Preliminary Announcement Of Half Yearly Results
For immediate release
17 May 2010
To: City Editors
Finsbury Growth & Income Trust PLC
Announces Interim Results for the six months to 31 March 2010
Financial Highlights:
(Unaudited) (Audited) % change
31 March 30 September
2010 2009
Share price 265.8p 231.0p +15.1
Net asset value per share (inc 281.9p 249.0p +13.2
income)
Net asset value per share (ex 277.5p 243.9p +13.8
income)
Discount of share price to net
asset value 4.2% 5.3% n/a
per share (ex income)
Shareholders' funds £143.3m £127.7m +12.2
Market capitalisation £135.1m £118.4m +14.1
Six months to One year to
31 March 30 September
2010 2009
Share price (total return)# +17.1% +22.9%
Net asset value per share (total +15.6% +24.0%
return)#
FTSE All-Share Index (total return) +12.2% +10.8%
# Source - Morningstar
Dividends Year ending Year ended
30 September 30 September
2010 2009
First interim dividend 4.4p per share 4.4p per share
Second interim dividend 4.4p per share* 5.1p per share
* Second interim dividend is expected to be 4.4p per share for the year ending
30 September 2010 and will be paid on 1 November 2010.
For and on behalf of
Frostrow Capital LLP, Secretary
17 May 2010
- ENDS -
The following are attached:
* Chairman's Statement
* Investment Manager's Review
* Income Statement
* Reconciliation of Movements in Shareholders' Funds
* Balance Sheet
* Cash Flow Statement
* Notes to the Interim Accounts
For further information please contact:
Alastair Smith/Mark Pope, Frostrow Capital LLP 020 3008 4911/4913
Jo Stonier, Quill Communications 020 7758 2236
Nick Train, Lindsell Train Limited 020 7227 8200
Chairman's Statement
Performance
I am pleased to report that for the six months under review the Company
continued its strong run of performance with a net asset value per share total
return of 15.6% and a share price total return of 17.1%. These results compare
favourably with the Company's benchmark, the FTSE All-Share Index, measured on
a total return basis, which provided a return of 12.2% during the same period.
Investment Policy
As I explained in my last statement, our investment manager, Lindsell Train
Limited, believes that it will be beneficial to shareholders to have the
ability to allocate up to 20% of the investment portfolio into quoted companies
worldwide. A resolution to amend the Company's investment policy was proposed
at the Annual General Meeting held in January of this year and I am delighted
to confirm that the change was approved by shareholders. The Company currently
has three investments listed outside the UK which account for approximately 12%
of the investment portfolio.
Share Capital and Discount Control
The Company has continued to be active in buying back shares for treasury where
they were offered at a discount greater than 5% to the net asset value per
share. A total of 2,270,862 shares were repurchased for treasury during the
half-year in accordance with the Company's stated policy and 1,855,000 shares
were reissued from treasury at a price representing a narrower discount to net
asset value per share than that at which they had been bought into treasury,
i.e. nearly 82 per cent of what was bought in. Following the half-year end a
further 186,399 shares have been repurchased to be held as treasury shares and
a total of 850,000 shares have been reissued out of treasury. As at the date of
this report, a total of 1,278,011 shares remain in treasury.
The Board attaches considerable importance to its discount control mechanism
which, as shareholders can see, we use actively and have done so consistently
over the last five years. The average month-end discount of share price to the
ex-income net asset value per share during the half year was 4.6%, comfortably
within the Company's target of 5% and we believe our ability to meet the
market's demand for liquidity in this way is very beneficial for all investors:
not just those wishing to sell, but those continuing to hold and those wishing
to buy.
