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RNS

Annual Financial Report

Released 07:00 09-Feb-2018

RNS Number : 3708E
Scottish American Investment Co PLC
09 February 2018
 

RNS Announcement: Preliminary Results

 

 Results for the year to 31 December 2017

 

Legal Entity Identifier code: 549300NF03XVC5IFB447

 

¾  Dividend - the full year dividend, including a recommended final dividend of 2.825p, is 11.1p per share. This is 2.5% higher than the 2016 dividend, extending the Company's record of dividend increases to thirty eight consecutive years. The dividend is fully covered by earnings.

¾  Total return - Net Asset Value total return (capital and income) for the year was 18.8%, some way ahead of the strong total return from global equities of 13.8%. The share price Total return was 17.2%. Returns were assisted by strong operational performance of many of the companies in which SAINTS invests, and also by the performance of the Company's property and bond investments.

¾  Revenues - Investment income was £20.5m (2016 - £18.6m) and earnings per share were 11.33p (2016 - 10.46p).

¾  Outlook - the likelihood of continued economic growth around the world seems strong, although the immediate prospects for both the UK economy and the market are less clear. The Board remains confident in the Company's ability to achieve its objective of delivering real dividend growth by increasing capital and growing income over the long term.          

 

8 February 2018

 

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.

The Company is managed by Baillie Gifford, the Edinburgh based fund management group with around £178 billion under management and advice as at 8 February 2018.

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 Dow and Toby Ross, Managers, The Scottish American Investment Company P.L.C.

Tel: 0131 275 2141 and 0131 275 2217

James Budden, Baillie Gifford & Co  

Tel: 0131 275 2816 or 07507 201208

Roland Cross, Director, Four Broadgate

Tel: 0203 697 4200 or 07831 401309

 

 

 

Chairman's Statement

 

 

The Company's objective is to deliver real dividend growth by increasing capital and growing income. An increased dividend of 11.1p (2016: 10.825p) will extend the Company's record of raising its dividend to thirty eight consecutive years.

 

Overview

Markets made further strong progress during the year, helped by continued and accelerating economic growth in both developed markets and elsewhere. 'Elsewhere' of course has been an important part of the mix, as emerging markets' share of the global economy continued to grow and many markets including China regained their momentum. This positive backdrop helped companies grow their earnings, and the happy combination of economic and earnings growth improved market sentiment.

There have of course been serious concerns in the background, notably geopolitical risk relating to Korea, itself linked to the unpredictability of US policy. Less dramatically, as in recent years two principal concerns have continued to bubble away in the background. The first is what happens when all this growth triggers further interest rate rises. The second is whether ten years of quantitative easing has stretched valuations to the point where a correction is likely to occur.

For investors based in the UK, the continued uncertainties around Brexit have also been prominent, although less so in the context of global markets. It is important to stress the international nature of SAINTS' equity portfolio, both in terms of listing but also economic focus. SAINTS' global approach provides the widest access to opportunities in equity markets and earlier sales of stocks with a domestic UK focus have been helpful.

The principal protection against the broader market concerns lies in the Manager's stock-driven approach which emphasises the importance of both income dependability and real growth. Dependability and quality of income should prove their worth if rising interest rates or an economic wild card cause problems for more indebted companies with less resilient cashflows.  Growing cashflows on the other hand facilitate growing distributions, both from the companies which we own and to you in turn as shareholders of SAINTS.

The Company's investment in property has again made a significant contribution to both income and to overall returns. Within the property portfolio there has been carefully planned progress in reducing exposure to any falls in UK consumer spending.

 

Total Return Performance

 

Your Company's investments have performed well over the year. SAINTS' net asset value total return (capital and income) for the year was 18.8% and the share price total return was 17.2%. The total return from the global equity market was 13.8%.  Whilst it is encouraging that returns have exceeded the very strong returns of equities generally over the year, both the Managers and your Board have a long-term perspective and so we do not believe that it is generally helpful to dwell on the comparison of performance against any equity index over short periods. As stressed last year, the Company's portfolio of investments differs markedly from the make up of the global equity index against which performance is often compared. This differentiated portfolio is necessary and appropriate in order for the Company to deliver a high and growing yield and service its borrowings.

