TIDMVIN
RNS Number : 5558E
Value and Income Trust plc
06 November 2020
Value and Income Trust PLC (the Company)
Half-Yearly Financial Report - Replacement announcement
The issuer advises of a minor amendment to the Half-Yearly
Financial Report announcement and that the following replaces the
Value and Income Trust PLC Half-Yearly Financial Report
announcement released at 07.00 BST on 6 November 2020 under RNS No.
4468E.
The references to the record and ex-dividend dates in respect of
the payment on 29 January 2021 of the second quarterly dividend
referred to in the Group Statement of Comprehensive Income and in
Note 5 to these Interim Financial Statements have been amended to 4
January 2021 and 31 December 2020 respectively.
All other details remain unchanged.
The full amended version is shown below.
VALUE AND INCOME TRUST PLC
Unaudited Half-Yearly Financial Report
For the Six Months Ended 30 September 2020
Summary
30 September 2020 31 March 2020 30 September 2019
Group net asset value per
share
(valuing debt at market) 226.47p 232.69p 316.73p
Group net asset value per
share
(valuing debt at par) 243.50p 253.14p 337.71p
Share price (mid) 173.50p 165.00p 249.00p
Dividend per share 5.80p 12.10p 5.80p
(first and second (total) (first and second
interim) interim)
Value and Income Trust PLC ('VIT') is a specialist investment
trust whose shares are listed on the London Stock Exchange. VIT
invests in higher yielding UK commercial property and quoted
equities, particularly in medium and smaller sized companies. VIT
aims for long-term real growth in dividends and capital value
without undue risk.
Over the six months ended 30 September 2020, VIT's share price
increased by 5.2% while the net asset value per share, valuing debt
at par, decreased by 3.8%. The FTSE All-Share Index rose by 5.6%
over the half year. VIT's property portfolio was revalued
independently at 30 September 2020.
The Company announced on 10 September 2020 the dates of the
quarterly dividends for the year to 31 March 2021. The first
quarterly dividend of 2.9p per share was paid on 30 October 2020 to
all shareholders on the register on 2 October 2020. The second
quarterly dividend of 2.9p per share will be paid on 29 January
2021 to those shareholders on the register on 4 January 2021. The
ex-dividend date will be 31 December 2020.
The third quarterly dividend of 2.9p per share will be paid on
30 April 2021 to those shareholders on the register on 6 April
2021. The ex-dividend date will be 1 April 2021. 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 30 July 2021.
Chairman's Statement
On behalf of your Board, I present the Interim Results for the
six months to 30 September 2020.
The past six months have been challenging due to the significant
impact on the global economy and financial markets caused by the
coronavirus (COVID-19) pandemic. However, you will see from the
Investment Managers' Reports in the Interim Report, that
considerable efforts are being made to maintain income.
Using the benefits of the closed end structure, it is the
Board's intention to preserve the Company's strong dividend record,
if possible, by distributing part of the Company's capital reserves
of 154.4p per share if necessary. However, maintaining the record
for the long term will require dividend cover to be rebuilt over
the years ahead.
The second and third interim dividend of 2.9p per share will be
paid on 29 January and 30 April 2021, respectively. Further details
of the payment of quarterly dividends can be found in the Interim
Report.
Shareholders will be aware that, in September, we announced the
appointment of Matthew Oakeshott as a Non-executive Director.
Matthew is one of the original founders of the Company having
previously served on the Board from 1 April 2007 to 1 April 2019
and he is the Chairman of OLIM Property Limited, which currently
manages the Company's property portfolio.
The Board also announced in September that it intended to carry
out a strategic review of the investment policy of the Company and
that Matthew's appointment formed part of that review.
The conclusion of the review of our investment policy is that we
will make modest use of the power to distribute from capital
reserves in the short term, but thereafter we will aim to rebuild
the cover for the dividend. This will be assisted by the
refinancing of the 11% Debenture Stock at a net interest rate of
3.17%, as detailed in the 2020 Annual Report, but will mainly be
achieved by an increase in the property portfolio which is
producing a high and reliable yield as reflected in the property
report in the Interim Report, with 96% of rents collected over the
past six months, 100% over the past quarter, and a robust capital
performance.
As announced on 4 November, OLIM Limited has given notice on its
contract to manage the Company's equity portfolio due to a decision
by OLIM Limited's parent company, Albion Capital Group LLP, to wind
down OLIM Limited's operations early next year. The Board is making
alternative arrangements for the management of the portion of the
portfolio currently managed by OLIM Limited.
James Ferguson
Chairman
5 November 2020
Summary of Portfolio
30 September 2019
30 September 2020 31 March 2020 (Restated)*
GBPm % GBPm % GBPm %
UK Equities 83.2 48.4 90.8 51.5 129.5 62.3
UK Property 77.1 44.9 74.5 42.3 75.6 36.3
Net current assets 11.5 6.7 10.9 6.2 2.9 1.4
171.8 100.0 176.2 100.0 208.0 100.0
* Restated to reflect prior year adjustment. Please see Note 10
to these Interim Financial Statements and Note 22 to the 2020
Annual Financial Statements for details.
ENQUIRIES:
Patrick Harrington
OLIM Limited, Investment Manager, Equities
Tel: 020 7367 5660
Website: www.olim.co.uk
Louise Cleary
OLIM Property Limited, Investment Manager, Property
Tel: 020 7647 6701
Website: www.olimproperty.co.uk
Investment Managers' Reports
UK EQUITIES
The Market
Over the six-month period to the end of September 2020, the UK
stock market, as measured by the FTSE All Share Index, rose by 5.6%
and, including dividends, the total return was 7.0%. The market has
recovered somewhat from the low point seen at the start of VIT's
financial year after the coronavirus inspired sell-off in February
and March. Share prices have responded positively to the extreme
measures of fiscal and monetary support announced by the Chancellor
and the Bank of England respectively. Share prices rose fairly
steadily in the early months of the period before peaking in late
July. Since then the stock market has fallen back as concerns have
grown about a potential second wave of coronavirus infections and
the lack of progress in the Brexit negotiations and it ended the
period on a relatively subdued note.
