TIDMVIN
RNS Number : 7138F
Value and Income Trust plc
30 October 2018
VALUE AND INCOME TRUST PLC
Unaudited Half-Yearly Financial Report
For The Six Months Ended 30 September 2018
Summary
30 September 31 March 2018 30 September
2018 2017
Group net asset value
per share
(valuing debt at market) 330.5p 309.2p 332.0p
=========================== ================= ============================== ============================
Group net asset value
per share
(valuing debt at par) 349.7p 330.5p 355.9p
=========================== ================= ============================== ============================
Share price (mid) 265.5p 262.0p 267.0p
=========================== ================= ============================== ============================
Dividend per share 5.6p 11.4p 5.4p
(first and second (total) (first and second
quarterly) quarterly)
=========================== ================= ============================== ============================
Value and Income Trust PLC ('VIT') is a specialist investment
trust whose shares are traded on the London Stock Exchange. VIT
invests in higher yielding, less fashionable areas of the UK
commercial property and equity markets, particularly in medium and
smaller sized companies. VIT aims for long-term real growth in
dividends and capital values without undue risk. Figures for net
asset values shown in the tables above and below are calculated
after deducting dividends declared but not yet paid, as in previous
years.
Over the six months ended 30 September 2018, VIT's share price
rose by 1.3% while the net asset value per share, valuing debt at
par, increased by 6.0%. The FTSE All-Share Index (the "Index") rose
by 1.5% over the half year. VIT's property portfolio was revalued
independently at 30 September 2018.
The Company announced on 11 September 2018 the dates of the
quarterly dividends for the year to 31 March 2019. The first
quarterly dividend of 2.8p per share was paid on 26 October 2018 to
all shareholders on the register on 28 September 2018. The second
quarterly dividend of 2.8p per share will be paid on 25 January
2019 to those shareholders on the register on 28 December 2018. The
ex-dividend date will be 27 December 2018.
The third quarterly dividend of 2.8p per share will be paid on
26 April 2019 to those shareholders on the register on 29 March
2019. The ex-dividend date will be 28 March 2019. The Board will
announce in due course the proposed fourth and final payment for
the year, which subject to shareholder approval, will be paid on or
around 26 July 2019.
SUMMARY OF PORTFOLIO
30 September 2018 31 March 2018 30 September 2017
GBPm % GBPm % GBPm %
UK Equities 135.7 65 128.9 65 140.4 66
=================== ===== === ========= ==== =========== ======
UK Property 67.9 32 68.7 34 67.6 32
=================== ===== === ========= ==== =========== ======
Net current assets 5.6 3 2.8 1 4.0 2
=================== ===== === ========= ==== =========== ======
209.2 100 200.4 100 212.0 100
=================== ===== === ========= ==== =========== ======
ENQUIRIES: Angela Lascelles
OLIM Limited, Investment Manager, Equities
Tel: 020 7367 5660
Website: www.olim.co.uk
Matthew Oakeshott
OLIM Property Limited, Investment Manager,
Property
Tel: 020 7647 6701
Website: www.olimproperty.co.uk
Investment Manager's Reports
UK Equities
The Market
Over the six month period to end September, the FTSE All-Share
Index of UK equities rose by 6.0% and, including dividends, the
total return was 8.2%. Our half-year began with a strong rebound
after the weakness seen in the first quarter of 2018, when the
market fell by nearly 8%, depressed by severe weather and a very
weak performance by the UK economy. In the quarter to end June, the
first of our current year, all the losses of the first quarter were
recovered and the All-Share Index recorded a rise of 7.9%. In
August and September the market declined modestly, influenced by
rising interest rates here and in America.
Within the UK market, large companies, measured by the FTSE 100
Index, rose by 6.4%, driven by the Oil & Gas sector and the
Pharmaceutical sector, whose components are mainly denominated in
dollars. The more domestically focussed FTSE 250 Index of mid-sized
companies rose by 4.4%. Worldwide, equity markets rose by 4.3%, led
by Japan and America, where the relevant indices rose by 12.4% and
10.3%. Elsewhere in the world market performances were more
subdued, with a rise of 1.2% in Germany and a fall of 11.2% in the
FTSE All Emerging Markets index.
Interest rates have risen in America and in the UK during the
half-year with a consequent effect on bond yields. In the US, ten
year bond yields closed September at 3.1%, forty basis points
higher than at the end of March and in the same period ten year UK
Gilt yields rose by twenty basis points to 1.6%. In the currency
markets the pound fluctuated against the dollar during the
half-year but closed September at $1.30, a fall of 7.0% compared to
the end March rate of $1.40. Against the euro, it fell by 1.3% in
the half-year to a closing level of EUR1.12. In commodity markets,
copper and iron ore both fell by 7%, depressed by the threat of
trade wars between America and China, but the oil price rose by
18%, driven by pressures on the supply of oil.
Economically, the background to these market movements has been
continuing strong growth in global GDP, though expectations have
recently been modestly downgraded due to the US/China trade
tensions. UK growth picked up strongly in the second quarter of
2018 helped by England's performance in the World Cup and the
prolonged spells of hot weather.
VIT's Portfolio
We made significant changes to the portfolio in the half-year.
Sales and purchases totalled GBP22.0m and many of the transactions
were motivated by the Board's wish to increase the equity income.
We reduced the lower yielding holdings of Beazley, Halma, Informa
and Rotork. We sold the entire holding in Daily Mail and General
Trust in order to reinvest in ITV, which has a significantly higher
yield and an attractive valuation. In the insurance sector, we
reduced the holding in Legal and General and started a holding in
Phoenix Group. Phoenix is a specialist closed life and pension fund
consolidator. Its recent acquisition of Standard Life Aberdeen's
life insurance assets, funded by a rights issue, is a
transformative deal that extends its dividend profile and de-risks
by product type. We sold the holding of Wood Group, where we were
concerned about the balance sheet following the acquisition of
AmecFosterWheeler.
