion Trust Limited, an inactive investment
company (together the Group).
Investment Objective
The Company's investment objective is to provide shareholders
with an attractive level of dividends coupled with capital growth
over the long term, through investment in a portfolio of equities,
preference shares, loan stocks, debentures and convertibles.
Investment Policy
The Company invests in equity and fixed income securities. The
equity portion of the portfolio would principally invest in UK
quoted companies, with a wide range of market capitalisations,
which are anticipated to pay a growing stream of dividends. It is
expected that the fixed income securities would include preference
shares, loan stocks, convertibles and related instruments and be
issued by UK quoted companies with a wide range of market
capitalisations. The conversion rights or equity warrants would
normally convert into the underlying equity of the quoted
company.
Any use of derivatives for investment purposes will be made on
the basis of the same principles of risk spreading and
diversification that apply to the Company's direct investments, as
described below. The Company will not enter into uncovered short
positions.
Risk diversification
Portfolio risk is mitigated by investing in a diversified spread
of investments. Investments in any one company shall not, at the
time of acquisition, exceed 15% of the value of the Company's
investment portfolio. In the long term, it is expected that the
Company's investments will generally be a portfolio of around 75 or
more different securities, most of which will represent
individually no more than 5% of the value of the Company's total
investment portfolio, as at the time of acquisition.
The Company will not invest more than 10% of its gross assets,
at the time of acquisition, in other listed closed-ended investment
funds, whether managed by the Investment Manager or not, except
that this restriction shall not apply to investments in listed
closed-ended investment funds which themselves have stated
investment policies to invest no more than 15% of their gross
assets in other listed closed-ended investment funds.
Unquoted investments
The Investment Manager may invest in unquoted fixed income
securities from time to time subject to prior Board approval.
Investment strategy
The Company uses a bottom-up investment approach to selecting a
diversified portfolio of equity and fixed income securities.
The investment approach can be described as active and
universal, as the Company will not seek to replicate any benchmark
and will adopt a multicap investment approach within an overall
diversified portfolio. Potential investments are assessed against
the key criteria, including, yield along with an assessment of the
prospects of underlying corporate growth prospects, market
positions, calibre of management and risk and financial
resilience.
Performance
Details of the Company's performance during the financial year
are provided in the Chairman's Statement. The Investment Manager's
Report includes a review of developments during the year as well as
information on investment activity within the portfolio.
Dividend Policy
Your Board intends to pay a total dividend of 15p(1) per share
during the year ending 30 July 2020. Any growth in net income in
future years will be taken into account in assessing dividend
levels with a view to gradually growing it going forward.
1 This is a target and should not be interpreted as a profit or
dividend forecast.
Total Assets and Net Asset Value
The Group, had total net assets of GBP16,620,311 and a NAV of
348.28p per ordinary share at 30 June 2019 (2018: GBP17,334,093 and
363.24p).
Principal Risks and Uncertainties
The management of the business and the execution of the Group's
strategy are subject to a number of risks. An assessment of the
principal risks to the Company has been carried out, including
those that would threaten its business model, future performance,
solvency and liquidity.
The UK political risk and continuing uncertainty around Brexit
are being closely monitored by the Board and Investment Manager as
are its potential impact on the Company, markets and the future
relationship between the UK and the EU.
With the exception of the potential risk from Brexit, the
Company's principal risks remain unchanged since last year and are
set out below, together with how these have been mitigated or
managed, where appropriate.
A summary of the risk management and internal control processes
can be found in the Corporate Governance Statement.
The key business risks affecting the Group are:
(i) Investment decisions: the performance of the Group's
portfolio is dependent on a number of factors including, but not
limited to the quality of initial investment decisions and the
strategy and timing of sales;
(ii) Investment valuations: the valuation of the Group's
portfolio and opportunities for realisations depend to some extent
on stock market conditions and interest rates; and
(iii) Macroeconomic environment for preference shares and prior
charge securities: the environment for issuing of new preference
shares and prior charge securities determines whether new issues
become available, thus affecting the choice and scope of investment
opportunities for the Group.
Risk Management
Specific policies for managing risks are summarised below and
have been applied throughout the year:
1. Market price risk
The Investment Manager monitors the prices of financial
instruments held by the Group on a regular basis. In addition, it
is the Board's policy to hold an appropriate spread of investments
in the portfolio in order to reduce risks arising from investment
decisions and investment valuations. The Investment Manager
actively monitors market prices throughout the year and reports to
the Board, which meets regularly in order to review investment
strategy. Most of the equity investments held by the Company are
listed on the London Stock Exchange.
2. Interest rate risk
In addition to the impact of the general investment climate,
interest rate movements may specifically affect the fair value of
investments in fixed interest securities. The Investment Manager
monitors the applicable interest rates and yields associated with
the securities.
3. Liquidity risk
The Group's assets mainly comprise readily realisable quoted
securities that can be sold to meet funding commitments if
necessary. Short-term flexibility is achieved through the use of
overdraft facilities.
Additional risks and uncertainties include:
Credit risk: the failure of a counterparty to a transaction to
discharge its obligations under that transaction that could result
in the Company suffering a loss. Normal delivery versus payment
practice and review of counterparties and custodians by the
Investment Manager mean that this is not a significant risk.
Discount volatility: The Company's shares may trade at a price
which represents a discount to its underlying NAV.
Regulatory risk: The Company operates in an evolving regulatory
environment and faces a number of regulatory risks. A breach of
section 1158/1159 of the Corporation Tax Act 2010 would result in
the Company being subject to capital gains tax on portfolio
investments. Breaches of other regulations, including the Companies
Act 2006, the UKLA Listing Rules, the UKLA Disclosure Guidance and
Transparency Rules, or the Alternative Investment Fund Managers'
Directive, could lead to a detrimental outcome. Breaches of
controls by service providers to the Company could also lead to
reputational damage or loss. The Board monitors compliance with
regulations, with reports from the Investment Manager and the
Administrator.
Protection of assets: The Company's assets are protected by
using a custodian, Fiske plc. In addition, the Company operates
clear internal controls to safeguard all assets.
These and other risks facing the Company are reviewed regularly
by the Audit Committee.
Key Performance Indicators ("KPIs")
The Board reviews performance by reference to a number of KPIs
and considers that the most relevant KPIs are those that
communicate the financial performance and strength of the Group as
a whole. The Board and Investment Manager monitor the following
KPIs:
- NAV performance relative to the FTSE All-Share Index (total
return)
The NAV per ordinary share at 30 June 2019 was 348.28p per share
(2018: 363.24p). The total return of the NAV after adding back
dividends paid was 3.24%. This compares with a total return on the
FTSE All-Share Index of 0.6%.
- (Discount)/premium of share price in relation to NAV
Over the year to 30 June 2019, the Company's share price moved
from trading at a discount of 8.9% to a discount of 14.4%.
- Ongoing Charges Ratio
The Ongoing Charges Ratio for the year to 30 June 2019 amounted
to 2.44%.
Viability Statement
The Directors have assessed the viability of the Company over a
two-year period, taking account of the Company's position and the
risks as set out in the Strategic Report.
The period assessed balances the long-term aims of the Company,
the Board's view that the success of the Company is best assessed
over a longer time period and the inherent uncertainty of looking
too far ahead. The Company puts forward an ordinary resolution for
the continuation of the Company each year, with the vote taking
place at the AGM.
As part of its assessment of the viability of the Company, the
Board has considered the principal risks and uncertainties and the
impact on the Company of a significant fall in the value of its
portfolio. To provide this assessment, the Board has considered the
Company's financial position and its ability to liquidate its
portfolio to meet its expenses or other liabilities as they fall
due.
-- The Company invests largely in debt, preference shares and
equity instruments issued by companies listed and traded on
regulated stock exchanges. These are traded, and whilst some may be
less liquid than larger quoted companies, the portfolio is well
diversified by both number of holdings and industry sector.
-- The expenses of the Company are predictable and modest in
comparison with the assets in the portfolio. There are no
commitments that would change that position.
