Half-Year Results - Dec 2016

RNS Number : 2244Y

JPMorgan Mid Cap Invest Trust PLC

01 March 2017

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN MID CAP INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST DECEMBER 2016

Legal Entity Identifier: 549300QED7IGEP4UFN49

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

Performance

In my first statement as Chairman of your Company, I am very pleased to report that the Company's performance has rebounded through the first half of the current financial year, having been taken off course by the somewhat surprising result of the UK's Referendum of its membership of the European Union. In the six months to 31st December 2016, the total return on net assets was +14.7%, which compares favourably with the return from the Company's benchmark, the FTSE 250 Index, excluding investment trusts of +12.0%.

In spite of this improved performance, the Company's share price discount to net asset value had remained frustratingly wide at 8.0%, reflecting a fall in demand for UK focussed investment vehicles following the result of the Referendum.

A review of the Company's performance for the period and the outlook for the remainder of the year is provided in the Investment Managers' Report.

Revenue and Dividends

Net revenue after taxation for the six months to 31st December 2016 was £3.72 million (2015: £3.81 million) and earnings per share, calculated on the weighted average number of shares in issue, were 15.51p (2015: 15.89p). The Board has declared an interim dividend of 8.0p (2015: 8.0p) to be paid on 18th April 2017 to shareholders on the register at the close of business on 17th March 2017.

Loan Facilities and Gearing

The Board has determined that in normal circumstances the Company's overall gearing range is 5% net cash to 25% geared. Within this range, after due consideration at each Board meeting, the Board normally sets a narrower, short term gearing range for the ensuing period. Changes in these guidelines between meetings may be undertaken after consultation with the Board. The Company has retained its minimal gearing / net cash position since the decision taken by the investment managers to reduce gearing ahead of Brexit, ending the half year at 0.9% geared.

At the end of the reporting period, the Company had £8 million drawn out of loan facilities in place totalling £40 million.

Management of the Discount

During the period under review, the Company did not repurchase any shares. Subsequent to the period end, and in line with the Board's buyback policy, the Company has repurchased 152,000 shares, in an effort to reduce the discount volatility. The Board believes that repurchase authority remains an important tool in the management of discount volatility and powers were again sought and approved by shareholders at the Company's 2016 Annual General Meeting. The Company will only repurchase shares at a discount to their prevailing net asset value.

Board of Directors

Following many years of service to the Company, Andrew Barker retired as a Director and Chairman in October 2016. I was appointed Chairman and Richard Huntingford has succeeded me as Senior Independent Director. We were delighted to welcome Richard Gubbins to the Board with effect from 1st January 2017. Mr Gubbins is a senior corporate partner of Ashurst LLP, bringing both legal and corporate experience to the Board.

The Board and the Company benefited greatly from Andrew's dedication and guidance over the years and we wish him well.

Prospects

Despite the dire expectations for the economy post the UK referendum not being met during the first half of our financial year, the longer term consequences of this vote are still a source of great uncertainty for the UK economy and markets. However, the repositioning of our portfolio to take advantage of the sharp decline in sterling and to reduce exposure to domestic consumer stocks, which could be adversely affected by a squeeze on real incomes, is a good example of the advantages to be had from an actively managed portfolio.

Our managers are also aware of the risks associated with the later stages of an economic cycle and have continued to emphasise those stocks which can provide secular growth opportunities. It is reassuring that so many of these stocks currently reside within the FTSE 250 universe and this provides a degree of confidence at a time when expectations for overall investment returns are more subdued for the UK economy and markets.

We are therefore confident that the combination of a diversified and actively managed portfolio, with a reliable income stream, should deliver attractive long term returns for shareholders.

Michael Hughes

Chairman                                                                                                                                    1st March 2017

INVESTMENT MANAGERS' REPORT

Performance and Market Background

A lot can happen in six months. In the first half of your Company's financial year the following notable events took place: a new UK Prime Minister, a UK interest rate cut and £170 billion Bank of England stimulus, the rapid fall in sterling, the surprise victory of Donald Trump in the US Election, the rise in oil prices after the OPEC deal to cut output, and a US interest rate rise (to name but some of the recent events). Due in part to some of these events, and in part despite them, the FTSE 250 Index rebounded. Economic newsflow steadily improved over the six months, and it gradually became clear that the predictions of a swift, dramatic and on-going decline in both business and consumer confidence were wrong, or at least very premature.

Against this volatile background, the FTSE 250 (ex Investment Trusts) Index enjoyed a rebound in the second half of 2016 post the Brexit-induced fall in the first half, and returned +12%. (For reference, the benchmark return for the calendar year 2016 was 5.1%). It is pleasing to report that your Company outperformed its benchmark in the half year and provided a total return on net assets of +14.7%. The share price total return was just above this at +15.1%, as the discount of the share price relative to the net assets remained wide but stable.

