Half-year Report

RNS Number : 1129X

Troy Income & Growth Trust Plc

04 May 2016

 



TROY INCOME & GROWTH TRUST PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 31 MARCH 2016

The principal objective of Troy Income & Growth Trust is to provide shareholders with an attractive income yield and the prospect of income and capital growth through investing in a portfolio of predominantly UK equities.

Financial Highlights
	31 March 2016	30 September 2015	% Change
Equity shareholders' funds (£'000)	191,997	178,247	+7.7
Net asset value per share	71.84p	68.87p	+4.3
Share price (mid-market)	72.75p	69.38p	+4.9
Premium to net asset value	1.3%	0.7%

Total Return* (for the periods to 31 March 2016)
		6 months	12 months	36 months	60 months
Share price		+6.7%	+6.7%	+31.7%	+70.3%
Net asset value per share		+6.2%	+7.4%	+32.3%	+67.2%
FTSE All-Share Index		+3.5%	-3.9%	+11.4%	+31.9%
	* Total return includes reinvesting the net dividend in the month that the share price goes ex-dividend.

INTERIM BOARD REPORT AS AT 31 MARCH 2016

Performance

The Company delivered a Net Asset Value (NAV) total return of +6.2% over the six months to 31 March 2016.  The share price total return of +6.7% reflected a small increase in the premium to NAV, while the FTSE All-Share Index produced a total return of +3.5% over the same period.  Over one and three years to 31 March 2016 the NAV total returns of +7.4% and +32.3% respectively compared favourably to that of the FTSE All-Share Index which returned -3.9% and +11.4% over the same periods.  The Company has performed particularly well during the 18 month period to 31 March 2016 returning nearly 20% over a period when the FTSE All-Share Index has been little better than flat.

The Company increased the aggregate of the first and second interim dividends by +4.35% to 1.20p (a quarterly rate of 0.60p) when compared to the equivalent dividends in the previous year.

Background

Over the last six months we have seen a more difficult environment for income investors.  A number of the largest companies in the UK equity market have either cut, or announced their intention to cut, their dividends.  The most prominent announcements to date came with BHP Billiton's 75% reduction in its pay-out followed quickly by Rio Tinto's announcement in February that it would be scrapping its progressive dividend policy.  This trend may yet have further to go. Pay-out ratios remain stretched in many sectors and those wishing to generate meaningful dividend income from the equity market will have to successfully differentiate between those yields that are sustainable and those that are optically enticing but fundamentally unsustainable.

Following a comparatively stable final quarter of calendar 2015, the current year started ominously.  The S&P 500 recorded its worst start to a year on record, falling 6% in the first week; the MSCI Emerging Markets Index fell 7% while in China the Shanghai Composite shed 14.8%. Closer to home, the FTSE 100 kicked off 2016 with its worst first week since 2000. Volatility remained high with markets jittery over China's currency, economy and its ability to manage both.  However, since mid-February equity markets have rallied and by the end of March the FTSE All-Share Index had regained nearly all of the ground lost since the beginning of January.

Discount Control Mechanism

In the six months to 31 March 2016, the Company issued 8.42 million shares to the market bringing the share count to 267.2 million.  No shares were repurchased.   As the Company has grown, partially due to the Discount Control Mechanism, the ongoing charges figure has steadily declined to 1.03% from 1.39% in 2009, a fall of over 25%.

Gearing

The Company has maintained its ungeared balance sheet but has the facilities in place to borrow in the event of an outstanding buying opportunity in equities. A conservative approach to gearing is one contributor to your Company being less volatile than most of its peers and the future use of borrowing would always be tactical rather than structural.

Board Changes

Since the Annual General Meeting in January David Garman has joined the Board as a Director. David held senior executive positions in United Biscuits and Associated British Foods before being appointed Chief Executive of TDG plc where he oversaw its sale to a financial purchaser. He is currently a non-executive Director of John Menzies plc and has served as a non-executive Director on the boards of a number of other listed companies including Carillion and Phoenix IT. His experience will be a valuable addition to the Board. 