In addition to Phoenix, we bought new holdings in Lloyds Bank,
ITV, referred to above, and Devro, all with well above average
yields. ITV's sales are becoming less dependent on advertising
revenue, with more than half now derived from its archive and
streaming services. Devro is the second largest manufacturer of
food casings, mainly for sausages, in the world. After a heavy
programme of capital investment, we believe it will deliver strong
returns, due to its cash flow and market position, combined with a
below average valuation. We added to our higher yielding holdings
of Marstons, BHP Billiton, Rio Tinto, Centrica and N Brown.
We made net sales of GBP763,000 but were fully invested at the
end of September.
Performance
VIT's equity portfolio outperformed over the half-year with a
total return of +8.5% compared to the FTSE All-Share Index Return
of +8.2%. In sector allocations, the absence of Tobacco holdings
was positive and our underweight allocation to the Bank sector was
also helpful. Our underweight holdings in the Oil & Gas and
Pharmaceutical sectors were negative factors in relative
performance. In stock selection our holdings in Cineworld (+34%),
Restaurant Group (+17%), Croda (+16%) and Halma (+23%) were
strongly positive factors to relative performance. These positives
were partially offset by the negative movements in Spectris (-12%),
Crest Nicholson (-23%) and N Brown (-23%).
Outlook
Globally, economic growth remains strong but the threats to
future growth prospects have increased. President Trump's policies
have raised the risks in the world economy, with particular anxiety
about his trade wars, though so far they are not extensive. GDP
growth in America has accelerated to an annual rate of 4.2% as a
result of his tax incentives, but the Federal Reserve is trying to
contain the inflationary consequences by raising interest rates
again and guiding to further raises later in the year. So far there
have been eight raises to the current rate of 2.0% to 2.25%.
The labour market in the USA and in the UK continues to be
tight, with unemployment in both areas at the lowest levels for
more than 40 years. The consequence of rising US interest rates has
been a strong dollar and increasing problems for highly borrowed
emerging economies which have dollar denominated debt. The Turkish
Lira has collapsed and interest rates there now are 24% and in
Argentina inflation has rocketed to 34%. Nevertheless, despite the
increasing threats to world stability, forecasts for global growth
in 2019 remain above 3.5% and are similar to the expectation for
2018. In the UK, there was a strong rebound in GDP growth in the
second quarter of this year. After a weather affected first quarter
sluggish statistic of +0.1%, GDP grew by 0.6% in the second
quarter, with helpful factors including the World Cup and the
hottest summer since 1976. Current expectations for 2018 remain
fairly subdued at 1.3% but may follow the trend of recent years
with an upgrade towards the end of the year. The faster rate of GDP
growth in the second quarter enabled the Bank of England to raise
Base Rate in August to 0.75%, the first raise above 0.5% since it
was reduced to that level in 2009. Brexit is currently the
predominate topic of politics and journalism and, with now less
than six months to go, is heightening debates and differences,
especially following the season of political party conferences.
If the Chequers proposal does become the eventual deal, we do
not expect a significant short term effect on the UK economy, as
our relationship with Europe in future will not be greatly changed.
If we exit without a deal there could be a prolonged negotiation
concerning the future terms of trade with Europe but, despite
alarming newspaper headlines, the sensible course would be to leave
trading terms unchanged until negotiations have been concluded.
Politically, there is much uncertainty and if Labour, under its
present leadership, were to win a future general election the
consequences are likely to be severe. Inflation in the UK has at
times exceeded wage growth, leading to renewed pressure on consumer
spending but recent statistics have demonstrated real growth in
wages. Changes in consumer spending habits have caused carnage on
high streets with many well-known retailers appointing
administrators or significantly reducing their property
estates.
In summary, the valuation of the UK equity market at 13.7x
earnings and with an average yield of 3.8% still looks compelling
compared to gilt yields and cash returns, which have risen slightly
since August but remain well below the current rate of inflation.
To the overseas investor the UK looks particularly cheap compared
to overseas markets, with the pound still at a severely reduced
exchange rate since the result of the EU Referendum in June 2016.
Until the Brexit deal is determined, much uncertainly will overhang
our market but we do believe that investors will take advantage of
our cheap valuation once the future of our relationship with Europe
has been determined.
OLIM Limited
30 October 2018
Investment Manager's Reports
Property
The Market
Capital value growth in UK commercial property has ground to a
halt, and is starting to turn down as squeezed real incomes and
Brexit uncertainty take their toll. After a total return of 9.6% in
2017 as measured by the IPD Annual Index, average property capital
values are up by 2% so far in 2018. But the serious pain in retail
property is only just starting to be reflected in valuations and
shorter and weaker let property in all sectors will follow retail
property downwards if there is a disorderly Brexit and economic
disruption. A flight to safety is developing right across the
property market.
Industrial/warehouse and the newer alternative types of
institutional investment property (such as leisure, hotels, petrol
filling stations/convenience stores, car showrooms and medical and
student accommodation) are substantially outperforming office and
retail property, as capital and rental values of shopping centres,
high street shops, retail warehouses, and shorter-let London
offices have come under increasing pressure this year. Rental
values are now flat on average across the property market as a
whole, with retail rents collapsing, residential slipping, offices
flat and rental growth concentrated in the industrial/warehouse and
alternatives sectors.
UK Commercial Property - Average Annual % Growth to September
2018
3 months 6 months 1 years 3 Years 5 Years 10 Years
=============== ======== ======== ======= ======= ======= ========
Capital Values +1.6 +2.6 +4.4 +2.2 +5.6 +0.9
=============== ======== ======== ======= ======= ======= ========
Rental Values +0.4 +0.8 +1.4 +1.9 +2.6 +0.1
=============== -------- -------- ------- ------- ------- --------
Total Return +6.8 +7.8 +9.9 +7.8 +11.6 +7.4
=============== ======== ======== ======= ======= ======= ========
Source: IPD Monthly Index - Annualised
Average capital values of commercial property may be flat over
2018 as a whole, with rental values just up. Income will provide
most of a total return around 5%. Retail capital values will be
well down, offices up slightly and industrials and alternatives
well ahead over 2018 as a whole. 2019 may be similar if there is a
relatively smooth (or no) Brexit, but worse with a disorderly
Brexit putting serious downward pressure on weaker property
values.