-- The ongoing charges ratio of the Company was 2.44% as at 30 June 2019.
Future Prospects
The future of the Company is dependent upon the success of the
investment strategy. The outlook for the Company is discussed in
the Chairman's Statement and the Investment Manager's report.
Further details are also provided in the above Viability
Statement.
Board Diversity
When recruiting a new Director, the Board's policy is to appoint
individuals on merit. The Board believes diversity is important in
bringing an appropriate range of skills, knowledge and experience
to the Board and gives that consideration when recruiting new
Directors.
As at 30 June 2019 there were three male Directors on the
Board.
Environmental, Human Rights, Employee, Social and Community
Issues
The Board consists entirely of non-executive Directors and
during the year the Company had no employees. Day-to-day management
of the portfolio is delegated to the Investment Manager. The
Company has no direct impact on the community or the environment,
and as such has no environmental, human rights, social or community
policies. In carrying out its investment activities and in
relationships with suppliers, the Company aims to conduct itself
responsibly, ethically and fairly.
Environmental, Social and Governance factors are considered as
part of the investment process as misjudgments on these matters can
incur additional costs to the portfolio holdings, as well as
undermining their equity return through reputational damage. The
Investment Manager questions the corporate management on a variety
of topics to ensure that investee companies are adhering to best
practice. These questions can be wide ranging.
The Strategic Report has been approved by the Board of
Directors.
On behalf of the Board
I. R. Dighé
Chairman
20 September 2019
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing this Annual Report
and the financial statements in accordance with applicable law and
regulations and those International Financial Reporting Standards
("IFRS") adopted by the European Union and Article 4 of the
International Accounting Standards. Company law requires the
Directors to prepare financial statements for each financial period
which present fairly the financial position of the Group and the
financial performance and cash flows of the Group for that
period.
In preparing those financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- state whether applicable IFRS have been followed, subject to
any material departures disclosed and explained in the financial
statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business; and
-- provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
Group financial statements comply with the Companies Act 2006 and
Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that comply with that law and those regulations, and for ensuring
that the Annual Report includes information required by the Listing
Rules of the Financial Conduct Authority.
The financial statements are available on the Administrator's
website, www.maitlandgroup.com. The work carried out by the Auditor
does not involve consideration of the maintenance and integrity of
this website and, accordingly, the Auditor accepts no
responsibility for any changes that have occurred to the financial
statements since they were initially presented on the website.
Visitors to the website need to be aware that legislation in the
United Kingdom covering the preparation and dissemination of the
financial statements may differ from legislation in their
jurisdiction.
We confirm that to the best of our knowledge:
-- the Group and Company financial statements, prepared in
accordance with IFRS as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group;
-- this Annual Report includes a fair review of the development
and performance of the business and the position of the Group
together with a description of the principal risks and
uncertainties that it faces; and
-- the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
On behalf of the Board
I. R. Dighé
Chairman
20 September 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2019
Year to 30 June 2019 Year ended 30 June 2018
Revenue Capital Total Revenue Capital Total
Notes GBP GBP GBP GBP GBP GBP
----- --------- --------- --------- --------- --------- ---------
Realisted gains
on investments 11 - 267,049 267,049 - 79,185 79,185
Unrealised (losses)/gains
on investments
held at fair
value through
profit or loss 11 - (864,171) (864,171) - 732,429 732,429
Movement in impairment
provision on
investments held
as available
for sale - - - - (3,745) (3,745)
Exchange losses
on capital items - (137) (137) - (3,050) (3,050)
Losses on derivative
contracts 12 - - - - (63,640) (63,640)
Investment income 2 1,154,271 - 1,154,271 956,273 - 956,273
Investment management
fee 3 (98,697) - (98,697) (88,259) - (88,259)
Other expenses 4 (301,825) (646) (302,471) (378,089) (123) (378,212)
--------- --------- --------- --------- --------- ---------
Return before
taxation 753,749 (597,905) 155,844 489,925 741,056 1,230,981
Taxation 5 (1,113) - (1,113) (5,329) - (5,329)
--------- --------- --------- --------- --------- ---------
Return after
taxation 752,636 (597,905) 154,731 484,596 741,056 1,225,652
Other comprehensive
income
Movement in unrealised
appreciation
on investments
held as available
for sale
Recognised in
equity - - - - 30,134 30,134
Recognised in
return after
taxation - - - - (670,657) (670,657)
--------- --------- --------- --------- --------- ---------
Other comprehensive
income after
taxation - - - - (640,523) (640,523)
--------- --------- --------- --------- --------- ---------
Profit for the
year 752,636 (597,905) 154,731 484,596 100,533 585,129
--------- --------- --------- --------- --------- ---------
Return after
taxation per
50p ordinary
share
Basic and diluted 6 15.77p (12.53p) 3.24p 10.16p 15.53p 25.69p
Return on profit
for the year
per 50p ordinary
share
Basic and diluted 6 15.77p (12.53p) 3.24p 10.16p 2.11p 12.27p
--------- --------- --------- --------- --------- ---------
The total column of this statement is the Consolidated Statement
of Comprehensive Income of the Group prepared in accordance with
IFRS. The supplementary revenue and capital columns are prepared in
accordance with the Statement of Recommended Practice issued by the
Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period. The "Profit for the year" is also the "Total
comprehensive income for the year" as defined in IAS2 and no
seperate Statement of Comprehensive Income has been presented.
The notes form part of these financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2019
Issued
ordinary Capital
share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve reserve Total
GBP GBP GBP GBP GBP GBP GBP
-------------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
Balance at 1
July
2018 2,386,025 4,453,903 2,408,820 1,917,418 7,310,117 (1,142,190) 17,334,093
Transition to
IFRS
9 (see note
19) - - - (1,917,418) 1,917,418 - -
Total
comprehensive
income
Profit for the
year - - - - (597,905) 752,636 154,731
Transactions
with
shareholders
recorded
directly to
equity
Ordinary
dividends
paid - - - - - (868,513) (868,513)
--------------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
Balance at 30
June
2019 2,386,025 4,453,903 2,408,820 - 8,629,630 (1,258,067) 16,620,311
--------------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
Balance at 1
July
2017 2,386,025 4,453,903 2,408,820 2,557,941 6,569,061 (638,973) 17,736,777
Total
comprehensive
income
Net return for
the
year - - - - 741,056 484,596 1,225,652
Movement in
unrealised
appreciation
on
investments
held
as available
for
sale:
- Recognised
in
equity - - - 30,134 - - 30,134
- Recognised
in
return after
taxation - - - (670,657) - - (670,657)
Transactions
with
shareholders
recorded
directly to
equity
Ordinary
dividends
paid - - - - - (987,813) (987,813)
--------------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
Balance at 30
June
2018 2,386,025 4,453,903 2,408,820 1,917,418 7,310,117 (1,142,190) 17,334,093
--------------- ----------- ------------ ----------- ----------- ----------- ----------- ----------
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2019
Issued Issued
ordinary preference Capital
share share Share redemption Revaluation Capital Revenue
capital capital premium reserve reserve reserve reserve Total
GBP GBP GBP GBP GBP GBP GBP GBP
------------ ----------- ------------- ----------- ----------- ---------- ---------- ----------
Balance at 1
July 2018 2,386,025 858,783 4,453,903 2,408,820 1,923,762 4,758,355 1,327,945 18,117,593
Transition to
IFRS 9
(see note 19) - - - - (1,923,762) 1,923,762 - -
Total comprehensive
income
Net return for