Within the UK market, large companies, measured by the FTSE 100
Index, rose by 3.4%, whilst the FTSE 250 Index of mid-sized
companies rose by 14.7%. Mid-caps outperformed due to having
greater representation in a number of sectors, such as General
Retail, that have recovered very strongly since March. Higher
yielding shares have continued to be at the centre of the storm and
have not benefitted from the general stock market recovery. The
FTSE Higher Yield Index actually fell by 6.5% in the six months
since the end of March and generated a negative total return of
-4.9% including income. In contrast to the subdued UK stock market,
the FTSE World Index rose by 27.6%, measured in dollars. Once
again, world markets were led by the US, where the S&P 500
index rose by 30.1%, largely as a result of the strong share price
performances from their giant technology companies. Other world
markets comfortably outperformed the UK as well, with the German
Dax Index rising by 28.4% and the Japanese Nikkei Index by 22.6%,
both measured in local currency.
Monetary policy has remained loose with central banks seeking to
support their economies following the large economic contraction
seen after lockdown measures were implemented. Bond markets were
relatively quiet in the period and the benchmark US ten-year bond
yield closed September at just 0.7%, the same level as at the end
of March. In the same period, ten-year UK Gilt yields fell from
0.4% to 0.2%, meaning that gilts generated a small positive total
return of 1.2%. In the currency markets, the pound was surprisingly
resilient despite the stalemate in the Brexit negotiations and weak
economic performance. During the period, the pound actually rose by
5% against the dollar, although it fell by 3% against the Euro to
finish the period at GBP1:$1.29 and GBP1:EUR1.10. Commodity prices
have risen with financial markets and the price of a barrel of oil
almost doubled in the six months to stand at $41 at the end of
September.
Performance
VIT's equity portfolio underperformed over the half year with a
total return of +3.2% compared to the FTSE All Share Index Return
of +7.0% reflecting the difficult background for high-yielding
shares; as noted above the FTSE Higher Yield Index underperformed
the FTSE All Share Index by over 12% in the period and recorded a
negative total return. It is difficult to remember a time when high
yielding shares have been so out of fashion, but the lockdown
measures have clearly impacted many high yielding companies most
severely. In broad terms, asset allocation between sectors was
positive, but this was more than offset by negative stock
selection. The main positive sector influences were the underweight
positions in Banks and Oil Producers and the overweight in
Chemicals, although these were somewhat offset by the underweight
position in General Retailers. In stock selection terms, a number
of the Company's mid-cap holdings were weak after initially
bouncing back including Go-Ahead (-30%), Beazley, (-22%) and
Babcock International (-35%). The portfolio also suffered from the
malaise at the higher yielding end of the stock market with
traditional high yielding stocks such as Vodafone (-9%) and BP
(-35%) underperforming markedly. There were good share price
recoveries seen at Croda International (+46%), M&G (+42%) and
FDM (+38%) but these were not enough to offset weakness
elsewhere.
Dividend income from the equity portfolio has also remained
under pressure and although several of the portfolio's companies,
such as Rotork, FDM and Devro, have resumed payments, we are still
expecting total income from equities to be down significantly this
year. Many companies in sectors where the recovery has been muted
have passed a second dividend after the rash of dividend
suspensions and cancellations in the spring. Total dividends from
the UK stock market are expected to fall by over a third in
calendar 2020, a trend reflected in VIT's equity portfolio.
VIT's Portfolio
There was a relatively high level of transactions on the
portfolio in the six-month period. In total, there were GBP12.9m of
sales and GBP4.5m of purchases meaning we made net sales of
approximately GBP8.4m in the six-month period. This cash difference
has funded purchases of higher yielding properties that will
bolster the Company's income account.
We made complete sales of Marston's and Lloyds Banking Group,
which both face difficult trading conditions and have very limited
dividend prospects. We also sold the small holding in Hansard
Global. Other sales were spread across the portfolio and focused on
those stocks with low yields or where the return to the dividend
list does not appear likely in the short term. These included Croda
International and Prudential in the first category and HSBC,
Beazley and Informa in the second. New holdings have been sought
that can provide the Company with a reliable dividend stream. To
this end, new investments were made in Wm Morrison Supermarkets,
the well-known food retailer, National Grid, the large
multi-utility group, and Telecom Plus, which is a discount utility
club with around 650,000 members. All three have strong balance
sheets, have traded well throughout the pandemic and have continued
paying dividends to their shareholders. At the purchase prices,
these stocks will provide an average yield approaching 5% for the
portfolio with the possibility of extra income from Wm Morrison,
which has a history of paying special dividends.
Outlook
The changes imposed on the global economy by the lockdown
measures applied by governments around the world have been
profound. Some sectors, such as technology and food retailing, have
benefitted, but others have been devastated. Global travel has
plummeted, in part due to governments imposing quarantine
requirements on travellers, and the hospitality sector,
particularly those areas most affected by social distancing rules,
has also been hard hit. However, economies have begun to recover as
lockdown measures have been eased. It seems likely that world
economic activity will shrink by around 5% in 2020 given the
economic rebound seen since the Q1 low point. As more social
interaction has been allowed, recorded infections have begun to
climb once more, but they remain well below the levels seen earlier
in the year after allowing for the large increase in testing. Some
governments, including our own, have opted to re-impose some of the
lockdown controls and this will inevitably hamper the economic
recovery. Initially, the UK economy made good progress in
recovering the ground lost in March and April when the full
lockdown was in progress; approximately half the lost value of GDP
has been recouped but this progress is likely to be reversed given
the new lockdown recently announced by the UK Government.
