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RNS

Half-year Report

Released 07:00 29-Sep-2017

RNS Number : 1529S
Dunedin Income Growth Inv Tst PLC
29 September 2017
 

DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC

 

HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 31 JULY 2017

Legal Entity Identifier (LEI):  549300PPXLZPR5JTL763

 

 

 

INVESTMENT OBJECTIVE

The objective of Dunedin Income Growth Investment Trust PLC is to achieve growth of income and capital from a portfolio invested mainly in companies listed or quoted in the United Kingdom.

 

HIGHLIGHTS

31 July 2017

31 January 2017

% change

513,302

485,339

+5.8

Equity shareholders' funds with debt at par (£'000)

443,299

415,810

+6.6

Market capitalisation (£'000)

394,778

366,498

+7.7

Net asset value per Ordinary share

295.32p

276.26p

+6.9

Net asset value per Ordinary shareB

281.62p

262.94p

+7.1

Share price per Ordinary share (mid)

263.00p

243.50p

+8.0

Discount to net asset valueB

6.6%

7.4%

Revenue return per Ordinary shareC

7.85p

7.67p

Gearing - netD

13.9%

14.6%

Gearing - equityE

5.1%

6.1%

Ongoing charges

0.60%F

0.63%G

A Defined as total assets per the Statement of Financial Position less current liabilities (before deduction of bank loans).

B Based on capital only net asset values with debt at fair value. The discount is the percentage by which the share price per Ordinary share is lower than this calculation of the net asset value per share (see note 7 for disclosure on net asset values).

C Figure for 31 July 2017 is for six months to that date. Figure for 31 January 2017 is for the six months to 31 July 2016.

D Calculated by dividing total borrowings less cash and cash equivalents by shareholders' funds, expressed as a percentage.

E Calculated as the amount by which the total value of equity securities exceeds shareholders' funds, expressed as a percentage of shareholders' funds.

F Based on forecast ongoing charges for the year ending 31 January 2018.

G Based on ongoing charges for the year ended 31 January 2017.

 

PERFORMANCE (total returnH)

Six months to 31 July 2017

Year ended 31 January 2017

Net asset value per Ordinary shareI

+9.7%

+19.2%

Share price per Ordinary share

+10.8%

+16.5%

FTSE All-Share Index

+7.1%

+20.1%

H Capital return plus net dividends reinvested.

I Debt at fair value.

 

For further information, please contact:-

 

Andrew Leigh

Aberdeen Asset Managers Limited            0207 463 6312



HALF YEARLY BOARD REPORT - CHAIRMAN'S STATEMENT

 

Introduction

This is my first Chairman's Statement since taking over from John Carson at the Annual General Meeting in May. I would like to thank John for his excellent work during the short time that he served as Chairman. I am pleased we will continue to benefit from his input as Senior Independent Director until his planned retirement from the Board at the Annual General Meeting next year.

 

Review of the Period

The six month period ended 31 July 2017 saw your Company deliver solid absolute and relative returns. The Company's net asset value ('NAV') increased by 9.7% on a total return basis, outperforming the FTSE All-Share Index which generated a total return of 7.1%. In addition, the discount of the share price to the NAV narrowed slightly over the period, from 7.4% to 6.6%, as at 31 July 2017 (on an ex-income basis with borrowings stated at fair value).  This resulted in a share price total return over the period of 10.8%. Year-on-year income from investments rose 5.2%, offset to some degree by lower income from derivatives, leaving revenue before tax up 3.3%. Reduced withholding tax refunds meant that net revenue per share was up a slightly lower 2.3% year-on-year at 7.85p.

 

Dividends

A first interim dividend, in respect of the year ending 31 January 2018, of 2.575p per share, was paid on 25 August 2017 and the Board has declared a second interim dividend of 2.575p per share, which will be paid on 24 November 2017 to shareholders on the register on 3 November 2017. It is our intention to make a further distribution of 2.575p per share in February and to pay a final balancing dividend in May next year, and we will seek to continue to grow the dividend in real terms.

