Half Yearly Report

RNS Number : 1575S

Investment Company PLC

16 November 2011

 



FOUNDED 1868 REGISTERED No. 4205 ENGLAND AND WALES

THE INVESTMENT COMPANY PLC UNAUDITED INTERIM REPORT For the six month period ended 30 September 2011

Chairman's Statement

Shareholders will probably not be surprised in view of the turmoil in world stock markets over the last few months to discover that the asset value per ordinary share of The Investment Company plc has fallen but they may be dismayed by the extent of the fall.  They would be justified in view of the fact that we hold by and large more stable investments than the average investment company which tends to hold more volatile ordinary shares than the prior charges where we invest.  Frankly we have been surprised at the volatility of some of these investments ourselves.  For example the 9% preference shares of National Westminster Bank fell by 14.7%. 

One might expect the Enhanced Capital Notes of the Lloyds Banking Group to respond to movements in the ordinary shares of that institution but to see four of the issues which we hold fall by over 20% and one by 22.5% in the three months since the end of June when we last reported our Net Asset Value (NAV) at 311.02p is surely remarkable. 

Bargain hunters in the Lloyds ECNs have already raised the price of most of them by 10% or so which is reflected in the NAV of our ordinary shares at 31st October which was 268.10p compared with the 249.59p calculated at 30 September.  The decline in capital value at 30 September was 68.65p from the 318.24p per the accounts at 31 March this year, a fall of 21.6%.  7.22p of this fall had occurred in the first three months to 30 June and a further 4p is accounted for by the payment of the final dividend paid on 22 July giving a decline of 57.44p per share in the last three months.  In one month, since the increase per share was 18.67p; volatility almost unheard of!

As shareholders will be aware the NAV of our ordinary shares is highly geared.  This accounted for the rapidity of the fall in asset value in 2007 and 2008 with the result that our NAV per share at 31 March 2009 was no more than 79.98p.  Not only did we maintain our gearing but we increased it and in the recovery generally in stock markets we enjoyed a very sharp recovery; in the following year to March 2010 when the NAV rose to 265.45p and further in the year to 31 March 2011 when the NAV peaked at 318.24p.  Towards the end of this period your Board had de-geared the company quite significantly. 

Your Board has Resolved to declare an interim ordinary dividend of 2p which will be paid on 6 January 2012 to ordinary shareholders registered on 2 December 2011.  The ordinary shares will be quoted ex dividend on 30 November 2011.  The half year basic preference dividend of 3.5p will be paid on 1 April 2012. 

The amount of the participation dividend, payable to the preference shareholders on 1st October was increased from 0.75p in 2010 to 1.0p in October 2011 as a result of the increase in the ordinary dividend total for the year to 31 March 2011 of 6.0p (5.0p in the previous year).  The amount payable in addition to the usual half year basic payment of 3.5p on 1 October 2012 will not be known until the total ordinary dividend for the current year is determined. 

Your Board continues to have serious reservations about the Accounting Standards that classify preference shares as creditors and sometimes result in preference shares in issue and forming part of the Issued Capital of a company not to be included in the note setting out Authorised Share Capital in public listed companies.  In May this year I drew particular attention to the absence of any mention of the £150,000 7.5% preference shares being part of the Issued Share Capital of Bioquell plc, an issue of which we held no less than 74.4%. 

On 27 June 2011 the directors of Bioquell informed us that they intended to repay these preference shares in accordance with the Articles of Association at a premium to par of 12.5p per share together with all dividends accrued to the date of repayment.  If we knew whom to ask we would ask the Quango (as no doubt it is) that approves International Accounting Standards whether in their experience other "creditors" are ever paid off at a premium? 

Shareholders will appreciate that circumstances are changing with such volatility at present with the markets generally sharply up and down depending on the latest news that anything written about prospects is fraught with uncertainty.