The deep structural cracks running through British retailing are
now producing a string of outright failures and CVAs. House of
Fraser, Poundworld, Toys R Us, Maplin, New Look, Carpetright,
Coast, Conviviality and The Original Factory Shop in retail, along
with restaurateurs like Carluccios, Gaucho, Jamie's Italian,
Prezzo, Bella Italia, Strada and the posh burger chains have all
torn up their leases or cut the rents they pay on over two thousand
properties. Supermarket sales have held up well with consumers
having had to spend more on their basic supermarket shop, cutting
back more discretionary areas of retail spending, especially
high-ticket purchases like cars, white goods, carpets and
furniture. Annual consumer price inflation has now peaked and
fallen back into the 2% - 3% range, so real consumer incomes have
stabilised, with the mid-summer heatwave and World Cup giving a
welcome short-term boost to drink and food sales, especially in
pubs. But any net growth in overall retail spending will be online
rather than through bricks and mortar retail properties. Many
shopping centres and high streets outside the most attractive and
prosperous towns and cities are now in terminal decline, hastened
by a crippling burden of business rates while online retailers like
Amazon pay less than 1% of their UK turnover in UK corporation
tax.
In the office sector, rising business rates and Brexit
uncertainty are stopping many London office tenants signing new
leases to increase the net space they occupy; instead they are
using serviced office suppliers like We Work to keep their options
open. But provincial office rents are more resilient and
industrial/warehouse rents are growing well, especially in Southern
England where much industrial land has been lost to housing. Rents
are also growing, often helped by inflation-linked leases, across
the alternatives sectors, (which accounted for about 30% of all
property investment transactions in 2017 and 2018 to date, against
only 10% in the retail sector). Safe property with long, preferably
index-linked leases, to strong covenants, is enjoying another year
of strong real returns. Institutional property investors are waking
up fast to the excellent investment value such property offers in a
yield-hungry world, in comparison with conventional and
index-linked gilt yields not far from their historic lows, as the
following table shows:
Comparative Yields - End December
2018 2017 2016 2015 2014 2011 2008 2006
Property (Equivalent Yield)
End December (except 2018 September)
5.4 5.5 5.7 5.6 5.9 6.8 8.1 5.4
Gilts(*) Conventional 1.6 1.4 1.5 2.2 2.0 2.5 3.7 4.6
========================================================= ===== ===== ===== ===== ===== ===== =====
Index Linked -1.6 -1.8 -1.8 -0.6 -0.8 -0.2 0.8 1.1
========================================================= ===== ===== ===== ===== ===== ===== =====
UK Equities 3.8 3.6 3.5 3.7 3.4 3.5 4.5 2.9
========================================================= ===== ===== ===== ===== ===== ===== =====
R.P.I
(Annual Rate) 3.3 4.1 2.5 1.1 2.0 4.8 0.9 4.4
========================================================= ===== ===== ===== ===== ===== ===== =====
Property less Conventional
Yield Gaps: Gilts 3.8 4.1 4.2 3.4 3.9 4.3 4.4 0.8
============ ===================================== ==== ===== ===== ===== ===== ===== ===== =====
less Index Linked Gilts 7.0 7.3 7.5 6.2 6.7 7.0 7.3 4.4
================================================== ==== ===== ===== ===== ===== ===== ===== =====
less Equities 1.6 1.9 2.2 1.9 2.5 3.3 3.6 2.5
================================================== ==== ===== ===== ===== ===== ===== ===== =====
Source: IPD (RPI: ONS)
(*) 10 year
The UK economy is still growing, but only at just over 1% a
year, against the Eurozone and U.S. economies at 2% - 3%. Weak
consumer spending and business confidence are holding back
investment decisions, with growing labour shortages in
construction, hospitality and agriculture in particular. The
greatest threat to the World economy is the escalating tariff war
between the U.S and China, in particular.
Consumer Price Inflation and Retail Price Inflation in the UK
have both peaked at 3% and 4% respectively and are now rising at
annual rates of around 2 1/2 % and 3 1/2 %. The public sector
deficit has come down from almost 10% of GDP to 2%, but the strains
of successive cuts are growing on local authorities, social care
and the NHS, with the 1% public sector pay cap now scrapped, and
rising pressure on the Treasury to relax austerity. The Bank of
England has raised base rate from 0.25% to 0.75% over the past
year. Longer term interest rates are clearly on the way up with
U.S. bond yields now rising and signs of overseas investors
starting to price in the rising risks of a hard Brexit or far-left
Labour government in the U.K.
There have been many more transactions in 2017 and 2018 in the
safer parts of the UK property market than in shorter-let retail
property in particular. Valuations of property in the strongest
areas, and the IPD indices overall, are therefore still too
optimistic, but they are starting to be marked to market, which
should make capital values turn down on the IPD Index before the
end of 2018. Private investors are still hungry for safe yields at
the smaller (typically sub GBP2 million) end of the market, but are
seeking longer leases and finding it hard to borrow on retail
property.
Safety first should stay the watchword for property investors
targeting strong real returns again at relatively low risk. This
approach has paid off since the 2016 Referendum, and property
portfolios with weighted average unexpired lease lengths above the
IPD average of 7 years, and void rates below IPD's 7.6%, should
continue to
deliver strong relative and absolute real returns over the next year.
VIT's Portfolio
VIT's property portfolio is independently valued by Savills at
the end of March and September each year. The latest valuation
total was GBP67,850,000 as at 30 September 2018.
Since the end of March, the sales of three properties have
completed, a short-let shop in Bedford and two public houses in
Lancaster, for GBP2.25 million, just above valuation and at a net
initial yield of 8.0%. There is now GBP1.8 million available for
reinvestment in VIT's property portfolio. There have been no
purchases over the last six months.