 

During the period, the Manager continued to execute our strategy of recycling capital towards lower yielding but higher growth companies. This may reduce our income in the near term but should enhance our longer term potential for both faster dividend growth and better capital performance. The Revenue Account is in good shape and the Company retains significant revenue reserves, which supports the sustainability of our dividend policy.

 

Economic and Market Background

It was another strong period for equity markets with the FTSE All-Share Index climbing to new highs. We entered 2017 with concerns abounding over political risks in the UK, the United States and Europe, with continued uncertainty over how 'Brexit' would develop, how President Trump would execute his agenda and elections in France and Holland that carried the potential for populist political outcomes. However, the actual outturn has been generally positive.

 

Nonetheless there is significant political uncertainty in the UK and Europe, both over the Brexit negotiations and the domestic legislative programme following the snap General Election in June. In the UK, ten years after the start of the Global Financial Crisis, growth remains weak, levels of consumer and corporate debt remain high, wage growth has been insignificant and productivity shows little sign of improvement. Whilst there are signs that the Government's commitment to a balanced budget is weakening it cannot be assumed that the electorate will continue to support fiscal policies that seek to constrain public spending indefinitely.  Rising inflation driven in part by a weakening currency would add further pressure.

 

With some divergence in sentiment between the outlook in the UK and Europe for political developments and near term monetary policy tightening, Sterling has, as mentioned, weakened against European currencies. This has been of benefit to the Company given our positioning, although we are aware that this trend could reverse. Meanwhile, against the US Dollar, Sterling has actually strengthened this year as investors signal some nervousness over the path of US policy.

 

It is important to remember that while we are investing predominantly in UK listed companies, it is appropriate to have a global perspective given that a significant proportion of our revenues are generated from outside of the UK and many of the companies in which we invest have very little exposure to the domestic economy. We see this as a fundamental strength of the UK market, where we have access to a wealth of global companies across a wide spectrum of industries with the benefit of a well-regulated and highly liquid market.

 

The Manager aims to select a portfolio of companies that can deliver our income requirement as well as, increasingly, greater capital returns. We believe the Manager now has a wider opportunity set to invest in, which allied to the flexibility the Company took some years ago to invest in companies not listed in the UK, provide greater scope to deliver good long-term returns.

 

Gearing

The Company's level of gearing fell during the period as investment values increased. Valuing debt at par, gearing net of cash stood at 13.9% at 31 July 2017, down from 14.6% at 31 January 2017. On an equity gearing basis, taking debt at par and offsetting cash and bond holdings, net indebtedness was 5.1%, down from 6.1% at the year end.

 

Given the strength of markets and relative equity market valuations your Board believes that a relatively conservative level of equity gearing is appropriate and provides the Company with financial flexibility should opportunities to deploy additional capital arise.

 

Share Buy Backs

During the period, the Company bought back 406,980 shares for holding in treasury. Shares held in treasury may only be re-issued at a premium to the NAV per share. 

 

Manager

The Board notes the recent completion of the merger between Aberdeen Asset Management PLC, which is the parent company of the Manager, and Standard Life PLC. The Board will continue to monitor developments closely in this regard to ensure that satisfactory arrangements are in place for the continued effective management of the Company.

 

Outlook

The FTSE All-Share Index continues to trade at high levels compared to the past and, with elevated equity valuations, your Manager remains wary that this could unwind. The UK faces a period of uncertainty as the nature of the exit from the EU remains under discussion and, although the economy has proved resilient so far, there is scope for those companies more domestically exposed to be impacted as a result. However, this caution is reflected in the broad range of geographies to which the companies in the portfolio are exposed. The Manager is paying close attention to valuation multiples and being mindful not to overpay. The Company's holdings are on a sound financial footing, many of them in a strong position to deliver both capital gains and the ability to sustain and grow dividends at attractive rates, which the Manager expects to support the delivery of superior total return performance over the longer term.

