Half Yearly Report

RNS Number : 3389H

F&C Capital & Income Inv Tst PLC

26 May 2011

 



Date:                26 May 2011

Contact:           Julian Cane                                                   

                        F&C Management Limited                              

                        020 7628 8000                                               

F&C Capital and Income Investment Trust PLC

Unaudited Statement of Results

for the half-year ended 31 March 2011

HIGHLIGHTS

·      Net asset value per share increased by 5.4% to 219.07p during the half-year ended 31 March 2011.

·      215,000 shares issued during the six month period.

·      Strong increase in revenue return per share (+10.6%).

·      Interim dividends totalling 4.00 pence per share (+2.6%) and fully covered by earnings.

SUMMARY OF UNAUDITED RESULTS

Attributable to equity shareholders	31 March 2011	30 September 2010	% Change
Net assets	£187.44m	£177.43m	+5.6
Net asset value per ordinary share	219.07p	207.90p	+5.4
Share price	225.00p	214.25p	+5.0
	Half-year ended 31 March 2011	Half-year ended 31 March 2010	% Change
Revenue return per ordinary share	4.06p	3.67p	+10.6
Dividends per ordinary share
First interim dividend in respect of year to 30 September 2011	* 2.00p	-
30 September 2010	-	1.95p
Second interim dividend in respect of year to 30 September 2011	** 2.00p	-
30 September 2010	-	1.95p
Total interim dividends relating to the period	4.00p	3.90p	+2.6

*   Paid on 31 March 2011.

** Payable on 30 June 2011 to shareholders registered on 10 June 2011.

The Chairman, commenting on the results, said:

Your Company's income generation has been strong, allowing us to pay two fully covered dividends each of 2.0 pence per share for the first six months of our financial year, an increase of 2.6% on the same period last year. Although economic recovery in the UK has been very hesitant  the UK stock market has made further progress with the FTSE All-Share ("the Index") rising by 7.0%.  Putting BP to one side, dividends from the rest of the market have increased and this, together with corporate earnings recovery, has helped to sustain the rally in equities.  The rise in our own net asset value ("NAV") per share (5.4%) and in our share price (5.0%) did not fully capture the strength of the market as once again higher yielding shares, which we continue to favour in our portfolio strategy, performed less well than lower yielding shares. We explained this strategy in more detail in our Annual Report for 2010, pages 5 and 6.

Capital performance

Although the UK economy is officially out of recession, the domestic environment remains extremely difficult.  The economy in Q4 of 2010 was hampered by severe weather, which contributed to a fall of 0.5% in GDP.  This was exactly matched by a rise in Q1 of 2011, but the net result over six months is that the economy has seen no growth.  This is despite the enormous monetary and fiscal stimuli to the economy in the form of low official interest rates at 0.5% and public sector net borrowing of £141bn for 2010/11, which takes public sector net debt to just under 60% of GDP.  Although the domestic economy was more or less marking time, most companies have done better as they were able to expand margins following previous cost control measures and benefit from improving international growth rates.

The strongest driver of our investment portfolio returns relative to the Index was ironically the absence of a holding in Lloyds Bank, which performed poorly.  The stocks with the largest negative impact were Caithness Petroleum, an unlisted oil exploration company whose value we reduced to reflect greater uncertainty in Morocco, where its largest asset lies, and BHP Billiton and Anglo American, which are not held in the portfolio.  The two mining companies have yields well below the Index and performed very strongly on the back of firm commodities prices.

Revenue and dividend

During and after the credit crisis the profitability and finances of many companies were under pressure, sometimes resulting in dividend cuts, but more recently we have started to see reasonable rates of dividend increase.  The prime example of this of course is BP, which suspended all dividends at the start of the Gulf of Mexico disaster and has restarted them this year, albeit at half the previous rate.  Overall, the more positive background is also reflected in our own portfolio where dividends received in total increased by 5.6% over the same period last year.  In addition to this we have generated £0.2m by writing options.  This is a new strategy that has so far proved to be profitable.  

The positioning of the portfolio has enabled us to increase dividends paid to shareholders consistently year on year.  Over the last five years dividends from both the Index and your Company initially grew strongly.  However, dividends from the Index subsequently fell sharply as a result of the credit crisis, recession and more recently BP.  It is pleasing to note that throughout this difficult period of generally falling dividends we have increased our payout to shareholders.

The first interim dividend of 2.0 pence per share in respect of the year to 30 September 2011 has already been declared and was paid on 31 March 2011.  The Board has declared a second interim dividend, also of 2.0 pence per share which will be payable on 30 June 2011.

Gearing

Throughout the half-year your Company borrowed up to £15m for investment and to generate higher returns.  The cost of borrowing at around 2.5% annualised was well below the returns achieved on the portfolio, so the use of gearing during the period proved to be a successful strategy.

