TIDMSCF
RNS Number : 9191O
Schroder Income Growth Fund PLC
23 May 2018
Half Year Report
Schroder Income Growth Fund plc (the "Company") hereby submits
its Half Year Report for the period ended 28 February 2018 as
required by the UK Listing Authority's Disclosure Guidance and
Transparency Rule 4.2.
The Half Year Report is also being published in hard copy format
and an electronic copy of that document will shortly be available
to download from the Company's website
www.schroders.co.uk/incomegrowth. Please click on the following
link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/9191O_1-2018-5-22.pdf
The Company has submitted a pdf of the hard copy format of its
Half Year Report to the National Storage Mechanism and it will
shortly be available for inspection at
www.morningstar.co.uk/uk/NSM.
Enquiries:
Andrea Davidson
Schroder Investment Management Limited Tel: 020 7658 4430
23 May 2018
Interim Management Report
Chairman's Statement
Performance
Over the six months to 28 February 2018, your Company marginally
underperformed the FTSE All-Share Index, achieving a total return
in net asset value ('NAV') terms of -1.8% as against an equivalent
-0.9% for the Index. The share price total return over the same
period was a slightly better -1.1%, reflecting a marginal narrowing
of the discount to NAV at which the Company's shares traded - from
6.9% to 6.4%. On 16 May (the latest practicable date prior to
publication of this Statement) the discount stood at 6.5%.
More detailed comment on the performance of your Company may be
found in the Manager's review.
Revenue and dividends
Revenue after taxation fell 15% year-on-year due both to the
timing of income received, as well as to the strengthening of
sterling. This is discussed further in the Manager's review.
During the period, the Company has paid two interim dividends
for the year ending 31 August 2018 amounting to 4.80 pence per
share (2017: 4.00 pence per share).
The increased rate of these interim dividends reflects the
Board's decision to rebalance distributions so that the difference
between the first three interim dividends and the fourth interim
dividend should be reduced.
While the Board remains committed to increasing the total annual
dividend level over time, the level of the two interim dividends so
far declared this financial year should not be considered
indicative of the level of total dividends that may be declared in
respect of the full year.
Gearing
The Company has in place a GBP20 million revolving credit
facility. At 28 February 2018, the facility was fully drawn, with
gearing having increased from 5.8% to 6.9% during the period under
review.
Board composition
At the last Annual General Meeting, one of our long-standing
Directors, Mr Keith Niven, stepped down as a Director and Mr Ewen
Cameron Watt was elected by shareholders to join the Board. We
thank Mr Niven for his wise counsel and meaningful contribution
over many years.
Meanwhile, your Board continues to review its composition,
balance and diversity in its ongoing succession planning.
Outlook
My vison of your Company's future starts, as always, with the
prospects for income growth. Whilst the companies in the portfolio
are doing well, the prospects for dividends remain significantly
influenced by currency movements. During a period when the pound is
stronger, income earned outside the UK is reduced in sterling terms
by currency appreciation. This has been particularly so in the
first half of the current year, which anyway represents a seasonal
low point in the timing of dividend payments. Forecasting currency
movements is a difficult business as outcomes rely on a range of
different factors both at home and abroad.
Your Board continues to endorse the Manager's ongoing search for
income growth to sustain the Company's proud achievement of
increasing its dividend every year since launch.
Ian Barby
Chairman
23 May 2018
Manager's Review
In the six months to 28 February 2018, the NAV total return was
-1.8%. This compares to -0.9% from the FTSE All-Share Index and
-2.4% from the average peer fund (source: Morningstar, AIC UK
Equity Income average excluding ZDPs). The share price total return
was -1.1%.
Whilst the Company usually receives a relatively small part of
its income in the first half of the financial year, income this
time fell 15% year-on-year. The principal reason has been timing.
In the same period last year the Company benefited from
considerable final dividends from Rio Tinto and Micro Focus, which
have not been captured in this period. Meanwhile, these negative
timing impacts have not been fully offset by the positive timing
impacts of dividends paid by British American Tobacco and Taylor
Wimpey. Additionally, income from new purchases (Hollywood Bowl,
Diageo and Tesco) was lower than had been received from holdings
sold over the past year (ENI, Imperial Tobacco, Sage and
Greencore). Lastly, the sterling/dollar exchange rate, which had a
positive effect on dividend income last year, has reversed its
direction.