 

The Company's dividend is well supported at current levels by earnings and accumulated revenue reserves. It remains the case that, whilst the Manager's continued focus on recycling capital out of lower growth, higher yielding companies may restrict growth in revenue per share in the near term, the dividend growth of the companies in which they invest in looks promising and this, together with our ability to utilise revenue reserves, should help support the Board's intention to increase the dividend in real terms over the medium term.

 

David Barron

Chairman

28 September 2017

 

 



HALF YEARLY BOARD REPORT - OTHER MATTERS

 

Directors' Responsibility Statement

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with applicable law and regulations.  The Directors confirm that to the best of their knowledge:

 

-    the condensed set of financial statements has been prepared in accordance with Financial Reporting Standard 104 'Interim Financial Reporting';

-    the Interim Board Report (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

-    the financial statements include a fair review of the information required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

 

Principal Risks and Uncertainties

The Board regularly reviews the principal risks and uncertainties faced by the Company together with the mitigating actions it has established to manage the risks. These are set out within the Strategic Report contained within the Annual Report for the year ended 31 January 2017 and comprise the following risk categories:

 

-    Investment objectives

-    Investment strategies

-    Investment Manager

-    Income/dividends

-    Gearing

-    Regulatory

-    Operational

 

The Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the remaining six months of the Company's financial year.

 

Going Concern

The Company's assets consist mainly of equity shares in companies listed on the London Stock Exchange and in most circumstances are realisable within a short timescale.  The Board has set limits for borrowing and derivative contract positions and regularly reviews actual exposures, cash flow projections and compliance with loan covenants.  The current bank loan expires in July 2018. The Directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future and for at least twelve months from the date of this Report. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

On behalf of the Board

David Barron

Chairman

28 September 2017

 

 



INVESTMENT MANAGER'S REVIEW

 

As the Chairman has mentioned, the first half of the year was  an active period for the portfolio as we continued to focus upon allocating capital away from higher yielding, lower growth investments into companies that can elevate the Company's  own medium term potential for capital and income growth.

 

We initiated five new overseas positions: Amplifon, GrandVision, SGS, Edenred and Heineken. The Company has the ability to invest up to 20% of its assets in companies listed outside of the UK. In the past we have used this capacity to add higher yielding companies and diversify within sectors such as oil and pharmaceuticals that have provided sizeable income contributions.  However, we now seek to add more capital to companies that, first and foremost, offer the potential of strong capital and income returns and which add economic exposures that we can't access within the UK stock market.

 

Italian listed Amplifon is a relatively small company, with a €2.5 billion market capitalisation, but is the largest retailer of hearing aids globally. The nature of the product means that sales are relatively defensive with underlying structural growth due to demographic trends and increasing penetration as awareness and technology continually improve. Whilst the dividend yield is low at 0.6%, earnings are set to grow at an attractive rate with the dividend expected to grow at a similar pace.

 

GrandVision, listed in the Netherlands, is the global leading optical retailer which shares many of the favourable characteristics of Amplifon with significant scope to expand in what is a very fragmented market. It also has a relatively low yield at 1.5% but with high dividend growth projected.

 

SGS is a Swiss-listed testing, inspection and certification business with a positive outlook as energy-related markets recover, internal initiatives take effect and growth momentum continues in newer areas such as nutrition and transportation. We have followed the company for a number of years alongside industry peers and the valuation has become more attractive of late providing an opportune entry point. It yields 3.3% and the dividend is expected to grow ahead of the market, being well underpinned by a defensive cash flow profile and solid balance sheet.

 

Edenred is a French company that provides prepaid vouchers on behalf of companies to staff for meals and other benefits, with global presence and particularly strong positions in France and Latin America. It has a relatively stable, cash generative business model with high barriers to entry and a range of growth initiatives. Consequently, the dividend, which currently yields 2.7%, is expected to grow at an attractive rate.