Return and Dividend
The Company's income statement shows the following results for the period under
review, for the comparable period last year and for the Company's last full
financial year:
Six months Six months Year ended
ended 31 ended 31 30
March 2010 March 2009 September 2009
Revenue Capital Total Revenue Capital Total Revenue Capital Total
4.1p 33.7p 37.8p 3.0p (29.7)p (26.7)p 9.1p 34.0p 43.1p
I mentioned in my statement for the full year to 30 September 2009 that the
Company's income for the current financial year may fall when compared to
income received in prior years and that there may be insufficient income to
maintain the Company's historic rate of dividend. During the period your Board
reviewed the Company's expected income for the current financial year to 30
September 2010 and on 19 February 2010 announced a first interim dividend of
4.4p per share, unchanged from the corresponding first interim dividend for the
previous year. In addition, your Board decided that it would be helpful to
shareholders to receive greater clarity on the Company's dividends for the full
year to 30 September 2010 and so on the same date we announced that the second
interim dividend for the current year was expected to be 4.4p per share, making
a total expected dividend distribution for the full year to 30 September 2010
of 8.8p per share. This compares to 9.5p per share for 2009.
The Board estimates that this new level of distribution is sustainable, but
should the companies in our portfolio become more cautious when deciding their
own dividends, the Company would have to re-evaluate the level of dividend
payments we make to our shareholders, such re-evaluation to reflect the actual
level of income received together with the balance of revenue reserves retained
by the Company from previous years and available for distribution.
It is of course to the Board's sincere regret that the dividend for the full
year to 30 September 2010 will be lower than the prior year by some 7%. The
principal reason behind the fall in the Company's income this year is the
significant reduction in the level of income from our Lloyds preference shares.
I reiterate however that the lower level of dividend for the current financial
year does not alter the Board's long term objective of a progressive dividend
policy. In addition, it is worth highlighting that even at this revised level
of distribution the yield on the Company's shares is approximately 3.3% which
compares to the current FTSE All-Share yield of 3.1%.
The ex-dividend date for the second interim dividend will be 29 September 2010
with an associated record date of 1 October 2010 and payment date of 1 November
2010.
Borrowing Facility
Your Company has a fixed term committed secured revolving credit facility of £
15m which is subject to a variable rate of interest. As at 31 March 2010 a
total of £14.45m was drawn down under this facility. Subsequent to the period
end £3.75m was repaid with £10.70m being drawn down at the date of this report.
We believe that the availability of a meaningful gearing facility of this kind
is very desirable for a closed end investment company such as ours.
Alternative Investment Fund Manager (`AIFM') Directive
Our trade association, the Association of Investment Companies continues to
work towards ensuring that the AIFM Directive, the draft legislation being
considered in Europe which will regulate `alternative investment funds'
including investment trusts, is drafted to accommodate the UK investment
company structure, something the initial draft very definitely did not. The
Association appears to be making good progress with this and your Board will
continue to keep shareholders informed of major developments concerning the
Directive as they arise.
Outlook
Overall, 2009 was an exceptional year in terms of a recovery in the fortunes of
global stock markets, assisted by a range of stimulus measures from central
governments. The UK economy has now edged out of recession and current
estimates indicate modest growth in GDP during 2010 and 2011. The outlook for
inflation, which has increased somewhat in recent months, is for it to fall
back towards the Bank of England's target over the next year and interest
rates, at least in the short term, are expected to remain at their current low
levels. However, the government is going to have a very tough job on its hands
in getting our economy back into balance and there may be considerable shocks
still to come.
Your Board considers that the portfolio is well positioned to take advantage of
an economic upturn and remains strongly supportive of the Investment Manager's
strategy of investing for the long term in well run, cash generative
franchises. We believe that this strategy is the best one to deliver strong
investment returns to shareholders.
Anthony Townsend
Chairman
Investment Manager's Review
Of course we are pleased that your net asset value continued to make decent
absolute and relative progress over the period. Mind you, that pleasure is
vitiated by the knowledge that we and other UK investors will never again be
able to invest directly into Cadbury; that company succumbing to Kraft at a
fair, but not exceptional price.