the year - - - - - (597,925) 764,255 166,330
Transactions
with shareholders
recorded directly
to equity
Ordinary dividends
paid - - - - - - (868,513) (868,513)
Preference share
dividends paid - - - - - - (172) (172)
------------ ----------- ------------- ----------- ----------- ---------- ---------- ----------
Balance at 30
June 2019 2,386,025 858,783 4,453,903 2,408,820 - 6,084,192 1,223,515 17,415,238
------------ ----------- ------------- ----------- ----------------------- ---------- ----------
Balance at 1
July 2017 2,386,025 858,783 4,453,903 2,408,820 2,556,323 4,025,262 1,827,740 18,516,856
Total comprehensive
income
Net return for
the year - - - - - 733,093 488,190 1,221,283
Movement in
unrealised appreciation
on investments
held as available
for sale:
- Recognised
in equity - - - - 41,318 - - 41,318
* Recognised in return after taxation - - - - (673,879) - - (673,879)
Transactions
with
shareholders
recorded
directly to
equity
Ordinary dividends
paid - - - - - - (987,813) (987,813)
Preference share
dividends paid - - - - - - (172) (172)
------------ ----------- ------------- ----------- ----------- ---------- ---------- ----------
Balance at 30
June 2018 2,386,025 858,783 4,453,903 2,408,820 1,923,762 4,758,355 1,327,945 18,117,593
------------ ----------- ------------- ----------- ----------- ---------- ---------- ----------
CONSOLIDATED BALANCE SHEET
As at 30 June 2019
Note Group Group
2019 2018
GBP GBP
----------- -----------
Non-current assets
Investments 11 15,777,113 16,340,329
Current assets
Trade and other receivables 15 192,958 265,341
Investments available
for sale - 2,077
Cash and cash equivalents 785,703 843,433
----------- -----------
978,661 1,110,851
----------- -----------
Current liabilities
Trade and other payables 16 (135,463) (117,087)
----------- -----------
(135,463) (117,087)
----------- -----------
Net current assets 843,198 993,764
----------- -----------
Net assets 16,620,311 17,334,093
----------- -----------
Capital and reserves
Issued ordinary share
capital 8 2,386,025 2,386,025
Share premium 4,453,903 4,453,903
Capital redemption
reserve 2,408,820 2,408,820
Revaluation reserve - 1,917,418
Capital reserve 8,629,630 7,310,117
Revenue reserve (1,258,067) (1,142,190)
----------- -----------
Shareholders' funds 10 16,620,311 17,334,093
----------- -----------
NAV per 50p ordinary
share 348.28p 363.24p
----------- -----------
These financial statements were approved by the Board on 20
September 2019 and were signed on its behalf by:
I. R. Dighé
Chairman
Company Number: 4205
COMPANY BALANCE SHEET
As at 30 June 2019
Note Company Company
2019 2018
GBP GBP
---------- ----------
Non-current assets
Investments 11 15,775,016 16,340,329
Investment in subsidiaries 13 862,656 862,656
---------- ----------
16,637,672 17,202,985
Current assets
Trade and other receivables 15 218,353 285,830
Cash and cash equivalents 785,703 843,433
---------- ----------
1,004,056 1,129,263
---------- ----------
Current liabilities
Trade and other payables 16 (226,490) (214,655)
---------- ----------
(226,490) (214,655)
---------- ----------
Net current assets 777,566 914,608
---------- ----------
Net assets 17,415,238 18,117,593
---------- ----------
Capital and reserves
Issued ordinary share
capital 8 2,386,025 2,386,025
Issued preference share
capital 9 858,783 858,783
Share premium 4,453,903 4,453,903
Capital redemption reserve 2,408,820 2,408,820
Revaluation reserve - 1,923,762
Capital reserve 6,084,192 4,758,355
Revenue reserve 1,223,515 1,327,945
---------- ----------
Shareholders' funds 17,415,238 18,117,593
---------- ----------
As permitted by section 408 of the Companies Act 2006, the
Company has not presented its own Income Statement. The amount of
the Company's return for the financial year dealt with in the
financial statements of the Group is a profit after tax of
GBP166,330 (2018: GBP588,722).
These financial statements were approved by the Board on 20
September 2019 and were signed on its behalf by:
I. R. Dighé
Chairman
Company Number: 4205
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
For the year ended 30 June 2019
Note Company
Group Year to Year
Year to Year to to
30 June 2019 30 30 June 2019 30
June 2018 June 2018
GBP GBP GBP GBP
------------------------ ------------------------
Cash flows from operating
activities
Cash received from investments 1,203,692 920,760 1,203,692 914,479
Interest received - 86 - 86
Sundry income - 1,300 - 1,300
Investment management fees
paid (95,795) (88,043) (95,795) (88,043)
Cash paid to and on behalf
of employees (1,167) (14,000) (1,167) (14,000)
Other cash payments (263,981) (369,197) (259,075) (359,643)
----------- ----------- ----------- -----------
Net cash inflow from operating
activities 842,749 450,906 847,655 454,179
----------- ----------- ----------- -----------
Cash flows from financing
activities
Dividends paid on ordinary
shares 7 (868,513) (987,813) (868,513) (987,813)
----------- ----------- ----------- -----------
Net cash outflow from financing
activities (868,513) (987,813) (868,513) (987,813)
----------- ----------- ----------- -----------
Cash flows from investing
activities
Purchase of investments 11 (6,497,746) (5,655,702) (6,497,746) (5,655,702)
Sale of investments 11 6,465,917 5,771,848 6,465,917 5,771,848
Loans to subsidiaries - - (4,906) (1,426)
----------- ----------- ----------- -----------
Net cash (outflow)/inflow
from investing activities (31,829) 116,146 (36,735) 114,720
----------- ----------- ----------- -----------
Net decrease in cash and cash
equivalents (57,593) (420,761) (57,593) (418,914)
----------- ----------- ----------- -----------
Reconciliation of net cash
flow to movement in net cash
Decrease in cash (57,593) (420,761) (57,593) (418,914)
Exchange rate movements (137) (3,050) (137) (3,050)
----------- ----------- ----------- -----------
Decrease in net cash (57,730) (423,811) (57,730) (421,964)
Net cash at start of period 843,433 1,267,244 843,433 1,265,397
----------- ----------- ----------- -----------
Net cash at end of period 785,703 843,433 785,703 843,433
----------- ----------- ----------- -----------
Analysis of net cash
Cash and cash equivalents 785,703 843,433 785,703 843,433
----------- ----------- ----------- -----------
785,703 843,433 785,703 843,433
----------- ----------- ----------- -----------
NOTES TO THE FINANCIAL STATEMENTS
At 30 June 2019
1. Accounting policies
Basis of Preparation
The Company is a public limited company limited by shares and
incorporated and registered in England and Wales. The Company has
been approved as an investment trust within the meaning of section
1158/1159 of the Corporation Tax Act 2010. The Company's registered
office is Hamilton Centre, Rodney Way, Chelmsford CM1 3BY.
The Group's consolidated financial statements for the year ended
30 June 2019, which comprise the audited results of the Company and
its wholly owned subsidiaries, Abport Limited and New Centurion
Trust Limited (together referred to as the "Group"), have been
prepared in conformity with IFRS as adopted by the European Union,
which comprise standards and interpretations approved by the
International Accounting Standards Board ("IASB"), and as applied
in accordance with the provision of the Companies Act 2006. The
annual financial statements have also been prepared in accordance
with the AIC Statement of Recommended Practice issued in November
2014 and updated in February 2018 with consequential amendments
("AIC SORP"), except to any extent where it is not consistent with
the requirements of IFRS.
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Income Statement
between items of a revenue and capital nature have been prepared
alongside the Income Statement.
The financial statements are presented in Sterling, which is the
Group's functional currency as the UK is the primary environment in
which it operates.
Going Concern
The financial statements have been prepared on a going concern
basis, being a period of at least 12 months from the date that
these financial statements were approved, and on the basis that
approval as an investment trust company will continue to be
met.
The Directors have made an assessment of the Group's ability to
continue as a going concern and are satisfied that the Group has
the resources to continue in business for the foreseeable future.
Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Group's
ability to continue as a going concern, having taken into account
the liquidity of the Group's investment portfolio and the Group's
financial position in respect of its cash flows, borrowing
facilities and investment commitments (of which there are none of
significance). Therefore, the financial statements have been
prepared on the going concern basis.
