Half Yearly Report

RNS Number : 3856G

Troy Income & Growth Trust Plc

07 May 2014

 



TROY INCOME & GROWTH TRUST PLC

INTERIM RESULTS FOR THE SIX MONTHS TO 31 MARCH 2014

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 2014	30 September 2013	% Change
Equity shareholders' funds (£'000)	147,807	145,778	+1.4
Net asset value per share	63.37p	60.22p	+5.2
Share price (mid-market)	64.00p	60.50p	+5.8
Premium to net asset value	1.0%	0.5%

Total Returns*		6 months ended 31 March 2014	12 months ended 31 March 2014	36 months ended 31 March 2014	From change of Manager 46 months ended 31 March 2014
Share price		+7.7%	+8.2%	+40.0%	+110.3%
Net asset value  per share		+7.6%	+9.3%	+38.1%	+94.1%
FTSE All-Share Index		+4.8%	+8.8%	+28.8%	+77.3%
	* Total return includes reinvesting the net dividend in the month that the share price goes ex-dividend.

INTERIM BOARD REPORT AS AT 31 MARCH 2014

Performance

The Company delivered a Net Asset Value (NAV) total return of +7.6% over the six months to 31 March 2014.  The share price total return of +7.7% reflected minimal premium/discount change, while the FTSE All-Share Index produced a total return of +4.8%.  Over the year to 31 March 2014 the NAV total return of +9.3% compared favourably to that of the FTSE All-Share Index which returned +8.8%.  The six months comprised two quarters in which the Company outperformed the market, including generating a positive total return in the quarter to 31March 2014 when the market actually fell. The Company increased the aggregate of the first and second interim dividends by 4.8% to 1.10p (a quarterly rate of 0.55p) when compared to the equivalent dividends in the previous year.

Overall the performance of your Company in the period under review was consistently strong, particularly in the more recent market downturn, after lagging the market when it was most ebullient earlier last year.  This is consistent with one of our objectives, that being the generation of total returns with lower volatility than the stock market as a whole.

Background

A number of dark clouds on the horizon have served to overshadow the exuberance which initially took hold when the 'dovish' Janet Yellen was nominated as Chair of the Board of Governors of the Federal Reserve in October.  Russia's annexation of Crimea from Ukraine has materially increased geopolitical tensions.  China's slowing growth has combined with concerns over the credit risk associated with billions of dollars of imminently maturing wealth management products to temper enthusiasm for what has long been an engine of earnings growth.  Moreover, the Federal Reserve has succeeded in creating further ambiguity over the timing of the tapering of quantitative easing (QE) and interest rate rises from the Federal Reserve.  Stock markets have however nudged upwards in the six months in what has been a bumpy ride for most markets. 

Closer to home, the UK economy saw its strongest expansion since 2007 with a 1.9% pick up in Gross Domestic Product for 2013.  The country's Purchasing Managers Index (PMI), an indicator of manufacturing activity (10% of economic output), has risen for 12 consecutive months and the unemployment rate has echoed this, falling to 7.2% in the fourth quarter of 2013.  As it neared the 7% mark, identified by the Bank of England's Governor as the level at which an increase in interest rates would be considered, Governor Carney adjusted the recently adopted policy of forward guidance, citing other areas of unused capacity that could delay the need for an imminent rate rise as output remains subdued and still below the levels of 2008.  The US Federal Reserve also tempered expectations of a rate rise in early 2015, citing considerable slack in the labour market as reason for continued central bank stimulus.  Soothed by such assurances, stock markets continue to skirt around all-time highs.    

Two stock market sectors that the Company is not exposed to, life insurance and gambling, suffered heavy losses following the March Budget as a result of the scrapping of compulsory annuity purchases by pensioners and the imposition of additional taxation on fixed odds betting terminals (slot machines). This is a salutary reminder of the capricious effect of governments on equity markets - an effect which is likely to recur as successive governments struggle to reduce the budget deficit.

Discount Control Mechanism

In the six months to 31 March 2014, the Company repurchased 9.359m shares and issued 0.55m shares, and, mostly as a result, the shares traded in a very narrow range around their NAV with minimal rating (i.e. discount/premium) volatility.   Provision of liquidity to both buyers and sellers of shares in the Company is a key element of the discount control mechanism and it is pleasing to see Shareholders being able to access greater liquidity in the Company than they might in many larger investment trusts.

Gearing

The Board and Manager will continue to assume a disciplined and conservative approach to the use of gearing but Shareholders can rest assured that, as and when the appropriate stock market conditions arise, the Company will take the opportunity to use this tool. 

Dividends

The current quarterly dividend rate is 0.55p and the second quarterly dividend was paid on 25 April 2014.  As in previous years the Board will consider the final quarterly dividend before the year end on 30 September.  UK equity market dividend growth prospects for the next twelve months are approximately 5% but, as the current year's market dividend growth forecast has been hampered by the recent strength of sterling, further earnings growth will be required to sustain this level of dividend growth. 