Over the six months the capital value of the existing portfolio
rose by 2.1% and the total return was 5.3%, against 3.9% on the IPD
Index of commercial property. Rental income and underlying rental
values both rose by 2.5%. Thirteen properties gained in value,
eight declined and four were unchanged. Industrial and motor trade
properties, the index-linked pubs and the caravan park performed
best with capital growth of 5%. The four shops remaining in the
portfolio slipped back by 8%. The running yield on valuation was
6.2% at end September (IPD: 4.9%) against 6.3% at the end of March.
There are no empty properties, against an IPD void rate of 7.6%.
All properties are let on full repairing and insuring leases with
upward only rent reviews and a weighted average unexpired lease
length of 14 years. 42% of rental income now has rent reviews with
R.P.I.-linked increases, and a further 21% has fixed increases.
This 63% index- related share of rental income is up from 62% at
end March and 39% five years ago.
VIT's property portfolio is partly funded from three fixed rate
loans - GBP15 million of VIT 11% Debenture Stock repayable in 2021
and GBP35 million repayable in 2026, comprising GBP20m of historic
9 3/8% Debenture Stock and a GBP15 million bank loan drawn down in
mid-2016 at an average fixed rate of 4.4%. Because the Debenture
Stocks were issued at a premium, our effective average annual
interest cost is 7.5% compared to the 13% p.a. long-term total
return on VIT's properties, and 9% on the IPD Index.
OLIM Property Limited
30 October 2018
Interim Board Report
Management and Administration of VIT
Value and Income Services Limited (VIS), a wholly owned
subsidiary of the Company, is the Company's Alternative Investment
Fund Manager (AIFM). As AIFM, VIS has responsibility for the
overall portfolio management and risk management of the assets of
the Company. VIS has delegated its portfolio management
responsibilities for the equity portfolio to OLIM Limited (OLIM)
and for the property portfolio to OLIM Property Limited (OLIMP)
(collectively the Investment Managers). The delegation by VIS of
its portfolio management responsibilities is in accordance with the
delegation requirements of the Alternative Investment Fund Managers
Directive (AIFMD). The Investment Managers remain subject to the
supervision and direction of VIS. The Investment Managers are
responsible to VIS and ultimately to the Company in regard to the
management of the investment of the assets of the Company in
accordance with the Company's investment objectives and policies.
VIS has a risk committee which reviews the effectiveness of the
Company's internal controls and risk management systems and
procedures and identifies, measures, manages and monitors the risks
identified as affecting the Company's business.
BNP Paribas Securities Services is the Company's Depositary and
oversees the Company's custody and cash arrangements.
Principal Risks and Uncertainties
The Board carries out a regular review and robust assessment of
the principal risks and uncertainties which have been identified as
affecting the Company's business. These risks and uncertainties are
summarised below and are considered equally applicable to the
second half of the financial year as for the period under review.
Policies are in place for the management of each of these risks and
uncertainties.
-- Discount volatility: The Company's shares may trade at a
price which represents a discount to its underlying net asset
value.
-- Regulatory risk: The Group operates in a complex regulatory
environment and therefore faces a number of regulatory risks. A
breach of Section 1158 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 but not
limited to, the Companies Act 2006, the FCA Listing Rules or the
FCA Disclosure, Guidance and Transparency Rules, could lead to a
number of detrimental outcomes and reputational damage. Breaches of
controls by service providers to the Company could also lead to
reputational damage or loss. The Audit and Management Engagement
Committee monitors compliance with regulations by reviewing
internal control reports from the Administrator and the Investment
Managers.
-- Market risk: The fair value of, or future cash flows from, a
financial instrument held by the Group may fluctuate because of
changes in market prices. This market risk comprises three elements
- price risk, interest rate risk and currency risk.
Price risk: Changes in market prices other than those arising
from interest rate or currency risk may affect the value of the
Group's investments. It is the Board's policy to hold an
appropriate spread of investments in the portfolio in order to
reduce the risk arising from factors specific to a particular
sector. For equities, asset allocation and stock selection both act
to reduce market risk. The Investment Managers actively monitor
market prices throughout the year and report to VIS and to the
Board, which meets regularly in order to review investment
strategy. The equity investments held by the Group are listed on
the UK Stock Exchange and all investment properties held by the
Group are commercial properties located in the UK with long, strong
income streams.
Interest rate risk: Interest rate movements may affect the fair
value of the investments in property and the level of income
receivable on cash deposits. The possible effects on fair value and
cash flows that could arise as a result of changes in interest
rates are taken into account when making investment and borrowing
decisions. The Board imposes borrowing limits to ensure that
gearing levels are appropriate to market conditions and reviews
these on a regular basis. Current borrowings comprise debenture
stock and the ten year secured term loan, providing secure
long-term funding. It is the Board's policy to maintain a gearing
level, measured on the most stringent basis of calculation after
netting off cash equivalents, of between 25% and 40%.
Currency risk: A small proportion of the Group's investment
portfolio is invested in securities whose fair value and dividend
stream are affected by movements in foreign exchange rates. It is
not the Board's policy to hedge this risk.
-- Liquidity risk: This is the risk that the Group will
encounter difficulty in meeting obligations associated with
financial liabilities. The Group's assets comprise readily
realisable securities which can be sold to meet commitments, if
required, and investment properties which, by their nature, are
less readily realisable.
-- Credit risk: This is the failure of a counterparty to a
transaction to discharge its obligations under that transaction
which could result in the Group suffering a loss. The risk is not
significant and is managed as follows:
- investment transactions are carried out with a large number of
brokers, whose credit-standing is reviewed periodically by OLIM
(who report to VIS) and limits are set on the amount that may be
due from any one broker.
- the risk of counterparty exposure due to failed trades causing
a loss to the Group is mitigated by the review of failed trade
reports on a daily basis. In addition, a stock reconciliation to
third party administrators' records is performed on a daily basis
to ensure that discrepancies are picked up on a timely basis. VIS
carries out periodic reviews of the Depositary's operations and
reports its findings to the Company. This review also includes
checks on the maintenance and security of investments held.
- cash is held only with reputable banks with high quality
external credit ratings which are monitored on a regular basis.
None of the Group's equity investments is secured by collateral
or other credit enhancements.