During this period, the facility with Lloyds Banking Group expired and it was replaced with a similar one from Scotia Bank.  The change was achieved smoothly; the loan limit is unchanged at £20m, and the overall terms are now more attractive.

Share price premium/discount to NAV per share

Over the six months under review, your Company's shares continued to trade at a small premium to their NAV.  On average over the period, the shares traded at a premium of 1.8%, with the largest discount being 0.7% and largest premium being 4.7%.  As the shares never traded at a substantial discount to NAV, no share buy-backs were made during the period, but 215,000 shares were issued at a small premium to NAV which ensured that investors buying shares did not pay too high a price relative to NAV.

New Director

I am delighted to report the appointment of Steve Bates to the Board after a rigorous selection process facilitated by external recruitment consultants.  He joined on 3 May as a non-executive director and will succeed me as Chairman when I retire immediately following the Company's annual general meeting early in 2012.  I am sure Steve will be a great asset to your Company and he brings with him wide and deep experience of investment management and senior board appointments.

Outlook

The outlook for the UK economy still appears relatively weak with official growth forecasts tending to be lowered as the government and individuals seek to reduce their indebtedness to more sustainable levels. Much will depend on how the impact of the crisis affects levels of personal expenditure and encourages saving rather than consumption. In general international prospects and the outlook for companies appear rather brighter although our traditional export markets are typically mature with lower growth expectations than the global average.  Furthermore, domestic interest rates look almost certain to rise in the coming months, in response to worrying levels of inflation.  Notwithstanding these uncertainties and, perhaps paradoxically, companies in general have strong finances and are currently expected to produce earnings and dividend growth in double digits for the rest of 2011 and 2012.

Equities have risen more than 50% from their low point in 2009. Given the earnings growth that has already been experienced since then and the earnings growth that is forecast still to come, the valuation of equities does not look historically too demanding, and looks attractive compared to bonds or cash.  Given the strategy for our portfolio, the outlook for our own dividend remains positive.

Pen Kent                                                                     

26 May 2011

Directors' Statement of Principal Risks and Uncertainties

The Company's assets consist mainly of listed securities and its principal risks are therefore market related. The Company invests in overseas companies and so is exposed to currency risk in respect of these investments. Other key risks faced by the Company relate to investment strategy, investment management resources, regulatory issues, operational and financial controls and counterparty (including the custodian) failure. These risks, and the way in which they are managed, are described in more detail under the heading "Principal risks and their management" within the Directors' Report and Business Review contained within the Company's annual report for the year ended 30 September 2010. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.

Directors' Statement of Responsibilities in Respect of the Financial Statements

In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm, in respect of the report and accounts for the half-year ended 31 March 2011 of which this statement is an extract, that to the best of their knowledge:

·              the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards and gives a true and fair view of the assets, liabilities, financial position and return of the Company;

·              the half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·              the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

·              the half-yearly report includes details on related party transactions.

On behalf of the Board

Pen Kent

Chairman

26 May 2011

Unaudited Condensed Income Statement

Half-year ended 31 March 2011

Half-year ended 31 March 2010

Note		Revenue	Capital	Total	Revenue	Capital	Total
		£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
	Gains on investments	-	10,256	10,256	-	12,224	12,224
	Foreign exchange (losses)/gains	-	(1)	(1)	-	2	2
	Income	4,218	-	4,218	3,783	-	3,783
	Management fee	(202)	(202)	(404)	(179)	(179)	(358)
	Other expenses	(390)	(5)	(395)	(431)	(29)	(460)
	Net return before finance costs and taxation	3,626	10,048	13,674	3,173	12,018	15,191
	Finance costs	(98)	(98)	(196)	(86)	(86)	(172)
	Net return on ordinary activities  before taxation	3,528	9,950	13,478	3,087	11,932	15,019
	Taxation on ordinary activities	(21)	-	(21)	(8)	-	(8)
	Net return attributable to shareholders	3,507	9,950	13,457	3,079	11,932	15,011
2	Return per share - pence	4.06	11.64	15.70	3.67	14.23	17.90

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

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

            A statement of total recognised gains and losses is not required as all gains and losses of the Company have been reflected in the above

            statement.