Unfortunately, the UK's service-based economy and relatively
dense population have made it especially vulnerable to the virus
and this has meant a poor relative economic performance compared to
other world economies. Consequently, the UK is likely to experience
a larger percentage contraction in economic activity this year than
most developed nations. The UK is also facing the uncertainty of
whether or not it will leave the European Union (EU) with a trade
deal. A 'No-Deal' exit would inevitably lead to further disruption,
which would not be helpful given the difficulties already being
faced as a result of the pandemic.
Nonetheless, global share prices worldwide have advanced, driven
by the US technology giants. They have been supported by a
combination of monetary stimulus and optimism regarding the pace of
economic recovery. Future equity returns and economic performance
are still inextricably linked to the success that the authorities
have in controlling the spread of the virus and the picture here is
concerning. In both the USA and Europe, there has been a rebound in
new case numbers after the lull over the summer months. In the UK,
the true economic cost of the pandemic is still being disguised by
the Chancellor's furlough scheme, but this comes to an end shortly,
to be replaced with a far less generous job retention programme.
Consequently, it is likely that unemployment will rise sharply in
the coming months and this is likely to dent consumer confidence
and spending. The UK stock market has also had to contend with the
stalemate in negotiations with the EU and, consequently, has been a
poor performer versus other world markets. Nonetheless, UK shares
are not highly rated by historical measures and look good value
relative to other world markets, but it is difficult to see them
making a great deal of progress until the political and economic
issues hanging over them are resolved.
Patrick Harrington
OLIM Limited
5 November 2020
PROPERTY
The Market
UK commercial property values have so far fallen by 7% on
average in 2020 on the MSCI (ex IPD) index. The decline may be over
10% by the year end, with further falls next year. But these
averages mask key structural changes in property which the COVID
crisis has made faster and more profound. We expect, not a
V-shaped, but a K-shaped recovery for both property and the UK
economy for the first time ever, with some sectors emerging
strongly from the crisis and others continuing to fall.
Supermarkets, convenience stores, industrial/warehouses and some
non-traditional "alternative" property types will outperform as the
upward arm of the K; non-food retail, especially High Street shops
and shopping centres, and offices, especially in London, will be
going down for years to come. The five-day office commute is
dead.
The MSCI Quarterly Property Index, the most representative
measure of the performance of institutional investment property
portfolios, showed a total return of -1.8% over the six months to
end September and -3.2% for calendar 2020 to date.
UK Commercial Property - Average Annual % Growth Rates to
September 2020
6 Months 1 Year 3 Years 5 Years 10 Years
Capital Values -8.0 -7.4 -2.3 -0.6 +1.8
Rental Values -4.0 -2.8 -0.6 +0.6 +1.1
Total Returns -3.6 -3.2 +2.2 +4.1 +7.1
Source: MSCI Quarterly Index - Annualised
British commercial property values have traditionally been
highly cyclical, but the past five years have seen a fundamental
shift in the key driver of property values from cyclical to
structural change. Previously, when the market generally was going
up, all the main property sectors shared in the rise to a greater
or lesser extent, and vice versa. Now it is different - retail
property values have fallen right back down to their levels at the
bottom of the property crash in 2009 - and are clearly heading much
lower. Warehouse and industrial property, by contrast, has
typically doubled in capital value over the past decade, and is
proving generally resilient through the pandemic.
Transaction volumes since March 2020 have been running around
one-third of normal levels, with meagre evidence in the weaker
sectors of the market. Meanwhile, property void rates are clearly
heading much higher, up from 7.5% to 9.2% over the past nine months
(and 11.4% to 14.9% on offices) on the MSCI Monthly Index. That
office void rate is even higher already than its peak during the
Great Financial Crash, with well over half Central London office
tenants already exercising break clauses in their leases when they
can.
Property investors are firefighting, ensuring tenants who can
pay their rent, do; agreeing phased payment plans with tenants who
are basically sound but temporarily closed; and judging which
weaker tenants really cannot pay and need help to keep a property
occupied. Overall, lease lengths in property will now shorten
further and break clauses will abound. The upwards only rent review
is now an endangered species for offices and non-food retail. Open
market rent review uplifts will be rare, except on industrials,
over the next two or three years. Meanwhile, the Government, under
tenant pressure, has suspended landlords' traditional tools for
enforcing rent collection - eviction orders, use of Commercial Rent
Arrears Recovery (CRAR), bailiffs and statutory demands for winding
up. But their Code of Practice for Commercial Property published in
June is utterly unbalanced and totally toothless because it allows
well-funded tenants like Boots or JD Sports just to refuse to pay
their rent.
Offices
The key strategic question now for UK commercial property is the
future of office investments in general, and highly valued and
rented London offices in particular. Their long-term performance
has broadly tracked the market as a whole, as measured by the MSCI
Index, but with more volatility, they will now suffer severe
structural damage, with falling demand and rental values. Five
years ago retail rents and capital values were clearly heading for
serious long-term decline so VIT sold all its shops. Offices are
now clearly also heading for the rocks.