Market background
UK equities fell sharply at end of the period, following the US
market down on fears around the pace of policy tightening in
response to growing inflationary pressures. The market weakness -
which more than offset strong performance earlier in the period -
was exacerbated by a rise in the VIX (volatility) index, which
forced leveraged short volatility strategies to close their
positions.
Government bond yields rose, driving a rotation away from more
stable and defensive areas of the market. While the 'Goldilocks'
scenario of low stable growth and inflation was put to the test,
hopes remained that the world economy would continue to enjoy a
sustained and synchronised recovery. The International Monetary
Fund upgraded its growth forecasts twice, and is now expecting the
global economy to expand by 3.9% in 2018 (up from a forecast of
3.6% in July 2017). Cyclical areas of the market continued to
perform well against this backdrop.
Sterling recovered as the Bank of England increased base rates
for the first time since November 2007. The Bank nudged up its
forecast for UK real GDP growth in 2018, from 1.7% to 1.8%.
Investors also welcomed progress with Brexit negotiations, with an
agreement struck to allow talks to proceed to the future of trade
arrangements.
Portfolio performance
The Company's NAV total return was behind the FTSE All-Share
Index, driven by negative stock selection, whilst the use of
gearing moderately detracted from returns as the market fell.
Six months to 28 February 2018 Impact (%)
-------------------------------- -----------
FTSE All-Share Index -0.9
-------------------------------- -----------
Stock selection -0.4
-------------------------------- -----------
Sector allocation 0.0
-------------------------------- -----------
Costs -0.4
-------------------------------- -----------
Gearing -0.1
-------------------------------- -----------
NAV total return -1.8
-------------------------------- -----------
Source: Schroders
Stock selection within financials was the principal driver of
the underperformance. Whilst Intermediate Capital and Lloyds
Banking performed well, the holding in Nordic financial services
group Nordea Bank was weak, while not holding Barclays was also a
negative relative to the benchmark. Having been one of the key
contributors last year, Nordea's share price suffered from raising
cost spend on IT systems. Investors were frustrated by an extended
period of higher investment spend as well as fearing the potential
for cost overrun and delays.
Burberry shares weakened in response to the new CEO's strategic
update. However, it is worth highlighting that the new strategic
initiatives were aimed at delivering longer-term benefits - in
particular, sharpening the brand positioning with renewed focus on
the new product range. The market also fretted about the need to
find a new creative director. On 1 March 2018 the company announced
the appointment of Riccardo Tisci. Tisci is regarded as having the
right credentials and is seen as a good fit, having previously
acted as creative director at Givenchy and having worked with CEO
Marco Gobbetti (also previously at Givenchy) before.
On the positive side, the portfolio benefited from not holding a
number of stocks which performed poorly. Consumer goods company
Reckitt Benckiser and biopharmaceuticals company Shire suffered
from more challenging operational performance of their core
businesses and recently acquired businesses. National Grid, also
not in the portfolio, weakened along with other domestic utilities
on heightened political risks under a Labour government. However,
this was somewhat offset by the portfolio's position in British Gas
owner Centrica, whose share price suffered further as a result of
pressures to cap pricing on domestic entry tariffs and
disappointing operating profits.
Five top/bottom relative stock performers
Weight
Portfolio relative Relative
Weight to index performance Impact
Security (%)(1) (%)(1) (%)(2) (%)(3)
---------------------- ---------- ---------- ------------- ---------
Reckitt Benckiser 0.0 -1.7 -20.4 +0.4
---------------------- ---------- ---------- ------------- ---------
National Grid 0.0 -1.2 -21.9 +0.3
---------------------- ---------- ---------- ------------- ---------
Intermediate Capital 1.6 1.5 21.0 +0.3
---------------------- ---------- ---------- ------------- ---------
Shire 0.0 -1.3 -18.0 +0.2
---------------------- ---------- ---------- ------------- ---------
Lloyds Banking 4.6 2.6 8.6 +0.2
---------------------- ---------- ---------- ------------- ---------
Weight
Portfolio relative Relative
Weight to index performance Impact
Security (%)(1) (%)(1) (%)(2) (%)(3)
---------------- ---------- ---------- ------------- ---------
Nordea Bank 2.3 2.3 -19.7 -0.5
---------------- ---------- ---------- ------------- ---------
Burberry Group 2.1 1.8 -13.3 -0.2
---------------- ---------- ---------- ------------- ---------
Centrica 1.0 0.7 -26.2 -0.2
---------------- ---------- ---------- ------------- ---------
RELX 2.6 1.9 -10.9 -0.2
---------------- ---------- ---------- ------------- ---------
Sky 0.0 -0.4 43.2 -0.2
---------------- ---------- ---------- ------------- ---------
Source: Factset, 31 August 2017 to 28 February 2018.
