TIDMLWI
RNS Number : 1559P
Lowland Investment Co PLC
05 June 2020
Legal Entity Identifier: 2138008RHG5363FEHV19
LOWLAND INVESTMENT COMPANY PLC
Unaudited results for the half-year ended 31 March 2020
This announcement contains regulated information.
Investment objective
The Company aims to give shareholders a higher than average
return with growth of both capital and income over the medium to
long-term, by investing in a broad spread of predominantly UK
Companies. The Company measures its performance against the FTSE
All-Share Index Total Return.
Investment policy
Asset Allocation
The Company will invest in a combination of large, medium and
smaller companies listed in the UK. We are not constrained by the
weightings of any index; we focus instead on controlling absolute
risk by diversifying on the basis of underlying company
characteristics such as size, industry, economic sensitivity,
clients and management. In normal circumstances up to half the
portfolio will be invested in FTSE 100 companies; the remainder
will be divided between small and medium-sized companies. On
occasions the Manager will buy shares listed overseas. The Manager
may also invest a maximum of 15% in other listed trusts.
Dividend
The Company aims to provide shareholders with
better-than-average dividend growth.
Gearing
The Board believes that debt in a closed-end fund is a valuable
source of long-term outperformance, therefore the Company will
usually be geared. At the point of drawing down debt, gearing will
never exceed 29.99% of the portfolio valuation. Borrowing will be a
mixture of short and long-dated debt, depending on relative
attractiveness of rates.
Key data for the six months to 31 March 2020
Net Asset Value Total Return -30.3%
Benchmark(1) Total Return -22.0%
Growth in Dividend 1.7%
Dividend 30.0p
(1) FTSE All-Share Index
Half-Year Ended Half-Year Ended Year Ended
Financial highlights 31 Mar 2020 31 Mar 2019 30 Sept 2019
-------------------------------------- ---------------- ---------------- --------------
NAV Per Ordinary Share(1) 985p 1,431p 1,428p
Share Price(2) 900p 1,340p 1,280p
Market Capitalisation GBP243m GBP362m GBP346m
Dividend Per Share 30.0p 29.5p 59.5p
Ongoing Charge Including Performance
Fee 0.7% 0.6% 0.6%
Ongoing Charge Excluding Performance
Fee 0.7% 0.6% 0.6%
Dividend Yield(3) 6.7% 4.3% 4.6%
Gearing 17.2% 11.9% 12.8%
Discount 8.6% 6.4% 9.1%
(1) NAV (Net Asset Value) with debt at par value
(2) Using mid-market closing price
(3) Based on dividends paid and declared in respect of the
previous twelve months
Total return performance (including dividends reinvested and
excluding transaction costs)
6 months 1 year 3 years 5 years 10 years
% % % % %
----------------- --------- ------- -------- -------- ---------
Net Asset Value -30.3 -29.5 -31.1 -18.6 84.2
Share Price (1) -28.1 -29.8 -30.2 -16.8 104.4
Benchmark (2) -22.0 -18.5 -12.2 2.9 53.6
(1) Using mid-market closing price
(2) FTSE All-Share Index
Sources: Morningstar, Funddata, Refinitiv Datastream and Janus
Henderson
Historical record - Year to 30 September
As at
31 Mar
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -----------
Net
Assets(1)
(GBPm) 204 214 266 347 362 355 387 440 439 386 266
Per Ordinary Share
Net Asset
Value(2) 770p 811p 1,008p 1,307p 1,346p 1,318p 1,432p 1,628p 1,625p 1,428p 985p
Share
Price 700p 763p 992p 1,325p 1,355p 1,287p 1,337p 1,504p 1,515p 1,280p 900p
Net
Revenue 22.5p 28.8p 31.1p 36.7p 39.4p 46.4p 47.7p 49.1p 58.6p 68.0p 14.5p
Net
Dividends
Paid 27.0p 28.0p 30.5p 34.0p 37.0p 41.0p 45.0p 49.0p 54.0p 59.5p 30.0p(3)
(1) Attributable to Ordinary Shares
(2) NAV with debt at par value
(3) First interim dividend of 15.0p per ordinary share paid on
30 April 2020 and second interim dividend of 15.0p per ordinary
share that will be paid on 31 July 2020
INTERIM MANAGEMENT REPORT
CHAIRMAN'S STATEMENT
Overview
Coronavirus has had a dramatic adverse impact on Lowland's quest
for growth in both capital and income. The first quarter of the
financial year saw modest growth in Net Asset Value ('NAV'), and
outperformance of the FTSE All-Share benchmark. This was sharply
reversed in the second quarter, and most especially in March, as
the impact on global and domestic economies of the steps taken to
contain coronavirus became more evident. Since then markets have
recovered some of their losses, perhaps based more on the scale of
governmental assistance than confidence in a rapid recovery from
the consequences of the pandemic.
During the month of March the NAV fell 26.5% versus a 15.1% fall
in the benchmark. In the half year as a whole, NAV fell by 30.3%
against a 22% decline in the index. The relative underperformance
therefore occurred entirely in March, and was largely a result of
the portfolio's bias to certain stocks in the industrial and
financial sectors, exacerbated by the effect of gearing in a
falling market. The Fund Managers go into more detail on the most
immediately problematic areas of the aerospace sector, banks, and
insurance, in their report.
Dividends
Underlying earnings per share fell to 14.5p during the period
compared to 22.2p last year. As a result of uncertainty surrounding
coronavirus many companies across a broad range of industries have
reduced, suspended or cancelled their dividends. This has created a
very difficult environment for an income investor, with 2020
dividend cuts steeper than during the financial crisis.
The Fund Managers discuss the dividend outlook in more detail in
their section of the report, and in their view, there may be an
extent to which some dividends have been deferred; but a good many
companies will take time to return to paying dividends; and recent
levels of income are unlikely to return before 2022.