-- Property risk: The Group's commercial property portfolio is
subject to both market and specific property risk. Since the UK
commercial property market has been markedly cyclical for many
years, it is prudent to expect that to continue. The price and
availability of credit, real economic growth and the constraints on
the development of new property are the main influences on the
property investment market. Against that background, the specific
risks to the income from the portfolio are tenants being unable to
pay their rents and other charges, or leaving their properties at
the end of their leases. All leases are on full repairing and
insuring terms, with upward only rent reviews. None of the Group's
financial assets is impaired.
-- Political risk: In a referendum held on 23 June 2016, the UK
voted to leave the European Union (informally known as "Brexit").
The political, economic and legal consequences of the referendum
vote are not yet known.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
-- the condensed set of Financial Statements within the
Half-Yearly Financial Report has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting';
and
-- the Interim Board Report includes a true and fair review of
the information required by 4.2.7R and 4.2.8R of the FCA's
Disclosure, Guidance and Transparency Rules.
For and on behalf of the Board of Value and Income Trust PLC
James Ferguson
Chairman
30 October 2018
Group Statement of Financial Position
As at 30 September 2018
As at As at As at
30 September 2018 31 March 2018 30 September 2017
Notes (Unaudited) (Audited) (Unaudited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ASSETS
NON CURRENT ASSETS
Investments held at
fair value through profit
or loss 135,706 128,925 140,465
Investment properties 67,850 68,700 67,545
========================================== ================== ==================
8 203,556 197,625 208,010
Deferred tax asset 248 287 -
========================================== ================== ==================
203,804 197,912 208,010
CURRENT ASSETS
Cash and cash equivalents 6,043 3,639 4,519
Receivables 717 711 787
========================================== ================== ==================
6,760 4,350 5,306
========================================== ================== ==================
TOTAL ASSETS 210,564 202,262 213,316
CURRENT LIABILITIES
Payables (1,371) (1,845) (1,312)
========================================== ================== ==================
TOTAL ASSETS LESS CURRENT
LIABILITIES 209,193 200,417 212,004
NON-CURRENT LIABILITIES
Borrowings (49,905) (49,898) (49,891)
========================================== ================== ==================
NET ASSETS 159,288 150,519 162,113
========================================== ================== ==================
EQUITY ATTRIBUTABLE
TO EQUITY SHAREHOLDERS
Called up share capital 4,555 4,555 4,555
Share premium 18,446 18,446 18,446
Retained earnings 6 136,287 127,518 139,112
========================================== ================== ==================
TOTAL EQUITY 159,288 150,519 162,113
========================================== ================== ==================
NET ASSET VALUE PER
ORDINARY SHARE (Pence) 349.70p 330.45p 355.90p
========================================== ================== ==================
Group Statement of Comprehensive Income
For the 6 months ended 30 September 2018
6 months ended 6 months ended Year ended
30 September 2018 30 September 2017 31 March 2018
(Unaudited) (Unaudited) (Audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Notes
INCOME
Dividend income 3,626 - 3,626 3,439 - 3,439 5,732 - 5,732
Other operating
income 2 2,143 - 2,143 2,201 - 2,201 4,337 - 4,337
5,769 - 5,769 5,640 - 5,640 10,069 - 10,069
GAINS AND
LOSSES
ON
INVESTMENTS
Realised
gains/(losses)
on held at fair
value
investments
and investment
properties
Unrealised
gains/(losses)
on held at fair
value
investments
and investment
properties - 4,178 4,178 - (1,653) (1,653) - (563) (563)
- 4,649 4,649 - 6,524 6,524 - (5,270) (5,270)
TOTAL INCOME 5,769 8,827 14,596 5,640 4,871 10,511 10,069 (5,833) 4,236
-------------- --------- --------- -------------- ----------- ---------- -------------- ---------- ---------
EXPENSES
Investment management
fees (175) (407) (582) (212) (494) (706) (427) (995) (1,422)
Other operating
expenses (389) - (389) (345) - (345) (691) - (691)
FINANCE COSTS (2,084) - (2,084) (2,084) - (2,084) (4,168) - (4,168)
TOTAL EXPENSES (2,648) (407) (3,055) (2,641) (494) (3,135) (5,286) (995) (6,281)
-------------- --------- --------- -------------- ----------- ---------- -------------- ---------- ---------
PROFIT/(LOSS)
BEFORE TAX 3,121 8,420 11,541 2,999 4,377 7,376 4,783 (6,828) (2,045)
TAXATION (116) 77 (39) - - - (256) 543 287
-------------- --------- --------- -------------- ----------- ---------- -------------- ---------- ---------
PROFIT/(LOSS)
ATTRIBUTABLE
TO EQUITY SHAREHOLDERS
OF PARENT COMPANY 3,005 8,497 11,502 2,999 4,377 7,376 4,527 (6,285) (1,758)
-------------- --------- --------- -------------- ----------- ---------- -------------- ---------- ---------
EARNINGS PER
ORDINARY
SHARE (Pence) 3 6.60 18.65 25.25 6.58 9.61 16.19 9.94 (13.80) (3.86)
-------------- --------- --------- -------------- ----------- ---------- -------------- ---------- ---------
The total column of this statement represents the Statement of
Comprehensive Income of the Group, prepared in accordance with
IFRS. The revenue return and capital return columns are
supplementary to this and are prepared under guidance issued by the
Association of Investment Companies. All items in the above
statement derive from continuing operations.
All income is attributable to the equity holders of Value and
Income Trust PLC, the parent company. There are no minority
interests.
The Board has declared a first quarterly dividend of 2.80p per
share (2018 - 2.70p) which was paid on 26 October 2018 to those
shareholders on the register on 28 September 2018 with an
ex-dividend date of 27 September 2018 and a second quarterly
dividend of 2.80p per share (2018 - 2.70p) which will be paid on 25
January 2019 to those shareholders on the register on 28 December
2018 with an ex-dividend date of 27 December 2018. The third
quarterly dividend of 2.80p (2018 - 2.70p) will be paid on 26 April
2019 to those shareholders on the register on 29 March 2019. The
ex-dividend date will be 28 March 2019.