Sir David Thomson Bt. Chairman 16 November 2011

Registered office: 3rd Floor, Salisbury House London Wall London EC2M 5QS

Consolidated Statement of Comprehensive Income

For six months ended 30 September 2011

	Notes	6 months to 30 September 2011 (unaudited)			6 months to 30 September 2010 (unaudited)			Year to 31 March 2011 (audited)
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
		£	£	£	£	£	£	£	£	£
Total income		624,652	-	624,652	625,798	-	625,798	1,063,628	-	1,063,628
Administrative expenses		(180,391)	-	(180,391)	(185,426)	-	(185,426)	(370,069)	-	(370,069)
Loan note interest		(36,670)	-	(36,670)	(45,713)	-	(45,713)	(90,047)	-	(90,047)
Other finance costs		(174,818)	-	(174,818)	(174,818)	-	(174,818)	(349,636)	-	(349,636)
Other interest payable		(502)	-	(502)	(16,655)	-	(16,655)	(23,024)	-	(23,024)
Realised gains on investments		-	19,958	19,958	-	421,648	421,648	-	1,202,663	1,202,663
Movement in impairment provisions		-	(574,794)	(574,794)	-	(257,771)	(257,771)	-	(119,597)	(119,597)
Net return before taxation		232,271	(554,836)	(322,565)	203,186	163,877	367,063	230,852	1,083,066	1,313,918
Taxation		-	-	-	-	-	-	-	-	-
Net return after taxation		232,271	(554,836)	(322,565)	203,186	163,877	367,063	230,852	1,083,066	1,313,918
Other comprehensive income/expense
Movement in unrealised appreciation of investments:
Recognised in equity		-	(883,436)	(883,436)	-	712,573	712,573	-	284,080	284,080
Recognised in profit or loss		-	(1,297)	(1,297)	-	(400,613)	(400,613)	-	(481,215)	(481,215)
Total comprehensive income for the period attributable to equity shareholders		232,271	(1,439,569)	(1,207,298)	203,186	475,837	679,023	230,852	885,931	1,116,783
Return per 50p Ordinary Share
From net return after taxation		12.44p	(29.71)p	(17.27)p	10.88p	8.78p	19.66p	10.36p	58.00p	68.36p
From movement in unrealised appreciation of investments:		-	(47.38)p	(47.38)p	-	16.71p	16.71p	-	(10.57)p	(10.57)p
Total: Basic and diluted	5	12.44p	(77.09)p	(64.65)p	10.88p	25.49p	36.37p	10.36p	47.43p	57.79p
Net asset value per 50p Ordinary Share				249.59p			298.81p			318.24p
All the Company's operations are continuing.

Consolidated Statement of Changes in Equity

For six months ended 30 September 2011

		Issued Capital	Share Premium	Own Shares Held	Capital Redemption Reserve	Revaluation Reserve	Capital Reserve	Revenue Account	Total
		£	£	£	£	£	£	£	£
Balance at 1 April 2011		1,808,728	1,019,246	(2,919,861)	685,250	2,452,571	5,050,228	344,102	8,440,264
Buy in of own shares		-	-	-	-	-	-	-	-
Movement in unrealised appreciation of investments
- recognised in equity		-	-	-	-	(883,436)	-	-	(883,436)
- recognised in profit or loss		-	-	-	-	(1,297)	-	-	(1,297)
Net increase in net assets from operations		-	-	-	-	-	(554,836)	232,271	(322,565)
Ordinary dividends paid		-	-	-	-	-	-	(74,696)	(74,696)
Participating element of preference dividends paid		-	-	-	-	-	-	-	-
Balance at 30 September 2011		1,808,728	1,019,246	(2,919,861)	685,250	1,567,838	4,495,392	501,677	7,158,270
Balance at 1 April 2010		1,808,728	1,019,246	(2,919,861)	685,250	2,649,706	3,967,162	244,081	7,454,312
Buy in of own shares		-	-	-	-	-	-	-	-
Movement in unrealised appreciation of investments
- recognised in equity		-	-	-	-	712,573	-	-	712,573
- recognised in profit or loss		-	-	-	-	(400,613)	-	-	(400,613)
Net increase in net assets from operations		-	-	-	-	-	163,877	203,186	367,063
Ordinary dividends paid		-	-	-	-	-	-	(56,022)	(56,022)
Participating element of preference dividends paid		-	-	-	-	-	-	-	-
Balance at 30 September 2010		1,808,728	1,019,246	(2,919,861)	685,250	2,961,666	4,131,039	391,245	8,077,313
Balance at 1 April 2010		1,808,728	1,019,246	(2,919,861)	685,250	2,649,706	3,967,162	244,081	7,454,312
Movement in unrealised appreciation of investments
- recognised in equity		-	-	-	-	284,080	-	-	284,080
- recognised in profit or loss		-	-	-	-	(481,215)	-	-	(481,215)
Net increase in net assets from operations		-	-	-	-	-	1,083,066	230,852	1,313,918
Ordinary dividends paid		-	-	-	-	-	-	(93,370)	(93,370)
Participating element of preference dividends paid		-	-	-	-	-	-	(37,461)	(37,461)
Balance at 31 March 2011		1,808,728	1,019,246	(2,919,861)	685,250	2,452,571	5,050,228	344,102	8,440,264