Lowland has pursued a progressive quarterly dividend policy
since 2013. I said in my last annual statement that we were
committed to maintaining this policy, with each quarterly
declaration being no less than the previous year's equivalent,
barring really adverse circumstances. That we face really adverse
circumstances is clear. As greater clarity emerges on the timing
and degree of recovery, the Board will consider whether we are able
to maintain this policy. Aside from very substantial capital
reserves, Lowland's revenue reserve, before payment of last year's
third interim and final dividends, amounted to GBP18.4m at the
financial year end, equivalent to 68p per share. We have added over
GBP11m to the reserve since we last paid an uncovered dividend in
2010, when earnings were still recovering from the financial
crisis. Revenue reserves are there for a rainy day. At present, it
feels more like a thunderstorm, and we will have to make a
judgement on whether we can maintain the policy. We are cognisant
of shareholders' desire for regular income and it is our firm
intention to maintain the policy if possible.
We declared a first interim dividend of 15p in January (2019:
14.5p), and the Board has today declared an unchanged second
interim of 15p, thus far maintaining our policy.
Gearing
As at the 31(st) March, gearing was 17.2%, up from 12.8% as at
the financial year end. This rise in gearing was largely passive,
driven by the fall in asset value. The absolute level of net debt
remained fairly constant during the six months, at around
GBP46m.
Since the year end debt has reduced slightly to GBP40.4m.
Gearing is now 14.2%, reflecting lower debt and slightly recovered
asset values.
Share price discount
During this volatile period, trading in the Company's shares
fluctuated between a discount of 13.0% and a premium of 7.4%. As at
the period end it was trading at an 8.6% discount versus a 9.1%
discount at the financial year end.
Outlook
Chairmen are prone to remarking that times are unusually
unpredictable. I think such an observation is excusable today.
There will be long-term consequences of the hiatus in normal life,
caused by governments' risk-averse reactions to the possible scale
of the pandemic. To a degree these consequences will be sectoral;
the great majority of companies throughout the economy will suffer
to some extent. The speed and shape of recovery from such an
unprecedented decline in economic activity is highly
unpredictable.
Our intention is to maintain a level of gearing which is
prudent. We certainly do not rule out further sharp market shocks.
At the same time our gearing must allow us to benefit from
opportunities in the market and from the recovery when it does
come. The Fund Managers' approach remains based on bottom-up stock
picking, although at this time stock picking is more than usually
influenced by macro considerations. Lowland is invested in a
diverse range of good quality companies which should benefit when
economies recover.
Robert Robertson
Chairman
5 June 2020
Performance as at 31 March 2020
Sector Analysis % as at 31 March 2020 % as at 30 September 2019
Benchmark
Company (1) Company Benchmark (1)
-------------------- ---------- ------------ ---------- ----------------
Basic Materials 4.8 7.4 4.0 7.4
Consumer Goods 3.5 15.6 4.4 14.3
Consumer Services 9.5 11.3 10.7 12.0
Financials 36.3 26.0 33.9 25.6
Health Care 6.2 11.2 5.7 9.3
Industrials 23.7 11.1 25.1 11.7
Oil & Gas 7.2 10.3 8.9 13.2
Technology - 1.0 0.5 1.0
Telecommunications 1.5 2.4 1.5 2.8
Utilities 7.3 3.7 5.3 2.7
-------------------- ---------- ------------ ---------- ----------------
Total 100.0 100.0 100.0 100.0
-------------------- ---------- ------------ ---------- ----------------
(1) FTSE All-Share Index
FUND MANAGERS' STATEMENT
Performance Review
The six months to the end of March was a very difficult
performance period for Lowland on an absolute and a relative basis.
The Company's NAV fell 30.3%; the FTSE All-Share benchmark declined
by 22% (both on a total return basis). This underperformance was
concentrated in March as it became clear that coronavirus would
have significant implications for both the domestic and global
economy. In March the Company's NAV fell 26.5% versus a 15.1% fall
in the FTSE All-Share.
Use of gearing detracted from returns by 3.5% during the six
months. Gearing over the long term has been a positive contributor
to performance and is one of the advantages of the investment trust
structure; however during a period when equity markets fell sharply
it has been a material detractor. At the end of the period the
gearing level was 17.2%. The increase since the year end was driven
passively by market falls rather than our having been a net
investor.
At the sector level, the largest detractors from performance
were our holdings in the industrials sector, which constituted
23.7% of the portfolio at the end of March. This detraction from
returns was predominantly a result of stock selection rather than
sector allocation, as the industrials sector as a whole performed
only marginally worse than the overall benchmark. With parts of the
global economy temporarily mothballed this will have a material
impact on future earnings within the industrials sector. While in
some cases we think the earnings impact will prove temporary (for
example companies exposed to infrastructure spending, which we
expect to continue to grow), in other areas such as civil
aerospace, the path to earnings recovery is much less clear.
Within the portfolio we have two industrial companies which are
materially exposed to civil aerospace - Senior, which designs and
manufactures components such as structures for the wing, and engine
maker Rolls-Royce. Going into this downturn, civil aerospace had
been a structural growth area as passenger miles flown had, for
many years, grown above global GDP growth, as emerging market
demand increased. However, the temporary grounding of a substantial
portion of the global aeroplane fleet has created a much more
difficult outlook for the aerospace industry than either the
financial crisis or 9/11. There will be excess capacity in
aeroplanes, even after Boeing and Airbus have curtailed production.
For Senior and Rolls Royce the earnings impact will be severe, but
both have other end-market exposure, including defence aerospace,
which is proving more resilient. For now we have maintained the
positions. The shares are trading on a low valuation relative to
their history with experienced management teams to steer the
companies through this challenging period.