Group Statement of Changes in Equity
For the 6 months ended 30 September 2018
6 months ended 30 September 2018
(Unaudited)
Share Share Retained
capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2018 Notes 4,555 18,446 127,518 150,519
Net profit for the period - - 11,502 11,502
Dividends paid 4 - - (2,733) (2,733)
======== ======== ========= ========
NET ASSETS AT 30 SEPTEMBER
2018 4,555 18,446 136,287 159,288
======== ======== ========= ========
Year ended 31 March 2018
(Audited)
Share Share Retained
capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2017 Notes 4,555 18,446 134,378 157,379
Net profit for the period - - (1,758) (1,758)
Dividends paid 4 - - (5,102) (5,102)
======== -------- --------- --------
NET ASSETS AT 31 MARCH 2018 4,555 18,446 127,518 150,519
======== -------- --------- --------
6 months ended 30 September 2017
(Unaudited)
Share Share Retained
capital premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March 2017 Notes 4,555 18,446 134,378 157,379
Net profit for the period - - 7,376 7,376
Dividends paid 4 - - (2,642) (2,642)
------------ ------------- ----------- -------
NET ASSETS AT 30 SEPTEMBER
2017 4,555 18,446 139,112 162,113
------------ ------------- ----------- -------
Group Cash Flow Statement
For the 6 months ended 30 September 2018
6 months ended 6 months ended Year ended
30 September 30 September
2018 2017 31 March 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
CASH FLOWS FROM OPERATING ACTIVITIES
Dividend income received 3,811 3,659 5,804
Rental income received 1,582 1,462 4,179
Interest received 1 - -
Operating expenses paid (1,079) (1,388) (2,271)
------- ------- -------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 4,315 3,733 7,712
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (10,713) (3,253) (11,890)
Sale of investments 13,609 4,463 12,780
-------- -------- --------
NET CASH INFLOW FROM INVESTING
ACTIVITIES 2,896 1,210 890
CASH FLOW FROM FINANCING ACTIVITIES
Interest paid (2,074) (2,074) (4,153)
Dividends paid (2,733) (2,642) (5,102)
-------- -------- --------
NET CASH OUTFLOW FROM FINANCING
ACTIVITIES (4,807) (4,716) (9,255)
------- ------- -------
NET INCREASE/(DECREASE) IN
CASH AND CASH EQUIVALENTS 2,404 227 (653)
Cash and cash equivalents at
the start of the period 3,639 4,292 4,292
------- ------- -------
CASH AND CASH EQUIVALENTS AT
THE OF THE PERIOD 6,043 4,519 3,639
------- ------- -------
Notes to the Financial Statements
1 Accounting policies
(a) The Financial Statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs) which
comprise standards and interpretations approved by the
International Accounting Standards Board (IASB) together with
interpretations of the International Accounting Standards and
Standing Interpretations Committee approved by the International
Accounting Standards Committee (IASC) that remain in effect, and to
the extent that they have been adopted by the European Union.
The functional and presentational currency of the Group is
pounds sterling because that is the currency of the primary
economic environment in which the Group operates. The Financial
Statements and the accompanying notes are presented in pounds
sterling and rounded to the nearest thousand pounds except where
otherwise indicated.
The Financial Statements have been prepared on a going concern
basis and on the historical cost basis, except for the revaluation
of certain financial assets. Where presentational guidance set out
in the Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' (the SORP)
issued by the Association of Investment Companies (AIC) in November
2014 and updated in February 2018 with consequential amendments is
consistent with the requirements of IFRSs, the Directors have
sought to prepare the Financial Statements on a basis compliant
with the recommendations of the SORP, except for the allocation of
finance costs to revenue as explained below.
The Board has considered the requirements of IFRS 8, 'Operating
Segments'. The Board is charged with setting the Group's investment
strategy. The Board has delegated the day to day implementation of
this strategy to the Investment Managers but the Board retains
responsibility to ensure that adequate resources of the Group are
directed in accordance with its decisions. The Board is of the view
that the Group is engaged in a single segment of business, being
investments in quoted UK equities and UK commercial properties. The
view that the Group is engaged in a single segment of business is
based on the fact that one of the key financial indicators received
and reviewed by the Board is the total return from the investment
portfolio taken as a whole. A review of the investment portfolio is
included in the Investment Managers' Reports.
All expenses and finance costs are accounted for on an accruals
basis. Expenses are presented as capital where a connection with
the maintenance or enhancement of the value of investments can be
demonstrated. In this respect and in accordance with the SORP, the
investment management fees are allocated 30% to revenue and 70% to
capital to reflect the Board's expectations of long term investment
returns.
It is normal practice and in accordance with the SORP for
investment trust companies to allocate finance costs to capital on
the same basis as the investment management fee allocation. However
as the Group has a significant exposure to property, and property
companies allocate finance costs to revenue to match rental income,
the Directors consider that, contrary to the SORP, it is
inappropriate to allocate finance costs to capital.
The Group's Financial Statements have been prepared using the
same accounting policies as those applied for the Financial
Statements for the year ended 31 March 2018 which received an
unqualified audit report.
(b) Going concern
The Group's business activities, together with the factors
likely to affect its future development and performance, are set
out in the Interim Board Report. The financial position of the
Group as at 30 September 2018 is shown in the Statement of
Financial Position. The cash flows of the Group for the half year
to 30 September 2018, which are not untypical, in the Group Cash
Flow Statement. The Group had fixed debt totalling GBP49,905,000 as
at 30 September 2018; none of the borrowings is repayable before
2021. The Group had no short term borrowings. As at 30 September
2018, the Group's total assets less current liabilities exceeded
its total non current liabilities by a factor of over four.
The assets of the Group consist mainly of securities and
investment properties that are held in accordance with the Group's
investment policy. Most of these securities are readily realisable,
even in volatile markets. The Directors, who have reviewed
carefully the Group's forecasts for the coming year, consider that
the Group has adequate financial resources to enable it to continue
in operational existence for the foreseeable future. Accordingly,
the Directors believe that it is appropriate to continue to adopt
the going concern basis in preparing the Group's Financial
Statements.
