Regulatory Story
Go to market news section View chart   Print
RNS

Half-year Report

Released 07:00 28-Jul-2017

RNS Number : 3522M
Scottish American Investment Co PLC
28 July 2017
 

RNS Announcement

 

The Scottish American Investment Company P.L.C. (SAINTS)

 

Legal Entity Identifier: 549300NF03XVC5IFB447

Regulated Information Classification: Half Yearly Financial Report.

 

Results for the six months to 30 June 2017

 

The following is the unaudited Interim Financial Report for the six months to 30 June 2017.

 

Interim Management Report

 

The net asset value total return for the first six months of 2017 was 10.8% and the share price total return was 10.2%. The total return on global equities, as measured by the FTSE All World Index in sterling*, was 6.3%.

Earnings per share for the six months were 6.22p compared to 5.77p in the same period last year. All SAINTS' primary asset classes1 contributed to the growth in earnings per share. The key drivers of growth were an increased allocation to the high-yielding UK property portfolio, steady growth in ordinary dividends and the uplift to overseas income in sterling terms as a result of last year's post-referendum fall in the pound. Underlying earnings growth was partially offset by a lower contribution from special dividends.

A first interim dividend of 2.725p was paid at the end of June and the second interim dividend of 2.75p is payable at the end of September. The total amount of these dividends, 5.475p, is 1.4% higher than the amount paid for the corresponding period in 2016. 

Over the six month period 725,000 shares (representing just over 0.5% of issued share capital at 1 January 2017) were issued at a premium to net asset value, with SAINTS' share price ending the period modestly above net asset value.

NAV performance exceeded the comparative FTSE All World Index return* for the six months to end June 2017 mainly due to strong performance from the equity portfolio. Operational updates from SAINTS' equity holdings have been generally encouraging, and price strength has been broad-based. Particularly notable performance was delivered by Kering, the owner of the Gucci and other luxury goods brands, Partners Group, the private markets investment manager, and Cochlear, the Australian hearing implant manufacturer, all of which generated total returns of over 25% over the six month period. The property and fixed income portfolios also posted positive total returns.

 

 

 

 

* See disclaimer at the end of this announcement.

 

The Company remained fully invested over the period, during which modest net additions were made to the property and fixed income portfolios. Within the equity portfolio the allocations to the four cash flow growth categories2 remained broadly similar, although there was an increase in the allocation to the Exceptional Revenue Opportunity category with new investments in the stock of companies that we believe have exciting growth potential alongside strong dividend prospects. Annualised turnover during the period was just below 20%, implying an average holding period of over five years. This is consistent with our long-term, low turnover, stock-driven approach.

The Company's primary objective is to deliver real dividend growth over time, as it has done over the past. Recent adjustments to the portfolio, with increased emphasis on dependable income growth and greater allocation to real assets, will, we believe enable the Company to deliver sustainable, above-inflation dividend increases over the long term.

 

The principal risks and uncertainties facing the Company are set out in note 12. Related party transaction disclosures are set out in note 10.

 

Baillie Gifford & Co

27 July 2017

 

Past performance is not a guide to future performance.

 

 

 

Responsibility Statement

 

 

We confirm that to the best of our knowledge:

a)   the condensed set of Financial Statements 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 and Transparency Rules 4.2.7R (indication of important events during the first six months, their impact on the Financial Statements and a description of principal risks and uncertainties for the remaining six months of the year); and

c)   the Interim Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).

 

By order of the Board

Peter Moon

Chairman

27 July 2017

 

Income Statement (unaudited)

 

For the six months ended

 30 June 2017

For the six months ended

30 June 2016

For the year ended

31 December 2016

(audited)

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Gains on sales of investments - securities

15,355

15,355

3,103 

3,103 

14,487 

14,487 

Gains on sales of investments - property

147

147

Changes in fair value of investments - securities

17,953

17,953

39,043 

39,043 

73,079 

73,079 

Changes in fair value of investments - property

1,136

1,136

250 

250 

1,265 

1,265 

Currency gains/(losses)

430

430

(527)

(527)

(1,084)

(1,084)