 

Heineken, listed in the Netherlands, may need less of an introduction being one of the largest brewers in the world with top positions in its major markets. The company has significant scope for growth as its more profitable premium products gain share and through increased scale and efficiency. The yield is 1.5% with dividend growth expected to grow well ahead of the market in the long term.

 

We added capital selectively to some of our newer positions where we continue to see attractive valuations, for example Manx Telecom, BBA Aviation, Nestlé, Chesnara and Novo Nordisk. In addition we added to Rotork and RPC on relative price weakness and Assura as part of an equity raise.

 

To fund these purchases, we substantially exited our holdings of Berendsen and Elementis. Berendsen is in the process of being acquired by French peer Elis, while Elementis made a significant acquisition during the period which takes its balance sheet into an indebted position and reduces the prospects for a special dividend in the upcoming years. Whilst we understand the strategic rationale behind the deal, we also have some reservations and, following a rerating of the shares, we decided to exit on strength.

 

We took some profits from a number of companies that performed relatively well such as Close Brothers and Unibail Rodamco, and continued to reduce our positions in some of the large cap companies that have high yields but low dividend growth prospects such as National Grid, BP and HSBC. Overall, these changes reduce income in the short term but raise the Company's potential for medium-term dividend growth.

 

Performance was solid in the first half, helped in part by corporate activity, with Berendsen's share price rising strongly due to the above mentioned takeover, and Unilever outperforming following the failed bid from Kraft Heinz and subsequent strategic review. Property holdings Hansteen and Assura also contributed and it was encouraging to see some recovery come through from companies that had previously been weak such as Standard Chartered and Rolls Royce.

 

Partially offsetting this was share price weakness from our two tobacco holdings, British American Tobacco and Imperial Brands. The sector was impacted in July from an announcement by the US Food and Drug Administration that it is looking at a comprehensive new plan for tobacco control. Also in July, AstraZeneca reported disappointing results from the 'Mystic' trial relating to its developing lung cancer drug. Despite the setbacks, we continue to believe that the long term investment cases remain intact for these companies.

 

Income generation was robust in the first half. We benefited from a special distribution in the period from Compass, worth around 0.3p per share to the Revenue Account with a number of companies announcing dividend declarations ahead of our expectations, such as Prudential, Inchcape, Schroders and British American Tobacco, amongst others. Against this, Pearson confirmed that its dividend would be cut to a lower level lower than we had anticipated. While average expected dividend growth remains healthy, we continue to monitor the companies where dividend cover is tight.

 

Following the period end, Provident Financial issued an unscheduled trading update announcing further significant operational problems in its home collected credit operations, an FCA investigation into the mis-selling of insurance products in its credit card business and a consequent decision by the board to both suspend the dividend with immediate effect and to cancel the already declared interim dividend. This caused a severe share price decline and we took the decision to exit our position given significant concerns over the future prospects for the company. Unfortunately this will have a small negative impact on capital and income performance in the second half of the year, although from an income perspective will be at least in part offset by positive contributions elsewhere.

 

We have seen a period of strong equity market performance during the last eighteen months helped by an improvement in the global growth dynamic, generally market-friendly political outcomes and the maintenance of low interest rates. From here the balance of risk probably lies to the downside with the prospect of rising interest rates and heightened geopolitical risks potentially impacting equity market valuations. For the UK, a key factor is the outcome of, and uncertainty caused by, the negotiations to leave the European Union. In an environment where, in general, equity valuations appear full, we believe that it makes sense to be cautious.  However, we maintain our stance that, in the long run, the underlying strength of the Company's holdings will outweigh the broader economic backdrop and we remain ready to take advantage of any volatility to invest in companies at more attractive valuations.