Nonetheless it is worth observing that the equity portfolio has outperformed in a period when other approaches with a different balance between current income and future growth have struggled. As in previous years, returns have been helped by the sound operational performance of the companies in which the portfolio is invested. It is also notable that the Company's equity, property and bond investments all contributed to growth in both income and capital.  The principal contributors to and detractors from performance and the changes to the equity, property and bond investments are explained in more detail in the Managers' Review.

 

Revenues

Earnings per share have increased by 8% to 11.33p and investment income has risen to £20.5m. Income has been helped by earnings and dividend progression from the Company's equity investments and also by increased revenues from both property and bonds where attractive new opportunities have been identified. In addition roughly half of the Company's earnings come from overseas and in 2017 currency movements boosted the sterling value of these earnings. Both managers (Baillie Gifford and, for the Company's property investments, OLIM) continue at the Board's request to emphasise supporting the dependability and the future growth of the Company's dividend in line with its objective.

 

Dividend and Inflation

A final dividend of 2.825p is recommended which will take the full year dividend to 11.1p per share, 2.5% higher than the 2016 dividend of 10.825p.

The recommended dividend is fully covered by this year's earnings. The Company has built up revenue reserves in the past and the Board has deemed it prudent to modestly augment those reserves this year, whilst also recommending a dividend which reinforces its progressive dividend policy. The ability to smooth dividend progression is a key advantage of investment trusts and, whilst the Board has great confidence in the long term prospects of the Company's investments, we also believe that a measured approach is appropriate, particularly given uncertainties around exchange rates and the path of the UK economy.

This year's increase, whilst slightly below the annual rate of inflation of 3% as measured by CPI, extends the Company's record of annual dividend increases to thirty eight years. Over the last ten year period the Company's dividends have increased at well over the rate of inflation, as shown on the first chart on page 1 of the Annual Report.

 

Borrowings

SAINTS' borrowings take the form of a single £80m debenture which is due for repayment in April 2022.  During 2017, the borrowings mainly funded a range of higher yielding commercial property and, to a much lesser extent, some fixed income investments.

The book value of the debenture is £83.4m which, at the year end, was equivalent to approximately 17% of shareholders' funds.  The estimated market or fair value of the debenture was £97.8m, a decrease from the previous year's value of £103.2m.  The market value of the Company's borrowings will continue to fall over the coming years as the redemption date approaches.

 

Outlook

Last year I suggested that the longer-term implications of both Brexit and President Trump's victory would take a while to emerge and that inflation was likely to pick up in the UK during 2017. Not particularly heroic predictions but as it happens correct thus far. Whether inflation persists at its current level is less clear, due to a combination of some weakness in the domestic economy and action by the Bank of England on the one hand and a strengthening oil price on the other. The likelihood of continued economic growth around the world seems strong, although the outlook for the UK economy is less positive. In addition the concerns relating to valuations and rising interest rates mentioned earlier make share price progress less than certain, as has been demonstrated recently

The Board and the Managers remain alert to both potential opportunities and challenges. It is important that the Company's future income prospects depend principally on the cashflows of our equity investments and the strength of property covenants and length of leases, all of which are explained further in the Managers' report, rather than on the level of markets. As a Board, we remain of the view that an approach anchored in fundamental analysis of growth and dependability of income is a firm foundation for the future. Your Board is fully supportive of and confident in the Managers' approach, and this confidence has been strengthened by another year of encouraging operational performance. We continue to believe that that the portfolio as a whole is well placed to support the growth of the Company's dividend over time.

 

Issuance

 

The Company has raised over £9 million from new issuance at a premium to Net Asset value in order to satisfy investor demand over the year. This indicates that the merits of the Company's approach are increasingly appreciated. It also serves the interests of current shareholders by reducing costs per share and helping to further improve liquidity.