Portfolio

In our last annual statement to the 12 months ended 30th June 2016, we outlined the repositioning of the portfolio that we undertook as a result of the Referendum. This continued in the first six months of this financial year. We further reduced our exposure to the UK consumer, selling out of positions such as Greggs, Rank, Marston's, Pendragon and Great Portland Estates. However, where we maintain high conviction, we continue to own consumer-related companies, such as JD Sports and Rightmove. New additions to the portfolio focussed on overseas earners and exporters, and included BBA Aviation, Renishaw and WS Atkins.

During the six months under review, three of our largest holdings, Ashtead, JD Sports and Micro Focus, all continued to deliver very strong performance, and were the most significant contributors to your Company's outperformance. By contrast, the key detractor from performance was our holding in CMC Markets, a spread-betting provider, which was knocked by regulation change. Since the period end we have fully exited this position.

Outlook

The outlook for 2017 is one of elevated uncertainty. In the UK, newsflow will be dominated by the Brexit negotiations, and we expect Article 50 to be triggered in March 2017. Outside the UK, focus will be on the European elections in France, Germany and the Netherlands, and on the emergence of Donald Trump's (actual) policy intentions in the US, rather than the rhetoric we heard during the US election campaign.

At the time of writing, global economic data is more positive than had been predicted, leading to upgraded expectations both for global growth, and also for growth forecasts in the UK economy. However, on the negative side we expect to see a significant increase in the rate of inflation in the UK, due to the rebound in commodity prices and the decline in sterling. This will lead to rising pressure on UK real household earnings, with an expected knock-on effect on consumer spending.

Therefore, as outlined in the portfolio section above, we have significantly de-emphasised our exposure to the UK consumer at this time and increased our position in companies which make a significant proportion of their profits overseas. The portfolio has been rebalanced to focus further on high quality secular growth companies, which can weather the volatility that this year is likely to bring. Valuations remain sensible, dividends continue to grow, and we will be surprised if we do not see the re-emergence of M&A in the FTSE 250, given that the decline in sterling has provided a significant incentive for overseas purchasers to buy UK assets.

Georgina Brittain

Katen Patel

Investment Managers                                                                                                                      1st March 2017

INTERIM MANAGEMENT REPORT

The Company is required to make the following disclosures in its half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company have not changed and fall into the following broad categories: investment and strategy; financial; accounting, legal and regulatory; corporate governance and shareholder relations and operational. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th June 2016.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the period.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operation existence for at least twelve months from the date of the approval of this half yearly financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i) the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st December 2016, as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; and

(ii)     the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure Guidance and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•   select suitable accounting policies and then apply them consistently;

•   make judgements and accounting estimates that are reasonable and prudent;

•   state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•   prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Michael Hughes

Chairman                                                                                                                                         1st March 2017

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2016

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st December 2016			31st December 2015			30th June 2016
	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
profit or loss	-	28,979	28,979	-	18,277	18,277	-	(23,857)	(23,857)
Net foreign currency gains/(losses)	-	11	11	-	(1)	(1)	-	(37)	(37)
Income from investments	4,247	-	4,247	4,379	-	4,379	8,283	-	8,283
Interest receivable and similar
income	61	-	61	11	-	11	62	-	62
Gross return/(loss)	4,308	28,990	33,298	4,390	18,276	22,666	8,345	(23,894)	(15,549)
Management fee	(232)	(542)	(774)	(249)	(582)	(831)	(493)	(1,151)	(1,644)
Other administrative expenses	(273)	-	(273)	(253)	-	(253)	(564)	-	(564)
Net return/(loss) on ordinary
activities before finance costs
and taxation	3,803	28,448	32,251	3,888	17,694	21,582	7,288	(25,045)	(17,757)
Finance costs	(34)	(80)	(114)	(61)	(143)	(204)	(109)	(253)	(362)
Net return/(loss) on ordinary
activities before taxation	3,769	28,368	32,137	3,827	17,551	21,378	7,179	(25,298)	(18,119)
Taxation	(46)	-	(46)	(14)	-	(14)	(112)	-	(112)
Net return/(loss) on ordinary
activities after taxation	3,723	28,368	32,091	3,813	17,551	21,364	7,067	(25,298)	(18,231)
Return/(loss) per share (note 4)	15.51p	118.22p	133.73p	15.89p	73.14p	89.03p	29.45p	(105.42)p	(75.97p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies.

The net return/(loss) on ordinary activities after taxation represents the profit/(loss) for the period and also the Total Comprehensive Income.