 

Ben Ritchie & Louise Kernohan

Aberdeen Asset Managers Limited

28 September 2017

 

 



INDEPENDENT REVIEW REPORT TO DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC

 

We have been engaged by the Company to review the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 31 July 2017 which comprises the Condensed Statement of Comprehensive Income, Condensed Statement of Financial Position, Condensed Statement of Changes in Equity, the Condensed Statement of Cash Flows and the related explanatory notes 1 to 13. We have read the other information contained in the Half Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' Responsibilities

The Half Yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with United Kingdom Generally Accepted Accounting Practice (including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'). The condensed set of financial statements included in this Half Yearly Financial Report has been prepared in accordance with Financial Reporting Standard 104 'Interim Financial Reporting'.

 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half Yearly Financial Report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of half yearly financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 31 July 2017 is not prepared, in all material respects, in accordance with Financial Reporting Standard 104 and Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Deloitte LLP

Statutory Auditor

Edinburgh

UK

28 September 2017

 



CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

 



Six months ended



31 July 2017



Revenue

Capital

Total


Note

£'000

£'000

£'000

Gains on investments


-

28,530

28,530

Income

3

13,605

-

13,605

Investment management fees


(342)

(513)

(855)

Administrative expenses


(509)

-

(509)

Exchange losses


-

(378)

(378)



_______

_______

_______

Net return on ordinary activities before finance costs and tax


12,754

27,639

40,393






Finance costs


(719)

(1,077)

(1,796)



_______

_______

_______

Net return on ordinary activities before tax


12,035

26,562

38,597






Tax expense

2

(245)

-

(245)



_______

_______

_______

Net return attributable to equity shareholders


11,790

26,562

38,352



_______

_______

_______






Return per Ordinary share (pence)

5

7.85

17.69

25.54



_______

_______

_______






The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

The accompanying notes are an integral part of the financial statements.

 

 



CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

 



Six months ended



31 July 2016



Revenue

Capital

Total


Note

£'000

£'000

£'000

Gains on investments


-

46,595

46,595

Income

3

13,174

-

13,174

Investment management fees


(301)

(452)

(753)

Administrative expenses


(517)

-

(517)

Exchange losses


-

(399)

(399)



_______

_______

_______

Net return on ordinary activities before finance costs and tax


12,356

45,744

58,100






Finance costs


(723)

(1,082)

(1,805)



_______

_______

_______

Net return on ordinary activities before tax


11,633

44,662

56,295






Tax expense

2

(69)

-

(69)



_______

_______

_______

Net return attributable to equity shareholders


11,564

44,662

56,226



_______

_______

_______






Return per Ordinary share (pence)

5

7.67

29.63

37.30



_______

_______

_______






The total column of the Condensed Statement of Comprehensive Income is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

The accompanying notes are an integral part of the financial statements.

 

 



CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

 



As at

As at



31 July 2017

31 January 2017


Note

£'000

£'000

Non-current assets




Equity securities


466,036

441,202

Fixed interest securities


29,477

29,462



_______

_______

Investments at fair value through profit or loss


495,513

470,664



_______

_______

Current assets




Loans and receivables


13,567

7,030

Cash and short-term deposits


8,344

8,648



_______

_______



21,911

15,678



_______

_______

Creditors: amounts falling due within one year




Bank loans


(11,715)

(11,253)

Traded options


(510)

-

Other creditors


(3,612)

(1,003)



_______

_______



(15,837)

(12,256)



_______

_______

Net current assets


6,074

3,422



_______

_______

Total assets less current liabilities


501,587

474,086





Creditors: amounts falling due after more than one year




Debenture Stock 2019


(28,577)

(28,571)

Loan Notes 2045


(29,711)

(29,705)



_______

_______



(58,288)

(58,276)



_______

_______

Net assets


443,299

415,810



_______

_______

Capital and reserves




Called-up share capital


38,419

38,419

Share premium account


4,619

4,619

Capital redemption reserve


1,606

1,606

Capital reserve

6

371,016

345,486

Revenue reserve


27,639

25,680



_______

_______

Equity shareholders' funds


443,299

415,810



_______

_______





Net asset value per Ordinary share (pence)

7

295.32

276.26



_______

_______





The accompanying notes are an integral part of the financial statements.