At the stock level, the largest contributors to relative
performance during the six months are detailed in the table
below.
Company Name Share Price (total Relative Contribution
return, %) (%)
Avon Rubber +39.4 +0.8
------------------- ----------------------
Severn Trent +7.2 +0.5
------------------- ----------------------
Pennon +32.9 +0.4
------------------- ----------------------
Direct Line -1.4 +0.3
------------------- ----------------------
Phoenix Group -9.4 +0.3
------------------- ----------------------
Taking each in turn:
1. Avon Rubber - completed the acquisition of a US body armour
and helmets company from 3M. The deal was on attractive terms for
Avon and is highly complementary to their existing defence
equipment business.
2. Severn Trent - shares re-rated following the UK General Election, which removed the threat of renationalisation. Their operations are also relatively unaffected by the virus.
3. Pennon - announced the sale of their waste management
business, Viridor, to private equity at a high valuation relative
to historic earnings and invested capital.
4. Direct Line - resilient underwriting results in a period of
rising claims costs in their motor book, along with an encouraging
presentation to investors, led to the shares re-rating.
5. Phoenix Group - life insurance business which consists
predominantly of pre-existing policies that are in gradual run-off,
therefore should be relatively unaffected by the current economic
back drop. The dividend yield remains attractive.
The largest relative detractors from performance during the six
months are detailed in the table below.
Company Name Share Price (total Relative Contribution
return, %) (%)
Senior -62.1 -0.9
------------------- ----------------------
Hiscox -44.3 -0.5
------------------- ----------------------
Ince -84.7 -0.4
------------------- ----------------------
Hammerson -72.7 -0.4
------------------- ----------------------
Rolls-Royce -56.7 -0.3
------------------- ----------------------
Taking each in turn:
1. Senior - exposed to the civil aerospace market (see above under 'Performance Review').
2. Hiscox - a writer of small and medium-sized business
insurance in the US and UK, including business interruption and
event cancellation insurance. In the current backdrop the claims
outlook in this area is unclear (although they do have reinsurance
cover in place). This uncertainty has led to a de-rating of the
shares.
3. Ince Group - a legal services company that announced a rights
issue in order to cover working capital requirements following an
acquisition. This has been a disappointing holding and is now a
small portion of the overall portfolio (0.2% as at the end of
March, following the period end the position has been sold).
4. Hammerson - shopping centres in the UK and Europe are largely
closed as a result of the virus, and second quarter rent receipts
as a result have been much weaker than they would otherwise have
been. There are question marks around the long-term value of retail
assets at a time when a growing portion of consumer spend is
online. Hammerson owns prime retail assets in city centres (such as
the Bullring in Birmingham) and in our view there is still a role
for flagship retail assets. However valuations will be likely to
continue to decline and the closure period as a result of the virus
is likely to accelerate pre-existing trends in the retail sector
with weaker companies entering administration.
5. Rolls-Royce - exposed to the civil aerospace market (please
again see above in 'Performance Review').
Income review
It was a difficult period for income generation, with many of
our companies choosing to suspend their dividends. These dividend
suspensions were across a broad range of sectors including banks,
industrials, housebuilders, non-life insurers and property
companies. Other sectors, including utilities, pharmaceuticals, oil
& gas producers and life insurers, have so far been more
resilient. This has caused a fall in earnings per share from 22.2p
this time last year to 14.5p this financial year.
Assessing the capacity for dividends to recover from their
current level is difficult, and needs to be done on a
company-by-company basis rather than at the sector level. Some
companies may use the current suspension as an opportunity to
rebase their payout ratio to a lower level. Other companies that we
have spoken to see the decision as a genuine deferral (rather than
cancellation) of the dividend and are keen to 'catch up' the
forgone dividend as soon as the outlook is clearer. There are other
nuances to be aware of - where companies are currently using, or
are considering using any of the applicable government schemes (for
example staff furloughing) they are pre-emptively cancelling
dividends. Many extended bank facilities in the current environment
are also coming with the proviso of no dividends being paid to
shareholders for as long as the facility is being used (and in some
cases for a set period afterwards as well). There may be a
political consideration for the dividend payouts of some sectors
such as banks. Therefore the dividend outlook is complex. In our
view 2021 will see some recovery in dividend levels, but not to the
levels seen in 2019.
Activity
The largest new investment during the period was asset manager
and life insurance company M&G. This came into the portfolio
via a spin-out from the existing holding in Prudential and we
subsequently purchased more shares, attracted by the high yield
that we believe they can continue to pay. Cash generation should be
resilient thanks to the large asset base attached to their closed
book of life insurance business (while their asset management
business will naturally be more volatile dependent on net flows and
market levels). Other new positions included Ricardo --a UK
consultancy business that specialises in environmental consulting
(for example working with governments and companies on how to
reduce carbon emissions and water wastage) -- and specialist
retailer Halfords. Under a new management team Halfords is becoming
more focused on return on capital and has taken steps to integrate
its business better (for example bringing the Halfords and
Autocentre business together onto one website for customers). We
have used periods of share price weakness to add to our positions
in all of these companies.
The largest individual sale during the period was pub operator
Greene King, which we sold at a small discount to the takeover
price, ahead of the completion of the takeover by Hong Kong
conglomerate CK Asset Holdings. We also sold medical device
designer and manufacturer Consort Medical ahead of its takeover by
European peer company Recipharm. We removed our position in Royal
Mail. This had been a disappointing performer for the portfolio as
a result of a steeper than expected fall in letter volumes and
difficulty in achieving targeted cost reductions.