(1) Average over period.
(2) Relative to FTSE All-Share Index.
(3) Contribution relative to the FTSE All-Share Index
Portfolio activity
We reduced or sold out of positions in some long-standing
winners in the portfolio, principally on valuation grounds, and
reinvested the proceeds into more out-of-favour, lower-valued
stocks where we believe the prospects have been treated
harshly.
We bought outsourcing company G4S as the shares trade on a low
valuation despite growing sales and earnings and initiated a
position in Weir Group, an engineer supplying the oil, gas and
mining sectors, given its significant operational leverage to
increased capex spend from resource companies, which is currently
below maintenance spend levels. Melrose was added after a setback
in the shares relating to a mixed half year results (its small gas
turbines business has been weak and there were cost headwinds in
the Nortek business) provided an attractive opportunity to start a
position.
We also added a number of domestic stocks. We believe Tesco's
turnaround is being effectively executed leading to a profile of
recovering earnings, balance sheet deleveraging and increasing cash
flow, which we expect to lead to the restoration of an attractive
dividend pay-out. Pets at Home is the UK's number one pet retailer.
The company has about 700 stores, with more than half including vet
practices and grooming parlours. These increase footfall for the
stores, while also bringing attractive earnings in their own right.
We also initiated a position in Hollywood Bowl, the UK's leading
tenpin bowling operator. This is a smaller company which has
invested steadily in improving its customer experience whilst
emphasising value for money. It is a cash-generative business
capable of funding its own growth as well as paying an attractive
dividend.
Utilising the Company's ability to invest outside the UK, we
added German property company Deutsche Wohnen whilst selling out of
Swiss pharmaceuticals company Roche. The former was added due to
the rental income growth derived from the strength of Berlin's
housing market. Their property portfolio has significant and
growing reversionary rental potential, which we believe will
deliver double-digit dividend growth. Meanwhile, we exited the
position in Roche as progress on the new therapeutic cancer
treatments has proved mixed.
We reduced holdings in long-standing winners, including Micro
Focus, Intermediate Capital, housebuilders Bellway and Taylor
Wimpey, RELX, Unilever and London Stock Exchange, mainly on
valuation grounds. We also sold out of Imperial Brands, with part
of the proceeds used to top up the holding in British American
Tobacco, which we believe has a superior position in Next
Generation products and operates in more attractive markets.
Lastly, we exited the position in Laird, as we believed it was
hard to argue for a further rerating given the recovery in margins.
Our confidence in the investment case waned following a meeting
with their management where the question was raised of whether the
company had the scale to take their connected vehicle solutions
business to the next level. We also had concerns about the strength
of the company's balance sheet given the cyclicality of the autos
business.
Outlook
The global economy has started 2018 on the same strong footing
that it ended 2017, with US fiscal stimulus expected to provide
further support. Given the relatively late stage of the cycle, this
growth brings the risk of an increase in inflationary pressures. We
expect the 'Goldilocks' environment of synchronised growth and
muted inflation that was the theme of last year to give way to a
more reflationary one in 2018. As a consequence, we expect a
continued slowdown in the growth in global liquidity. This is
expected to turn into an outright contraction in 2019. We also
expect to see further interest rate rises from both the Federal
Reserve and the Bank of England during 2018.
It is clearly a positive that economies no longer require the
same level of monetary support. However, the shift from the loose
conditions that provided a positive tailwind over the last nine
years may present challenges, particularly with the high debt
pervading the global economy.
In anticipation of both rising interest rates and inflation,
global bond yields rose in the early part of 2018. This was one of
the main triggers that led to the market volatility of the first
quarter. Periods of elevated volatility do present opportunities
for us, but we are conscious that there is still a considerable
amount of optimism baked into global markets, so we continue to
proceed with caution and are selective in looking for new
opportunities.