 

 



CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

 

Six months ended 31 July 2017











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total


Note

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 January 2017


38,419

4,619

1,606

345,486

25,680

415,810

Net return on ordinary activities after tax


-

-

-

26,562

11,790

38,352

Dividends paid

4

-

-

-

-

(9,831)

(9,831)

Buyback of Ordinary shares for treasury


-

-

-

(1,032)

-

(1,032)



_______

_______

_______

______

_______

_______

Balance at 31 July 2017


38,419

4,619

1,606

371,016

27,639

443,299



_______

_______

_______

______

_______

_______

Six months ended 31 July 2016











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total


Note

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 January 2016


38,419

4,619

1,606

299,437

23,960

368,041

Net return on ordinary activities after tax


-

-

-

44,662

11,564

56,226

Dividends paid

4

-

-

-

-

(9,428)

(9,428)

Buyback of Ordinary shares for treasury


-

-

-

(1,059)

-

(1,059)



_______

_______

_______

______

_______

_______

Balance at 31 July 2016


38,419

4,619

1,606

343,040

26,096

413,780



_______

_______

_______

______

_______

_______









The accompanying notes are an integral part of the financial statements.

 

 



CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

 


Six months ended

Six months ended


31 July 2017

31 July 2016


£'000

£'000

Operating activities



Net return before finance costs and taxation

40,393

58,100

Adjustments for:



Gains on investments

(28,530)

(46,595)

Exchange losses

378

399

Increase in accrued dividend income

(395)

(556)

Increase in accrued interest income

(188)

(98)

Stock dividends included in dividend income

(347)

(1,002)

Amortisation of fixed income book cost

146

180

Decrease in other debtors

4

12

Increase in other creditors

435

440

Net tax paid

(443)

(91)


_______

_______

Net cash inflow from operating activities

11,453

10,789




Investing activities



Purchases of investments

(32,913)

(29,975)

Sales of investments

33,723

36,659


_______

_______

Net cash from investing activities

810

6,684


_______

_______

Financing activities



Interest paid

(1,785)

(1,803)

Dividends paid

(9,831)

(9,428)

Buyback of Ordinary shares for treasury

(1,032)

(1,059)

Repayment of loan

-

(6,000)

Drawdown of loan

-

5,878


_______

_______

Net cash used in financing activities

(12,648)

(12,412)


_______

_______

(Decrease)/increase in cash and cash equivalents

(385)

5,061


_______

_______




Analysis of changes in cash and cash equivalents during the period



Opening balance

8,648

568

Effect of exchange rate fluctuations on cash held

81

101

(Decrease)/increase in cash as above

(385)

5,061


_______

_______

Closing balance

8,344

5,730


_______

_______

 

 



NOTES TO THE FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED 31 JULY 2017

 

1.

Accounting policies


Basis of preparation


The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 'Interim Financial Reporting' and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.




The Half Yearly financial statements have been prepared using the same accounting policies applied as the preceding annual financial statements, which were prepared in accordance with Financial Reporting Standard 102.

 

2.

Taxation


The taxation expense reflected in the Condensed Statement of Comprehensive Income is based on the estimated annual tax rate expected for the full financial year. The estimated annual corporation tax rate used for the year to 31 January 2018 is an effective rate of 19.17%. This is above the current corporation tax rate of 19% because prior to 1 April 2017 the prevailing corporation tax rate was 20%.




During the period the Company received £nil (2016 - £117,000) in respect of a reclaim of French withholding tax expensed in prior years. There was a foreign exchange gain of £nil (2016 - £18,000) on an amount that was accrued at the previous year end and the Company suffered withholding tax on overseas income of £245,000 (2016 - £204,000).

 



Six months ended

Six months ended



31 July 2017

31 July 2016

3.