 

The Board and the Managers

There have been no changes to the Board over the year and as Chairman I have been extremely pleased with the manner in which those Board members who have joined more recently have bedded in, combining well with the valued contribution of longer standing members.

As announced in the summer Dominic Neary has moved on from Baillie Gifford, and the Board would like to reiterate our warm thanks and appreciation to him for his considerable contribution to SAINTS in recent years. The Board is however very pleased to have James Dow and Toby Ross as joint managers of the Company and confident in their ability to continue the investment approach which they helped to develop. The joint appointment reflects Baillie Gifford's team-based approach and the Board looks forward to a continued fruitful and productive working relationship with the Managers.

 

AGM

The AGM will be held at 11am on Thursday 5 April 2018 at Baillie Gifford's offices at Calton Square, 1 Greenside Row, Edinburgh. The Managers will make a presentation on the investment portfolio and there will also be an opportunity to ask questions. The Directors and the Managers look forward to meeting you there.

 

Peter Moon

Chairman

8 February 2018

 

 

For a definition of terms see Glossary of Terms, note 10.

Past performance is not a guide to future performance.
 

 

Income Statement

 

The following is the unaudited preliminary statement for the year to 31 December 2017 which was approved by the Board on 8 February 2018. The Board of The Scottish American Investment Company P.L.C. is recommending to the Annual General Meeting of the Company to be held on 5 April 2018 the payment of a final dividend of 2.825p (2.725p last year) per ordinary share making a total of 11.10p (10.825p last year) paid and proposed for the year ended 31 December 2017.

 

For the year ended

31 December 2017

 

For the year ended

31 December 2016

 

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Net gains on investments - securities

56,191 

56,191 

87,566 

87,566 

Net gains on investments - property

4,845 

4,845 

1,265 

1,265 

Currency gains/(losses)

558 

558 

(1,084)

(1,084)

Income (note 2)

20,484 

20,484 

18,630 

18,630 

Management fees

(893)

(1,659)

(2,552)

(775)

(1,440)

(2,215)

Other administrative expenses

(1,086)

(1,086)

(968)

(968)

Net return before finance costs and taxation

18,505 

59,935 

78,440 

16,887 

86,307 

103,194 

Finance costs of borrowings

(2,001)

(3,715)

(5,716)

(2,015)

(3,741)

(5,756)

Net return on ordinary activities before taxation

16,504 

56,220 

72,724 

14,872 

82,566 

97,438 

Tax on ordinary activities

(1,291)

515 

(776)

(933)

293 

(640)

Net return on ordinary activities after taxation

15,213 

56,735 

71,948 

13,939 

82,859 

96,798 

Net return per ordinary share (note 3)

11.33p

42.24p

53.57p

10.46p

62.16p

72.62p

 

The total column of the Income 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 this statement derive from continuing operations.

A Statement of Comprehensive Income is not required as there is no other comprehensive income.

 

 

Balance Sheet

 

 

At 31 December 2017

 

At 31 December 2016

 

£'000

£'000

£'000

£'000

Fixed assets

 

 

 

 

Investments - securities

495,645 

 

452,554 

 

Investments - property

84,950 

 

61,000 

 

 

 

580,595 

 

513,554 

Current assets

 

 

 

 

Debtors

1,222 

 

1,116 

 

Cash and cash equivalents

2,894 

 

4,174 

 

 

4,116 

 

5,290 

 

Creditors

 

 

 

 

Amounts falling due within one year

(3,345)

 

(3,222)

 

Net current assets

 

771 

 

2,068 

Total assets less current liabilities

 

581,366 

 

515,622 

Creditors

 

 

 

 

Amounts falling due after more than one year

 

(83,428)

 

(84,112)

Net assets

 

497,938 

 

431,510 

Capital and reserves

 

 

 

 

Share capital

 

33,994 

 

33,349 

Share premium account

 

10,744 

 

2,131 

Capital redemption reserve

 

22,781 

 

22,781 

Capital reserve

 

413,632 

 

356,897 

Revenue reserve

 