Towards the end of the period we reduced the positions in some
banks including Royal Bank of Scotland and HSBC. We originally held
these on the basis of their strong capital positions which offered
some scope for the return of excess capital to shareholders over
time. This was particularly the case for RBS, which went into this
calendar year with a strong capital position versus peers and which
had already announced a special dividend was to be paid to
shareholders in March. However, it became clear during the lockdown
that given the banks (particularly the domestic banks) would be
indirect beneficiaries of a number of government support schemes,
they would not be paying dividends to shareholders for at least the
remainder of the calendar year. Our original investment thesis of
an attractive dividend yield for shareholders was therefore
invalidated.
Outlook
Since the period end there has been a slight return of investor
confidence with both the NAV total return and the FTSE All-Share
total return rising by 8.5% (at the end of May). The sentiment is
fragile with concerns that there might be second waves of the
infection. However, companies have been adapting fast to the
changed circumstances and have reduced their cost bases materially.
When the economic recovery happens we therefore expect the earnings
impact of a rise in sales to be substantial. Many companies have
also raised equity in order to emerge from the crisis with a better
balance sheet and stronger competitive position. We have
selectively participated in these placings for Lowland since the
period end.
Lowland has historically performed well when emerging from an
economic downturn as a result of its sector positioning (such as
the significant weighting in industrials) and small company
holdings, which tend to be more tied into the domestic economic
cycle. Understandably given the lack of visibility about the speed
at which lockdown restrictions will be eased, and therefore the
speed and scale of earnings recovery, these areas have performed
poorly during this period. However, valuations on any historic
sales or earnings basis are low. What has given us the most
confidence during this difficult period is speaking frequently to
the management teams of companies held. These are highly
experienced management teams who are pulling all necessary levers
to get businesses through to a period of economic recovery. In many
cases businesses will emerge to a weakened competitive environment
in which they can take market share. When the economic recovery
comes there could be a period of both earnings and valuation
recovery in those areas that have been most impacted by the current
disruption. While we fully understand that this has been a
disappointing performance period, we do not think now is the time
to change course.
James Henderson and Laura Foll
Fund Managers
5 June 2020
Related party transactions
The Company's current related parties are its Directors and
Janus Henderson. There have been no material transactions between
the Company and its Directors during the year and the only amounts
paid to them were in respect of Directors' remuneration and
expenses incurred on the Company's business, for which there were
no outstanding amounts payable at the period end.
In relation to the provision of services by Janus Henderson,
other than fees payable by the Company in the ordinary course of
business and the provision of sales and marketing services, there
have been no material transactions with Janus Henderson affecting
the financial position of the Company during the year under
review.
Principal risks and uncertainties
The principal risks and uncertainties associated with the
Company's business can be divided into various areas:
-- Investment Activity and Strategy;
-- Portfolio and Market Price;
-- Financial;
-- Gearing;
-- Operational; and
-- Accounting, Legal and Regulatory.
Information on these risks and how they are managed are given in
the Annual Report for the year ended 30 September 2019. In the view
of the Board, these principal risks and uncertainties are as
applicable to the remaining six months of the financial year as
they were to the six months under review.
There are a number of risks stemming from the COVID-19 pandemic
and the uncertainty that this has created in global markets, both
economically and politically, that may impact the operation of the
Company, as referenced in the Chairman's Statement. The Fund
Managers will continue to review carefully the composition of the
Company's portfolio and be proactive in taking investment decisions
where necessary. Janus Henderson (the "Manager") and the Company's
other third-party service providers remain fully operational and
have implemented appropriate business continuity plans to ensure
that there has been no change in service while the majority of
staff are working from home .
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge:
(a) the set of financial statements for the half-year to 31
March 2020 has been prepared in accordance with "FRS 104 Interim
Financial Reporting";
(b) the Interim Management Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.7R (indication of important events during the first six months
and description of principal risks and uncertainties for the
remaining six months of the year); and
(c) the Interim Management Report includes a fair review of the
information required by the Disclosure Guidance and Transparency
Rule 4.2.8R (disclosure of related party transactions and changes
therein).
For and on behalf of the Board
Robert Robertson
Chairman
5 June 2020
PORTFOLIO INFORMATION
As at 31 March 2020
Market value % of
Company Sector GBP'000 portfolio
GlaxoSmithKline Pharmaceuticals & Biotechnology 13,707 4.4
Royal Dutch Shell Oil & Gas Producers 12,224 3.9
Phoenix Life Insurance 10,479 3.4
Severn Trent Gas Water & Multiutilities 8,550 2.7
National Grid Gas Water & Multiutilities 7,730 2.5
Direct Line Non-Life Insurance 7,693 2.5
HSBC Banks 7,177 2.3
Relx Media 6,928 2.2
Prudential Life Insurance 6,731 2.2
Hiscox Non-Life Insurance 6,303 2.0
----------------------------- ------------------------------------- ------------- -----------
10 Largest 87,522 28.1
-------------------------------------------------------------------- ------------- -----------