Basis of Consolidation
IFRS10 stipulates that subsidiaries of Investment Entities are
not consolidated. The Investment Company meets all three
characteristics of Investment Entity as described, however, it is
envisaged that one of the subsidiaries will be a dealing subsidiary
and, therefore consolidated financial statements are presented for
the Group. The financial statements of the subsidiaries are
prepared for the same reporting year as the parent Company, using
consistent accounting policies. All inter-company balances and
transactions, including unrealised profits arising from them are
eliminated.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being investment business.
The Group primarily invests in companies listed in the UK.
Accounting Developments
The following policies were adopted during the financial
year.
International Financial Reporting Standards
IFRS 9 Classification and measurement of financial assets after initial recognition
IFRS 15 Revenue form contracts with customers
The new impairment model will also apply to the Group's other
financial assets including trade and other receivables and cash and
cash equivalents. The Directors expect to apply the simplified
approach to recognise lifetime expected credit losses for these
current assets. The adoption of IFRS 9 has no material impact on
the reported Net Asset Value.
There will be no change in the accounting for financial
liabilities.
In summary, on adoption of IFRS 9 for the first period
commencing after 1 January 2018, the Directors consider that IFRS 9
has not had a material impact on the financial position or
performance of the Group. See note 19 for further details.
The following accounting standards and their amendments were in
issue at the period end but will not be in effect until after this
financial year.
International Financial Reporting Standards Effective date*
IFRS 3 Business Combinations (amendment) 1 January 2020**
IFRS 16 Leases 1 January 2019
International Accounting Standards
Investments in Associates and Joint
Ventures (long term interests in
IAS 28 associates or joint venture) 1 January 2019
IFRIC Interpretations
IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019
Annual improvements to IFRS 2015-2017 Cycle 1 January 2019
*Years beginning on or after
**Not yet endorsed for use in the EU
The Directors do not expect that the adoption of other standards
listed above will have a material impact on the financial
statements of the Group in future periods.
Critical Accounting Judgments and Key Sources of Estimation
Uncertainty
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and the reported amounts in
the Balance Sheet, the Statement of Comprehensive Income and the
disclosure of contingent assets and liabilities at the date of the
financial statements. The estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of
which form the basis of making judgements about carrying values of
assets and liabilities that are not readily apparent from other
sources.
The estimates and underlying assumptions are based on historical
experience and other factors that are considered to be relevant.
These are reviewed on an ongoing basis. Actual results may differ
from these estimates. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the
revision affects only that period or in the period of the revision
and future period if the revision affects both current and future
periods.
The major part of the investment portfolio is valued by
reference to quoted prices. However GBP4,087,767 of the portfolio
comprises fixed interest stocks which are thinly traded; such
stocks are best valued by reference to current market price lists
provided by an independent broker, itself a recognised leader in
such preference share and similar fixed interest stocks. The
Directors may overlay such prices with situation specific
adjustments including (a) taking a second independent opinion on a
specific stock, or (ii) reducing the value to a net present value,
to reflect the likely time to be taken to realise a stock which the
Group is actively looking to sell. The outturn is reflected in the
valuations set out in Note 11 to the accounts.
There were no other significant accounting estimates or
significant judgements in the current or previous year.
Investments
As the Group's business is investing in financial assets with a
view to profiting from their total return in the form of income and
capital growth, Investments are classified at fair value through
profit or loss on initial recognition in accordance with IFRS 9.
The portfolio of financial assets is managed and its performance
evaluated on a fair value basis, in accordance with a documented
investment strategy, and information about the portfolio is
provided internally on that basis to the Group's Board of
Directors.
Investments are measured initially, and at subsequent reporting
dates, at fair value, and derecognised at trade date where a
purchase or sale is under a contract whose terms require delivery
within the time-frame of the relevant market. For listed
investments this is deemed to be bid market prices or closing
prices for Stock Exchange Electronic Trading Service - quotes and
crosses ("SETSqx").
Changes in fair value of investments, realised gains and losses
on disposal are recognised in the Income Statement as capital
items.
The holdings of the investment in subsidiaries are stated at
cost less diminution in value.
All investments for which fair value is measured or disclosed in
the financial statements are categorised within the fair value
hierarchy in note 11.
Foreign Currency
Transactions denominated in foreign currencies are converted to
Sterling at the actual exchange rate as at the date of the
transaction. Items that are denominated in foreign currencies at
the year end are reported at the rate of exchange at the Balance
Sheet date. Any gain or loss arising from a change in exchange rate
subsequent to the date of the transaction is included as an
exchange gain or loss in the capital reserve or the revenue account
depending on whether the gain or loss is of a capital or revenue
nature.
Cash and Cash Equivalents
Cash comprises cash in hand, overdrafts and demand deposits.
Cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject
to insignificant risk of changes in value.
For the purpose of the Statement of Cash Flows, cash and cash
equivalents consist of cash and cash equivalents as defined
above.
Income
Dividends receivable on quoted equity shares are taken to
revenue on an ex-dividend basis. Dividends receivable on equity
shares where no ex-dividend date is quoted are brought into account
when the Company's right to receive payment is established. Fixed
returns on non-equity shares are recognised on a time-apportioned
basis.
Dividends from overseas companies are shown gross of any
non-recoverable withholding taxes which are disclosed separately in
the Income Statement.
Dividend income will only be recognised when there is reasonable
certainty that the issuer has the ability to make the return.
Expenses and Finance Costs
All expenses and finance costs are accounted for on an accruals
basis.
Taxation
The tax expense represents the sum of the tax currently payable.
The tax payable is based on the taxable profit for the year.
Taxable profit differs from net profit as reported in the
Consolidated Statement of Comprehensive Income because it excludes
items that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates applicable
at the balance sheet date.
No taxation liability arises on gains from sales of fixed asset
investments by the Group by virtue of its investment trust status.
However, the net revenue (excluding UK dividend income) accruing to
the Group is liable to corporation tax at the prevailing rates.
Dividends Payable to Shareholders
Dividends to shareholders are recognised as a liability in the
period in which they are paid or approved in general meetings and
are taken to the Statement of Changes in Equity. Dividends declared
and approved by the Company after the Balance Sheet date have not
been recognised as a liability of the Company at the Balance Sheet
date.
Share Capital
Issued share capital consists of Ordinary shares with voting
rights and issued preference shares which are non-voting. The
Issued preference shares, owned in their entirety by New Centurion
Trust Limited, a wholly-owned subsidiary of the Company, are
entitled to receive a cumulative dividend of 0.01p per share per
annum, and are entitled to receive their nominal value, 50p, on a
distribution of assets or a winding up.
Share Premium
The share premium account represents the accumulated premium
paid for shares issued in previous periods above their normal value
less issue expenses. This is a reserve forming part of
non-distributable reserves. The following items are taken to this
reserve:
-- Costs associated with the issue of equity;
-- Premium on the issue of shares.
Capital Redemption Reserve
The reserve represents the nominal value of the shares bought
back and cancelled. This reserve is not distributable.
Revaluation Reserve
Following the adoption of IFRS 9, there are no investments
classified as "assets available for sale". As a result the
revaluation reserve has been transferred to the Capital
Reserve.
Capital Reserve
The following are taken to this reserve:
-- Gains and losses on derivatives;
-- Gains and losses on the disposal of investments;
-- Net movement arising from changes in the fair value of
investments held and classified as at "fair value through profit or
loss";
-- Exchange differences of a capital nature; and
-- Expenses together with the related taxation effect, allocated
to this reserve in accordance with the above policies.
Realised gains on investments less expenses, provisions and
unrealised gains may be considered by the Board for distribution.
This reserve is not distributable.
Revenue Reserves
The revenue reserve represents the surplus accumulated
profits and is distributable.