16,787 

 

16,352 

Shareholders' funds

 

497,938 

 

431,510 

Net asset value per ordinary share (debenture at fair value)

 

355.6p

 

309.2p

Net asset value per ordinary share (debenture at book value)

 

366.2p

 

323.5p

Ordinary shares in issue (note 6)

 

135,975,943 

 

133,395,943 

 

 

 

Statement of Changes in Equity

 

 

For the year ended 31 December 2017

 

Share
capital

£'000

 

Share

premium account

£'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

645

8,613

-

-

9,258 

Net return on ordinary activities after taxation

-

-

-

56,735

15,213 

71,948 

Dividends paid in the year (note 4)

-

-

-

-

(14,778)

(14,778)

Shareholders' funds at 31 December 2017

33,994

10,744

22,781

413,632

16,787 

497,938 

 

 

For the year ended 31 December 2016

 

Share
capital

£'000

 

Share

premium account

£'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

-

-

-

82,859

13,939 

96,798 

Dividends paid in the year (note 4)

-

-

-

-

(14,397)

(14,397)

Shareholders' funds at 31 December 2016

33,349

2,131

22,781

356,897

16,352 

431,510 

 

 

 

*      The capital reserve balance as at 31 December 2017 includes investment holding gains of £147,461,000 (31 December 2016 - £128,030,000).

Cash Flow Statement

 

 

Year Ended

31 December 2017

 

Year Ended

31 December 2016

 

 

£'000

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

 

Net return on ordinary activities before taxation

72,724 

 

97,438 

 

Net gains on investments - securities

(56,191)

 

(87,566)

 

Net gains on investments - property

(4,845)

 

(1,265)

 

Currency (gains)/losses

(558)

 

1,084 

 

Finance costs of borrowings

5,716 

 

5,756 

 

Overseas withholding tax

(810)

 

(625)

 

Changes in debtors and creditors

51 

 

233 

 

Other non-cash changes

(25)

 

(65)

 

Cash from operations

 

16,062 

 

14,990 

Interest paid

 

(6,400)

 

(6,400)

Net cash inflow from operating activities

 

9,662 

 

8,590 

Cash flows from investing activities

 

 

 

 

Acquisitions of investments

(129,531)

 

(83,824)

 

Disposals of investments

123,551 

 

91,034 

 

Forward currency contracts

469 

 

(1,691)

 

Net cash (outflow)/inflow from investing activities

 

(5,511)

 

5,519 

Cash flows from financing activities

 

 

 

 

Equity dividends paid

(14,778)

 

(14,397)

 

Shares issued

9,258 

 

656 

 

Net cash outflow from financing activities

 

(5,520)

 

(13,741)

(Decrease)/increase in cash and cash equivalents

 

(1,369)

 

368 

Exchange movements

 

89 

 

407 

Cash and cash equivalents at 1 January

 

4,174 

 

3,399 

Cash and cash equivalents at 31 December*

 

2,894 

 

4,174 

 

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

 

 

 

Asset Allocation

 

 

At 31 December

2017

%

 

 

At 31 December 2016

%

 

 

Quoted equities

 

79.6

 

 

82.8

Bonds

5.7

 

5.0

Direct property

14.6

 

11.8

Net liquid assets

0.1

 

0.4

Total assets

100.0

 

100.0

 

 

Performance Attribution

 

 

 

 

 

 

Portfolio Breakdown

Average allocation

Total return

Benchmark

%

Global equities

93.2 

100.0

15.5 

13.8

Bonds

6.8 

 

30.1 

 

Direct property

16.3 

 

13.7 

 

Deposits

1.6 

 

 

Debenture at book value

(17.8)

 

6.8 

 

Portfolio total return (debenture at book value)

 

 

17.6 

13.8

Other items*

 

 

(0.8)

 

Fund total return (debenture at book value)

 

 

16.8 

13.8

Adjustment for change in fair value of debenture

 

 

2.0 

 

Fund total return (debenture at fair value)

 

 

18.8 

13.8

 

* Includes Baillie Gifford and OLIM management fees.