Income - dividends and interest

8,516 

-

8,516

7,968 

7,968 

14,586 

14,586 

Income - rent and other

2,488 

-

2,488

1,966 

1,966 

4,044 

4,044 

Management fees

(437)

(812)

(1,249)

(368)

(684)

(1,052)

(775)

(1,440)

(2,215)

Other administrative expenses

(563)

-

(563)

(526)

(526)

(968)

(968)

Net return before finance costs and taxation

10,004 

34,209

44,213

9,040 

41,185 

50,225 

16,887 

86,307 

103,194 

Finance costs of borrowings

(1,000)

(1,858)

(2,858)

(1,007)

(1,871)

(2,878)

(2,015)

(3,741)

(5,756)

Net return on ordinary activities before taxation

9,004 

32,351

41,355

8,033 

39,314 

47,347 

14,872 

82,566 

97,438 

Tax on ordinary activities

(700)

216

(484)

(352)

110 

(242)

(933)

293 

(640)

Net return on ordinary activities after taxation

8,304 

32,567

40,871

7,681 

39,424 

47,105 

13,939 

82,859 

96,798 

Net return per ordinary share (note 4)

6.22p

24.39p

30.61p

5.77p

29.60p

35.37p

10.46p

62.16p

72.62p

Note:

Dividends paid and payable per share

(note 5)

5.475p

 

 

5.40p

 

 

10.825p

 

 

 

The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies.

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

A Statement of Comprehensive income is not required as all gains and losses of the Company have been reflected in the above statement.

 

 

Balance Sheet (unaudited)

 

 

At 30 June 2017

£'000

At 31 December 2016

(audited)

£'000

Fixed assets

 

 

Investments - securities

475,264 

452,554 

Investments - property

74,850 

61,000 

 

550,114 

513,554 

Current assets

 

 

Debtors

2,018 

1,116 

Cash and deposits

8,027 

4,174 

 

10,045 

5,290 

Creditors

 

 

Amounts falling due within one year

(8,729)

(3,222)

Net current assets

1,316 

2,068 

Total assets less current liabilities

551,430 

515,622 

Creditors

 

 

Debenture stock (note 7)

(83,770)

(84,112)

Net assets

467,660 

431,510 

Capital and reserves

 

 

Share capital

33,530 

33,349

Share premium

4,508 

2,131 

Capital redemption reserve

22,781 

22,781 

Capital reserve

389,464 

356,897 

Revenue reserve

17,377 

16,352 

Shareholders' funds

467,660 

431,510 

Net asset value per ordinary share

(Debenture at fair value) (note 7)

337.1p

309.2p

Net asset value per ordinary share

(Debenture at book value)

348.7p

323.5p

Ordinary shares in issue (note 8)

134,120,943

133,395,943 

 

 

 

Statement of Changes in Equity (unaudited)

 

 

For the six months ended 30 June 2017

 

Share
capital

£'000

 

Share

Premium

£'000

Capital redemption reserve

£'000

Capital reserve*

£'000

Revenue reserve

£'000

Shareholders'
funds

£'000

Shareholders' funds at 1 January 2017

33,349

2,131

22,781

356,897

16,352 

431,510

Shares issued

181

2,377

-

-

2,558

Net return on ordinary activities after taxation

-

-

-

32,567

8,304 

40,871

Dividends paid (note 5)

-

-

-

-

(7,279)

(7,279)

Shareholders' funds at 30 June 2017

33,530

4,508

22,781

389,464

17,377

467,660

 

 

For the six months ended 30 June 2016

 

Share
capital

£'000

 

Share

Premium

£'000

Capital redemption reserve

£'000

Capital reserve*

£'000

Revenue reserve

£'000

Shareholders'
funds

£'000

Shareholders' funds at 1 January 2016

33,290

1,534

22,781

274,038

16,810 

348,453 

Shares issued

59

597

-

-

656 

Net return on ordinary activities after taxation

-

-

-

39,424

7,681 

47,105 

Dividends paid (note 5)

-

-

-

-

(7,193)

(7,193)

Shareholders' funds at 30 June 2016

33,349

2,131

22,781

313,462

17,298 

389,021 

*      The Capital Reserve balance at 30 June 2017 includes investment holding gains of £147,118,000; (30 June 2016 - gains of £92,979,000).