UK domestic outlook
The UK economy continues to fare better than the majority of
forecasters predicted in the aftermath of the decision to leave the
EU. We have seen upward revisions to growth figures, which are now
closer to 2% a year than 1.5% - not brilliant, but certainly not
disastrous.
Unemployment at 4.3% is matching the lowest level since 1975.
Regular wage growth continues a steady upward trend. Consumer Price
Inflation in February also dropped below 3% for the first time
since August 2017. This suggests that the 2017 price increases from
the depreciation of sterling have started to wane. As a result,
real wage growth is now at its least negative since March 2017, and
is expected to turn positive later in the year. This provides a
boost to household spending power, and companies that serve the UK
consumer should be among the main beneficiaries. Given that
inflation is expected to remain above the Bank of England's 2%
target for a while though, expectations are for another interest
rate rise in May.
Despite this, uncertainty about the UK's relationship with the
EU has left many international investors nervous about investing in
UK companies. One poll showed that UK stocks were the least popular
among global fund managers. As a result of this nervousness, the
valuation of the UK market looks attractive relative to other major
markets. Shares of domestic stocks in particular are trading at
their biggest discount to exporters and to the overall market since
the financial crisis of 2008/09.
We continue to be selective in our search for high-quality
domestic companies trading on attractive valuations, and pay close
attention to the strength of the balance sheets, since high debt
can quickly become a burden when profits fall.
The valuation opportunity, combined with the relatively weak
level of sterling, makes many UK companies look attractive to
international buyers, factors that have given rise to a pick-up in
corporate activity. There have been a number of high profile
takeover approaches for UK businesses, the majority from overseas
predators, as well as a number of stakes by activist investors.
Activity like this supports our view that there is a significant
relative valuation opportunity in the UK market at present.
Further US rate rises
President Trump's fiscal stimulus is expected to provide further
support to global growth, albeit leading to a worsening US budget
deficit and raising the risk of the economy overheating. New
Federal Reserve Chair Jerome Powell announced that the committee
had pushed up its growth and inflation forecasts and increased its
expected path for interest rates. In addition, as the European
economic recovery continues, the European Central Bank is likely to
end its programme of quantitative easing in September 2018, before
raising interest rates in 2019.
Whereas stronger US demand should feed through into stronger
trade and better growth elsewhere, President Trump's proposed trade
tariffs threaten to derail this. Trade tariffs could bring about
elevated global political tension in 2018, particularly with
China.
Dividend outlook
The principal influence over the portfolio's dividends, in both
the short and medium term, is the exchange rate. Your Company, like
the equity market as a whole, derives around two fifths of its
income from companies which declare their dividends in overseas
currencies. Dividend income in the periods to February and August
2017 was boosted by the weakness in the exchange rate in 2016.
However sterling has strengthened since early 2017, particularly
against the US dollar, and this strength, if sustained, will
negatively impact income from international UK equities. Sterling
also has a direct bearing on the rate of UK inflation.
The likely shape of Brexit negotiations could also influence the
exchange rate. This may lead to further sterling strength in a
'soft/good Brexit' which would result in stronger UK growth but
reduce dividend income from international companies. Alternatively
a 'hard/bad Brexit' would lead to a fall in sterling which would be
negative for UK economic activity but which would benefit dividends
from companies whose dividends are declared in US dollars or
euros.
Dividend pay-out ratios remain somewhat higher than historical
averages and whilst companies' earnings are increasing it is likely
that dividend increases will lag the increases in earnings in order
to rebalance pay-out ratios. Additionally special dividends have
run at high levels recently and whilst there was a partial
moderation from the peak in 2016, we would not be surprised to see
this continue. Notwithstanding this, the portfolio is likely to
continue to see special dividends augment its income.
We maintain our confidence in being able to find attractive
investment opportunities to maintain the portfolio's dividend
growth over the longer term, in order to meet our and shareholders'
objectives of growing dividends to investors in real terms.
Investment policy
We remain disciplined investors using a long-term fundamental
approach and the team's long investment experience. We are acutely
conscious of the need to balance the risks relative to the
potential reward from opportunities that can be thrown up in such
unpredictable markets.