Standard Chartered Banks 5,924 1.9
Pennon Gas Water & Multiutilities 5,428 1.7
Irish Continental (Ireland) Travel & Leisure 5,035 1.6
BP Oil & Gas Producers 4,991 1.6
Avon Rubber Aerospace & Defence 4,841 1.6
Aviva Life Insurance 4,699 1.5
BAE Systems Aerospace & Defence 4,696 1.5
Rio Tinto Mining 4,648 1.5
Vodafone Mobile Telecommunications 4,597 1.5
Ten Entertainment Travel & Leisure 4,505 1.4
20 Largest 136,886 43.9
-------------------------------------------------------------------- ------------- -----------
Randall & Quilter (1) Non-Life Insurance 4,361 1.4
FBD (Ireland) Non-Life Insurance 4,225 1.4
Mondi Forestry & Paper 4,143 1.3
Morgan Advanced Materials Electronic & Electrical Equipment 4,026 1.3
St Modwen Properties Real Estate 3,938 1.3
Senior Aerospace & Defence 3,830 1.2
Henderson Opportunities
Trust Equity Investment Instruments 3,798 1.2
Johnson Service (1) Support Services 3,781 1.2
Clarkson Industrial Transportation 3,727 1.2
Sabre Insurance Non-Life Insurance 3,693 1.2
----------------------------- ------------------------------------- ------------- -----------
30 Largest 176,408 56.6
-------------------------------------------------------------------- ------------- -----------
Standard Life Aberdeen Financial Services 3,562 1.2
XP Power Electronic & Electrical Equipment 3,539 1.1
Croda Chemicals 3,529 1.1
Headlam Household Goods & Home Construction 3,493 1.1
Hill & Smith Industrial Engineering 3,362 1.1
Land Securities Real Estate 3,341 1.1
HICL Infrastructure Equity Investment Instruments 3,236 1.0
DS Smith General Industrials 3,205 1.0
Anexo (1) Support Services 3,156 1.0
H&T Group (1) Financial Services 3,134 1.0
----------------------------- ------------------------------------- ------------- -----------
40 Largest 209,965 67.3
-------------------------------------------------------------------- ------------- -----------
Castings Industrial Engineering 3,113 1.0
Churchill China (1) Household Goods & Home Construction 3,078 1.0
Babcock Support Services 3,066 1.0
Balfour Beatty Construction & Materials 3,048 1.0
Chesnara Life Insurance 2,992 1.0
Rolls-Royce Aerospace & Defence 2,980 0.9
Somero Enterprises (1)
(USA) Industrial Engineering 2,975 0.9
TT Electronics Electronic & Electrical Equipment 2,746 0.9
Epwin (1) Construction & Materials 2,687 0.9
AstraZeneca Pharmaceuticals & Biotechnology 2,634 0.8
----------------------------- ------------------------------------- ------------- -----------
50 Largest 239,284 76.7
-------------------------------------------------------------------- ------------- -----------
Market value % of
Company Sector GBP'000 portfolio
---------------------------- ------------------------------------- --------------- ------------
Bellway Household Goods & Home Construction 2,479 0.8
K3 Capital (1) Financial Services 2,472 0.8
Numis (1) Financial Services 2,468 0.8
IMI Industrial Engineering 2,456 0.8
Royal Bank of Scotland Banks 2,427 0.8
M&G Financial Services 2,421 0.8
International Personal
Finance Financial Services 2,411 0.8
Palace Capital Real Estate 2,410 0.8
STV Media 2,402 0.7
Helical Real Estate 2,275 0.7
---------------------------- ------------------------------------- --------------- ------------
60 Largest 263,505 84.5
------------------------------------------------------------------- --------------- ------------
Studio Retail General Retailers 2,252 0.7
Lloyds Banking Banks 2,240 0.7
Gibson Energy (Canada) Oil & Gas Producers 2,217 0.7
Herald Investment Trust Equity Investment Instruments 2,013 0.7
International Consolidated
Airlines Travel & Leisure 1,936 0.6
Appreciate (1) Financial Services 1,863 0.6
IP Group Financial Services 1,854 0.6
Shoe Zone (1) General Retailers 1,841 0.6
Redde Northgate Industrial Transportation 1,813 0.6
Provident Financial Financial Services 1,811 0.6
---------------------------- ------------------------------------- --------------- ------------
70 Largest 283,345 90.9
------------------------------------------------------------------- --------------- ------------
Daily Mail & General
Trust Media 1,737 0.5
Euromoney Media 1,620 0.5
Elecosoft (1) Technology 1,577 0.5
Oxford Sciences Innovation
(2) Pharmaceuticals & Biotechnology 1,573 0.5
Vitec Industrial Engineering 1,472 0.5
Ilika (1) Alternative Energy 1,456 0.5
Ibstock Construction & Materials 1,410 0.4
Ricardo Construction & Materials 1,307 0.4
Elementis Chemicals 1,201 0.4
Tyman Construction & Materials 1,154 0.4
---------------------------- ------------------------------------- --------------- ------------
80 Largest 297,852 95.5
------------------------------------------------------------------- --------------- ------------
Hammerson Real Estate 1,122 0.4
Stobart Industrial Transportation 1,114 0.4
Anglo American Mining 1,062 0.3
Centrica Gas Water & Multiutilities 1,047 0.3
Airea (1) Personal Goods 907 0.3
Low & Bonar General Industrials 883 0.3
Renold (1) Industrial Engineering 861 0.3
Taylor Wimpey Household Goods & Home Construction 823 0.3
Indus Gas (1) Oil & Gas Producers 794 0.2
Wadworth - Ordinary
shares (2) Travel & Leisure 709 0.2
---------------------------- ------------------------------------- --------------- ------------
90 Largest 307,174 98.5
------------------------------------------------------------------- --------------- ------------
Ince (1) Support Services 659 0.2
Halfords General Retailers 628 0.2
Horizon Discovery (1) Pharmaceuticals & Biotechnology 508 0.2
Faron Pharmaceuticals
(1) (Finland) Pharmaceuticals & Biotechnology 450 0.1
4D Pharma (1) Pharmaceuticals & Biotechnology 423 0.1
Atlantis Resources (1) Alternative Energy 323 0.1
Severfield Industrial Engineering 300 0.1
Velocys (1) Chemicals 228 0.1
Premier Oil Oil & Gas Producers 215 0.1
Hornby (1) Leisure Goods 209 0.1
---------------------------- ------------------------------------- --------------- ------------
100 Largest 311,117 99.8
------------------------------------------------------------------- --------------- ------------
(1) AIM Stocks
(2) Unlisted Investments
Source: Janus Henderson
CONDENSED INCOME STATEMENT
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
31 March 2020 31 March 2019 30 September 2019
Revenue Capital Revenue Capital Revenue Capital
return return Total return return Total return return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- ----------