Dividends

The current quarterly dividend rate is 0.60p and the second quarterly dividend was paid on 29 April 2016.  As in previous years the Board will consider an uplift to the final quarterly dividend before the year end on 30 September. 

Outlook

The portfolio has weathered the recent bouts of volatility well and the income account has proved as robust as the capital values. It is indisputable however, that the outlook for dividend growth is more uncertain now than it has been at any time since the financial crisis of 2007/8 resulted in widespread dividend cuts. The concentration of income in the portfolio is considerably lower than that of the market as a whole and the investment process has ensured the Company has had no exposure to 14 out of the 15 FTSE 100 companies that have either cut, or announced their intention to cut, their dividends over the last 18 months.  This does provide some comfort but the dividend prospects of all the companies in the portfolio will require constant monitoring if the real dividend growth trajectory is to be sustained.

It is also true to say that there are many companies which are well able to grow their dividends almost irrespective of the wider market background because of the strength of their franchises. Your Managers continue to bias their efforts towards these companies which can continue to deliver the long term returns that investors seek. 

David Warnock

Chairman

3 May 2016

Principal Risks and Uncertainties

The principal risks facing the Company relate to the Company's investment activities and include performance and market risk, resource risk and operational risk. Other risks faced by the Company include breach of regulatory rules which could lead to suspension of the Company's Stock Exchange Listing, financial penalties, or a qualified audit report. Breach of Section 1159 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains.

An explanation of these principal risks and how they are managed is contained in the Strategic Report within the Annual Report and Accounts for the year ended 30 September 2015.

The Company's principal risks and uncertainties have not changed since the date of the Annual Report and are not expected to change for the remaining six months of the Company's financial year.

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. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibility Statement

The Directors are responsible for preparing the half yearly financial report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

-    the condensed set of interim financial statements contained within the half yearly financial report have been prepared in accordance with International Accounting Standard 34; and,

-    the Interim Board Report includes a fair review of the information required by 4.2.7R (indication of important events during the first six months of the financial year and description of principal risks and uncertainties for the remaining six months of the year) and 4.2.8R (disclosure of related party transactions and changes therein) of the FCA's Disclosure and Transparency Rules.

The half yearly financial report for the six months to 31 March 2016 comprises the Interim Board Report, the Directors' Responsibility Statement and a condensed set of financial statements.

For and on behalf of the Board

David Warnock

Chairman

3 May 2016

STATEMENT OF COMPREHENSIVE INCOME
		Six months ended 31 March 2016 (unaudited)			Six months ended 31 March 2015 (unaudited)
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Profits on investments held at fair value
		-	8,309	8,309	-	13,420	13,420
Currency (losses)/gains		-	(6)	(6)	-	10	10
Income	2	3,614	-	3,614	2,939	-	2,939
Investment management
fees		(244)	(454)	(698)	(219)	(407)	(626)
Other administrative
expenses		(228)	-	(228)	(226)	-	(226)
		_______	______	_______	_______	______	_______
Profit before taxation		3,142	7,849	10,991	2,494	13,023	15,517
Taxation	3	(36)	-	(36)	(34)	-	(34)
		_______	______	_______	_______	______	_______
Profit for the period		3,106	7,849	10,955	2,460	13,023	15,483
		_______	______	_______	_______	______	_______
Earnings per Ordinary
share (pence)	5	1.18	2.98	4.16	0.99	5.26	6.25
		_______	______	_______	______	_______	______

The "Profit for the period" is also the Total Comprehensive Income for the period as defined in IAS1 (revised). The total columns of this statement represents the Statement of Comprehensive Income prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. No operations were acquired or discontinued during the period.

STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)		Year ended 30 September 2015 (audited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Profits on investments held at fair value		-	12,144	12,144
Currency gains		-	11	11
Income	2	7,013	-	7,013
Investment management fees		(453)	(842)	(1,295)
Other administrative expenses		(442)	-	(442)
		______	_______	______
Profit before taxation		6,118	11,313	17,431
Taxation	3	(79)	-	(79)
		______	_______	______
Profit for the period		6,039	11,313	17,352
		______	_______	______
Earnings per Ordinary share (pence)	5	2.42	4.52	6.94
		______	_______	______

STATEMENT OF FINANCIAL POSITION
		As at 31 March 2016 (unaudited) £'000	As at 31 March 2015 (unaudited) £'000	As at 30 September 2015 (audited) £'000
	Notes
Non-current assets
Ordinary shares		181,914	164,450	171,474
		______	______	______
Investments held at fair value through profit or loss		181,914	164,450	171,474
		______	______	______
Current assets
Financial assets	6	203	-	-
Accrued income and prepayments		1,082	873	582
Trade and other receivables		-	246	-
Cash and cash equivalents		9,605	7,887	6,630
		______	______	______
Total current assets		10,890	9,006	7,212
		______	______	______
Total assets		192,804	173,456	178,686
Current liabilities
Trade and other payables		(807)	(418)	(420)
Traded option contracts		_	_	(19)
		______	______	______
Total current liabilities		(807)	(418)	(439)
		______	______	______
Net assets		191,997	173,038	178,247
		______	______	______
Issued capital and reserves attributable to
equity holders
Called-up share capital	8	66,811	62,504	64,706
Share premium account		11,353	3,480	7,525
Special reserves		63,504	63,504	63,504
Capital reserve	9	46,348	40,209	38,499
Revenue reserve		3,981	3,341	4,013
		______	______	______
Equity shareholders' funds		191,997	173,038	178,247
		______	______	______
Net asset value per Ordinary share (pence)	5	71.84	69.21	68.87
		______	______	______

STATEMENT OF CHANGES IN EQUITY
Six months ended 31 March 2016 (unaudited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserves	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2015	64,706	7,525	63,504	38,499	4,013	178,247
Total comprehensive income for the period	-	-	-	7,849	3,106	10,955
Equity dividends	-	-	-	-	(3,138)	(3,138)
Discount control costs	-	(17)	-	-	-	(17)
New shares issued	2,105	3,845	-	-	-	5,950
	______	_______	______	______	_______	______
Balance at 31 March 2016	66,811	11,353	63,504	46,348	3,981	191,997
	______	_______	______	______	_______	______
Six months ended 31 March 2015 (unaudited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserves	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2014	60,514	86	61,924	27,186	3,681	153,391
Total comprehensive income for the period	-	-	-	13,023	2,460	15,483
Equity dividends	-	-	-	-	(2,800)	(2,800)
Costs of cancellation of share premium account	-	-	(4)	-	-	(4)
Discount control costs	_	(18)	_	_	_	(18)
Shares issued from treasury	-	36	1,584	-	-	1,620
New shares issued	1,990	3,376	-	-	-	5,366
	______	_______	______	______	_______	______
Balance at 31 March 2015	62,504	3,480	63,504	40,209	3,341	173,038
	______	_______	______	______	_______	______
Year ended 30 September 2015 (audited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserves	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2014	60,514	86	61,924	27,186	3,681	153,391
Total comprehensive income for the year	-	-	-	11,313	6,039	17,352
Equity dividends	-	-	-	-	(5,707)	(5,707)
Costs of cancellation of share premium account	-	-	(4)	-	-	(4)
Discount control costs	-	(33)	_	_	-	(33)
Shares issued from treasury	-	36	1,584	-	-	1,620
New shares issued	4,192	7,436	_	-	-	11,628
	______	_______	______	______	_______	______
Balance at 30 September 2015	64,706	7,525	63,504	38,499	4,013	178,247
	______	_______	______	______	_______	______