Comparative Yields - End December (Except 2020)
2020
(Sept) 2019 2018 2017 2011 2008 2006
Property
(Equivalent
Yield) 5.8 5.6 5.4 5.5 6.8 8.1 5.4
Long Gilts Conventional 0.2 1.0 1.5 1.4 2.5 3.7 4.6
Index Linked -2.6 -2.0 -1.8 -1.8 -0.2 0.8 1.1
UK Equities* 3.7 4.1 4.5 3.6 3.5 4.5 2.9
R.P.I.
(Annual Rate) 0.5 2.2 3.2 4.1 4.8 0.9 4.4
Yield Property less Conventional
Gaps: Gilts 5.6 4.6 3.9 4.1 4.3 4.4 0.8
less Index Linked
Gilts 8.4 7.6 7.2 7.3 7.0 7.3 4.4
less Equities 2.1 1.5 0.9 1.9 3.3 3.6 2.5
Source: MSCI and ONS
* UK Equity Yields: Historic - except 2020 which is consensus
forecast for 2021 post dividend cuts.
Retail
Many retailers in high streets and shopping centres were already
on their last legs before COVID. Although most "non-essential"
retailers have re-opened since the summer, only about half are
paying any rent. A torrent of Company Voluntary Arrangements
(CVAs), like New Look's, are pushing the retail property market
fast towards turnover-linked leases. The lockdown opened the eyes
of many older consumers, in particular, to the ease of buying
on-line, and its wide range of goods and services and speed of
delivery. Many obsolete retail properties must now be valued from
their site value up, not the former retail value down. Retail
warehouse values will also come under downward pressure, but the
falls may be limited, in prosperous parts of Southern England at
least, by their potential alternative use values, for industrial or
distribution purposes, low-rent food stores for Aldi or Lidl, or
even, if the site is right, residential development. Car showrooms
are clearly still overvalued and overrented, but second-hand car
sales may continue to outperform new.
On the high street, the steepest and most significant falls in
property value will be in Central London, with its unique focus on
commuter and international tourist spending which will never come
back to their previous peaks. Suburbs and smaller towns with more
affordable rents and an attractive mix of convenience and
independent traders may prove more resilient, but with short,
turnover-related leases and therefore double-figure valuation
yields.
Supermarkets and convenience stores (including petrol filling
stations), have responded well to the crisis with increases of as
much as 20% in their turnover. The large supermarket chains have
growing on-line operations, but on-line penetration remains far
lower than in non-food retail, and many consumers still prefer the
choice and convenience of their local food shop, where the Co-op is
uniquely well placed.
Warehouse/Industrial Property
Warehouse and industrial property has enjoyed an historic
re-rating in recent years, so that it is now valued below the
average yield for all property, in line with offices and well below
retail property. That industrial premium rating will improve
further, in contrast to offices and retail property, where
valuation yields will rise and capital values fall.
Modern, well-let warehouse property should prove relatively
resilient with vacancy rates low and rents still growing in strong
Southern and Midland locations. A wave of bankruptcies among weaker
tenants and rapidly rising unemployment over the next year may see
vacancies rise and capital values fall on multi-let industrial
estates, especially in the North, where there is little support
from alternative use values.
Non-Traditional Alternatives
Property in the "Alternatives" sectors - i.e. everything except
office, retail or industrial - has been growing rapidly in
importance for institutional investors in recent years. It now
accounts for 15% - 20% of the main UK commercial property market
indices and took over a third of all investment property
transactions both in 2019 and 2020 to date. Most alternative sector
investments have relatively long, often indexed, leases, so the
tenant's ability to pay is crucial for valuation purposes.
Alternative investments may still tend to outperform the more
traditional sectors of the property market, but with wide
variations between different sub-sectors, as follows:
Alternatives - Leisure
Pubs are better placed now than restaurants, where many
private-equity backed multiple chains were already drowning in
debt. Profitable, spacious pubs, with plenty of outside space let
to strong tenants, traded well over the summer due to a combination
of the Chancellor's Eat Out to Help Out subsidy, the "staycation"
boom in British holidays and more people working from home. Winter
will be much harder. Most pubs of this type can still manage with a
10pm closure in suburban, small town and rural locations rather
than city centres, provided wider and long lockdowns can be
avoided. There is, however, no future for many individual city
centre pubs and traditional boozers, as well as bar and nightclub
operators. The well-established trend of smaller pubs closing and
larger and better-run pubs gaining market share will accelerate
rapidly.
Health and Fitness clubs generally froze their memberships
during lockdown and have rebuilt them typically to about
three-quarters of their previous levels, at discounted rates. They
will also suffer some erosion of membership from job losses and
reduced consumer spending, but the well-financed high-quality
operators like David Lloyd and Nuffield with good car parking
should be better placed than in-town gyms.
Bowling companies have reopened successfully with 50% of their
lanes in use, but cinemas face a bleaker future with COVID speeding
up their structural challenges. The heavily indebted market leader,
Cineworld, is especially vulnerable.
Alternatives - Hotels
Hotel valuations are now varying more and more by tenant and
location. Hotels in London, other large city centres and near
airports relying heavily on overseas visitors or big corporate
customers are doing far worse than hotels in smaller towns and
rural areas serving British holidaymakers and small businesses.
That trend will continue for the foreseeable future with
permanently lower office occupancy and less international business
travel.
Alternatives - Care Homes and Medical
Care homes are being hard hit by the pandemic. Costs and vacancy
rates have risen because of both COVID deaths and slower
admissions, while the main private-equity backed care homes
providers are over-geared and will need recapitalisations and rent
cuts. High quality homes with self-funded residents will continue
to outperform those dependent on public funding. Medical centres
and private hospitals are generally well placed.