Five largest overweight stocks
Portfolio Index
weight weight Difference
Security (%) (%) (%)
---------------- ---------- -------- -----------
Rio Tinto 5.0 2.0 +3.0
---------------- ---------- -------- -----------
Lloyds Banking 4.9 2.1 +2.8
---------------- ---------- -------- -----------
Aviva 3.2 0.9 +2.3
---------------- ---------- -------- -----------
Nordea Bank 2.2 - +2.2
---------------- ---------- -------- -----------
Assura 2.1 0.1 +2.0
---------------- ---------- -------- -----------
Source: Schroders, as at 28 February 2018
We continue to actively monitor the holdings and the investment
universe to identify mispriced opportunities. We are working
closely with our in-house analysts who provide proprietary research
to help to identify attractive investment candidates and to assess
the validity of the investment case for current holdings. We
continue to prioritise balance sheet strength and companies'
competitive advantages. We remain disciplined in our portfolio
construction to ensure that our highest conviction ideas are
reflected in the holdings. Our process focuses on building a
diversified portfolio within a risk controlled framework, which
aims to deliver attractive levels of income that can grow in real
terms.
Schroder Investment Management
23 May 2018
The securities shown above are for illustrative purposes only
and are not to be considered recommendations to buy or sell.
Principal risks and uncertainties
The principal risks and uncertainties with the Company's
business fall into the following risk categories: strategy and
competitiveness; investment management; financial and currency;
accounting, legal and regulatory; custodian and depositary; and
service providers. A detailed explanation of the risks and
uncertainties in each of these categories can be found on pages 12
and 13 of the Company's published Annual Report and Accounts for
the year ended 31 August 2017. These risks and uncertainties have
not materially changed during the six months ended 28 February
2018.
Going concern
Having assessed the principal risks and uncertainties, and the
other matters discussed in connection with the viability statement
as set out on page 14 of the published Annual Report and Accounts
for the year ended 31 August 2017, the Directors consider it
appropriate to adopt the going concern basis in preparing the
accounts.
Related party transactions
There have been no transactions with related parties that have
materially affected the financial position or the performance of
the Company during the six months ended 28 February 2018.
Directors' responsibility statement
The Directors confirm that, to the best of their knowledge, this
set of condensed financial statements has been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (UK GAAP) and with the Statement of Recommended Practice,
"Financial Statements of Investment Companies and Venture Capital
Trusts" issued in November 2014 and updated in February 2018 and
that this Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the Financial Conduct
Authority's Disclosure Guidance and Transparency Rules.
Income Statement
For the six months ended 28 February 2018 (unaudited)
(Unaudited) (Unaudited) (Audited)
For the six months ended For the six months ended For the year ended
28 February 2018 28 February 2017 31 August 2017
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
-------------------------- --------- -------- -------- --------- -------- -------- ------- ------- -------
(Losses)/gains on
investments held at fair
value through profit or
loss - (5,834) (5,834) - 14,160 14,160 - 19,489 19,489
Net foreign currency losses - (25) (25) - (4) (4) - (9) (9)
Income from investments 3,128 - 3,128 3,650 - 3,650 10,553 - 10,553
Other interest receivable
and similar income 6 - 6 - - - - - -
--------------------------- --------- -------- -------- --------- -------- -------- ------- ------- -------
Gross return/(loss) 3,134 (5,859) (2,725) 3,650 14,156 17,806 10,553 19,480 30,033
Investment management fee (410) (410) (820) (402) (402) (804) (834) (834) (1,668)
Administrative expenses (166) - (166) (150) - (150) (302) - (302)
--------------------------- --------- -------- -------- --------- -------- -------- ------- ------- -------
Net return/(loss) before
finance costs and taxation 2,558 (6,269) (3,711) 3,098 13,754 16,852 9,417 18,646 28,063
Finance costs (41) (41) (82) (135) (135) (270) (243) (243) (486)
--------------------------- --------- -------- -------- --------- -------- -------- ------- ------- -------
Net return/(loss) on
ordinary activities before
taxation 2,517 (6,310) (3,793) 2,963 13,619 16,582 9,174 18,403 27,577
Taxation on ordinary
activities (note 3) (16) - (16) (15) - (15) (67) - (67)
--------------------------- --------- -------- -------- --------- -------- -------- ------- ------- -------
Net return/(loss) on
ordinary activities after
taxation 2,501 (6,310) (3,809) 2,948 13,619 16,567 9,107 18,403 27,510
Return/(loss) per share
(note 4) 3.64p (9.19)p (5.55)p 4.29p 19.83p 24.12p 13.26p 26.79p 40.05p
--------------------------- --------- -------- -------- --------- -------- -------- ------- ------- -------
The "Total" column of this statement is the profit and loss
account of the Company. The "Revenue" and "Capital" columns
represent supplementary information prepared under guidance issued
by The Association of Investment Companies. The Company has no
other items of other comprehensive income, and therefore the net
return on ordinary activities after taxation is also the total
comprehensive income for the period.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the period.