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

Past performance is not a guide to future performance.

Source: Baillie Gifford

 

 

List of Investments at 31 December 2017

 

Name

Business

 

Value

£'000

% of
total assets

Coca Cola

Beverage manufacturer

 

11,968

2.1

Johnson and Johnson

Pharmaceuticals and healthcare products

 

11,946

2.1

Prudential

Life insurer

 

10,874

1.9

CH Robinson

Delivery and logistics

 

10,850

1.9

Deutsche Boerse

Securities exchange owner/operator

 

10,563

1.8

Procter & Gamble

Household product manufacturer

 

10,511

1.8

Partners Group

Asset management

 

10,319

1.8

Fastenal

Distribution and sales of industrial supplies

 

9,942

1.7

Sonic Healthcare

Laboratory testing

 

9,475

1.6

Anta Sports Products

Sportswear manufacturer and retailer

 

9,378

1.6

Hiscox

Property and casualty insurance

 

9,239

1.6

AVI 

Staple foods manufacturer

 

8,995

1.5

Admiral

Car insurance

 

8,625

1.5

Analog Devices

Integrated circuits

 

8,620

1.5

Cochlear

Hearing aids

 

8,357

1.4

Pepsico

Snack and beverage manufacturer

 

8,354

1.4

Microsoft

Computer software

 

8,289

1.4

McDonald's

Fast food restaurants

 

8,222

1.4

Edenred

Voucher programme outsourcer

 

8,150

1.4

Total

Integrated oil company

 

8,101

1.4

Taiwan Semiconductor Manufacturing

Semiconductor manufacturer

 

8,014

1.4

United Parcel Service

Courier services

 

7,868

1.4

Experian

Credit scoring and marketing services

 

7,614

1.3

Scottish & Southern Energy

Electricity utility

 

7,603

1.3

WPP

Advertising agency

 

7,547

1.3

Kering

Luxury brand conglomerate

 

7,441

1.3

Rio Tinto

Mining

 

7,321

1.3

British American Tobacco

Cigarette manufacturer

 

7,299

1.3

Atlas Copco

Engineering

 

7,241

1.2

China Mobile

Mobile telecommunication services

 

7,075

1.2

Nestlé

Food producer

 

6,940

1.2

National Instruments

Electronic test and measurement systems

 

6,885

1.2

Dia

Discount supermarkets

 

6,844

1.2

Apple

Computer technology

 

6,547

1.1

Kimberly-Clark de México

Paper-based household products

 

6,403

1.1

Bankinter

Corporate and retail bank

 

6,211

1.1

Pandora

Manufactures handmade jewellery

 

6,075

1.0

Alphabet Class A

Online search engine

 

5,984

1.0

United Overseas Bank

Commercial banking

 

5,980

1.0

Dolby Laboratories

Multimedia software

 

5,696

1.0

Sumitomo Mitsui Trust Holdings

Trust bank and investment manager

 

5,692

1.0

Brambles

Pallet pool operator

 

5,685

1.0

Continental

Tyres and automotive parts manufacturer

 

5,635

1.0

Sandvik

Engineering

 

5,632

1.0

Want Want

Snacks and milk-based products

 

5,548

1.0

SAP

Business software developer

 

5,496

0.9

Novo Nordisk

Pharmaceutical company

 

5,487

0.9

Wolters Kluwer

Information services and solutions provider

 

5,466

0.9

Svenska Handelsbanken

Banking

 

5,435

0.9

B3 S.A.