Alternatives - Student Housing
Student housing faces serious challenges, with some university
courses still virtual during COVID and profitable overseas students
returning slowly. Long, direct-let investments to the best
universities should benefit from a general flight to safety but
weaker universities and colleges must now represent a real credit
risk. Rental and capital values of student housing without a long
university lease may fall, especially as house prices generally
will go into reverse when the current false dawn fades after Stamp
Duty goes up again in 2021.
Conclusion
UK commercial property values will continue to fall through 2021
unless COVID is clearly conquered by next summer. Offices and
non-food retail property will suffer most, with well-let
supermarkets, convenience stores, warehouses/industrials and some
alternative sectors continuing on their long-term winning ways.
The key message for property owners and investors, reinforced by
the crisis so far, is to stick to properties let at affordable
rents to sound tenants in strong sectors on long, index-linked
leases like those in which VIT invests. Secure, long-term income
will be valued more highly after the crisis is over in a
yield-hungry world of vanishing equity dividends and negligible
interest rates and bond yields. In a K-shaped future for the UK
economy and property market, where some sectors will recover whilst
others continue to decline, it is essential to be on the right side
of long-term structural change. The simple message now in property
is to stay away from offices and non-food retail and keep tenant
and re-letting risk to a minimum within the other sectors.
VIT's Property Portfolio
VIT's property portfolio is independently valued by Savills at
the end of March and September each year. The latest valuation
total was GBP72,825,000 prior to IFRS 16 adjustment as at 30
September 2020. While the economy and property markets remain
uncertain, external valuers now have enough evidence of property
transactions to provide unqualified valuations, so the "material
uncertainty" clause attached to Savills' 31 March valuation has now
been removed for all properties in the 30 September valuation.
Since the end of March, the purchases of three Co-op convenience
stores have completed, the empty ex-Adelie Foods unit at Milton
Keynes has been taken over by a tenant with a stronger covenant on
a longer lease and six rent increases have been achieved on
review.
For the six months to 30 September, 96% of the contracted rent
roll on VIT's properties has been collected. In the second quarter,
93% was collected for April - June with only the rent for Adelie
Foods in administration at the Milton Keynes industrial property
written off. 100% of the contracted rent roll for July - September,
the third quarter, has been collected.
Purchases
We invested GBP5.5m plus costs over the six months at a net
initial yield of 6.1% in three freehold index-linked Co-op
convenience stores in Barton Upon Humber, Cleethorpes and
Kirriemuir. All three supermarkets have index-linked leases and a
weighted average unexpired lease length of 13 years. These three
properties were valued at end-September at 1.4% above their total
purchase price excluding costs.
These supermarkets with RPI-linked leases to the undoubted
covenant of the Co-operative Group Limited should produce
attractive long-term real returns at low risk from an initial yield
over 8 points above index-linked gilts, with favourable capped and
collared RPI indexation on one and uncapped RPI indexation on two.
The Co-op have a 6% market share in food retailing, with a very
strong position in local and convenience shopping in over 3,700
stores which have performed exceptionally well during the pandemic.
They should have no difficulty in meeting their RPI-linked rental
payments on these properties.
Sales
Contracts were exchanged in September and October, with
completion fixed for early in 2021, for the sale of two properties,
the bingo hall in Manchester and the roadside property in Horsham
held on a 36 year lease, for GBP4.75m in total, 18.8% above their
GBP4.0m end-September valuation totals.
Assignment
Milton Keynes - Former Adelie Foods Industrial Unit
Adelie Foods went into administration in May 2020. The lease has
now been assigned to Winterbotham Darby Ltd at the same rent with
the unexpired lease term increased from 7.6 years to 14.9 years,
with a tenant's option to break in 2030. No rent was received for
Q2, but it has been fully paid for Q3 and Q4. Since 1962,
Winterbotham Darby has been supplying high-quality continental
food, such as olives, antipasti, continental meats and pasta to the
major UK supermarkets and food suppliers.
Bradford & Manchester
Buzz Bingo undertook a CVA on 3 August. Both VIT properties were
in the most favoured Category A, with the rents and lease terms
unchanged, and where the tenant's covenant has been improved by the
cancellation of leases on their less profitable properties not held
by VIT.
Rent Reviews
There have been six index-linked rent reviews since March at
Cheltenham, Coventry, Newcastle upon Tyne (Pubs), Dover (Caravan
Park) and Southampton (Roadside) plus the new purchase at
Kirriemuir (Supermarket) with an average uplift of 2.6% on their
passing rents.
COVID-19 and Rent Collection
Two thirds of our tenants had to shut down their operations
during the COVID-19 related lockdowns and restrictions, which has
created unprecedented trading challenges for our leisure operators
who earned no revenue for at least half of the reporting period.
All reopened in the summer.
It has been a challenging period for rent collection in some
property sectors but we benefitted from owning no shops, retail,
warehouses, or shopping centres, and by continuing close contact
with all our tenants. 93% of contracted rents were collected in Q2
April - June and we are pleased to report that 100% has been
collected for Q3 July - September. Q4 rent collection has started
well.
Valuation & Performance
Over the six months, the capital value of the existing portfolio
fell by 4.2% and rental income rose by 0.8% (due to six rent
reviews). The portfolio gave a total return of -1.9%, in line with
the MSCI Quarterly Index, after all costs of new purchases, and
three months' loss of rent plus a capital contribution to the new
tenant at Milton Keynes.