(c) Basis of consolidation
The consolidated Financial Statements incorporate the Financial
Statements of the Company and the entity controlled by the Company
(its subsidiary). An investor controls an investee when it is
exposed, or has rights, to variable returns from its involvement
with the investee and has ability to affect those returns through
its power over the investee. The Company consolidates the investee
that it controls. All intra-group transactions, balances, income
and expenses are eliminated on consolidation.
Value and Income Services Limited is a private limited company
incorporated in Scotland under company number SC467598. It is a
wholly owned subsidiary of the Company and has been appointed to
act as the Alternative Investment Fund Manager of the Company.
(d) Presentation of Statement of Comprehensive Income
In order to reflect better the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Statement of
Comprehensive Income between items of a revenue and capital nature
has been presented alongside the Statement of Comprehensive Income.
In accordance with the Company's Articles, net capital returns may
be distributed by way of dividend however the Board has no
intention of exercising this authority at present.
(e) Dividends payable
Interim dividends are recognised as a liability in the period in
which they are paid as no further approval is required in respect
of such dividends. Final dividends are recognised as a liability
only after they have been approved by Shareholders in general
meeting.
(f) Investments
Equity investments
All investments have been designated upon initial recognition as
fair value through profit or loss. Investments are recognised and
derecognised on the trade date where a purchase or sale is under a
contract whose terms require delivery within the timeframe
established by the market concerned, and are initially measured at
fair value.
Subsequent to initial recognition, investments are recognised at
fair value through profit or loss. For listed investments, this is
deemed to be bid market prices or closing prices for SETS stocks
sourced from the London Stock Exchange. SETS is the London Stock
Exchange electronic trading service covering most of the market
including all FTSE 100 constituents and most liquid FTSE 250
constituents along with some other securities. Gains and losses
arising from changes in fair value are included in net profit or
loss for the period as a capital item in the Statement of
Comprehensive Income and are ultimately recognised in the retained
earnings.
Investment properties
Investment properties are initially recognised at cost, being
the fair value of consideration given, including transaction costs
associated with the investment property. Any subsequent capital
expenditure incurred in improving investment properties is
capitalised in the period incurred and included within the book
cost of the property.
After initial recognition, investment properties are measured at
fair value, with gains and losses recognised in the Statement of
Comprehensive Income.
The Group leases out all of its properties on operating leases.
A property held under an operating lease is classified and
accounted for as an investment property where the Group holds it to
earn rental, capital appreciation or both. Any such property leased
under an operating lease is carried at fair value. Fair value is
established by half-yearly professional valuation on an open market
basis by Savills (UK) Limited, Chartered Surveyors and Valuers, and
in accordance with the RICS Valuation - Professional Standards
issued in July 2017 (the 'RICS Red Book') by reference to the
Investment Method whereby the net annual income derived from a
property is capitalised by an appropriate capitalisation rate or
Years' Purchase figure to arrive at the present Capital Value of
the property after an allowance for the purchaser's costs. The
relevant capitalisation rate is chosen, based on the investment
rate of return expected (as derived from comparisons of other
similar property investments) for the type of property concerned
and taking into consideration such factors as risk, capital
appreciation, security of income, ease of sale and management of
the property.
2 Other operating income
6 months ended 6 months ended Year ended
September 2018 September 2017 March 2018
GBP'000 GBP'000 GBP'000
Rental income 2,142 2,201 4,337
Interest receivable on short
term deposits 1 - -
--------------- --------------- -----------
2,143 2,201 4,337
--------------- --------------- -----------
3 Return per ordinary share
The return per ordinary share is based on the following
figures:
6 months ended 6 months ended Year ended
September 2018 September 2017 March 2018
GBP'000 GBP'000 GBP'000
Revenue return 3,005 2,999 4,527
Capital return 8,497 4,377 (6,285)
Weighted average ordinary
shares in issue 45,549,975 45,549,975 45,549,975
Return per share - revenue 6.60p 6.58p 9.94p
Return per share - capital 18.65p 9.61p (13.80p)
--------------- --------------- -----------------------------
Total return per share 25.25p 16.19p (3.86p)
--------------- --------------- -----------------------------
4 Dividends paid
6 months ended 6 months ended Year ended
30 September 30 September 31 March 2018
2018 2017 GBP'000
GBP'000 GBP'000
Dividends on ordinary shares:
Third quarterly dividend of
2.70p per share (2017 - 2.60p)
paid 27 April 2018 1,230 1,184 1,184
Final dividend of 3.30p per
share (2017 - 3.20p) paid
27 July 2018 1,503 1,458 1,458
First quarterly dividend of
2.70p per share (2017 - 2.60p)
paid 27 October 2017 * - - 1,230
Second quarterly dividend
of 2.70p per share (2017 -
2.60p) payable 26 January
2018 * - - 1,230
-------------- -------------- --------------
Dividends paid in the period 2,733 2,642 5,102
-------------- -------------- --------------
* First and second quarterly dividends for the year to 31 March
2019 have been declared with pay dates falling after 30 September
2018. These have not been included as liabilities in these
Financial Statements.
5 Quarterly dividends
The Directors have declared a first quarterly dividend of 2.80p
per ordinary share, paid on 26 October 2018 to shareholders
registered on 28 September 2018, with an ex-dividend date of 27
September 2018 (2018 - 2.70p) and a second interim dividend of
2.80p per share, payable on 25 January 2019 to shareholders
registered on 28 December 2018, with an ex-dividend date of 27
December 2018 (2018 - 2.70p). The third quarterly dividend of 2.80p
(2018 - 2.70p) will be paid on 26 April 2019 to those shareholders
on the register on 29 March 2019. The ex-dividend date will be 28
March 2019.
6 Retained earnings
The table below shows the movement in retained earnings analysed
between revenue and capital items.