Securities exchange owner/operator

 

5,313

0.9

Hong Kong Exchanges and Clearing

Securities exchange owner/operator

 

5,299

0.9

MTN Group

South African wireless telecom company

 

5,286

0.9

Albemarle

Producer of speciality and fine chemicals

 

5,244

0.9

Man Wah

Sofa designer and manufacturer

 

5,182

0.9

Ambev

Brewing

 

5,157

0.9

Pearson

Educational publisher

 

5,065

0.9

Roche Holdings

Pharmaceuticals

 

4,806

0.8

Zenkoku Hosho

Speciality finance

 

4,782

0.8

Challenger

Investment management company

 

4,677

0.8

Greencoat UK Wind

UK wind farms

 

4,548

0.8

Aberforth Split Level Income Trust

UK small-cap equities fund

 

4,434

0.8

Arthur J Gallagher

Insurance broker

 

4,428

0.8

Apache

Oil exploration and production

 

4,157

0.7

Philips Lighting

Light manufacturing company

 

4,041

0.7

Doric Nimrod Air Two

Aircraft leasing

 

3,801

0.6

Li & Fung

Supply chain management services company

 

3,237

0.6

WPP Aunz

Advertising agency

 

2,562

0.4

Cambium Global Timberland

Forestry investment fund

 

1,146

0.2

Terra Catalyst Fund

Fund of European property funds

 

265

-

D Carnegie

Swedish housing developer

 

1

-

Total Equities

 

 

462,873

79.6

Direct Property

 

 

 

 

Direct Property

See table below

 

84,950

14.6

Bonds

 

 

 

 

Euro denominated

Aryzta Finance 4.5% 2019 Perpetual

 

4,731

0.8

US dollar denominated

Alibaba Convertible 5.75% 2019

6,963

 

 

 

Athena Debt Opportunities Fund

12,130

19,093

3.3

Argentinian peso denominated

Argentina 15.5% 17/10/2026

 

1,556

0.3

Brazilian real denominated

Brazil CPI Linked 15/05/2045

 

7,392

1.3

Total Bonds

 

 

32,772

5.7

Total Investments

 

 

580,595

99.9

Net Liquid Assets

 

 

771

0.1

Total Assets

 

 

 

 

(before deduction of debenture)

 

 

581,366

100.0

 

Property Portfolio

 

Location

Type

Tenant

 

2017

Value £'000

 

2017

%

 of total assets

 

2016

Value £'000

Basingstoke

Warehouse

G4S Cash Solutions (UK) Ltd

3,450

 

0.6

 

3,300

Beccles

Restaurant

Prezzo Limited

-

 

-

 

1,300

Biggleswade

Warehouse

Quest Automotive Products UK Limited

4,800

 

0.8

 

4,400

Bishop's Stortford

Restaurant

Prezzo Limited

1,250

 

0.2

 

1,500

Blandford Forum

Restaurant

Prezzo Limited

-

 

-

 

1,100

Cleethorpes

Public House

Stonegate Pub Company Limited

900

 

0.2

 

750

Crawley

Petrol Station and Convenience Store

Co-operative Food Stores Limited

3,750

 

0.6

 

3,600

Denbigh*

Supermarket

Aldi Stores Limited

Peacocks Stores Limited

Poundland Retail Limited

5,900

 

1.0

 

-

Dundee

Public House

JD Weatherspoon Plc

1,300

 

0.2

 

1,250

Earley

Public House

Spirit Pub Company (Managed) Limited

3,250

 

0.6

 

3,000

Inverness

Warehouse

Brake Brothers Limited

-

 

-

 

2,750

Kenilworth

Nursing Home

Care UK Community Partnerships Limited

7,200

 

1.2

 

6,800

Leicester

Car Showroom

Sytner Properties Limited

-

 

-

 

3,450

Luton

Public House

Stonegate Pub Company Limited

3,150

 

0.5

 

2,500

Milton Keynes*

Data Centre

TalkTalk Communications Limited

16,000

 

2.8

 

-

New Romney

Holiday Village

Park Resorts Ltd

11,500

 

2.0

 

10,000

Newport Pagnell

Car Showroom

Pendragon Plc

4,000

 

0.7

 

4,150

Otford

Public House

Spirit Pub Company (Managed) Limited

2,250

 

0.4

 

2,100

Pagham*

Convenience Store

Co-operative Food Stores Limited

1,300

 

0.2

 

-

Portsmouth

Public House

JD Weatherspoon Plc

2,600

 

0.5

 