One property rose in value, seventeen declined and eight were
unchanged. The best performing property within the portfolio was
the caravan park (+3.8%), with industrials and the one held
supermarket unchanged, but pubs and leisure declined. The running
yield on valuation was 6.7% at end September (MSCI: 5.1%) against
6.4% at end March. There are no empty properties, against a MSCI
void rate of 9.2%. All 29 properties and 31 tenancies are let on
full repairing and insuring leases with upwards only rent reviews
and a weighted average unexpired lease length of 16 years (15 years
if the tenants' break options are exercised), with 77% of the
income having leases with over 10 years to expiry (23 out of 31
tenancies). Contracted rental income now has 87% in total on
index-linked leases: 79% with RPI linked increases (38% with annual
reviews and 41% five yearly) and a further 8% of rental income has
fixed increases (6% with annual reviews and 2% five yearly).
Louise Cleary & Matthew Oakeshott
OLIM Property Limited
5 November 2020
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 and Emerging Risks and Uncertainties
The Board carries out a regular review and robust assessment of
the principal and emerging risks facing the Group including those
that would threaten its business model, future performance,
solvency or liquidity. These principal and emerging risks and
uncertainties were set out in full in the Strategic Report within
the 2020 Annual Report, and are considered equally applicable to
the second half of the financial year as for the period under
review.
Climate Change and Social Responsibility Risk
The Board recognises that climate change is an important
emerging risk that all companies should take into consideration
within their strategic planning. However, the Company has little
direct impact on environmental issues. As an investment trust
company, the Company has no direct employee or environmental
responsibilities. The Board is aware that the Manager continues to
take into account environmental, social and governance matters when
considering investment proposals.
Other Emerging Risks
The Directors are cognisant of the potential impact of the
coronavirus (COVID-19) outbreak and its implications for the
activities of the Manager and on the performance of investee
companies and assets.
While VIT's property portfolio is sufficiently robust to
withstand the current market impacts of the pandemic, there is a
risk that property values may fall and tenants may struggle to pay
rent. If this happens, there is a risk that loan to value and
interest cover covenants could be breached. If this were to occur,
VIT has sufficient cash and liquid equity investments to cover any
loan repayments triggered by covenant breaches.
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
5 November 2020
Group Statement of Comprehensive Income
For the 6 months ended 30 September 2020
6 months ended 6 months ended Year ended
30 September 2020 30 September 2019 31 March 2020
(Unaudited) (Unaudited and restated) (Audited)
Notes 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
INCOME
Dividend income 2,376 - 2,376 3,857 - 3,857 5,931 - 5,931
Other operating
income 2 2,346 - 2,346 2,294 - 2,294 4,813 - 4,813
4,722 - 4,722 6,151 - 6,151 10,744 - 10,744
GAINS AND LOSSES
ON INVESTMENTS
Realised
(losses)/gains
on
held-at-fair-value
investments and
investment
properties - (3,008) (3,008) - 3,165 3,165 - (3,482) (3,482)
Unrealised
gains/(losses)
on
held-at-fair-value
investments and
investment
properties - 272 272 - (916) (916) - (31,381) (31,381)
TOTAL INCOME 4,722 (2,736) 1,986 6,151 2,249 8,400 10,744 (34,863) (24,119)
EXPENSES
Investment
management
fees (148) (345) (493) (180) (420) (600) (345) (805) (1,150)
Other operating
expenses (394) - (394) (357) - (357) (878) - (878)
FINANCE COSTS (2,537) - (2,537) (2,183) - (2,183) (4,609) - (4,609)
TOTAL EXPENSES (3,079) (345) (3,424) (2,720) (420) (3,140) (5,832) (805) (6,637)
(LOSS)/PROFIT
BEFORE TAXATION 1,643 (3,081) (1,438) 3,431 1,829 5,260 4,912 (35,668) (30,756)
TAXATION (153) 66 (87) (124) 80 (44) (263) 359 96
(LOSS)/PROFIT
ATTRIBUTABLE
TO EQUITY
SHAREHOLDERS
OF PARENT 1,490 (3,015) (1,525) 3,307 1,909 5,216 4,649 (35,309) (30,660)
EARNINGS PER
ORDINARY SHARE
(Pence) 3 3.27 (6.61) (3.34) 7.27 4.19 11.46 10.21 (77.52) (67.31)
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 2.90p per
share (2020 - 2.90p) which was paid on 30 October 2020 to those
shareholders on the register on 2 October 2020 with an ex-dividend
date of 1 October 2020 and a second quarterly dividend of 2.90p per
share (2020 - 2.90p) which will be paid on 29 January 2021 to those
shareholders on the register on 4 January 2021 with an ex-dividend
date of 31 December 2020. The third quarterly dividend of 2.90p
(2020 - 2.90p) will be paid on 30 April 2021 to those shareholders
on the register on 6 April 2021. The ex-dividend date will be 1
April 2021.