Losses on
investments
held at fair
value through
profit or loss - (114,880) (114,880) - (49,907) (49,907) - (54,206) (54,206)
Income from
investments 4,913 - 4,913 7,117 - 7,117 20,640 - 20,640
Other interest
receivable and
similar income 81 - 81 51 - 51 121 - 121
--------- -------- --------- --------- -------- --------- --------- --------- ---------
Gross revenue
and capital
losses 4,994 (114,880) (109,886) 7,168 (49,907) (42,739) 20,761 (54,206) (33,445)
Management fee
and
performance
fee (note 2) (433) (432) (865) (488) (488) (976) (983) (983) (1,966)
Other
administrative
expenses (note
2) (259) - (259) (271) - (271) (539) - (539)
--------- -------- --------- --------- -------- --------- --------- --------- ---------
Net
return/(loss)
before finance
costs and
taxation 4,302 (115,312) (111,010) 6,409 (50,395) (43,986) 19,239 (55,189) (35,950)
Finance costs (315) (315) (630) (324) (324) (648) (669) (670) (1,339)
--------- -------- --------- --------- -------- --------- --------- --------- ---------
Net
return/(loss)
before
taxation 3,987 (115,627) (111,640) 6,085 (50,719) (44,634) 18,570 (55,859) (37,289)
Taxation on net
return (75) - (75) (82) - (82) (205) - (205)
--------- -------- --------- --------- -------- --------- --------- --------- ---------
Net
return/(loss)
after taxation 3,912 (115,627) (111,715) 6,003 (50,719) (44,716) 18,365 (55,859) (37,494)
====== ====== ====== ====== ====== ====== ===== ====== =====
Return/(loss)
per ordinary
share - basic
and diluted
(note 3) 14.5p (428.0p) (413.5p) 22.2p (187.7p) (165.5p) 68.0p (206.7p) (138.7p)
====== ====== ====== ====== ====== ====== ===== ====== ======
The total columns of this statement represent the Income
Statement of the Company, prepared in accordance with FRS 104. The
revenue and capital columns are supplementary to this and are
published under guidance from the Association of Investment
Companies.
The Company has no recognised gains or losses other than those
disclosed in the Income Statement and Statement of Changes in
Equity.
All items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the
period.
The accompanying notes are an integral part of the condensed
financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
Half-year ended 31 March 2020
Called Share premium Capital Other
up share account redemption capital Revenue
capital GBP'000 reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------------- -------------- ------------ ------------ ------------ ------------
At 1 October 2019 6,755 61,619 1,007 298,139 18,384 385,904
Net (loss)/return after
taxation - - - (115,627) 3,912 (111,715)
Third interim dividend
(15.0p) for
the year ended 30 September
2019 - - - (4,053) (4,053)
Final dividend (15.0p)
for
the year ended 30 September
2019 - - - (4,053) (4,053)
------------ ------------ ----------- ----------- ----------- -----------
At 31 March 2020 6,755 61,619 1,007 182,512 14,190 266,083
======= ======= ======= ====== ======= =======
(Unaudited)
Half-year ended 31 March 2019
Share premium Capital Other
Called account redemption capital Revenue
up share GBP'000 reserve reserves reserve Total
capital GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
------------------------------ ------------- -------------- ------------ ------------ ------------ ------------
At 1 October 2018 6,755 61,619 1,007 353,998 15,555 438,934
Net (loss)/return after
taxation - - - (50,719) 6,003 (44,716)
Third interim dividend
(14.0p) for
the year ended 30 September
2018 - - - - (3,783) (3,783)
Final dividend (14.0p)
for
the year ended 30 September
2018 - - - - (3,782) (3,782)
------------ ------------ ----------- ----------- ----------- -----------
At 31 March 2019 6,755 61,619 1,007 303,279 13,993 386,653
======= ======= ======= ======= ======= =======
(Audited)
Year ended 30 September 2019
Share Capital Other
Called premium redemption capital
up share account reserve reserves Revenue
capital GBP'000 GBP'000 GBP'000 reserve Total
GBP'000 GBP'000 GBP'000
------------ ------------ ------------ ------------ ------------- ------------
At 1 October 2018 6,755 61,619 1,007 353,998 15,555 438,934
Net (loss)/return after
taxation - - - (55,859) 18,365 (37,494)
Third interim dividend
(14.0p) for
the year ended 30 September
2018 - - - (3,783) (3,783)
Final dividend (14.0p)
for
the year ended 30 September
2018 - - - (3,782) (3,782)
First interim dividend
(14.5p) for the
year ended 30 September
2019 - - - - (3,918) (3,918)
Second interim dividend
(15.0p) for the
year ended 30 September
2019 - - - (4,053) (4,053)
----------- ----------- ----------- ----------- ------------ -----------
At 30 September 2019 6,755 61,619 1,007 298,139 18,384 385,904
======= ======= ======= ======= ======= =======
The accompanying notes form an integral part of these condensed
financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
31 March 2020 31 March 2019 30 September
GBP'000 GBP'000 2019
GBP'000
Fixed assets
Investments held at fair value
through profit or loss (note
4) 311,793 432,493 435,187
----------- ----------- -----------
Current assets
Debtors 4,039 2,263 1,710
Cash at bank 1,137 1,983 2,008
----------- ----------- -----------
5,176 4,246 3,718
Creditors: amounts falling due
within one year (21,112) (20,312) (23,222)
----------- ----------- -----------
Net current liabilities (15,936) (16,066) (19,504)
----------- ----------- -----------
Total assets less current liabilities 295,857 416,427 415,683
----------- ----------- -----------
Creditors: amounts falling due
after more than one year (29,774) (29,774) (29,779)
----------- ----------- -----------
Net assets 266,083 386,653 385,904
====== ====== =======
Capital and reserves
Called up share capital 6,755 6,755 6,755
Share premium account 61,619 61,619 61,619
Capital redemption reserve 1,007 1,007 1,007
Other capital reserves 182,512 303,279 298,139
Revenue reserve 14,190 13,993 18,384
----------- ----------- -----------
Total shareholders' funds 266,083 386,653 385,904
====== ====== =======
Net asset value per ordinary
share - basic and diluted (note
7) 984.8p 1,431.1p 1,428.3p
======= ======= =======
The accompanying notes form an integral part of these condensed
financial statements.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited) (Audited)
(Unaudited) Half-year Year ended