2,500

Prestatyn

Public House

Stonegate Pub Company Limited

1,600

 

0.3

 

1,450

Redditch

Warehouse

Weston Body Hardware Ltd

-

 

-

 

1,500

Sale

Public House

Stonegate Pub Company Limited

750

 

0.1

 

650

Southend-on-Sea*

Warehouse

Giant Booker Limited

8,600

 

1.5

 

-

Torquay

Public House

Mitchells & Butlers Retail Limited

1,400

 

0.2

 

1,350

Winchester

Public House

Fuller Smith & Turner Plc

-

 

-

 

1,600

 

 

 

84,950

 

14.6

 

61,000

 

*       Property purchased during the year.

†      Property sold during the year.

 

 

 

 

 

 

Notes

 

1.    

The Financial Statements for the year to 31 December 2017 have been prepared in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland and on the basis of the accounting policies set out in the Annual Report and Financial Statements for the year ending 31 December 2017.

 

2.    

Income

2017

£'000

 2016

£'000

Income from investments

 

 

UK dividends

3,243

3,176

UK interest

-

157

Overseas dividends

10,648

10,316

Overseas interest

1,426

873

 

15,317

14,522

Other income

 

 

Deposit interest

10

64

Rental income

5,120

4,021

Other income

37

23

 

5,167

4,108

Total income

20,484

18,630

 

Total income comprises

 

 

Dividends from financial assets designated at fair value through profit or loss

13,891

13,492

Interest from financial assets designated at fair value through profit or loss

1,426

1,030

Interest from financial assets not at fair value through profit or loss

10

64

Other income not from financial assets

5,157

4,044

 

20,484

18,630

 

 

 

Notes

 

 

3.    

Net return per ordinary share

2017

2016

 

 

Revenue

Capital

Total

Revenue

Capital

Total

 

Net return per ordinary share

11.33p

42.24p

53.57p

10.46p

62.16p

72.62p

 

Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £15,213,000 (2016 - £13,939,000) and on 134,296,614 (2016 - 133,291,026) ordinary shares of 25p, being the weighted average number of ordinary shares in issue during the year.

Capital return per ordinary share is based on the net capital gain for the financial year of £56,735,000 (2016 - net capital gain of £82,859,000), and on 134,296,614 (2016 - 133,291,026) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

There are no dilutive or potentially dilutive shares in issue.

4.    

Ordinary Dividends

2017

2016

2017

£'000

2016

£'000

Amounts recognised as distributions in the year:

 

 

 

 

Previous year's final (paid 12 April 2017)

2.725p

2.70p

3,635

3,595

First interim (paid 23 June 2017)

2.725p

2.70p

3,644

3,598

Second interim (paid 22 September 2017)

2.75p

2.70p

3,694

3,602

Third interim (paid 18 December 2017)

2.80p

2.70p

3.805

3,602

 

11.00p

10.80p

14,778

14,397

 

We also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution out of current year profits by way of dividend for the year is £15,213,000 (2016 - £13,939,000).

 

 

2017

2016

2017

£'000

2016

£'000

Dividends paid and payable in respect of the year:

 

 

 

 

First interim (paid 23 June 2017)

2.725p

2.70p

3,644

3,598

Second interim (paid 22 September 2017)

2.75p

2.70p

3,694

3,602

Third interim (paid 18 December 2017)

2.80p

2.70p

3,805

3,602

Current year's proposed final dividend (payable 12 April 2018)

2.825p

2.725p

3,841

3,635

 

11.10p

10.825p

14,984

14,437

 

If approved the final dividend of 2.825p will be paid on 12 April 2018 to all shareholders on the register at the close of business on 9 March 2018. The ex-dividend date is 8 March 2018. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for the receipt of elections for reinvestment of this dividend is 20 March 2018.

5.    

The fair value of the 8% Debenture Stock 2022 at 31 December 2017 was £97.8m (2016 - £103.2m).

6.    