CASH FLOW STATEMENT
	Six months ended 31 March 2016 (unaudited) £'000	Six months ended 31 March 2015 (unaudited) £'000			Year ended 30 September 2015 (audited) £'000
Cash flows from operating activities
Investment income received	3,032	2,752			7,103
Other income received	97	-			-
Administrative expenses paid	(921)	(812)			(1,696)
	______	______			______
Cash generated from operations	2,208	1,940			5,407
Taxation	(36)	(34)			(76)
	______	______			______
Net cash inflows from operating activities	2,172	1,906			5,331
	______	______			______
Cash flows from investing activities
Purchases of investments	(17,699)	(5,994)			(20,628)
Sales of investments	15,713	5,314			11,656
	______	______			______
Net cash outflow from investing activities	(1,986)	(680)			(8,972)
	______	______			______
Net cash inflow/(outflow) before financing	186	1,226			(3,641)
	______	______			______
Financing activities
Proceeds of issue of shares	5,950	6,726			13,248
Dividends paid	(3,138)	(2,800)			(5,707)
Costs incurred on cancellation of share premium account and on issue of new shares	(17)	(30)			(36)
	______	______			______
Net cash inflow from financing activities	2,795	3,896			7,505
	______	______			______
Net increase in cash and short term deposits	2,981	5,122			3,864
Cash and short term deposits at the start of the period	6,630	2,755			2,755
Effect of foreign exchange rate changes	(6)	10			11
	______	______			______
Cash and short term deposits at the end of the period	9,605	7,887			6,630
	______	______			______
Reconciliation of operating profit to operating cash flows
Profit before taxation	10,991	15,517			17,431
Adjustments for:
Gains on investments	(8,309)	(13,420)			(12,144)
Currency losses/(gains)	6	(10)			(11)
(Increase)/decrease in accrued income and prepayments	(484)	(183)			89
Increase in trade and other payables	4	36			42
	______	______			______
Cash generated from operations	2,208	1,940			5,407
	______	_______			______

Distribution of Assets and Liabilities
	Valuation at 30 September 2015					Valuation at 31 March 2016
			Purchases	Sales	Appreciation/ (depreciation)
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	171,474	96.2	18,082	(15,713)	8,071	181,914	94.7
Current assets	7,212	4.0				10,890	5.7
Current liabilities	(439)	(0.2)				(807)	(0.4)
	______	_____				______	_____
Net assets	178,247	100.0				191,997	100.0
	______	_____				______	_____
Net asset value per share	68.87p					71.84p
	______					______

NOTES TO THE ACCOUNTS
1.	Accounting policies
	(a)	Basis of accounting
		The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) IAS 34 - 'Interim Financial Reporting', as adopted by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). They have also been prepared using the same accounting policies applied for the year ended 30 September 2015 financial statements.
	(b)	Dividends payable
		Dividends are recognised on the ex-dividend date.

2.	Income	Six months ended 31 March 2016 £'000	Six months ended 31 March 2015 £'000	Year  ended 30 September 2015 £'000
	Income from listed investments
	UK dividend income	3,295	2,717	6,468
	Overseas dividend income	239	222	528
		______	______	______
		3,534	2,939	6,996
		______	______	______
	Other income from investment activity
	Traded option premiums	80	-	17
		______	______	______
	Total income	3,614	2,939	7,013
		______	______	______

3.	Taxation
	The taxation charge for the period represents withholding tax suffered on overseas dividend income.

4.	The following table shows the revenue for each period less the dividends declared in respect of the financial period to which they relate.
		Six months ended 31 March 2016* £'000	Six months ended 31 March 2015+ £'000	Year  ended  30 September 2015++ £'000
	Revenue	3,106	2,460	6,039
	Dividends declared	(3,192)	(2,859)	(5,883)
		______	______	______
		(86)	(399)	156
		______	______	______
	* Dividends declared relate to the first two interim dividends (both 0.60p each) declared in respect of the financial year 2015/2016.
	+ Dividends declared relate to the first two interim dividends (both 0.575p each) declared in respect of the financial year 2014/2015.
	++ Dividends declared relate to the four interim dividends declared in respect of the financial year 2014/2015 totalling 2.325p.