Statement of Changes in Equity
For the six months ended 28 February 2018 (unaudited)
Called-up Capital Warrant Share
share Share redemption exercise purchase Capital Revenue
capital premium reserve reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- -------- ----------- --------- --------- --------- -------- --------
At 31 August 2017 6,869 7,404 2,011 1,596 34,936 153,627 10,275 216,718
Net (loss)/return
on ordinary activities - - - - - (6,310) 2,501 (3,809)
Dividends paid in
the period
(note 5) - - - - - - (5,221) (5,221)
------------------------ --------- -------- ----------- --------- --------- --------- -------- --------
At 28 February 2018 6,869 7,404 2,011 1,596 34,936 147,317 7,555 207,688
------------------------ --------- -------- ----------- --------- --------- --------- -------- --------
For the six months ended 28 February 2017 (unaudited)
Called-up Capital Warrant Share
share Share redemption exercise purchase Capital Revenue
capital premium reserve reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- -------- ----------- --------- --------- --------- -------- --------
At 31 August 2016 6,869 7,404 2,011 1,596 34,936 135,224 8,450 196,490
Net return on ordinary
activities - - - - - 13,619 2,948 16,567
Dividends paid in
the period
(note 5) - - - - - - (4,534) (4,534)
----------------------- --------- -------- ----------- --------- --------- --------- -------- --------
At 28 February 2017 6,869 7,404 2,011 1,596 34,936 148,843 6,864 208,523
----------------------- --------- -------- ----------- --------- --------- --------- -------- --------
For the year ended 31 August 2017 (audited)
Called-up Capital Warrant Share
share Share redemption exercise purchase Capital Revenue
capital premium reserve reserve reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- -------- ----------- --------- --------- --------- -------- --------
At 31 August 2016 6,869 7,404 2,011 1,596 34,936 135,224 8,450 196,490
Net return on ordinary
activities - - - - - 18,403 9,107 27,510
Dividends paid in
the year
(note 5) - - - - - - (7,282) (7,282)
----------------------- --------- -------- ----------- --------- --------- --------- -------- --------
At 31 August 2017 6,869 7,404 2,011 1,596 34,936 153,627 10,275 216,718
----------------------- --------- -------- ----------- --------- --------- --------- -------- --------
Statement of Financial Position
at 28 February 2018 (unaudited)
(Unaudited) (Unaudited) (Audited)
28 February 28 February
2018 2017 31 August
GBP'000 GBP'000 2017
GBP'000
--------------------------------------- ------------- ------------- ------------
Fixed assets
Investments held at fair value through
profit or loss 221,876 226,001 228,315
--------------------------------------- ------------- ------------- ------------
Current assets
Debtors 1,147 1,620 1,982
Cash at bank and in hand 5,729 1,447 7,349
--------------------------------------- ------------- ------------- ------------
6,876 3,067 9,331
--------------------------------------- ------------- ------------- ------------
Current liabilities
Creditors: amounts falling due within
one year (21,064) (20,545) (20,928)
Net current liabilities (14,188) (17,478) (11,597)
--------------------------------------- ------------- ------------- ------------
Total assets less current liabilities 207,688 208,523 216,718
Net assets 207,688 208,523 216,718
--------------------------------------- ------------- ------------- ------------
Capital and reserves
Called-up share capital (note 6) 6,869 6,869 6,869
Share premium 7,404 7,404 7,404
Capital redemption reserve 2,011 2,011 2,011
Warrant exercise reserve 1,596 1,596 1,596
Share purchase reserve 34,936 34,936 34,936
Capital reserves 147,317 148,843 153,627
Revenue reserve 7,555 6,864 10,275
--------------------------------------- ------------- ------------- ------------
Total equity shareholders' funds 207,688 208,523 216,718
--------------------------------------- ------------- ------------- ------------
Net asset value per share (note 7) 302.36p 303.58p 315.51p
--------------------------------------- ------------- ------------- ------------
Registered in England and Wales
Company registration number: 3008494
Notes to the Accounts
1. Financial Statements
The information contained within the accounts in this half year
report has not been audited or reviewed by the Company's
auditor.