2. Income
Year ended Year ended
30 June 2019 30 June
2018
GBP GBP
------------ ----------
Income from investments:
UK dividends 848,003 505,852
------------ ----------
Un-franked dividend income 46,335 96,066
UK fixed interest 259,933 346,877
------------ ----------
1,154,271 948,795
Other income:
Bank deposit interest - 85
Underwriting commission - 1,300
Net dealing gains of subsidiaries - 6,093
------------ ----------
Total income 1,154,271 956,273
------------ ----------
3. Investment Management Fee
Year ended Year ended
30 June 2019 30 June 2018
GBP GBP
------------- -------------
Investment Management
Fee 98,697 88,259
------------- -------------
The management fee payable monthly in arrears by the Company to
the Investment Manager, Fiske plc is calculated at the rate of
one-twelfth of 0.75% per calendar month of the NAV of the Company,
capped at GBP90,000 for the first twelve months to 31 March 2019.
For these purposes, the NAV shall be calculated as at the last
business day of each month.
At 30 June 2019 an amount of GBP10,402 (2018: GBP7,500) was
outstanding and due to the Investment Manager.
4. Other Expenses
Year ended 30 June 2019 Year ended
GBP 30 June
2018
GBP
--------------------------------------------------------- --------------
Administration and secretarial
services 81,000 121,229
Auditors' remuneration
for:
- audit of the Group's
financial statements 35,000 33,950
Directors' remuneration
(see note 18) 45,319 60,000
Staff costs 1,167 14,000
Pension costs 233 280
Other expenses 139,106 148,630
--------------------------------------------------------- --------------
301,825 378,089
--------------------------------------------------------- --------------
The audit of the Group's financial statements includes the cost
of the audit of Abport Limited of GBP2,000 (2018: GBP2,000) and New
Centurion Trust Limited GBP2,000 (2018: GBP2,000), which are
charged to the subsidiaries.
In conjunction with the resignation of former directors, a
secretary also retired with the aggregate remuneration consisting
of:
Year ended 30 June Year ended
2019 30 June
GBP 2018
GBP
---------------------------------------- --------------
Staff costs
Wages and salaries 1,167 14,000
Social security costs - 1,579
---------------------------------------- --------------
Total 1,167 15,579
---------------------------------------- --------------
Pension costs
Pension payments 233 280
---------------------------------------- --------------
Total 233 280
---------------------------------------- --------------
There were no employees as at 30 June 2019
(2018: one).
The Company does not have a provision (2018: same) in respect of
future pension payments. There are no pension liabilities due to
past employees.
5. Taxation
Year ended Year ended
30 June 2019 30 June 2018
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
------- -------------- ----- ------- ----------------- -----
Current Taxation
Overseas taxation
suffered 1,113 - 1,113 5,329 - 5,329
------- -------------- ----- ------- ----------------- -----
1,113 - 1,113 5,329 - 5,329
------- -------------- ----- ------- ----------------- -----
The current tax charge for the year is lower than (2018: lower
than) the standard rate of corporation tax in the UK of 19% to 30
June 2019 and 19% to 30 June 2018. The differences are explained
below:
Year ended 30 June Year ended 30 June
2019 2018
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
--------------------------- --------- --------- --------- -------- --------- ---------
Return on ordinary
activities 753,749 (597,905) 155,844 489,925 741,056 1,230,981
Theoretical
tax at UK Corporation
tax rate of
19% (2018: 19%) 143,212 (113,602) 29,610 93,086 140,801 233,887
Effects of:
UK dividends
that are not
taxable (161,121) - (161,121) (96,112) - (96,112)
Overseas dividends
that are not
taxable (4,422) - (4,422) (18,253) - (18,253)
Non taxable
investment gains/(losses) - 113,602 113,602 - (140,801) (140,801)
Overseas taxation
suffered 1,113 - 1,113 5,329 - 5,329
Unrelieved expenses 22,331 - 22,331 21,279 - 21,279
--------------------------- --------- --------- --------- -------- --------- ---------
Actual current
tax charged
to the revenue
account 1,113 - 1,113 5,329 - 5,329
--------------------------- --------- --------- --------- -------- --------- ---------
Factors that may affect future tax charges
The Company has excess management expenses of GBP1,714,172
(2018: GBP1,596,643). It is unlikely that the Company will generate
sufficient taxable income in the future to use these expenses to
reduce future tax charges and therefore no deferred tax asset has
been recognised.
Deferred tax is not provided on capital gains and losses arising
on the revaluation or disposal of investments because the Company
meets (and intends to continue for the foreseeable future to meet)
the conditions for approval as an investment trust company under
HMRC rules.
Further reductions to the UK Corporation tax rates were
substantively enacted as part of the Finance Bill on 15 September
2015. These reduce the main rate to 17% from 1 April 2020.
6. Return per Ordinary Share
Year ended 30 June 2019 Year ended 30 June 2018
Revenue Capital Total Revenue Capital Total
-------- ---------- ---------- -------- -------- ----------
Return after
taxation
Return attributable
to ordinary
shareholders
(GBP) 752,636 (597,905) 154,731 484,596 741,056 1,225,652
-------- ---------- ---------- -------- -------- ----------
Weighted
average
number of
ordinary
shares in
issue (excluding
shares held
in Treasury) 4,772,049 4,772,049
Return per
ordinary
share (pence)
basic and
diluted 15.77p (12.53)p 3.24p 10.16p 15.53p 25.69p
-------- ---------- ---------- -------- -------- ----------
7. Dividends per Ordinary Share
Year ended Year ended
30 June 2019 30 June 2018
GBP GBP
------------- -------------
Declared and paid per
Ordinary Share
In respect of the prior
period:
Fourth interim dividend
5.70p (2018: 5.70p) 272,007 272,007
In respect of the year
under review:
First interim 5.00p
(2018: 5.00p) 238,602 238,602
Second interim dividend
3.75p (2018: 5.00p) 178,952 238,602
Third interim dividend
3.75p (2018: 5.00p) 178,952 238,602
------------- -------------
868,513 987,813
------------- -------------
Declared per Ordinary
Share
Dividend declared in
respect of the year
under review:
Fourth interim dividend
3.75p (2018: 5.70p) 178,952 272,007
------------- -------------
8. Ordinary Share Capital
Group and Company Group and Company
2019 2018
Number GBP Number GBP
Issued, allotted
and fully paid:
--------- --------- --------- ---------
Ordinary shares
of 50p each 4,772,049 2,386,025 4,772,049 2,386,025
The ordinary shares entitle the holders to receive all ordinary
dividends and all remaining assets on a winding up, after the fixed
rate preference shares have been satisfied in full.
The Company does not hold any ordinary shares in Treasury (2018:
none).
9. Issued Preference Share Capital
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Issued preference
share capital - - 858,783 858,783
The 1,717,565 fixed rate preference shares of 50p each are
non-voting, entitled to receive a cumulative dividend of 0.01p per
share per annum, and are entitled to receive their nominal value,
50p, on a distribution of assets or a winding up. The whole of the
issue is held by New Centurion Trust Limited, a wholly owned
subsidiary of the Company.
The Directors do not consider the fair values of the issued
preference share capital to be significantly different from the
carrying values.
10. Net Asset Value per Ordinary Share
The NAV per ordinary share is calculated as
follows:
2019 2018
GBP GBP
Net assets 16,620,311 17,334,093
Ordinary shares in issue, excluding
own shares held in Treasury 4,772,049 4,772,049
NAV per ordinary share 348.28p 363.24p
The underlying investments of the wholly owned subsidiary New
Centurion Trust Limited comprise issued preference share capital,
as discussed in note 9, in the Company and, being effectively
eliminated on consolidation, the valuation thereof does not impact
the NAV attributable to ordinary shareholders.
11. Investments
During the year, upon transition to IFRS 9, investments held for
sale were re-designated as investments held at fair value through
profit or loss.