Consolidated Balance Sheet

At 30 September 2011

		30 September 2011 (Unaudited) £	30 September 2010 (Unaudited) £	31 March 2011 (Audited) £
Investments Investments at cost		12,873,237	13,155,330	12,168,673
Unrealised depreciation		(1,907,058)	(76,608)	(447,531)
Portfolio investments at market value		10,966,179	13,078,722	11,721,142
Current assets
Trade and other receivables		416,957	152,848	882,787
Investments		178,236	138,221	194,820
Cash and bank balances		297,927	519,281	198,416
		893,120	810,350	1,276,023
Current liabilities
Bank overdraft		400,000	1,150,000	-
Preference dividends payable		174,818	174,818	174,818
Trade and other payables		166,006	161,036	421,878
5% loan notes maturing 2011		365,700	365,700	365,700
		1,106,524	1,851,554	962,396
Net current (liabilities)/assets		(213,404)	(1,041,204)	313,627
Non-current liabilities
5% loan notes maturing 2011 / 2015		(1,097,102)	(1,462,802)	(1,097,102)
Participating preference shares		(2,497,403)	(2,497,403)	(2,497,403)
Net assets		7,158,270	8,077,313	8,440,264
Capital and reserves
Issued capital		1,808,728	1,808,728	1,808,728
Share premium		1,019,246	1,019,246	1,019,246
Own shares held		(2,919,861)	(2,919,861)	(2,919,861)
Capital redemption reserve		685,250	685,250	685,250
Revaluation reserve		1,567,838	2,961,666	2,452,571
Capital reserve		4,495,392	4,131,039	5,050,228
Revenue reserves		501,677	391,245	344,102
Shareholders' funds		7,158,270	8,077,313	8,440,264
Net Asset Value per 50p Ordinary share		249.59p	298.81p	318.24p

Company Number:  4205

Consolidated Cash Flow Statement

For the six months ended 30 September 2011

	Notes	6 months to 30 September 2011 (unaudited)	6 months to 30 September 2010 (unaudited)	Year to 31 March 2011 (audited)
		£	£	£
Cash flows from operating activities
Cash received from investments		173,222	541,769	658,809
Interest received		230,395	70,761	395,944
Sundry income		-	-	11
Cash paid to and on behalf of employees		(76,072)	(71,647)	(145,982)
Other cash payments		(132,136)	(140,000)	(220,162)
Net cash inflow from operating activities		195,409	400,883	688,620
Cash flows from financing activities
Bank interest paid		(502)	(16,655)	(23,024)
Loan note interest paid		(36,670)	(45,713)	(90,047)
Loan notes redeemed		-	-	(365,700)
Fixed element of dividends paid on preference shares		(174,818)	(174,818)	(349,636)
Participating element of dividends paid on preference shares		-	-	(37,461)
Dividends paid on ordinary shares		(73,080)	(55,379)	(91,765)
Net cash outflow from financing activities		(285,070)	(292,565)	(957,633)
Cash flows from investing activities
Purchase of investments		(1,118,038)	(837,200)	(1,874,046)
Sale of investments		907,210	1,193,880	3,437,192
Net cash (outflow)/inflow from investing activities		(210,828)	356,680	1,563,146
Net (decrease)/increase in cash and cash equivalents	7	(300,489)	464,998	1,294,133

Notes to the Interim Report

1           Financial information

The Investment Company plc is a limited company incorporated in Great Britain and registered in England and Wales, company number 4205. The address of its registered office and principal place of business is 3rd Floor, Salisbury House, London Wall, London EC2M 5QS.

The financial information contained in this half year financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 30 September 2011 and 30 September 2010 has been neither audited nor reviewed by the auditors.

The figures and financial information for the year ended 31 March 2011 are extracted from the latest published audited financial statements of the Company and do not constitute the statutory accounts for that year. The audited financial statements for the year ended 31 March 2011 have been filed with the Registrar of Companies. The report of the independent auditors on those accounts contained no qualification or statement under section 498(2) or section 498(3) of the Companies Act 2006.

Except as described below, the Group has applied consistent accounting policies in preparing the interim financial statements for the six months ended 30 September 2011, the comparative information for the six months ended 30 September 2010, and the financial statements for the period ended 31 March 2011.

The Group applies revised IAS 1 Presentation of Financial Statements, as a result of which the Company presents in the statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the statement of comprehensive income. This standard is concerned with presentation only and does not have any impact on the results or net assets of the Company.

2           Accounting policies

These financial statements have been prepared in accordance with International Accounting Standards (IAS) issued by the International Accounting Standards Board (IASB) as adopted by the EU and in accordance with the Interpretations of International Accounting Standards issued by the Standing Interpretations Committee of the IASB.