Of interest, we think, is the fact that the portfolio performed competitively,
despite having little or no exposure to the cyclical commodity and "recovery"
sectors, which are current market favourites. We have found our returns
elsewhere, specifically the gains delivered by what we consider to be true
"growth" companies - those whose earnings have advanced despite the recession,
thus demonstrating secular, or non-cyclical growth. In particular Technology
and Media shares did well, led by Fidessa, Pearson and Sage. We hope these
companies and their peers are only at the beginning of a sustained period of
reward, based on superior business performance. In addition, we must
acknowledge and give thanks for the contribution to our return from A.G. Barr,
the largest holding in your Company now. The steady growth of its key brands -
IRN-BRU and Rubicon - has attracted new and deserved investor interest.
We also note that the two other major holdings in the portfolio - Diageo and
Unilever - had a relatively quiet last quarter. Combined this pair account for
22.3% of the Company's net assets as at 31 March 2010, so their performance
really matters! Thankfully, the business progress for both is satisfactory,
confirmed by their nicely increasing dividends. The reliability of their
profits and the opportunities both enjoy in the Emerging Markets mean that
these two are likely to generate wonderful returns for your Company over time,
we are sure.
At the Annual General Meeting earlier this year shareholders approved a
resolution to allow us, Lindsell Train Limited (LTL), to invest up to 20% of
your Company's portfolio outside the FTSE All-Share Index, its benchmark -
specifically to invest overseas. We are grateful for this permission and
believe you made the "right" decision. Nonetheless it was not a request we
tabled lightly and we are conscious of the risks that can attend any such
straying away from benchmark. At the very least, for instance, we would
sympathise with the righteous anger of any shareholder who discovered that his
"UK" investment had done poorly because of possible problems with the future
performance of non-UK securities.
Nonetheless, there are three reasons why we asked for the authority - all of
which are of broader interest, because they reveal something of the way the UK
stock market has changed in recent years.
First, we needed shareholders to approbate what was already a fait accompli;
because your Company already has investments in non-UK companies, though made
inadvertently. They came about like this. As cross-border takeovers have become
increasingly common - part of the trend toward "globalisation" - it has become
correspondingly common for UK investors to find themselves inheriting shares
issued by international companies to pay for UK acquisitions. Sometimes these
shares are attractive and it seems irrational to sell them simply because they
are not "British". For instance and most pertinent for the portfolio, the major
holding in Cadbury was about to turn into a mixture of cash and Kraft shares.
While Kraft is, in our opinion, not such a compelling investment as was
Cadbury, it is nevertheless a solid business, now with improved growth
prospects. Should we be required to sell Kraft, simply because it doesn't have
a listing on the London market? Well, thanks to the recent vote, now we don't
have to and can consider it on its merits.
By the way, we expect many more such dilemmas for investors - in other words
lots more takeovers - as regional companies around the world look to fashion
themselves into truly global enterprises.
Second, there is another way in which our request to invest more overseas
reflects a fait accompli. This is the extraordinary extent to which the FTSE
All-Share Index has already become an international Index, almost without
investors knowing. Consider the following. The top ten companies in the
All-Share currently amount to 44% of the value of the whole market. For these
ten the average proportion of their annual sales generated in the UK is 7%. Or
contrariwise, 93% of the business of 44% of the FTSE All-Share's constituents
takes place outside their home market. Indeed, we have seen it estimated that
65% of all the revenues of UK quoted companies arise overseas.
Now, the UK has always been an outward looking economy - and this is a very
good thing - but there is a further twist in this globalisation of the Index, a
twist relating to dividends. Today, 45% by value of all the dividends paid by
UK companies to UK investors are paid in US dollars, not in pounds sterling,
led by the big drug, mining and oil companies. This is perhaps the biggest
shift in the constitution of the UK stock market in my near 30 year career.
This really is a big deal, because it is a widely acknowledged rule that
mismatches between assets and liabilities are best avoided. If you have long
term sterling liabilities, it is prudent to hold sterling assets to pay for
them. Well, many UK investors - perhaps saving for their retirements in a "UK
Equity Income Fund" - are inadvertently, possibly unknowingly, exposed to such
a mismatch and taking a currency bet. Because the dividend flows they receive
from the UK's largest companies are not paid in the currency they will need to
actually pay their pensions.