		Six months ended 31 March 2016		Six months ended 31 March 2015		Year  ended 30 September 2015
5.	Return and net asset value per share	p		p		p
	Revenue return	1.18		0.99		2.42
	Capital return	2.98		5.26		4.52
		______		______		______
	Total return	4.16		6.25		6.94
		______		______		______
	The figures above are based on the following:
		£'000		£'000		£'000
	Revenue return	3,106		2,460		6,039
	Capital return	7,849		13,023		11,313
		______		______		______
	Total return	10,955		15,483		17,352
		______		______		______
	Weighted average number of Ordinary shares in issue
		262,921,094		247,867,001		249,946,644
		__________		__________		__________
	The net asset value per share is based on net assets attributable to shareholders of £191,997,000 (31 March 2015 - £173,038,000; 30 September 2015 - £178,247,000) and on 267,244,045 (31 March 2015 - 250,017,445; 30 September 2015 - 258,824,045) Ordinary shares in issue at the period end.
6.	Financial assets		As at 31 March 2016 (unaudited) £'000		As at 31 March 2015 (unaudited) £'000		As at 30 September 2015 (audited) £'000
	Fair value of forward currency contract		203		_		_
			______		______		______

7.	Financial instruments
		Level 1 £'000	Level 2 £'000	Level 3 £'000	2016 Total £'000
	Financial assets at fair value through profit or loss as at 31 March 2016
	Investments	181,914	_	_	181,914
	Current assets	_	203	_	203
		______	______	______	______
		181,914	203	_	182,117
		______	______	______	______

Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments the fair value of which is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets. The Company's forward currency contract has been included in this level as fair value is achieved using the foreign exchange spot rate and forward points which vary depending on the duration of the contract.
Level 3 reflects financial instruments the fair value of which is determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable market transactions in the same instrument and not based on available observable market data.
There were no transfers of investments between levels during the six months ended 31 March 2016.
The fair value of the Company's financial assets and liabilities as at 31 March 2016 was not materially different from the carrying value.

		As at 31 March 2016 (unaudited)	As at 31 March 2015 (unaudited)	As at 30 September 2015 (audited)
8.	Ordinary Share Capital
	Ordinary Shares of 25p each	No. of shares	No. of shares	No. of shares
	Allotted, called-up and fully paid	267,244,045	250,017,445	258,824,045
	During the six months ended 31 March 2016, the six months ended 31 March 2015, and the year to 30 September 2015 there were no Ordinary shares of 25p each repurchased by the Company. During the six months ended 31 March 2016 there were no Ordinary shares re-issued from treasury.  During the six months ended 31 March 2015 and the year ended 30 September 2015 there were 2,569,000 Ordinary shares re-issued from treasury for proceeds totalling £1,620,215. During the six months ended 31 March 2016 there were 8,420,000 new Ordinary shares of 25p each issued by the Company for cash proceeds totalling £5,949,553. During the six months ended 31 March 2015 there were 7,960,000 new Ordinary shares of 25p each issued by the Company for cash proceeds totalling £5,374,025. During the year ended 30 September 2015 there were 16,766,600 new Ordinary shares of 25p each issued by the Company for cash proceeds totalling £11,628,000.

9.	Capital reserve
	The capital reserve shown in the Balance Sheet at 31 March 2016 includes gains of £42,803,000 (31 March 2015 - gains of £41,717,000; 30 September 2015 - gains of £37,731,000) which relate to the revaluation of investments held at the reporting date.

10.	Transaction costs
	During the period expenses were incurred in acquiring or disposing of investments classified as held at fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Statement of Comprehensive Income. The total costs were as follows:
				Six months ended 31 March 2016 £'000	Six months ended 31 March 2015 £'000		Year  ended 30 September 2015 £'000
	Purchases			39	25		100
	Sales			25	6		16
				______	______		______
				64	31		116
				______	______		______

11.	Publication of non-statutory accounts
	The financial information contained in this Half Yearly Financial Report does not constitute statutory accounts as defined in Sections 434-436 of the Companies Act 2006. The financial information for the six months ended 31 March 2016 and 31 March 2015 has not been audited.
	The information for the year ended 30 September 2015 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.

12.	This Half Yearly Financial Report was approved by the Board on 3 May 2016.

.

13.	This Half Yearly Financial Report will shortly be available for viewing on the Company's website (www.tigt.co.uk) and will be posted to shareholders in May 2016.

For Troy Income & Growth Trust plc Steven Cowie, C.A., Secretary 3 May 2016 Enquiries: 0131 538 6610

 

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