Half-year ended ended 31 30 September
31 March 2020 March 2019 2019
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------------ -------------- ---------------
Cash flows from operating activities
Net loss before taxation (111,640) (44,634) (37,289)
Add back: finance costs 630 648 1,339
Add: losses on investments held
at fair value through profit or
loss 114,880 49,907 54,206
Withholding tax on dividends deducted
at source (111) (107) (282)
Decrease/(increase) in debtors 791 (220) 386
(Decrease)/increase in creditors (609) 523 1,159
----------- ----------- -----------
Net cash inflow from operating
activities 3,941 6,117 19,519
====== ====== ======
Cash flows from investing activities
Purchase of investments (26,205) (28,240) (51,677)
Sale of investments 31,693 38,776 54,923
----------- ----------- -----------
Net cash inflow from investing
activities 5,488 10,536 3,246
Cash flows from financing activities
Equity dividends paid (net of refund
of unclaimed distributions and
reclaimed distributions) (8,106) (7,565) (15,536)
Net loans repaid (1,554) (7,885) (5,342)
Interest paid (640) (665) (1,344)
----------- ----------- -----------
Net cash outflow from financing
activities (10,300) (16,115) (22,222)
Net (decrease)/increase in cash
and cash equivalents (871) 538 543
Cash and cash equivalents at start
of year 2,008 1,445 1,445
Effect of foreign exchange rates - - 20
----------- ----------- -----------
Cash and cash equivalents at end
of year 1,137 1,983 2,008
====== ====== ======
Comprising:
Cash at bank 1,137 1,983 2,008
====== ====== ======
The accompanying notes are an integral part of these condensed
financial statements.
NOTES TO THE FINANCIAL STATEMENTS
The half-year financial statements cover the period from 1
October 2019 to 31 March 2020 and have not been audited or reviewed
by the Company's auditors.
1. Accounting policies - basis of preparation
The condensed set of financial statements has been prepared
in accordance with FRS 104, Interim Financial Reporting, FRS
102, the Financial Reporting Standard applicable in the UK and
Republic of Ireland, and the Statement of Recommended Practice
for "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" which was issued by the Association
of Investment Companies in October 2019.
2. Expenses
All expenses with the exception of the performance fee, management
fee and finance costs are charged wholly to revenue. Performance
fees are charged wholly to capital. Management fees and finance
costs are charged 50% to revenue and 50% to capital. Expenses
which are incidental to the purchase or sale of an investment
are included in the cost or deducted from the proceeds of sale
of the investment. No provision has been made for a performance
fee based on the Company's performance relative to the FTSE
All-Share Index (the benchmark) over the thirty months to 31
March 2020 (31 March 2019 and 30 September 2019: GBPnil). Any
performance fee payable will be calculated based on the actual
relative performance for the thirty-six months to 30 September
2020 and will be equal to 15% of any outperformance (on a total
return basis) of the FTSE All-Share Index by more than 10% (the
"hurdle rate"). The performance fee is capped at 0.25% of average
net chargeable assets for the year.
No performance fee will be payable if the net asset value per
share on the last day of the relevant calculation period is
lower than the net asset value per share on the first day of
the calculation period.
3. Return per ordinary share - basic and diluted
(Unaudited) (Audited)
Half-year ended (Unaudited) Year ended
31 March 2020 Half-year ended 30 September
GBP'000 31 March 2019 2019
GBP'000 GBP'000
---------------------------- ----------------- ----------------- --------------
The return/(loss)
per ordinary share
is based on the following
figures:
Net revenue return 3,912 6,003 18,365
Net capital loss (115,627) (50,719) (55,859)
---------- ---------- ----------
Net total loss (111,715) (44,716) (37,494)
====== ====== ======
Weighted average number
of ordinary shares
in issue for each
period 27,018,565 27,018,565 27,018,565
Revenue return per
ordinary share 14.5p 22.2p 68.0p
Capital loss per ordinary
share (428.0p) (187.7p) (206.7p)
---------- ---------- ----------
Total loss per ordinary
share (413.5p) (165.5p) (138.7p)
====== ====== ======
The Company does not have any dilutive securities; therefore,
basic and diluted returns per share are the same.
4. Fair value of financial assets and liabilities
The table below analyses fair value measurements for investments
held at fair value through profit or loss. These fair value measurements
are categorised into different levels in the fair value hierarchy
based on the valuation techniques used and are defined as follows:
Level 1: valued using quoted prices in active markets for identical
assets
Level 2: valued by reference to valuation techniques using observable
inputs other than quoted prices included in Level 1
Level 3: valued by reference to valuation techniques using inputs
that are not based on observable market data
Investments held at fair value through Level Level Level Total
profit or loss at 31 March 2020 (unaudited) 1 2 3 GBP'000
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- --------- --------- ---------
Investments 309,385 - 2,408 311,793
Investments held at fair value through Level Level Level Total
profit or loss at 1 2 3 GBP'000
31 March 2019 (unaudited) GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- --------- --------- ---------
Investments 430,012 - 2,481 432,493
Investments held at fair value through Level Level Level Total
profit or loss at 1 2 3 GBP'000
30 September 2019 (audited) GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- --------- --------- ---------
Investments 432,765 - 2,422 435,187
A reconciliation of movements within Level 3 is set out below:
2020
GBP'000
------------------------------------------------------------------------- --------- ---------
Opening balance 2,422
Disposal proceeds -
Transfers in -
Total gain/loss included in the Income Statement
- on investments written off -
- on investments held (14)
Closing balance 2,408
---------
The valuation techniques used by the Company are explained in the
accounting policies note in the Company's Annual Report for the
year ended 30 September 2019.