I don't mean to be alarmist - quite possibly this bet will pay off - sterling
looks pretty good toast in comparison to most other currencies. But all of us
are being forced to consider what is really meant when we say we invest in UK
companies - and, frankly, it means less and less.
The final reason is one specific to LTL's investment approach. We are committed
investors in consumer brands and similar franchises - believing that investing
in great brands, like Burberry, makes sense for the long term. We note, with
some disquiet, that the UK stock market has never been as richly stocked with
world class branded goods companies as some others and that with the loss to
takeover in recent years of such companies as Allied Domecq, Scottish &
Newcastle and now Cadbury there are even fewer of them. For instance, the
consultancy Interbrand produces an annual survey of what, on its analysis, are
the 100 most valuable brands on the planet. The 2009 survey arrived at the
depressing conclusion that the UK is home to only four of these top 100 brands,
compared to 51 in the US or 11 in Germany. At a time when the London stock
market is increasingly dominated by more or less speculative mining and oil
exploration companies, whose profits depend on something as unpredictable as a
commodity price or striking it rich, we think investors should be loathe to
lose access to assets as predictable and durable as Crunchie or Halls cough
drops.
What's done is done, but we now, thankfully, have the ability to identify and
invest in Cadbury-type companies outside the UK, hoping to capture similar
benefits for your Company. In fact we have not yet made any such investments
(and when we do we will be sure to broadcast it widely in our regular
communications with you).
Whatever, we hope shareholders will see it as a logical response to the way
that the world and the world's stock markets are changing.
Nick Train, Lindsell Train Limited
Investment Manager
Income Statement
For the six months ended 31 March 2010
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31 March 2010 31 March 2009 30 September 2009
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses)
on investments
held at fair
value through - 17,609 17,609 - (14,571) (14,571) - 17,942 17,942
profit or loss
Exchange - (3) (3) - 2 2 - 2 2
difference
Income (note 2,570 - 2,570 1,959 - 1,959 5,401 - 5,401
2)
Investment
management and (140) (285) (425) (107) (217) (324) (226) (460) (686)
management
fees
(note 3)
Recovery of 11 23 34 - - - 50 101 151
VAT on
investment
management fee
previously
paid
Other expenses (278) (87) (365) (212) - (212) (410) - (410)
Return/(loss)
on ordinary
activities
before finance 2,163 17,257 19,420 1,640 (14,786) (13,146) 4,815 17,585 22,400
charges and
taxation
Finance (69) (140) (209) (123) (250) (373) (176) (359) (535)
charges
Return/(loss)
on ordinary
activities 2,094 17,117 19,211 1,517 (15,036) (13,519) 4,639 17,226 21,865
before
taxation
Taxation on
ordinary (35) - (35) - - - - - -
activities
Return/(loss)
on ordinary
activities 2,059 17,117 19,176 1,517 (15,036) (13,519) 4,639 17,226 21,865
after taxation
Return/(loss)
per share 4.1p 33.7p 37.8p 3.0p (29.7)p (26.7)p 9.1p 34.0p 43.1p
(note 4)
The "Total" column of this statement represents the Income Statement of the
Company. The "Revenue" and "Capital" columns are supplementary to this and are
prepared under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations. The Company
had no recognised gains or losses other than those declared in the Income
Statement.