Group Statement of Financial Position
As at 30 September 2020
As at As at As at
30 September 2020 31 March 2020 30 September 2019
Notes (Unaudited) (Audited) (Unaudited and Restated)
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 83,239 90,757 129,484
Investment properties 77,076 74,459 75,616
8 160,315 165,216 205,100
Deferred tax asset 398 485 345
160,713 165,701 205,445
CURRENT ASSETS
Cash and cash equivalents 26,928 26,428 4,584
Receivables 744 668 492
27,672 27,096 5,076
TOTAL ASSETS 188,385 192,797 210,521
CURRENT LIABILITIES
Debenture stock (15,000) (15,000) -
Payables (1,590) (1,624) (2,525)
(16,590) (16,624) (2,525)
TOTAL ASSETS LESS CURRENT
LIABILITIES 171,795 176,173 207,996
NON-CURRENT LIABILITIES
Payables (4,234) (4,243) (4,251)
Borrowings (56,649) (56,623) (49,920)
(60,883) (60,866) (54,171)
NET ASSETS 110,912 115,307 153,825
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 87,911 92,306 130,824
TOTAL EQUITY 110,912 115,307 153,825
NET ASSET VALUE PER ORDINARY
SHARE (Pence) 243.50p 253.14p 337.71p
Group Statement of Changes in Equity
For the 6 months ended 30 September 2020
6 months ended 30 September
2020
(Unaudited)
Share Retained
Share capital premium earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000
Net assets at 31 March
2020 4,555 18,446 92,306 115,307
Loss for the period - - (1,525) (1,525)
Dividends paid 4 - - (2,870) (2,870)
Net assets at 30 September
2020 4,555 18,446 87,911 110,912
Year ended 31 March 2020
(Audited)
Net assets at 31 March
2019 4,555 18,446 128,432 151,433
Loss for the period - - (30,660) (30,660)
Dividends paid 4 - - (5,466) (5,466)
Net assets at 31 March
2020 4,555 18,446 92,306 115,307
6 month ended 30 September
2019
(Unaudited and restated)
Net assets at 31 March
2019 4,555 18,446 128,432 151,433
Profit for the period - - 5,216 5,216
Dividends paid 4- - (2,824) (2,824)
Net assets at 30 September
2019 4,555 18,446 130,824 153,825
Group Statement of Cash Flows
For the 6 months ended 30 September 2020
6 months ended 6 months ended Year ended
30 September 2020 30 September 2019 31 March 2020
(Unaudited) (Unaudited and restated) (Audited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
CASH FLOWS FROM OPERATING
ACTIVITIES
Dividend income received 2,420 4,383 6,466
Rental income received 2,219 1,903 4,162
Interest received 43 6 10
Operating expenses paid (843) (1,045) (2,101)
NET CASH INFLOW FROM OPERATING
ACTIVITIES 3,839 5,247 8,537
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of investments
held at
fair value through profit
or loss (4,500) (8,359) (13,900)
Purchase of investment properties (6,209) (9,254) (10,758)
Sale of investments held
at fair
value through profit or
loss 12,874 11,041 17,160
Sale of investment properties - 6,575 9,199
NET CASH INFLOW FROM INVESTING
ACTIVITIES 2,165 3 1,701
CASH FLOW FROM FINANCING
ACTIVITIES
Loans drawn down - - 22,000
Fees paid on new loan (4) - (320)
Interest paid on loans (2,527) (2,077) (4,156)
Finance cost of leases (95) (95) (191)
Payments of lease liabilities (8) (8) (15)
Dividends paid (2,870) (2,824) (5,466)
NET CASH (OUTFLOW)/INFLOW
FROM FINANCING ACTIVITIES (5,504) (5,004) 11,852
NET INCREASE IN CASH AND
CASH EQUIVALENTS 500 246 22,090
Cash and cash equivalents
at the
start of the period 26,428 4,338 4,338
CASH AND CASH EQUIVALENTS
AT THE OF THE PERIOD 26,928 4,584 26,428
Notes to the Financial Statements
1 Accounting policies
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.
(a) Basis of preparation
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 October
2019 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 in the Interim
Report.
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 2020 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 2020 is shown in the Statement of
Financial Position in the Interim Report. The cash flows of the
Group for the half year to 30 September 2020, which are not
untypical, are set out in the Interim Report. The Group had fixed
debt totalling GBP71,649,000 as at 30 September 2020; none of the
borrowings is repayable before 2021. As at 30 September 2020, the
Group's total assets less current liabilities exceeded its total
non current liabilities by a factor of over 1.5.
The assets of the Group consist mainly of securities and
investment properties that are held in accordance with the Group's
investment policy, as set out in the Interim Report. 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 and having taken into account the liquidity of the
Group's investment portfolio and the Group's financial position in
respect of cash flows, borrowing facilities and investment
commitments (of which there is none of significance), are not aware
of any material uncertainties that may cast significant doubt upon
the Group's ability to continue as a going concern. 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 Service 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.
(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 equity investments are classified on the basis of their
contractual cash flow characteristics and the Group's business
model for managing its assets. The business model, which is the
determining feature, is such that the portfolio of equity
investments is managed, and performance is evaluated, on the basis
of fair value. Consequently, all equity investments are measured at
fair value through profit or loss.
For listed investments, fair value through profit or loss 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. 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 retained earnings.
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 - Global Standards January
2020 (the 'RICS Red Book'). The determination of fair value by
Savills is supported by market evidence.
Leases
The Group leases properties that meet the definition of
investment property. These right-of-use assets are presented as
part of Investment Properties in the Balance Sheet and held at fair
value.
2 Other operating income
6 months ended 6 months ended Year ended
September
September 2020 2019 March 2020
GBP'000 GBP'000 GBP'000
(Restated)
Rental income 2,239 2,289 4,716
Interest receivable on short term deposits 107 5 97
2,346 2,294 4,813
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 2020 September 2019 March 2020
GBP'000 GBP'000 GBP'000
Revenue return 1,490 3,307 4,649
Capital return (3,015) 1,909 (35,309)
Weighted average ordinary
shares in issue 45,549,975 45,549,975 45,549,975
Return per share - revenue 3.27p 7.27p 10.21p
Return per share - capital (6.61p) 4.19p (77.52p)
Total return per share (3.34p) 11.46p (67.31p)
4 Dividends paid
6 months ended 6 months ended Year ended
30 September 30 September 31 March 2020
2020 2019
GBP'000 GBP'000 GBP'000
Dividends on ordinary shares:
Third quarterly dividend of
2.90p per share (2020- 2.80p)
paid
24 April 2020 1,321 1,275 1,275
Final dividend of 3.40p per
share (2020 - 3.40p) paid 28
August 2020 1,549 1,549 1,549
First quarterly dividend of
2.90p per share (2020- 2.80p)
paid
25 October 2019 * - - 1,321
Second quarterly dividend of
2.90p per share (2020- 2.80p)
paid 31 January 2020 * - - 1,321
Dividends paid in the period 2,870 2,824 5,466
* First and second quarterly dividends for the year to 31 March
2021 have been declared with pay dates falling after 30 September
2020. These have not been included as liabilities in these
financial statements.