 

Condensed Cash Flow Statement (unaudited)

 

 

Six months to

30 June 2017

£'000

Six months to

30 June 2016

£'000

Cash flows from operating activities

 

 

Net return on ordinary activities before taxation

41,355 

Net gains on investments - securities

(33,308)

Net gains on investments - property

(1,283)

Currency (gains)/losses

(430)

Finance costs of borrowings

2,858 

Overseas withholding tax

(512)

Changes in debtors and creditors

(1,190)

Other non-cash changes

Cash from operations

7,493 

7,385 

Interest paid

(3,200)

(3,200)

Net cash inflow from operating activities

4,293 

4,185 

Cash flows from investing activities

 

Acquisitions of Investments

(49,620)

Disposals of investments

53,752 

Forward currency contracts

18 

Net cash inflow from investing activities

4,150 

3,442 

Equity dividends paid

(7,279)

Shares issued

2,558 

656 

Net cash outflow from financing activities

(4,721)

(6,537)

Increase in cash and cash equivalents

3,722 

Exchange movements

131 

Cash and cash equivalents at start of period

4,174 

3,399 

Cash and cash equivalents at end of period*

8,027 

4,820 

 

 

 

*     Cash and cash equivalents represent cash at bank and short term money market deposits repayable on demand.

 

Performance Attribution (unaudited)

 

 

 

 

 

 

Portfolio Breakdown

Average allocation

Total return

SAINTS

%

Benchmark

%

SAINTS

%

Benchmark

%

Global equities

94.1 

100.0

8.8 

6.3

Bonds

6.5 

 

18.6 

 

Direct property

16.2 

 

5.5 

 

Deposits

1.7 

 

 

Debenture at book value

(18.4)

 

3.4 

 

Portfolio total return (debenture at book value)

 

 

9.8 

6.3

Other items*

 

 

(0.3)

 

Fund total return (debenture at book value)

 

 

9.5 

 

Adjustment for change in fair value of debenture

 

 

1.3 

 

Fund total return (debenture at fair value)

 

 

10.8 

6.3

 

 

 

The above returns are calculated on a total return basis with net income reinvested.

Source: Baillie Gifford

*      Includes Baillie Gifford and OLIM management fees.

See disclaimer at end of this announcement

Past performance is not a guide to future performance.

 

 

 

 

Twenty Largest Equity Holdings (unaudited)

 

 

Name

Business

Value at

 30 June

2017

£'000

% of
total assets*

Taiwan Semiconductor Manufacturing

Semiconductor manufacturer

12,102

2.2

Coca Cola

Beverage manufacturer

11,997

2.2

Johnson and Johnson

Pharmaceuticals and healthcare products

11,548

2.1

Partners Group

Asset management

10,520

1.9

Reynolds American

Cigarette manufacturer

10,257

1.9

Prudential

Life insurer

9,901

1.8

Deutsche Boerse

Securities exchange owner/operator

9,726

1.8

Procter & Gamble

Household product manufacturer

9,709

1.8

Sonic Healthcare

Laboratory testing

8,987

1.6

Kering

Luxury brand conglomerate

8,562

1.6

Anta Sports Products

Sportswear manufacturer and retailer

8,493

1.5

Total

Integrated oil company

8,432

1.5

Pepsico

Snack and beverage manufacturer

8,378

1.5

United Parcel Service

Courier services

8,251

1.5

Scottish & Southern Energy

Electricity utility

8,201

1.5

Dia

Discount supermarkets

8,194

1.5

Hiscox

Property and casualty insurance

8,176

1.5

Fastenal

Distribution and sales of industrial supplies

8,074

1.4

Kimberly-Clark De México

Paper-based household products

7,991

1.4

McDonald's

Fast food restaurants

7,614

1.4

 

 

185,113

33.6

*      Before deduction of the debenture.

 

 

 

 

 

Notes to the Condensed Financial Statements (unaudited)

 

1.    