Reconciliation of Movements in Shareholders' Funds
(Unaudited) Capital
Called Share Special redemption Capital Revenue
up premium reserve reserve reserve reserve Total
Six months ended 31 share account
March 2010 capital £'000 £'000 £'000 £'000 £'000 £'000
£'000
At 30 September 200 13,199 35,914 12,424 3,453 57,890 4,779 127,659
9
Netreturnfrom - - - - 17,117 2,059 19,176
ordinary activities
Second interim
dividend (5.1p per
share) for the year - - - - - (2,615) (2,615)
ended 30 September
2009
Repurchase of - - - - (5,435) - (5,435)
shares into
treasury
Sale of shares from - 420 - - 4,132 - 4,552
treasury
At 31 March 2010 13,199 36,334 12,424 3,453 73,704 4,223 143,337
(Unaudited)
Six months ended 31
March 2009
At 30 September 13,199 35,914 12,424 3,453 39,845 4,949 109,784
2008
Net (loss)/ return
from ordinary - - - - (15,036) 1,517 (13,519)
activities
Second interim
dividend (5.1p per
share) for the year - - - - - (2,598) (2,598)
ended 30 September
2008
Repurchase of - - - - (1,323) - (1,323)
shares into
treasury
Sale of shares from - - - - 87 - 87
treasury
At 31 March 2009 13,199 35,914 12,424 3,453 23,573 3,868 92,431
(Audited)
Year ended 30
September 2009
At 30 September 13,199 35,914 12,424 3,453 39,845 4,949 109,784
2008
Net return from - - - - 17,226 4,639 21,865
ordinary activities
Second interim
dividend (5.1p per
share) for the year - - - - - (2,598) (2,598)
ended 30 September
2008
First interim
dividend (4.4p per
share) for the year - - - - - (2,211) (2,211)
ended 30 September
2009
Repurchase of - - - - (1,856) - (1,856)
shares into
treasury
Sale of shares from - - - - 2,675 - 2,675
treasury
At 30 September 2009 13,199 35,914 12,424 3,453 57,890 4,779 127,659
Balance Sheet
As at 31 March 2010
(Unaudited) (Unaudited) (Audited)
31 March 2010 31 March 2009 30 September 2009
£'000 £'000 £'000
Fixedassets
Investments designated
at fair value through 147,826 104,898 138,799
profit or loss
Current assets
Debtors 2,529 623 1,022
Cash at bank 7,646 293 1,531
10,175 916 2,553
Current liabilities
Creditors (214) (383) (193)
Bank loan (14,450) (13,000) (13,500)
(14,664) (13,383) (13,693)
Net current liabilities (4,489) (12,467) (11,140)
Total net assets 143,337 92,431 127,659
Capital and reserves
Called-up share capital 13,199 13,199 13,199
Share premium account 36,334 35,914 35,914
Special reserve 12,424 12,424 12,424
Capital redemption 3,453 3,453 3,453
reserve
Capital reserve 73,704 23,573 57,890
Revenue reserve 4,223 3,868 4,779
Equity shareholders' 143,337 92,431 127,659
funds
Net asset value per
share 281.9p 183.9p 249.0p
(note 5)
Cash Flow Statement
For the six months ended 31 March 2010
(Unaudited) (Unaudited) (Audited)
31 March 2010 31 March 2009 30 September 2009
£'000 £'000 £'000
Net cash inflow from
operating activities (note 297 2,088 4,573
7)
Servicing of finance
Loan interest and
arrangement fees paid (192) (284) (487)
Taxation (21) - -
Financial investment
Purchase of investments (6,473) (3,035) (7,017)
Sale of investments 15,055 5,152 7,746
Net cash inflow from
financial investment 8,582 2,117 729
Equity dividends paid (2,615) (2,598) (4,809)
Net cash inflowbefore 6,051 1,323 6
financing
Financing
Repurchase of shares into (5,435) (1,323) (1,856)
treasury
Sale of shares from 4,552 87 2,675
treasury
Drawdown of loans 950 - 500
Net cash inflow/ (outflow) 67 (1,236) 1,319
from financing
Increase in cash 6,118 87 1,325
Reconciliation of net cash
flow to movement in net
debt
Increase in cash resulting
from cashflows 6,118 87 1,325
Increase in debt (950) - (500)
Exchange movements (3) 2 2
Movement in net debt 5,165 89 827
Net debt at start of period (11,969) (12,796) (12,796)
/year
Net debt at end of period/ (6,804) (12,707) (11,969)
year
Notes to the interim accounts
1. Basis of Preparation
The financial statements have been prepared under the historical cost
convention except for the measurement of investments which are valued at
fair value, and in accordance with applicable accounting standards, the
Statement of Recommended Practice `Financial Statements of Investment Trust
Companies' dated January 2009 and the Accounting Standard Board's Statement
Half Yearly Reports.