Income

£'000

£'000


Income from investments




UK dividend income

9,634

8,392


Overseas dividend income

2,586

2,510


Fixed income

683

691


Stock dividends

347

1,002



_______

_______



13,250

12,595



_______

_______


Other income




Deposit interest

-

53


Income on derivatives

337

525


Income from stock lending

13

1


Underwriting commission

5

-



_______

_______



355

579



_______

_______


Total income

13,605

13,174



_______

_______

 

 



Six months ended

Six months ended



31 July 2017

31 July 2016

4.

Ordinary dividends on equity shares

£'000

£'000


Third interim dividend 2017 of 2.575p (2016 - 2.575p)

3,876

3,888


Final dividend 2017 of 3.975p (2016 - 3.675p)

5,969

5,540


Refund of unclaimed dividends

(14)

-



_______

_______



9,831

9,428



_______

_______






A first interim dividend in respect of the year ending 31 January 2018 of 2.575p (2017 - 2.575p) was paid on 25 August 2017 to shareholders on the register on 4 August 2017. The ex-dividend date was 3 August 2017.

 



Six months ended

Six months ended



31 July 2017

31 July 2016

5.

Returns per share

p

p


Revenue return

7.85

7.67


Capital return

17.69

29.63



_______

_______


Total return

25.54

37.30



_______

_______


The returns per share are based on the following:





Six months ended

Six months ended



31 July 2017

31 July 2016



£'000

£'000


Revenue return

11,790

11,564


Capital return

26,562

44,662



_______

_______


Total return

38,352

56,226



_______

_______


Weighted average number of Ordinary shares

150,193,191

150,730,739



__________

__________

 

6.

Capital reserves


The capital reserve reflected in the Condensed Statement of Financial Position at 31 July 2017 includes gains of £117,843,000 (31 January 2017 - gains of £101,391,000) which relate to the revaluation of investments held at the reporting date.

 

7.

Net asset value


Equity shareholders' funds have been calculated in accordance with the provisions of Financial Reporting Standard 102. The analysis of equity shareholders' funds on the face of the Condensed Statement of Financial Position does not reflect the rights under the Articles of Association of the Ordinary shareholders on a return of assets.

 


These rights are reflected in the net asset value and the net asset value per share attributable to Ordinary shareholders at the period end, adjusted to reflect the deduction of the Debenture Stock and the Loan Notes at par. A reconciliation between the two sets of figures is given below:







As at

As at



31 July 2017

31 January 2017






Net assets attributable (£'000)

443,299

415,810


Number of Ordinary shares in issue at the period endA

150,105,707

150,512,687


Net asset value per Ordinary share

295.32p

276.26p


A Excluding shares held in treasury








Adjusted net assets

£'000

£'000


Net assets attributable

443,299

415,810


Unamortised Debenture Stock premium and issue expenses

(23)

(29)


Unamortised Loan Notes issue expenses

(289)

(295)



_______

_______


Adjusted net assets attributable

442,987

415,486



_______

_______






Number of Ordinary shares in issue at the period endA

150,105,707

150,512,687


Adjusted net asset value per Ordinary share

295.12p

276.05p


A Excluding shares held in treasury.








Net assets - debt at fair value

£'000

£'000


Net assets attributable

443,299

415,810


Amortised cost Debenture Stock

28,577

28,571


Amortised cost Loan Notes

29,711

29,705


Market value Debenture Stock

(31,772)

(32,547)


Market value Loan Notes

(35,295)

(34,637)



_______

_______


Net assets attributable

434,520

406,902



_______

_______






Number of Ordinary shares in issue at the period endA

150,105,707

150,512,687


Net asset value per Ordinary share (debt at fair value)

289.48p

270.34p


A Excluding shares held in treasury.