The condensed Financial Statements for the six months to 30 June 2017 comprise the statements set out on the previous pages together with the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance 'Review of Interim Financial Information'. The Financial Statements for the six months to 30 June 2017 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 31 December 2016.

Going Concern

Having considered the nature of the Company's principal risks and uncertainties, as set out in note 12, together with its current position, investment objective and policy, its assets and liabilities and projected income and expenditure, together with the Company's dividend policy, it is the Directors' opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. The Company has no short term borrowings and the redemption date for the Company's debenture is April 2022. Accordingly, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements and confirm that they are not aware of any material uncertainties which may affect the Company's ability to continue to do so over a period of at least twelve months from the date of approval of these Financial Statements.

2.    

The financial information contained within this Interim Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 31 December 2016 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified, and did not contain statements under sections 498(2) or (3) or (4) of the Companies Act 2006.

3.    

Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed by the Company as its Alternative Investment Fund Manager (AIFM) and Company Secretary. The investment management function has been delegated to Baillie Gifford & Co. The management agreement can be terminated on six months' notice. The annual fee is 0.45% of total assets less current liabilities, excluding the property portfolio, calculated on a quarterly basis.

As AIFM, Baillie Gifford & Co Limited has delegated the management of the property portfolio to OLIM Property Limited. OLIM receives an annual fee of 0.5% of the value of the property portfolio, subject to a minimum quarterly fee of £6,250. The agreement can be terminated on three months' notice.

4.    

Net return per ordinary share

Six months to

 30 June

 2017

£'000

Six months to

30 June

 2016

£'000

 

Revenue return on ordinary activities after taxation

8,304

7,681

 

Capital return on ordinary activities after taxation

32,567

39,424

 

Total net return

40,871

47,105

 

Weighted average number of ordinary shares in issue

133,512,793

133,184,953

 

Net return per ordinary share figures are based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period.

There are no dilutive or potentially dilutive shares in issue.

         

 

Notes to the Condensed Financial Statements (unaudited) (ctd)

 

 

 

5.    

Dividends

Six months to

 30 June

 2017

£'000

Six months to

30 June

 2016

£'000

Amounts recognised as distributions in the period:

 

 

Previous year's final of 2.725p (2016 - 2.70p), paid 12April 2017

3,635

3,595

First interim of 2.725p (2016 - 2.70p), paid 23 June 2017

3,644

3,598

 

7,279

7,193

 

 

 

 

 

Amounts paid and payable in respect of the period:

 

 

First interim of 2.725p (2016 - 2.70p), paid 23 June 2017

3,644

3,598

Second interim of 2.75p (2016 - 2.70p)

3,692

3,602

 

7,336

7,200

 

The second interim dividend was declared after the period end date and has therefore not been included as a liability in the Balance Sheet. It is payable on 22 September 2017 to shareholders on the register at the close of business on 18 August 2017.  The ex-dividend date is 17 August 2017. The Company's Registrars offer a Dividend Reinvestment Plan and the final date for elections for this dividend is 1 September 2017.

6.    

Fair Value Hierarchy

The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit or loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement.

Level 1 - using unadjusted quoted prices for identical instruments in an active market;

Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable

               (based on market data); and

Level 3 - using inputs that are unobservable (for which market data is unavailable).

An analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below.

 

As at 30 June 2017

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

 

 

Securities

 

 

 

 

 

 

Listed equities/funds

441,335

2,009

-

443,344

 

 

Bonds

-

20,300

11,620

31,920

 

 

Property

 

 

 

 

 

 

Freehold

-

-

74,850

74,850

 

 

Total financial asset investments

441,335

22,309

86,470

550,114

 

                   
 

Notes to the Condensed Financial Statements (unaudited) (ctd)

 

 

As at 31 December 2016

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

 

Securities

 

 

 

 

 

Listed equities/funds

424,881

1,919

 

426,800

 

Bonds

-

15,190

10,564

25,754

 

Property

 

 

 

 

 

Freehold

-

-

61,000

61,000

 

Total financial asset investments

424,881

17,109

71,564

513,554

 

There have been no transfers between levels of the fair value hierarchy during the period. The fair value of listed investments is bid value or, in the case of holdings on certain recognised overseas exchanges, last traded price. They are categorised as Level 1 if they trade in an active market and Level 2 if they are traded on a market which is not considered to be active. The fair value of unlisted investments is determined using valuation techniques, determined by the Directors, based upon observable and/or non-observable data such as latest dealing prices, stockbroker valuations, net asset values and other information, as appropriate. The Company's holdings in unlisted investments are categorised as Level 3 as the valuation techniques applied include the use of non-observable data.