These financial statements have been prepared under the historical cost convention, except for Portfolio Investments which are stated at market value.

3           Directors' Responsibility Statement

The Directors confirm that, to the best of their knowledge:

(a) these condensed financial statements have been prepared in accordance with IAS 34;

(b) the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (an indication of important events that have occurred during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

(c) the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

4           Dividends payable

		6 months to 30 September 2011 (unaudited)	6 months to 30 September 2010 (unaudited)	Year to 31 March 2011 (audited)
		£	£	£
Participating preference shares
Participating preference element		-	-	37,461
Ordinary shares
Prior year final		74,696	56,022	56,022
Current year interim		-	-	37,348
Total dividends		74,696	56,022	130,831

5           Return per ordinary share

	6 months to 30 September 2011 (unaudited)		6 months to 30 September 2010 (unaudited)		Year to 31 March 2011 (audited)
Ordinary shares	1,867,391		1,867,391		1,867,391
	£	Per Share Pence	£	Per Share Pence	£	Per Share Pence
Revenue
Net return after taxation	232,271	12.44	203,186	10.88	230,852	12.37
Participating dividend	-	-	-	-	(37,461)	(2.01)
Capital
Net investment (losses)/gains after taxation	(554,836)	(29.71)	163,877	8.78	1,083,066	58.00
Net (deficit)/return after taxation	(322,565)	(17.27)	367,063	19.66	1,276,457	68.36
Movement in unrealised appreciation of investments	(884,733)	(47.38)	311,960	16.71	(197,135)	(10.57)
Total	(1,207,298)	(64.65)	679,023	36.37	1,079,322	57.79

As the Company has no options or warrants in issue, basic and diluted loss per share are the same.

6           Preference shares

The participating preference shares entitle the holders, in priority to the payment of any dividend to the holders of all or any other shares in the capital of the company, to a fixed net cash cumulative dividend at the rate of 7p per share per annum. In addition, holders are entitled to a participating dividend at the rate of 25% of any dividends paid on the Ordinary Shares in excess of 2p per share for any year, subject to a maximum participating dividend in respect of any year of 3p net per share. On any return of capital holders are entitled to the payment of a premium of 50p per share.

7           Analysis of net debt

		At 30 September 2011 (unaudited)	Cash flow (unaudited)	At 1 April 2011 (audited)
		£	£	£
Cash and bank balances		297,927	99,511	198,416
Bank overdraft		(400,000)	(400,000)	-
5% loan notes maturing March 2011		(365,700)	-	(365,700)
5% loan notes maturing March 2012-15		(1,097,102)	-	(1,097,102)
		(1,564,875)	(300,489)	(1,264,386)
Participating preference shares		(2,497,403)	-	(2,497,403)
		(4,062,278)	(300,489)	(3,761,789)

8           Movement in Net Asset Value

	£	p	p
NAV at 1 April 2011			318.24
Revenue in period	232,271	12.44
Realised gains on investments	19,958	1.07
Movement in impairment provisions	(574,794)	(30.78)
	(554,836)	(29.71)
			(17.27)
Revaluation reserve at year-end	1,567,838
Revaluation reserve at start of year	2,452,571
Increase in the year in unrealised appreciation of investments above cost	(884,733)		(47.38)
Dividends paid to ordinary shareholders	(74,696)		(4.00)
NAV at 30 September 2011			249.59

IFRS requires diminution in value from the cost of an investment to be reflected through the Consolidated Income Statement. This does not reflect similarly any rise in value above the cost. However once provision for any diminution in value or unrealised loss (known as an Impairment Provision) has been put through the Income Statement, any subsequent recovery up to original cost does go through the Income Statement; but if the value of those investments continues to rise above cost, until that gain is realised it is confined to the Statement of Changes in Equity where it is shown in the Revaluation Reserve on the Balance Sheet.

9           Principal Risks and Uncertainties

The group's financial instruments comprise investments in fixed interest securities and prior charge investments, borrowings for investment purposes, cash balances and debtors and creditors that arise directly from its operations. Its principal risks are market price risk, interest rate risk and liquidity risk. These risks, and the way in which they are managed, are described in more detail within the Company's Annual Report and Accounts for the year ended 31 March 2011. The nature of the Company's principal risks and uncertainties has not changed materially since the date of that report.

10         Related Party Transactions

During the first six months of the current financial year, no new transactions with related parties have taken

Place. Details of related party transactions are contained in the Company's Annual Report for the year ended 31 March 2011.

 

END

 

 

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