The same accounting policies used for the year ended 30 September 2009 have
been applied.
2. Income
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 30
31 March 2010 31 March 2009 September
2009
£'000 £'000 £'000
Franked investment income 2,293 1,884 5,326
Limited Liability Partnership 80 70 70
profit-share
Overseas dividends 184 - -
Money market dividend - 5 5
Interest from HMRC 13 - -
Total 2,570 1,959 5,401
3. Investment Management and Management Fees
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 30 September
31 March 2010 31 March 2009
2009
£'000 £'000 £'000
Investment management fee 277 205 437
Management fee 127 103 216
VAT thereon* 21 16 33
Total 425 324 686
* VAT on management fee.
4. Return/(loss) pershare
The total return per share is based on the total return attributable to
equity shareholders of £19,176,000 (six months ended 31 March 2009: loss of
£13,519,000; year ended 30 September 2009: return of £21,865,000) and on
50,760,106 shares (six months ended 31 March 2009: 52,709,699; year ended
30 September 2009: 50,737,975), being the weighted average number of shares
in issue.
The revenue return per share is calculated by dividing the net revenue
return of £2,059,000 (six months ended 31 March 2009: return of £1,517,000;
year ended 30 September 2009: return of £4,639,000) by the weighted average
number of shares in issue as above.
The capital return per share is calculated by dividing the net capital
return attributable to shareholders of £17,117,000 (six months ended 31
March 2009: loss of £15,036,000; year ended 30 September 2009: return of £
17,226,000) by the weighted average number of shares in issue as above.
5. Net asset value per share
The net asset value per share is based on net assets attributable to shares
of £143,337,000 (31 March 2009: £92,431,000 and 30 September 2009: £
127,659,000) and on 50,855,811 shares in issue (excluding treasury shares)
(31 March 2009: 50,254,173 and 30 September 2009: 51,271,673) (excluding
treasury shares)
6. Transaction costs
Purchase transaction costs for the six months ended 31 March 2010 were £
47,000 (six months ended 31 March 2009: £19,000; year ended 30 September
2009: £36,000).
Sales transaction costs for the six months ended 31 March 2010 were £9,000
(six months ended 31 March 2009: £9,000; year ended 30 September 2009: £
13,000).
7. Reconciliation of net totalreturn/(loss)before finance costs and taxation
to net cash inflow from operating activities
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended 31 ended 31 30 September
March 2010 March 2009 2009
£'000 £'000 £'000
Total return/(loss) before finance 19,420 (13,146) 22,400
charges and taxation
Capital return/(loss) before finance (17,260) 14,788 (17,583)
charges and taxation
Losses/(gains) on exchange movements 3 (2) (2)
Net revenue before finance costs and 2,163 1,640 4,815
taxation
Decrease in accrued income 572 541 271
Increase in other debtors (2,092) (5) (134)
Increase/(decrease) in creditors 3 129 (20)
Investment management, management and (262) (217) (359)
performance fees charged to capital
Other expenses charged to capital (87) - -
Net cash inflow from operating 297 2,088 4,573
activities
8. 2009Account
The figures and financial information for the year ended 30 September 2009
are extracted from the latest published accounts of the Company and do not
constitute statutory accounts for the year.
Those accounts have been delivered to the Registrar of Companies and
included the Report of the Auditors which was unqualified and did not
contain a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report, and did not contain a
statement under section 498 of the Companies Act 2006.
Frostrow Capital LLP
Company Secretary
17 May 2010
- ENDS -
Monday, 20th May 2024
COMPANIES COVERED:
Latest directors dealings
- 1 hour ago Aquila Energy Efficiency Trust (EUR)
- 2 hours ago Boohoo Group
- 2 hours ago Tritax Big Box Reit
- 2 hours ago Standard Chartered
- 3 hours ago Coca-Cola HBC AG (CDI)