The figures and financial information for the year ended 31
August 2017 are extracted from the latest published accounts of the
Company and do not constitute statutory accounts for that year.
Those accounts have been delivered to the Registrar of Companies
and included the report of the auditor which was unqualified and
did not contain a statement under either section 498(2) or 498(3)
of the Companies Act 2006.
2. Accounting policies
Basis of accounting
The accounts have been prepared in accordance with United
Kingdom Generally Accepted Accounting Practice and with the
Statement of Recommend Practice "Financial Statements of Investment
Trust Companies and Venture Capital Trusts" issued by the
Association of Investment Companies in November 2014 and updated in
February 2018.
All of the Company's operations are of a continuing nature.
The accounting policies applied to these accounts are consistent
with those applied in the accounts for the year ended 31 August
2017.
3. Taxation on ordinary activities
The Company's effective corporation tax rate is nil, as
deductible expenses exceed taxable income. Taxation on ordinary
activities comprises irrecoverable overseas withholding tax.
4. Return/(loss) per share
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
28 February 28 February 31 August
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------------------------------- ------------- ------------- ------------
Revenue return 2,501 2,948 9,107
Capital (loss)/return (6,310) 13,619 18,403
----------------------------------- ------------- ------------- ------------
Total (loss)/return (3,809) 16,567 27,510
----------------------------------- ------------- ------------- ------------
Weighted average number of shares
in issue during the period 68,688,343 68,688,343 68,688,343
Revenue return per share 3.64p 4.29p 13.26p
Capital (loss)/return per share (9.19)p 19.83p 26.79p
----------------------------------- ------------- ------------- ------------
Total (loss)/return per share (5.55)p 24.12p 40.05p
----------------------------------- ------------- ------------- ------------
5. Dividends paid
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
28 February 28 February 31 August
2018 2017 2017
GBP'000 GBP'000 GBP'000
--------------------------------- ------------- ------------- ------------
2017 fourth interim dividend
of 5.2p (2016: 4.6p) 3,572 3,160 3,160
First interim dividend of 2.4p
(2017: 2.0p) 1,649 1,374 1,374
Second interim dividend of 2.0p - - 1,374
Third interim dividend of 2.0p - - 1,374
--------------------------------- ------------- ------------- ------------
5,221 4,534 7,282
--------------------------------- ------------- ------------- ------------
A second interim dividend of 2.4p (2017: 2.0p) per share,
amounting to GBP1,649,000 (2017: GBP1,374,000) has been declared
payable in respect of the year ending 31 August 2018.
6. Called-up share capital
(Unaudited)
(Unaudited) Six months
Six months ended
ended 28 February (Audited)
28 February 31 August
2018 2017 2017
GBP'000 GBP'000 GBP'000
---------------------------------- ------------- -------------- -----------
Ordinary shares allotted, called
up and fully paid: 68,688,343
(28 February 2017 and
31 August 2017: same) shares
of 10p each 6,869 6,869 6,869
---------------------------------- ------------- -------------- -----------
7. Net asset value per share
Net asset value per share is calculated by dividing
shareholders' funds by the number of shares in issue at 28 February
2018 of 68,688,343 (28 February 2017 and 31 August 2017: same).
8. Financial instruments measured at fair value
The Company's financial instruments that are held at fair value
comprise its investment portfolio. At 28 February 2018, all
investments in the Company's portfolio were categorised as Level 1
in accordance with the criteria set out in paragraph 34.22
(amended) of FRS 102. That is, they are all valued using unadjusted
quoted prices in active markets for identical assets (28 February
2017 and 31 August 2017: same).
9. Events after the interim period that have not been reflected
in the financial statements for the interim period
The Directors have evaluated the period since the interim date
and have not noted any events which have not been reflected in the
financial statements.
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 ZLLFLVEFBBBV
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