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Available for sale - 6,592,447 - 6,592,447
At fair value through
profit or loss 15,777,113 9,747,882 15,775,016 9,747,882
-----------
Total investments designated
at fair value 15,777,113 16,340,329 15,775,016 16,340,329
Investments available
for sale
Opening book cost 5,211,124 6,562,916 5,266,743 6,618,535
Opening net investment
holding gains 1,381,323 2,025,591 1,325,704 1,969,972
Re-classification to
fair value through profit
or loss upon transition
to IFRS 9 (6,592,447) - (6,592,447) -
Total investments designated
as available for sale - 8,588,507 - 8,588,507
Movements in the year:
Purchases at cost - - - -
Sales - proceeds - (1,923,800) - (1,923,800)
- gains on sales - 572,008 - 572,008
Decrease in investment
holding gains - (644,268) - (644,268)
-----------
Closing valuation - 6,592,447 - 6,592,447
Closing book cost - 5,211,124 - 5,266,743
Closing net investment
holding gains - 1,381,323 - 1,325,704
- 6,592,447 - 6,592,447
Analysis of changed
in investment holding
gains
Movement in impairment
provision - (3,745) - (11,707)
Recognised in equity - 30,134 - 41,318
Recognised in return
after taxation - (670,657) - (673,879)
Losses on investments - (644,268) - (644,268)
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Opening book cost 14,827,617 8,301,661 14,883,235 8,301,661
Opening net investment
holding gains/(losses) 1,514,789 (601,039) 1,457,094 (601,039)
Total investments designated
as held at fair value 16,342,406* 7,700,622 16,340,329* 7,700,622
Movements in the year:
Purchases at cost 6,497,746 5,655,702 6,497,746 5,655,702
Sales - proceeds (6,465,917) (3,848,048) (6,457,917) (3,848,048)
- gains (losses) on
sales 267,049 (492,823) 288,915 (492,823)
(Decrease)/increase
in investment holding
gains (864,171) 732,429 (886,057) 732,429
Closing valuation 15,777,113 9,747,882 15,775,016 9,747,882
Closing bookcost 15,126,495 9,616,492 15,203,979 9,616,492
Closing net investment
holding gains 650,618 131,390 571,037 131,390
15,777,113 9,747,882 15,775,016 9,747,882
*This includes re-classified
available for sale assets.
Group Company
Year ended Year ended
2019 2018 2019 2018
GBP GBP GBP GBP
Transaction costs
Costs on acquisitions 30,438 28,265 30,438 28,265
Costs on disposals 9,165 8,020 9,165 8,020
39,603 36,285 39,603 36,285
Group Company
Year ended Year ended
2019 2018 2019 2018
GBP GBP GBP GBP
Analysis of capital
gains
Gains on sale of investments 267,049 79,185 288,915 79,185
Movement in investment
holding gains (864,171) 88,161 (886,057) 88,161
(597,122) 167,346 (597,142) 167,346
Fair Value Hierarchy
The Group is required to classify fair value measurements using
a fair value hierarchy that reflects the subjectivity of the inputs
used in measuring the fair value of each asset. The fair value as
the amount at which the asset could be sold or the liability
transferred in an orderly transaction between market participants,
at the measurement date, other than a forced or liquidation
sale.
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset as follows:
Level 1 - valued using quoted prices, unadjusted in active
markets for identical assets or liabilities.
Level 2 -valued by reference to valuation techniques using
observable inputs for the asset or liability other than quoted
prices included in level 1.
Level 3 - valued by reference to valuation techniques using
inputs that are not based on observable market data or the asset or
liability.
The table below sets out fair value measurements of financial
instruments by the level in the fair value hierarchy into which the
fair value measurement is categorised.
At 30 June 2019 Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets at fair
value through profit or
loss
Equities 8,803,036 300,353 2,250,165 11,353,554
Fixed Interest bearing
securities 3,721,476 - 702,083 4,423,559
12,524,512 300,353 2,952,248 15,777,113
At 30 June 2018 Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets at fair
value through profit or
loss
Equities 7,770,314 - - 7,770,314
Fixed Interest bearing
securities 471,448 - 1,506,120 1,977,568
Financial assets available
for sale
Equities 800,000 413,559 2,889,789 4,103,348
Fixed Interest bearing
securities 2,061,228 - 427,871 2,489,099
Current asset investments
held by a trading subsidiary 2,077 - - 2,077
11,105,067 413,559 4,823,780 16,342,406
There were no transfers between level 1 and 2 during the current
or prior year.
The valuation techniques used by the Group are set out in the
Accounting Policies in Note 1.
Valuation process for Level 2 investments
The valuations are provided by an independent third party
broker. The values are determined using observable inputs including
prevailing interest rates, the maturity and redemption dates of the
investment. The equity securities of the issuing company of the
investments held are or have been publicly listed. The information
includes reported results, commentary on current trading and, third
party research.
Valuation process for Level 3 investments
Investments classified within Level 3 have significant
unobservable inputs. Level 3 investments can typically include
unlisted equity and corporate debt securities. As observable prices
are not available for these securities, the Group has used
valuation techniques to derive the fair value using recognised
valuation methodologies, in accordance with International Private
Equity and Venture Capital ("IPEVC") Valuation Guidelines including
discounted cash flow modelling where relevant.
The Level 3 investments held by the Group currently consist of
fixed interest bearing securities and certain equity securities.
These are valued by the Investment Manager with valuation
confirmations provided to the Board on a regular basis. The equity
securities of the issuing company of the Level 3 investments held
have been formerly listed and, therefore, detailed public
information is available to substantiate the future prospects of
the issuing company. The fixed interest bearing securities
anticipated future cash returns and cash-flows. This information
includes reported results, commentary on current trading, and third
party research.
The Group uses a variety of methods and makes assumptions that
are based on market conditions existing at each reporting date.
Valuation techniques used include the use of comparable recent
arm's length transactions, reference to other instruments that are
substantially the same, discounted cash flow analysis, option
pricing models and other valuation techniques commonly used by
market participants making the maximum use of market inputs and
relying as little as possible on entity specific inputs.
Unobservable inputs are not provided by the Group but provided
by a third party pricing vendor, these prices that are provided by
the pricing vendor are not adjusted.
The following stocks, each having no independent source of
pricing, have been assessed by the Directors as having the
following values:
Nil value: 600 Group Warrants, Fairpoint Group Ordinary shares,
Gable Holdings 7.35% Loan Note and Whitnash 6.5% 2nd Preference
shares.
Par value: Intercede Group 8% Secured Convertible Loan
notes.
Written down value: Liberty Limited 6% Cumulative Non Redeemable
Preference shares and Liberty Retail Limited 9.5% Cumulative Non
Redeemable Preference shares have each been marked down to reflect
expectations of discounted value.
If the value of the level 2 and 3 investments were to increase
or decrease by 10%, while all the other variables remained
constant, the net assets and net profit available to shareholders
would have increased/decreased by GBP325,260 (2018:
GBP523,734).
The table below presents the movement in Level 3 investments
that were accounted for at fair value for the year ending 30 June
2019.
Year ended 30 June 2019
Group Financial
assets
at fair
value
through
profit
or loss
GBP
Opening balance 4,823,780
Transfer to level 1* (1,056,120)
Movement in unrealised gains/(losses)
on investments at fair value through
profit or loss 206,423
Realised gain 45,398
Sales proceeds (1,067,233)
Closing balance 2,952,248
Company Financial
assets
at fair
value
through
profit
or loss
GBP
Opening balance 4,823,780
Transfer to level 1* (1,056,120)
Movement in unrealised gains/(losses)
on investments at fair value through
profit or loss 171,292
Realised gain 80,529
Sales proceeds (1,067,233)
Closing balance 2,952,248
*During the year one investment converted to equity and another
listed on an exchange, and had a quoted price as at 30 June
2019.