During the year, 2,580,000 (2016 - 235,000) shares were issued at a premium to net asset value raising proceeds of £9,258,000 (2016 - £656,000). At 31 December 2017 the Company had authority to buy back 19,996,051 ordinary shares and to allot 10,759,592 ordinary shares without application of pre-emption rights in accordance with the authorities granted at the AGM in April 2017. No shares were bought back during the year.

7.    

Transaction costs incurred on the purchase and sale of investments are added to the purchase cost or deducted from the sale proceeds, as appropriate. During the year, transaction costs on purchases amounted to £2,027,000 (2016 -£390,000) and transaction costs on sales amounted to £254,000 (2016 - £47,000).

8.    

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016. The financial information for 2016 is derived from the statutory accounts for 2016 which have been delivered to the Registrar of Companies. The auditor has reported on the 2016 accounts; the report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and (iii) did not contain a statement under sections 498 (2) or 498(3) of the Companies Act 2006. The statutory accounts for 2017 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

9.    

The Report and Accounts will be available on the SAINTS page of the Managers' website www.saints-it.com on or around 1 March 2018

10. 

Glossary of Terms

Total Assets

Total assets less current liabilities, before deduction of all borrowings.

Net Asset Value

Net Asset Value (NAV) is the value of total assets less liabilities (including borrowings). The NAV per share is calculated by dividing this amount by the number of ordinary shares in issue.

Net Asset Value (Debentures at Fair Value)

Borrowings are valued at an estimate of their market worth.

Net Asset Value (Debentures at Par Value)

Borrowings are valued at adjusted net issue proceeds.

 

 

31 December

2017

31 December

2016

Shareholders' funds (debenture at book value)

£497,938 

£431,510 

Add: book value of debenture

£83,428 

£84,112 

Less: fair value of debenture

(£97,832)

(£103,200)

Shareholders' funds (debenture at fair value)

£483,534 

£412,422 

Shares in issue at year end

135,975,943 

133,395,943 

Net Asset Value per ordinary share (debenture at fair value)

355.6p

309.2p

 

Discount/Premium

As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium.

Total Return

The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend.

Ongoing Charges

The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average net asset value (with debt at fair value). The ongoing charges have been calculated on the basis prescribed by the Association of Investment Companies. The percentage is lower than the ongoing charges stated in the Company's Key Information Document which has been calculated as prescribed by relevant regulation and are required to include the cost of borrowings.

 

Gearing

At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.

Gearing represents borrowings at book less cash and cash equivalents expressed as a percentage of shareholders' funds.

Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds.

Equity gearing is the Company's borrowings adjusted for cash, bonds and property expressed as a percentage of shareholders' funds.

Leverage

For the purposes of the Alternative Investment Fund Managers (AIFM) Directive, leverage is any method which increases the Company's exposure, including the borrowing of cash and the use of derivatives. It is expressed as ratio between the Company's exposure and its net asset value and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company's positions after the deduction of sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and after certain hedging and netting positions are offset against each other.

Active Share

Active share, a measure of how actively a portfolio is managed, is the percentage of the listed equity portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index.

                   

 

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.

 

Automatic Exchange of Information

 

In order to fulfil its legal obligations under UK tax legislation relating to the automatic exchange of information, The Scottish American Investment Company P.L.C. is required to collect and report certain information about certain shareholders.

The legislation requires investment trust companies to provide personal information to HMRC on certain investors who purchase shares in investment trusts. Accordingly, The Scottish American Investment Company P.L.C. will have to provide information annually to the local tax authority on the tax residencies of a number of non-UK based certificated shareholders and corporate entities.

All new shareholders, excluding those whose shares are held in CREST, who come on to the share register with effect from 1 January 2016 will be sent a certification form for the purposes of collecting this information.

For further information, please see HMRC's Quick Guide: Automatic Exchange of Information - information for account holders https://www.gov.uk/government/publications/exchange-of-information-account-holders

 

Regulated Information Classification: Additional regulated information required to be disclosed under the laws of a Member State of the European Union.

 

‡    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.

 

 

 

- ends -


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Annual Financial Report - RNS