The fair value of the senior unsecured loan notes at 31 March 2020
has been estimated to be GBP36,221,000 (31 March 2019: GBP32,451,000;
30 September 2019: GBP35,029,000). The fair value of the senior
unsecured loan notes is calculated using a discount rate which reflects
the yield on a UK Gilt of similar maturity plus a suitable credit
spread.
The senior unsecured loan notes are categorised as level 3 in the
fair value hierarchy.
5. Share Capital
At 31 March 2020 there were 27,018,565, ordinary shares of 25p each
in issue (31 March 2019: 27,018,565; 30 September 2019: 27,018,565).
During the half-year ended 31 March 2020 no shares were issued or
bought back (31 March 2019 and 30 September 2019: no shares were
issued or bought back).
6. Transaction costs
Purchase transaction costs for the half-year ended 31 March 2020
were GBP135,000 (31 March 2019: GBP121,000; 30 September 2019: GBP228,000).
Sale transaction costs for the half-year ended 31 March 2020 were
GBP14,000 (31 March 2019: GBP15,000; 30 September 2019: GBP22,000).
These comprise mainly stamp duty and commission.
7. Net asset value per ordinary share - basic and diluted
The net asset value per ordinary share of 984.8p (31 March 2019:
1,431.1p; 30 September 2019: 1,428.3p) is based on the net assets
attributable to the ordinary shares of GBP266,083,000 (31 March
2019: GBP386,653,000; 30 September 2019: GBP385,904,000) and
on 27,018,565 ordinary shares (31 March 2019 and 30 September
2019: 27,018,565), being the number of ordinary shares in issue
at the end of each period.
8. Dividend
On 30 April 2020, a first interim dividend of 15.0p per ordinary
share was paid in respect of the year ending 30 September 2020.
A second interim dividend of 15.0p per ordinary share has been
declared and will be paid on 31 July 2020 to shareholders on
the register of members at the close of business on 3 July 2020.
The ex-dividend date is 2 July 2020. Based on the number of
shares in issue on 5 June 2020 of 27,018,565, the cost of the
dividend will be GBP4,053,000 (second interim dividend for the
year ended 30 September 2019: GBP3,513,000).
9. Going concern
The assets of the Company consist of securities that are readily
realisable and, accordingly, the Directors believe that the
Company has adequate resources to continue in operational existence
for at least twelve months from the date of approval of the
financial statements. Having assessed these factors and the
principal risks, the Board has determined that it is appropriate
for the financial statements to be prepared on a going concern
basis.
10. Comparative Information
The financial information contained in this half-year report
does not constitute statutory accounts as defined in section
434 of the Companies Act 2006. The financial information for
the half-years ended 31 March 2020 and 31 March 2019 has not
been audited nor reviewed by the Company's auditor.
The figures and financial information for the year ended 30
September 2019 are extracted from the latest published accounts
and do not constitute the statutory accounts for that year.
Those accounts have been delivered to the Registrar of Companies
and included the report of the independent auditors, which was
unqualified and did not include a statement under either section
498(2) or 498(3) of the Companies Act 2006.
A glossary of terms and details of alternative performance measures
can be found in the Annual Report for the year ended 30 September
2019
11. Manager
Henderson Investment Funds Limited ('HIFL') is appointed to
act as the Company's Alternative Investment Fund Manager. HIFL
delegates investment management services to Henderson Global
Investors Limited. References to Janus Henderson within these
results refer to the services provided by both entities.
12. General information
Company Status
The Company is a UK-domiciled investment trust company. The
registered number is 670489.
The London Stock Exchange Daily Official List SEDOL number is
0536806
The ISIN number is GB0005368062.
The London Stock Exchange (TIDM) Code is LWI.
The Global Intermediary Identification Number (GIIN) is 2KBHLK.99999.SL.826
.
The Legal Entity Identifier Number (LEI) is 2138008RHG5363FEHV19
Directors
The Directors of the Company are Robert Robertson (Chairman),
Gaynor Coley (Audit Committee Chairman), Duncan Budge, Karl
Sternberg and Thomas Walker.
Corporate Secretary
Henderson Secretarial Services Limited, represented by Helena
Harvey ACG.
Email: ITSecretariat@janushenderson.com
Registered Office
201 Bishopsgate, London EC2M 3AE.
Website
Details of the Company's share price and net asset value, together
with general information about the Company, monthly factsheets
and data, copies of announcements, reports and details of general
meetings can be found at www.lowlandinvestment.com .
13. Half-year report
An abbreviated version of the half-year report, the 'Update',
will be posted to shareholders in June 2020. The Update will
also be available on the Company's website, and hard copies
will be available at the Company's registered office, 201 Bishopsgate,
London EC2M 3AE.
For further information, please contact:
James Henderson / Laura Foll
Fund Managers
Lowland Investment Company plc
Tel: 020 7818 4370 / 020 7818 6364
James de Sausmarez
Director and Head of Investment Trusts
Janus Henderson Investors
Tel: 020 7818 3349
Laura Thomas
Investment Trust PR Manager
Janus Henderson Investors
Tel: 020 7818 2636
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
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 KKPBPNBKDQAK
(END) Dow Jones Newswires
June 05, 2020 09:57 ET (13:57 GMT)
Lowland Investment (LSE:LWI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Lowland Investment (LSE:LWI)
Historical Stock Chart
From Jul 2023 to Jul 2024