Year ended 30 June 2018
Group
Financial assets
at fair value
through profit Available for
or loss sale Total
GBP GBP GBP
Opening balance 1,664,286 3,816,982 5,481,268
Movement in impairment
provision on
investments available
for sale - (99,952) (99,952)
Movement in unrealised
appreciation
on investments
available for
sale recognised
in equity - (20,156) (20,156)
Movement in unrealised
appreciation
on investments
available for
sale recognised
in return after
taxation - 3,865 3,865
Purchases at
cost - -
Movement in unrealised
gains/(losses)
on investments
at fair value
through profit
or loss (158,165) - (158,165)
Realised loss - 16,930 16,930
Sales proceeds - (400,010) (400,010)
Closing balance 1,506,121 3,317,659 4,823,780
Company
Financial assets
at fair value
through profit Available for
or loss sale Total
GBP GBP GBP
Opening balance 1,664,286 3,816,982 5,481,268
Movement in impairment
provision on
investments available
for sale - (99,952) (99,952)
Movement in unrealised
appreciation
on investments
available for
sale recognised
in equity - (20,156) (20,156)
Movement in unrealised
appreciation
on investments
available for
sale recognised
in return after
taxation - 3,865 3,865
Purchases at
cost - -
Movement in unrealised
gains/(losses)
on investments
at fair value
through profit
or loss (158,165) - (158,165)
Realised loss - 16,930 16,930
Sales proceeds - (400,010) (400,010)
Closing balance 1,506,121 3,317,659 4,823,780
During the year there were four significant disposals:
Stock Valuation@
Proceeds Cost 30.06.2018
GBP GBP GBP
Charles Taylor 514,317 334,592 595,814
Direct Line 341,909 354,049 362,174
Lloyds 7.625%
Perp 308,051 204,360 522,301
Lloyds 7.875%
Perp 423,809 245,997 419,721
12.Derivative Contracts
The derivative contracts serve as components of the Company's
investment strategy and are utilised primarily to structure and
hedge investments, to enhance performance and reduce risk to the
Group (the Company does not designate any derivative as a hedging
instrument for hedge accounting purposes). The derivative contracts
that the Company may hold from time to time or issue include:
index-linked notes, contracts for differences, covered options and
other equity-related derivative instruments.
These instruments can involve a high degree of leverage and are
very volatile. A relatively small movement in the underlying value
of a derivative contract may have a significant impact on the
profit and loss and net assets of the Group. The Company's
investment objective sets limits on investments in derivatives with
a high risk profile. The Investment Manager is instructed to
closely monitor the Company's exposure under derivative contracts
and any use of the derivatives for investment purposes will be made
on the basis of the same principles of risk spreading and
diversification that apply to the Company's direct investments. The
Company will not enter into uncovered short positions.
As at 30 June 2019, the Group had no positions in the following
type of derivative:
Options
Options are contractual agreements that convey the right, but
not the obligation, for the purchaser either to buy or sell a
specific amount of a financial instrument at a fixed price, either
at a fixed future date or at any time within a specified
period.
The Company purchases either Put or Call options through
regulated exchanges and OTC markets. Options purchased by the
Company provide the Company with the opportunity to purchase (Call
options) or sell (Put options) the underlying asset at an
agreed-upon value either on or before the expiration of the option.
The Company is exposed to credit risk on purchased options only to
the extent of their carrying value, which is their fair value.
During the year ended 30 June 2018, the FTSE 100 March 2018
6,000 Put option expired.
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Movements in the period:
Opening valuation - 63,640 - 63,640
Purchases at cost - - - -
Sales proceeds - - - -
Losses on sales - (339,853) - (339,853)
Movements in unrealised
loss - 276,213 - 276,213
Closing valuation - - - -
Closing bookcost - - - -
Closing unrealised - - - -
loss
- - - -
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Analysis of capital
gains
Losses on sale of
investments - (339,853) - (339,853)
Movement in investment
holding losses - 276,213 - 276,213
- (63,640) - (63,640)
13. Investment in Subsidiaries
Company
2019 2018
GBP GBP
At cost 5,410,552 5,410,552
Provision for
diminution in
value (4,547,896) (4,547,896)
At cost 862,656 862,656
At 30 June 2019, the Company held interests in the following
subsidiary companies:
Country % share of % share of Nature of business
of Incorporation capital held voting rights
Investment
Abport Limited England 100% 100% dealing company
New Centurion Investment
Trust Limited England 100% 100% holding company
The registered office for both companies above is:
Hamilton Centre, Rodney Way, Chelmsford, Essex CM1 3BY
14. Substantial Share Interests
The Company has no notified interests in 3% or more of the
voting rights of any companies at 30 June 2019.
15. Trade and Other Receivables
Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Amounts due from subsidiaries - - 25,395 20,489
Accrued income 35,577 15,998 35,577 15,998
Due from brokers - - - -
Dividends receivable 146,804 215,804 146,804 215,804
Taxation recoverable 6,064 3,182 6,064 3,182
Other receivables 4,513 30,357 4,513 30,357
192,958 265,341 218,353 285,830
The carrying amount of trade receivables approximates to their
fair value. Trade and other receivables are not past due at 30 June
2019.
16. Trade and Other Payables Group Company
2019 2018 2019 2018
GBP GBP GBP GBP
Preference dividends payable
to the Company's wholly
owned subsidiary - - 1,033 861
Amount due to subsidiaries - - 101,533 101,533
Investment management fees 10,402 7,500 10,402 7,500
Other trade payables and
accruals 125,061 109,587 113,522 104,761
135,463 117,087 226,490 214,655
17. Financial Instruments and Associated Risks
The Groups financial instruments comprise securities, cash
balances, receivables and payables. They are classified in the
following categories:
-- those to be measured subsequently at fair value through profit or loss; and
-- those to be measured at and amortised cost.
The financial assets held at amortised cost include trade and
other receivables, cash and cash equivalents.
Investment Objective and Policy
The Group's investment objective is to provide shareholders with
an attractive level of dividends coupled with capital growth over
the long-term. The investing activities in pursuit of its
investment objective involve certain inherent risks.
Any use of derivatives for investment purposes will be made on
the basis of the same principles of risk spreading and
diversification that apply to the Group's direct investments, as
described below.
Risks
The risks identified arising from the Group's financial
instruments are market risk (which comprises market price risk and
interest rate risk, liquidity risk and credit and counterparty
risk). The Group may enter into derivative contracts to manage
risk. The Board reviews and agrees policies for managing each of
these risks, which are summarised below.
Market Risk
Market risk arises mainly from uncertainty about future prices
of financial instruments used in the Group's business. It
represents the potential loss the Group might suffer through
holding market positions by way of price movements, interest rate
movements and exchange rate movements. The Group assesses the
exposure to market risk when making each investment decision and
these risks are monitored by the Investment Manager on a regular
basis and the Board at quarterly meetings with the Investment
Manager.
Market price risk
Market price risk (i.e. changes in market prices other than
those arising from currency risk or interest rate risk) may affect
the value of investments.
The Board manages the risks inherent in the investment portfolio
by ensuring full and timely reporting of relevant information from
the Investment Manager. Investment performance and exposure are
reviewed at each Board meeting.
The Group's exposure to changes in market values was
GBP15,777,113 (2018: GBP16,342,406). The direct impact of a 5%
movement in the value of investments amounts to GBP788,856 (2018:
GBP817,120). An equal change in the opposite direction would have
decreased the net assets and net profit available to shareholders
by an equal and opposite amount. The analysis is based on closing
balances only and is not representative of the year as a whole. The
market value of the option may move in a different direction to
Securities.
2019 2018
GBP GBP
Securities available for sale - 6,592,447
Securities at fair value through
profit or loss 15,777,113 9,747,882
Total investment 15,777,113 16,340,829
2019 2018
GBP GBP
Securities available for sale - 329,622
Securities at fair value through
profit or loss 788,856 487,394
Effect on post-tax profit for
the year and on equity 788,856 817,016
Interest Rate Risk
Interest rate movements may affect the level of income
receivable on cash deposits. The Group's financial assets and
liabilities, excluding short-term debtors and creditors, may
include investment in fixed interest securities, such as UK
corporate debt stock, whose fair value may be affected by movements
in interest rates. The majority of the Group's financial assets and
liabilities, however, are non-interest bearing. As a result, the
Group's financial assets and liabilities are not subject to
significant amounts of risk due to fluctuations in the prevailing
levels of market interest rates.
The possible effects on the fair value and cash flows that could
arise as a result of changes in interest rates are taken into
account when making investment decisions. The Board imposes
borrowing limits to ensure gearing levels are appropriate to market
conditions.