Revenue Capital Total
GBP'000 GBP'000 GBP'000
At 31 March 2018 4,305 123,213 127,518
Movement during the period:-
Profit for the period 3,005 8,497 11,502
Dividends paid on ordinary
shares (2,733) - (2,733)
-------- -------- --------
At 30 September 2018 4,577 131,710 136,287
-------- -------- --------
7 Transaction costs
During the period, expenses were incurred in acquiring and
disposing of investments classified as fair value through profit or
loss. These have been expensed through capital and are included
within gains and losses on investments in the Statement of
Comprehensive Income.
The total costs are as follows:-
6 months ended 6 months ended
30 September 30 September Year ended
2018 2017 31 March 2018
GBP'000 GBP'000 GBP'000
Purchases 61 2 17
Sales 11 4 11
-------------- -------------- --------------
72 6 28
-------------- -------------- --------------
8 Fair value hierarchy disclosures
The table below sets out fair value measurements using the IFRS
13 Fair Value hierarchy:-
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
At 30 September 2018 (unaudited)
Equity investments 135,706 - - 135,706
Investment properties - - 67,850 67,850
------------ ------------ -------- --------
135,706 - 67,850 203,556
Borrowings - (58,764) - (58,764)
============ ============ ======== ========
135,706 (58,764) 67,850 144,792
============ ============ ======== ========
At 31 March 2018 (audited)
Equity investments 128,925 - - 128,925
Investment properties - - 68,700 68,700
------------ ------------ -------- --------
128,925 - 68,700 197,625
Borrowings - (59,685) - (59,685)
------------ ------------ -------- --------
128,925 (59,685) 68,700 137,940
------------ ------------ -------- --------
At 30 September 2017 (unaudited)
Equity investments 140,465 - - 140,465
Investment properties - - 67,545 67,545
------------ ------------ -------- --------
140,465 - 67,545 208,010
Borrowings - (60,874) - (60,874)
------------ ------------ -------- --------
140,465 (60,874) 67,545 147,136
------------ ------------ -------- --------
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 in an active market for
identical assets
Level 2 - valued by reference to valuation techniques using
observable inputs other than quoted prices
Level 3 - valued by reference to valuation techniques using
inputs that are not based on observable market data
The fair values of the debentures are determined by comparison
with the fair values of equivalent gilt edged securities,
discounted to reflect the differing levels of credit worthiness of
the borrowers. The fair value of the loans are determined by a
discounted cash flow calculation based on the appropriate
inter-bank rate plus the margin per the loan agreement. All other
assets and liabilities of the Group are included in the balance
sheet at fair value.
There were no transfers between Levels during the period.
9 Relationship with the Investment Managers and other Related Parties
Angela Lascelles is a Director of OLIM Limited which has an
agreement with the Group to provide investment management
services.
Matthew Oakeshott is a Director of OLIM Property Limited which
has an agreement with the Group to provide property management
services.
OLIM and OLIM Property each receives an investment management
fee of 0.60% of the capital assets that they manage.
With effect from 1 April 2018, there is no performance fee.
OLIM Limited received an investment management fee of GBP388,000
(half year to 30 September 2017: GBP494,000 and year to 31 March
2018: GBP995,000 including a performance fee of GBPnil). At the
period end, the balance owed by the Group to OLIM Limited was
GBP91,000 (31 March 2018: GBP82,000) comprising management fees for
the month of September 2018, subsequently paid in October 2018.
OLIM Property Limited received an investment management fee of
GBP194,000 (half year to 30 September 2017: GBP212,000 and year to
31 March 2018: GBP427,000 including a performance fee of GBPnil).
At the period end, the balance owed by the Group to OLIM Property
Limited was GBP32,000 (31 March 2018: GBP35,000) comprising
management fees for the month of September 2018, subsequently paid
in October 2018.
Value and Income Services Limited is a wholly owned subsidiary
of Value and Income Trust PLC and all costs and expenses are borne
by Value and Income Trust PLC. Value and Income Services Limited
has not traded during the period.
10 Half-Yearly Report
The financial information contained in this Half-Yearly
Financial Report does not constitute statutory accounts as defined
in sections 434 - 436 of the Companies Act 2006. The financial
information for the six months ended 30 September 2018 and 30
September 2017 has not been audited.
The figures and financial information for the year ended 31
March 2018 has been extracted and abridged from the latest
published audited Financial Statements and do not constitute the
statutory accounts for that year. Those Financial Statements have
been filed with the Registrar of Companies and included the Report
of the Independent Auditor, which contained no qualification or
statement under section 498 (2), (3) or (4) of the Companies Act
2006.
This Half-Yearly Report was approved by the Board on 30 October
2018.
A full copy of the 2018 Half-Yearly Report will be printed and
issued to Shareholders.
Other information
Unsolicited Offers for shares in Value and Income Trust PLC
(Boiler room scams)
The Directors have recently become aware that some shareholders
have been targeted by organisations offering to buy their shares in
Value and Income Trust PLC at prices much higher than current
market values. These calls are unsolicited and are usually made by
overseas organisations or organisations using false UK addresses or
phone lines routed abroad who may indicate that the Company is the
subject of a hostile takeover.
Please be aware that the Company is not the subject of a
takeover and that these calls are being made by fraudsters.
Whilst the callers may sound credible and professional,
shareholders should be aware that their intentions are often
fraudulent and high pressure sales techniques may be applied, often
involving a request for an indemnity or a payment to be provided in
advance.
If you receive such a call, you should exercise caution and,
based on advice from the FCA, the following precautions are
suggested:
-- obtain the name of the individual or organisation calling;
-- check the FCA register to confirm if the caller is authorised;
-- call back using the details on the FCA register to verify the caller's identity;
-- discontinue the call if you are in any doubt about the
intentions of the caller, or if calls persist; and
-- report any individual or organisation that makes unsolicited
calls with an offer to buy or sell shares to the FCA and the City
of London Police.
Useful Contact Details:
ACTION FRAUD
Telephone: 0300 123 2040
Website: www.actionfraud.police.uk
FCA
Telephone: 0800 111 6768 (freephone)
E-mail: consumer.queries@fca.org.uk
Website: www.fca.org.uk
Maven Capital Partners UK LLP
Company Secretary
0141 306 7400
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BBLFXVBFXFBL
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