STATEMENT OF CHANGES IN EQUITY

	Called up	Capital
	share	redemption	Capital	Revenue
	capital	reserve	reserves	reserve1	Total
	£'000	£'000	£'000	£'000	£'000
Six months ended 31st December 2016 (Unaudited)
At 30th June 2016	6,350	3,650	198,298	9,976	218,274
Net return on ordinary activities	-	-	28,368	3,723	32,091
Dividends paid in the period	-	-	-	(4,200)	(4,200)
At 31st December 2016	6,350	3,650	226,666	9,499	246,165
Six months ended 31st December 2015 (Unaudited)
At 30th June 2015	6,350	3,650	223,596	8,789	242,385
Net return on ordinary activities	-	-	17,551	3,813	21,364
Dividends paid in the period	-	-	-	(3,960)	(3,960)
At 31st December 2015	6,350	3,650	241,147	8,642	259,789
Year ended 30th June 2016 (Audited)
At 30th June 2015	6,350	3,650	223,596	8,789	242,385
Net (loss)/return on ordinary activities	-	-	(25,298)	7,067	(18,231)
Dividends paid in the period	-	-	-	(5,880)	(5,880)
At 30th June 2016	6,350	3,650	198,298	9,976	218,274

¹This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.

STATEMENT OF FINANCIAL POSITION

AT 31ST DECEMBER 2016

	(Unaudited)	(Unaudited)	(Audited)
	31st December 2016	31st December 2015	30th June 2016
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	248,479	273,016	217,222
Current assets
Debtors	674	915	4,679
Cash and cash equivalents 1	5,386	19,236	8,957
	6,060	20,151	13,636
Current liabilities
Creditors: amounts falling due within one year	(374)	(30,378)	(4,584)
Net current assets/(liabilities)	5,686	(10,227)	9,052
Total assets less current liabilities	254,165	262,789	226,274
Creditors: amounts falling due after more than one year	(8,000)	(3,000)	(8,000)
Net assets	246,165	259,789	218,274
Capital and reserves
Called up share capital	6,350	6,350	6,350
Capital redemption reserve	3,650	3,650	3,650
Capital reserves	226,666	241,147	198,298
Revenue reserve	9,499	8,642	9,976
Total shareholders' funds	246,165	259,789	218,274
Net asset value per share (note 5)	1,025.8p	1,082.6p	909.6p

¹ This line item combines the two lines of 'Investments in liquidity funds held at fair value through profit or loss' and 'Cash and short term deposits' in the financial statements for the period ended 31st December 2015 into one. Under FRS 102, liquidity funds are considered cash equivalents as they are held for cash management purposes.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2016

1.  Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's Auditor.

The figures and financial information for the year ended 30th June 2016 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the Auditor which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.  Accounting policies

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the revised 'SORP') issued by the Association of Investment Companies in November 2014.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 31st December 2016.

The Company has elected not to prepare a statement of cash flows for the current period on the basis that substantially all of its investments are liquid and carried at market value.

All of the Company's operations are of a continuing nature.

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 30th June 2016.

3.  Dividends paid¹

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2016	31st December 2015	30th June 2016
	£'000	£'000	£'000
2016 Final dividend of 13.0p (2015: 12.0p)	3,120	2,880	2,880
2016 Special dividend of 4.5p (2015: 4.5p)	1,080	1,080	1,080
2016 Interim dividend of 8.0p	-	-	1,920
Total dividends paid	4,200	3,960	5,880

      ¹All dividends paid in the period/year have been funded from the Revenue Reserve.

An interim dividend of 8.0p has been declared in respect of the six months ended 31st December 2016, costing £1,920,000.

4.  Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2016	31st December 2015	30th June 2016
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	3,723	3,813	7,067
Capital return/(loss)	28,368	17,551	(25,298)
Total return/(loss)	32,091	21,364	(18,231)
Weighted average number of shares in issue	23,997,180	23,997,180	23,997,180
Revenue return per share	15.51p	15.89p	29.45p
Capital return/(loss) per share	118.22p	73.14p	(105.42)p
Total return/(loss) per share	133.73p	89.03p	(75.97)p

5.  Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2016	31st December 2015	30th June 2016
Net assets (£'000)	246,165	259,789	218,274
Number of shares in issue	23,997,180	23,997,180	23,997,180
Net asset value per share	1,025.8p	1,082.6p	909.6p

6.  Fair valuation of investments

The fair value hierarchy analysis for financial instruments held at fair value at the period end is as follows:

	(Unaudited)		(Unaudited)		(Audited)
	Six months ended		Six months ended		Year ended
	31st December 2016		31st December 2015		30th June 2016
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
	£'000	£'000	£'000	£'000	£'000	£'000
Level 1: Quoted prices for identical instruments in
active markets1	248,479	-	270,565	-	217,222	-
Level 3: Valuation techniques using non-observable data2	-	-	2,451	-	-	-
Total value of investments	248,479	-	273,016	-	217,222	-

¹     Figure of December 2015 has been amended to exclude investment in liquidity funds.

²     Pace plc shares were suspended as at 31st December 2015 pending a takeover of the company by Arris Group, Inc.

JPMORGAN FUNDS LIMITED

1st March 2017

For further information, please contact:

Alison Vincent

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

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.

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

ENDS

A copy of the Half Year Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM

The Half Year Report will also shortly be available on the Company's website at www.jpmmidcap.co.uk  where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

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