Cash flow Cash flow
interest No interest interest No interest
rate risk rate risk Total rate risk rate risk Total
2019 2019 2019 2018 2018 2018
GBP GBP GBP GBP GBP GBP
Investments available
for sale - - - 2,489,099 4,103,348 6,592,447
Investments at fair
value through profit
or loss 3,957,341 11,817,675 15,775,016 1,506,120 8,241,762 9,747,882
Investment in Subsidiary - 2,097 2,097 - 2,077 2,077
Other receivables* - 188,445 188,445 - 234,984 234,984
Cash at bank 785,703 - 785,703 843,433 - 843,433
Current liabilities - (135,463) (135,463) - (117,087) (117,087)
---------- ---------- ----------
4,743,044 11,872,754 16,615,798 4,838,652 12,465,084 17,303,736
* The above table doesn't include prepayments of GBP4,513 (2018:
GBP30,357).
Interest rate movements may affect the level of income
receivable on cash deposits and fixed interest bearing securities.
The impact of a 1% movement in interest rates would move net assets
and net profit available to shareholders by the following
amounts:
2019 2018
GBP GBP
Fixed interest bearing securities 2,599 3,469
Bank interest - 1
2,599 3,470
Liquidity Risk
The Group's assets mainly comprise readily realisable quoted and
unquoted securities that can be sold to meet funding commitments if
necessary. Short-term flexibility is achieved through the ability
to liquidate listed securities.
The Group's liquidity risk is managed by the Investment Manager
in accordance with established policies and procedures in place.
Cash flow forecasting is performed in the operating entities of the
Group and aggregated by the Investment Manager. The Investment
Manager monitors the rolling forecasts of the group's liquidity
requirements to ensure it has sufficient cash to meet obligations
as they fall due.
The maturity profile of the Group's financial liabilities
GBP135,463 (2018: GBP117,087) are all due in one year or less.
Credit and Counterparty Risk
Credit risk is the risk of financial loss to the Group if the
contractual party to a financial instrument fails to meet its
contractual obligations.
The maximum exposure to credit risk as at 30 June 2019 was
GBP978,661 (2018: GBP1,108,774). The calculation is based on the
Group's credit risk exposure as at 30 June 2019 and this may not be
representative for the whole year.
The Group's quoted investments are held on its behalf by Fiske
plc acting as the Group's custodian. Bankruptcy or insolvency of
the custodian may cause the Group's rights with respect to
securities held by the custodian to be delayed.
Where the Investment Manager makes an investment in a bond,
corporate or otherwise, the credit rating of the issuer is taken
into account so as to minimise the risk to the Group of
default.
Investment transactions are carried out with a number of brokers
where creditworthiness is reviewed by the Investment Manager.
Cash is only held at banks that have been identified by the
Board as reputable and of high credit quality.
Foreign Currency Risk
Although the Group's performance is measured in sterling, a
proportion of the Group's assets may be either denominated in other
currencies, investments with currency exposure or the trading
activities of its investee companies.
At 30 June, the Group held GBP1,285 (2018: GBP1,502) of
investments held for sale denominated in Australian Dollars. This
is not material to the Group.
Derivatives
The Investment Manager may use derivative instruments in order
to "hedge" the market risk of part of the portfolio. The Investment
Manager reviews the risks associated with individual investments
and, where they believe it appropriate, may use derivatives to
mitigate the risk of adverse market (or currency) movements. The
Investment Manager discusses regularly the hedging strategy with
the Board.
At the year end, there were no derivative contracts open (2018:
none).
Capital Management Policies
Capital is managed so as to maximise the return to shareholders
while maintaining a capital base to allow the Group to operate
effectively. Capital is managed on a consolidated basis and to
ensure that it will be able to continue as a going concern.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell securities to
reduce debt.
The Board, with the assistance of the Investment Manager,
monitors and reviews the capital on the basis of the gearing ratio.
This ratio is calculated as net debt divided by total capital. Net
debt is calculated as total borrowings (including current and
non-current borrowings' as shown in the consolidated balance sheet)
less cash and cash equivalents. Total capital is calculated as
"equity" as shown in the consolidated balance sheet plus net debt.
The gearing ratios at 30 June 2019 and 2018 were as follows:
2019 2018
GBP GBP
Cash and bank balances 785,703 843,433
Net cash 785,703 843,433
Ordinary shareholders' funds 16,620,311 17,568,224
Gearing (net debt/ordinary nil nil
shareholders' funds)
18. Related Party Transactions
Details of the relationship between the Company/Group and the
Investment Manager, Fiske plc are disclosed in the Strategic
Report.
The amounts paid to the Investment Manager, together with
details of the Investment Management Agreement, are disclosed in
note 3. Investment Management fees for the year amounted to
GBP98,697 (2018: GBP88,259). In addition, GBP6,141 was paid to
Fiske plc pursuant to a custody agreement (2018: GBP5,079).
As at the year end, the following amounts were outstanding
payable to Fiske plc: GBP13,670 (2018: GBP12,579).
Key Management Personnel
The Board consists of three non-executive Directors all of whom,
with the exception of Mr Perrin who is a non-executive Director of
Fiske plc, are considered to be independent by the Board. For the
year ended 30 June 2019 all Directors including, the Chairman,
received an annual fee of GBP15,000. The Directors did not receive
any other form of renumeration.
Controlling Party
The Director's consider that there is no controlling party.
At the year end, there were no outstanding fees payable to
Directors (2018: nil).
Expenses outstanding to Directors at the year end consists of
GBPnil (2018: GBPnil). No interest is charged on the balance and
consists of reimbursement of expenses incurred.
There were no other related party transactions during the
current or previous year.
19. Transition to IFRS 9 Financial Instruments
IFRS 9 'Financial Instruments' is effective for periods
beginning on or after 1 January 2018 and has been adopted by the
Group in the year. IFRS 9 sets out requirements for recognising and
measuring financial assets and financial liabilities and replaces
IAS 39 'Financial Instruments: Recognition and Measurement'. The
impact on the consolidated financial statements of the Group is
detailed below.
Classification of financial assets
IFRS 9 contains a new classification and measurement approach
for financial assets that reflects the business model in which
assets are managed and the cash flow characteristics of the
assets.
IFRS 9 contains three principal classification categories for
financial assets: measured at amortised cost, fair value through
other comprehensive income and fair value through profit or loss.
The standard eliminates the existing IAS 39 categories of held to
maturity, loans and receivables and available for sale. The new
classification requirements do impact the accounting for the
Group's financial assets and all investments previously classified
as available for sale have been reclassified to fair value through
profit or loss.
Impairment of financial assets
IFRS 9 replaces the incurred loss model in IAS 39 with a
forward-looking 'expected credit loss' model. The new impairment
model will apply to financial assets measured at amortised cost.
There is no impact on the values reported in the financial
statements from adopting IFRS 9 in respect of expected credit
losses.
Cash and cash equivalents
Cash and cash equivalents are held at banks with a strong credit
rating and are not subject to any period of notice. The Group
typically maintains a low value of cash and cash equivalents and
often a net overdrawn cash position as part of its RCF funding
arrangement. There is no impact on the values reported in the
financial statements from adopting IFRS 9 in respect of expected
credit losses.
Classification of financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification of financial liabilities. The classification
requirements of IFRS 9 do not impact the financial statements.
Transition
The impact on the financial statements from the adoption of IFRS
9 is detailed below. The Group and Company has applied the
simplified approach and therefore adjustments on transition to IFRS
9 are presented as an adjustment to opening reserves at 1 July
2018.
Opening Reserves Adjustment
Year ended
30 June 2018
GBP
-------------
Consolidated Balance Sheet and
Consolidated Statement of Changes
in Equity
Capital and reserves
Revaluation Reserve (1,917,418)
Capital Reserve 1,917,418
-
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END
FR URABRKBAKUAR
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September 23, 2019 02:00 ET (06:00 GMT)
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