5 Interim dividend
The Directors have declared a first quarterly dividend of 2.90p
per ordinary share, paid on 30 October 2020 to those shareholders
on the register on 2 October 2020, with an ex-dividend date of 1
October 2020 (2020 - 2.90p) and a second interim dividend of 2.90p
per share, payable on 29 January 2021 to those shareholders on the
register on 4 January 2021, with an ex-dividend date of 31 December
2020 (2020 - 2.90p).
The third quarterly dividend of 2.90p (2020 - 2.90p) will be
paid on 30 April 2021 to those shareholders on the register on 6
April 2021. The ex-dividend date will be 1 April 2021.
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 2020 3,191 89,115 92,306
Movement during the period:-
Loss for the period 1,490 (3,015) (1,525)
Dividends paid (see Note 4) (2,870) - (2,870)
At 30 September 2020 1,811 86,100 87,911
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 Year ended
30 September 2020 30 September 31 March 2020
2019
GBP'000 GBP'000 GBP'000
Purchases 27 56 83
Sales 13 11 17
40 67 100
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 2020 (unaudited)
Equity investments 83,239 - - 83,239
Investment properties - - 77,076 77,076
83,239 - 77,076 160,315
Borrowings - (79,757) - (79,757)
(79,757
83,239 ) 77,076 80,558
At 31 March 2020 (audited)
Equity investments 90,757 - - 90,757
Investment properties - - 74,459 74,459
90,757 - 74,459 165,216
Borrowings - (81,317) - (81,317)
(81,317
90,757 ) 74,459 83,899
At 30 September 2019 (unaudited and
revised)
Equity investments 129,484 - - 129,484
Investment properties - - 75,616 75,616
129,484 - 75,616 205,100
Borrowings - (59,557) - (59,557)
(59,557
129,484 ) 75,616 145,543
Fair value categorisation within the hierarchy has been
determined on the basis of the degree to which the inputs to the
fair value measurements are observable and the significance of the
inputs to the fair value measurement in its entirety as
follows:-
Level 1 - inputs are unadjusted quoted prices in an active
market for identical assets
Level 2 - inputs, not being quoted prices, are observable,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices)
Level 3 - inputs are not observable
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 values 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. These
instruments are therefore considered to be Level 2 as defined
above. There were no transfers between Levels during the period.
All other assets and liabilities of the Group are included in the
Balance Sheet at fair value.
9 Relationship with the Investment Managers and other Related Parties
Matthew Oakeshott is a Director of OLIM Property Limited which
has an agreement with the Group to provide property management
services.
OLIM Limited and OLIM Property Limited each receives an annual
investment management fee of 0.60% of the capital assets that they
manage.
OLIM Limited received an investment management fee of GBP292,000
(half year to 30 September 2019: GBP393,000 and year to 31 March
2020: GBP738,000). At the period end, the balance owed by the Group
to OLIM Limited was GBP42,000 (31 March 2020: GBP4,000) comprising
management fees for the month of September 2020, subsequently paid
in October 2020.
OLIM Property Limited received an investment management fee of
GBP201,000 (half year to 30 September 2019: GBP207,000 and year to
31 March 2020: GBP412,000). At the period end, the balance owed by
the Group to OLIM Property Limited was GBP30,000 (31 March 2020:
GBP34,000) comprising management fees for the month of September
2020, subsequently paid in October 2020.
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 Prior Year Adjustments
As noted in the Financial Statements for the year to 31 March
2020, the Financial Statements were restated on 31 March 2018 to
recognise finance lease liabilities for leasehold properties which
are classified as investment property at fair value under the
requirements of IAS 40 and IAS 17. Previously, the value of the
leased investment property recorded on the Balance Sheet had been
the net valuation of the leasehold property and the leases had been
accounted for as operating leases. This has been corrected to
recognise the gross valuation of the asset and a corresponding
finance lease liability at the present value of minimum lease
payments using the incremental borrowing rate at the inception of
the lease(s). There has also been a reclassification of the charges
previously netted off against Rental Income to Finance Costs and
unrealised gains/losses in investment property. Full details of
these adjustments are shown in Note 22 to the Financial Statements
for the year to 31 March 2020.
After the adoption of IFRS 16, a right-of-use asset and lease
liability are required to be recognised on the Balance Sheet with
the right-of use asset classified as investment property and
subsequently fair-valued under IAS 40. As the leased assets have
been adjusted to have been recognised previously under finance
leases, and meet the definition of and are included in investment
property, they are not affected.
The impact of this revision had the following impacts as at 1
April 2019 and 30 September 2019:
(i) The Group as a lessee recognised an additional GBP4,287,000
as a right-of-use asset and as a lease liability (comprising a
current liability of GBP15,000, and a non-current liability of
GBP4,272,000). In addition, GBP204,000 has been reclassified from
rental to finance costs (half year to 30 September 2019 -
GBP103,000).
11 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 2020 and 30
September 2019 has not been audited.
The information for the year ended 31 March 2020 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 of
the Companies Act 2006.
This Half-Yearly Report was approved by the Board on 5 November
2020.
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
5 November 2020
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