7.    

The market value of the 8% Debenture Stock 2022 at 30 June 2017 was £99.3m (31 December 2016 - £103.2m).

8.    

At 30 June 2017, the Company had the authority to buy back 19,996,051 ordinary shares, and to issue 12,614,592 ordinary shares without application of pre-emption rights, in accordance with the authorities granted at the AGM in April 2017. During the six months to 30 June 2017, 725,000 (31 December 2016 - 235,000) shares were issued at a premium to net asset value raising proceeds of £2,558,000 (31 December 2016 - £656,000). Between 1 July 2017 and 27 July 2017, the Company issued a further 125,000 shares at a premium to net asset value raising proceeds of £444,000. No shares were bought back (31 December 2016 - £nil).

9.    

During the period, transaction costs on equity purchases amounted to £33,000 (30 June 2016 - £107,000) and on equity sales £15,000 (30 June 2016 - £30,000). Transaction costs on property purchases amounted to £1,101,000 (30 June 2016 - £200,000) and on property sales £57,000 (30 June 2016 - £nil).

10. 

Related party transactions

There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period and there have been no changes in the related party transactions described in the last Annual Report and Financial Statements that could have had such an effect on the Company during that period.

11. 

The Interim Financial Report will be available on the SAINTS page of the Managers' website: www.saints-it.com on or around 11 August 2017.

12. 

Principal Risks and Uncertainties

The principal risks facing the Company are investment strategy risk, financial risk, regulatory risk, custody and depositary risk, operational risk, discount risk, leverage risk and political risk. An explanation of these risks and how they are managed is set out on pages 7 and 8 of the Company's Annual Report and Financial Statements for the year to 31 December 2016 which is available on the Company's website: www.saints-it.com. The principal risks and uncertainties have not changed since the publication of the Annual Report.

‡    Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

SAINTS' objective is to deliver real dividend growth by increasing capital and growing income. Its policy is to invest mainly in equity markets, but other investments may be held from time to time including bonds, property and other asset classes.

 

Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, is appointed as investment managers and secretaries to SAINTS. Baillie Gifford & Co, the Edinburgh based fund management group has around £171 billion under management and advice as at 27 July 2017.

Past performance is not a guide to future performance. SAINTS is a listed UK company. As a result, the value of its shares and any income from those shares is not guaranteed and could go down as well as up. You may not get back the amount you invested. As SAINTS invests in overseas securities, changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up. You can find up to date performance information about SAINTS on the SAINTS page of the Managers' website www.saints-it.com. 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.

 

For further information please contact:

James Budden, Baillie Gifford & Co

Tel: 0131 275 2816

Roland Cross, Director, Four Broadgate

Tel: 020 3761 4440

 

Third party data provider disclaimer

 

No third party data provider ('Provider') makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data. No Provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the index data included in this document, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom.

No Provider has any obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate.

Without limiting the foregoing, no Provider shall have any liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgments, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein.

 

FTSE Index data

 

FTSE International Limited ('FTSE') © FTSE 2017. 'FTSE®' is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data and no party may rely on any FTSE indices, ratings and/or data underlying data contained in this communication. No further distribution of FTSE Data is permitted without FTSE's express written consent. FTSE does not promote, sponsor or endorse the content of this communication.

 

- ends -

 

1 Global equities, directly-held UK property, fixed income.

2 We consider the drivers of growth in cash flow available for dividends to be broadly divided into four key categories: Compounding Machines, Exceptional Revenue Opportunities, Profitability Transformation, and Capital Decisions. For full details please refer to the 2016 Annual Report.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR LLFSEDRIDFID
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Half-year Report - RNS