Net assets - debt at fair value (capital basis)

£'000

£'000


Net assets attributable

434,520

406,902


Less: revenue return for the period

(11,790)

(18,899)


Add: interim dividend paid

-

7,752



_______

_______


Net assets attributable

422,730

395,755



_______

_______


Number of Ordinary shares in issue at the period endA

150,105,707

150,512,687


Net asset value per Ordinary share (debt at fair value)

281.62p

262.94p


A Excluding shares held in treasury.



 

8.

Transaction costs


During the period expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:



Six months ended

Six months ended



31 July 2017

31 July 2016



£'000

£'000


Purchases

61

164


Sales

18

25



_______

_______



79

189



_______

_______

 

9.

Fair value hierarchy


FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications:




Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.


Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.


Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.




The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:






Level 1

Level 2

Level 3

Total


As at 31 July 2017

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

466,036

-

-

466,036


Quoted bonds

b)

-

29,477

-

29,477





_______

_______

_______

_______


Total


466,036

29,477

-

495,513




_______

_______

_______

_______


Financial liabilities at fair value through profit or loss






Derivatives

c)

(510)

-

-

(510)




_______

_______

_______

_______


Net fair value


465,526

29,477

-

495,003




_______

_______

_______

_______











Level 1

Level 2

Level 3

Total


As at 31 January 2017

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

441,202

-

-

441,202


Quoted bonds

b)

-

29,462

-

29,462




_______

_______

_______

_______


Total


441,202

29,462

-

470,664




_______

_______

_______

_______


Financial liabilities at fair value through profit or loss






Derivatives

c)

-

-

-

-




_______

_______

_______

_______


Net fair value


441,202

29,462

-

470,664




_______

_______

_______

_______










a)

Quoted equities








The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.





b)

Quoted bonds



The fair value of the Company's investments in quoted bonds has been determined by reference to their quoted bid prices at the reporting date. Bonds included in Fair Value Level 2 are Corporate Bonds. Investments categorised as Level 2 are not considered to trade in active markets.





c)

Derivatives



The fair value of the Company's investments in Exchange Traded Options has been determined using observable market inputs on an exchange traded basis and has been included in Fair Value Level 1.

 

10.

Transactions with the Manager


The Company has agreements with Aberdeen Fund Managers Limited ("AFML" or the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional activity services.




The management fee is calculated, on a monthly basis, at 0.45% per annum on the first £225 million, 0.35% per annum on the next £200 million and 0.25% per annum on amounts over £425 million of the net assets of the Company, with debt at par and excluding commonly managed funds. The management fee is chargeable 40% to revenue and 60% to capital. During the period £855,000 (31 July 2016 - £753,000) of investment management fees were payable to the Manager, with a balance of £nil (31 July 2016 - £133,000) being due at the period end. There were no commonly managed funds held in the portfolio during the six months to 31 July 2017 (2016 - none).




The management agreement may be terminated by either party on not less than six months' written notice. On termination by the Company on less than the agreed notice period the Manager would be entitled to receive fees which would otherwise have been due up to that date.




The Manager also receives a separate promotional activities fee which is based on a current annual amount of £372,000 payable quarterly in arrears. During the period £186,000 (31 July 2016 - £186,000) of fees were payable to the Manager, with a balance of £31,000 (31 July 2016 - £31,000) being due at the period end.

 

11.

Segmental information


The Company is engaged in a single segment of business, which is to invest mainly in equity securities. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

 

12.

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 31 July 2017 and 31 July 2016 has not been audited.




The information for the year ended 31 January 2017 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditor on those accounts contained no qualification or statement under Section 498 of the Companies Act 2006.




The auditor has reviewed the financial information for the six months ended 31 July 2017 pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. The report of the auditor is on page 19.

 

13.

This Half Yearly Financial Report was approved by the Board on 28 September 2017.

 

By order of the Board

Aberdeen Asset Management PLC

Company Secretary

28 September 2017

 

Please note that past performance is not necessarily a guide to the future and the value of investments and the income from them may fall as well as rise.  Investors may not get back the amount they originally invested

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Half-year Report - RNS