Unaudited Condensed Reconciliation of Movements in Shareholders' Funds

		Share	Capital				Total
	Share	premium	redemption	Special	Capital	Revenue	shareholders'
	capital	account	reserve	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Half-year ended 31 March 2011
Balance at 30 September 2010	21,336	87,452	4,146	4,434	54,572	5,487	177,427
Movements during the half-year ended 31 March 2011
Dividends paid	-	-	-	-	-	(3,931)	(3,931)
Ordinary shares issued	54	428	-	-	-	-	482
Return attributable to shareholders	-	-	-	-	9,950	3,507	13,457
Balance at 31 March 2011	21,390	87,880	4,146	4,434	64,522	5,063	187,435
Half-year ended 31 March 2010
Balance at 30 September 2009	20,911	84,399	4,146	4,434	46,992	5,802	166,684
Movements during the half-year ended 31 March 2010
Dividends paid	-	-	-	-	-	(3,772)	(3,772)
Ordinary shares issued	144	1,049	-	-	-	-	1,193
Return attributable to shareholders	-	-	-	-	11,932	3,079	15,011
Balance at 31 March 2010	21,055	85,448	4,146	4,434	58,924	5,109	179,116
Year ended 30 September 2010
Balance at 30 September 2009	20,911	84,399	4,146	4,434	46,992	5,802	166,684
Movements during the year ended 30 September 2010
Dividends paid	-	-	-	-	-	(7,070)	(7,070)
Ordinary shares issued	425	3,053	-	-	-	-	3,478
Return attributable to shareholders	-	-	-	-	7,580	6,755	14,335
Balance at 30 September 2010	21,336	87,452	4,146	4,434	54,572	5,487	177,427

Unaudited Condensed Balance Sheet

	31 March 2011	31 March 2010	30 September 2010
	£'000s	£'000s	£'000s
Fixed assets
Investments	203,543	191,351	188,905
Current assets
Debtors	1,014	1,634	1,417
Cash at bank and short-term deposits	304	657	2,209
	1,318	2,291	3,626
Current liabilities
Short-term loans	(15,000)	(14,000)	(14,000)
Derivative financial instruments	(174)	-	-
Other creditors	(2,252)	(526)	(1,104)
	(17,426)	(14,526)	(15,104)
Net current liabilities	(16,108)	(12,235)	(11,478)
Net assets	187,435	179,116	177,427
Capital and reserves
Share capital	21,390	21,055	21,336
Share premium account	87,880	85,448	87,452
Capital redemption reserve	4,146	4,146	4,146
Special reserve	4,434	4,434	4,434
Capital reserves	64,522	58,924	54,572
Revenue reserve	5,063	5,109	5,487
Total shareholders' funds	187,435	179,116	177,427
Net asset value per ordinary share - pence	219.07	212.68	207.90

Unaudited Condensed Summary Cash Flow Statement

	Half-year ended	Half-year ended
	31 March 2011	31 March 2010
	£'000s	£'000s
Net cash inflow from operating activities	3,066	2,471
Interest paid	(241)	(164)
Equity dividends paid	(3,931)	(3,772)
Net cash outflow from purchases and sales of investments	(3,716)	(1,965)
Net cash outflow before use of liquid resources and financing	(4,822)	(3,430)
Decrease in short-term deposits	1,904	1,365
Net cash inflow from financing	2,229	1,619
Decrease in cash	(689)	(446)
Reconciliation of net cash flow to movement in net debt
Decrease in cash	(689)	(446)
Decrease in short-term deposits	(1,904)	(1,365)
Increase in short-term loans	(1,000)	-
Exchange movement	(1)	2
Movement in net debt	(3,594)	(1,809)
Net debt at the beginning of the period	(11,854)	(11,534)
Net debt at the end of the period	(15,448)	(13,343)
Represented by:
Cash at bank	-	40
Short-term deposits	304	617
Bank overdraft	(752)	-
	(448)	657
Short-term loans	(15,000)	(14,000)
	(15,448)	(13,343)

Notes

1    Accounting policies

These financial statements have been prepared on the basis of the accounting policies set out in the Company's financial statements at 30 September 2010.  These accounting policies are expected to be followed throughout the year ending 30 September 2011.

2    Return per ordinary share

Return per ordinary share attributable to ordinary shareholders reflects the overall performance of the Company in the period.  Net revenue recognised in the first six months is not indicative of the total likely to be received in the full accounting year.

	Half-year ended 31 March 2011 £'000s	Half-year ended 31 March 2010 £'000s	Year ended 30 September 2010 £'000s
Revenue return	3,507	3,079	6,755
Capital return	9,950	11,932	7,580
Total return	13,457	15,011	14,335
	Number	Number	Number
Weighted average ordinary shares in issue	85,451,174	83,866,278	84,177,419

3    Dividend

The second interim dividend in respect of the year ending 30 September 2011 of 2.00 pence per share will be paid on 30 June 2011 to shareholders registered on 10 June 2011. The total cost of this dividend, based on 85,559,268 shares in issue and entitled to dividend on 24 May 2011, is £1,711,000.

4    Results

The results for the half-year ended 31 March 2011 and 31 March 2010, which are unaudited, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 September 2010; the report of the independent auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 September 2010 are an extract from those accounts.

5    Half-yearly report and accounts

The half-yearly report and accounts will be posted to shareholders and made available on the internet at www.fandccit.com shortly.  Copies may be obtained during normal business hours from the Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY.

By order of the Board

F&C Management Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

26 May 2011

 

END

 

 

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