Outlook

Stock markets have certainly entered this year on a more fragile footing than they ended the last.  With broad stock market valuations significantly overextended relative to their long-term average, many share prices remain vulnerable to a de-rating should events conspire to derail the QE-inspired optimism.  The conflict in Ukraine serves as a cautionary reminder that the catalyst for a correction could come in a number of guises.  Although the Managers see reduced numbers of compelling buying opportunities at current levels, they continue to research new investment ideas.  When stock market conditions change the Managers believe they will have a number of opportunities to make purchases at lower prices than are available today.

The Alternative Investment Fund Managers Directive ("AIFMD")

As stated in the September 2013 Annual Report and Accounts, the Board anticipates no problem with being in a position to comply with the implications of this legislation for the Company. The Board has agreed in principal to appoint Personal Assets Trust Administration Company Ltd ("PATAC") as the Company's Alternative Investment Fund Manager ("AIFM") as required by the AIFMD and the Manager has agreed to ensure that this will not involve any extra expense for the Company.  The Company will however also be obliged to appoint a depositary which will involve some extra cost for the Company.  The Board fully expects to be able to implement the changes with PATAC and other service providers prior to the expiry of the AIFMD's transitional arrangements in July 2014.

Board Changes

Roger White, Chief Executive of A.G. Barr plc, joined the Board on 29 April. The Board looks forward to benefiting from his insights and believes it has been fortunate to recruit such an outstanding, recognised and experienced businessman.

D Warnock

Chairman

6 May 2014

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 Directors' Report within the Annual Report and Accounts for the year ended 30 September 2013.

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.

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 2014 comprises the Interim Board Report, the Directors' Responsibility Statement and a condensed set of financial statements.

For and on behalf of the Board

D Warnock

Chairman

6 May 2014

STATEMENT OF COMPREHENSIVE INCOME
		Six months ended 31 March 2014 (unaudited)			Six months ended 31 March 2013 (unaudited)
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value
		-	8,393	8,393	-	11,788	11,788
Currency losses		-	(2)	(2)	-	(3)	(3)
Income	2	2,479	-	2,479	2,333	-	2,333
Investment management
fees		(192)	(358)	(550)	(173)	(321)	(494)
Other administrative
expenses		(214)	-	(214)	(207)	-	(207)
Finance costs of
borrowing		-	-	-	-	-	-
		_______	______	_______	_______	______	_______
Profit before taxation		2,073	8,033	10,106	1,953	11,464	13,417
Taxation	3	(34)	-	(34)	(41)	-	(41)
		_______	______	_______	_______	______	_______
Profit for the period		2,039	8,033	10,072	1,912	11,464	13,376
		_______	______	_______	_______	______	_______
Earnings per Ordinary
share (pence)	5	0.87	3.42	4.29	0.82	4.92	5.74
		_______	______	_______	______	_______	______

The "Profit for the period" is also the Total Comprehensive Income for the period as defined in IAS1 (revised). The total column of this statement represents the Statement of Comprehensive Income prepared in accordance with International Financial Reporting Standards ("IFRS"). 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.

INCOME STATEMENT (CONTINUED)		Year ended 30 September 2013 (audited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains on investments held at fair value		-	11,157	11,157
Currency gains		-	1	1
Income	2	6,001	-	6,001
Investment management fees		(364)	(677)	(1,041)
Other administrative expenses		(343)	-	(343)
Finance costs of borrowing		(5)	(10)	(15)
		______	_______	______
Profit before taxation		5,289	10,471	15,760
Taxation	3	(95)	-	(95)
		______	_______	______
Profit for the period		5,194	10,471	15,665
		______	_______	______
Earnings per Ordinary share (pence)	5	2.21	4.45	6.66
		______	_______	______

BALANCE SHEET
	As at 31 March 2014 (unaudited) £'000	As at 31 March 2013 (unaudited) £'000	As at 30 September 2013 (audited) £'000
Non-current assets
Ordinary shares	145,042	135,310	140,861
Other fixed interest	-	1,584	378
	______	______	______
Investments held at fair value through profit or loss	145,042	136,894	141,239
	______	______	______
Current assets
Accrued income and prepayments	755	1,574	684
Cash and cash equivalents	2,413	5,963	4,243
	______	______	______
Total current assets	3,168	7,537	4,927
	______	______	______
Total assets	148,210	144,431	146,166
Current liabilities
Trade and other payables	(403)	(2,370)	(388)
	______	______	______
Total current liabilities	(403)	(2,370)	(388)
	______	______	______
Net assets	147,807	142,061	145,778
	______	______	______
Issued capital and reserves attributable to
equity holders
Called-up share capital	60,514	58,904	60,514
Share premium account	36,419	34,115	36,432
Special reserve	52,755	58,163	58,163
Capital reserve	(4,867)	(11,907)	(12,900)
Revenue reserve	2,986	2,786	3,569
	______	______	______
Equity shareholders' funds	147,807	142,061	145,778
	______	______	______
Net asset value per Ordinary share (pence)	63.37	60.29	60.22
	______	______	______

STATEMENT OF CHANGES IN EQUITY
Six months ended 31 March 2014 (unaudited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2013	60,514	36,432	58,163	(12,900)	3,569	145,778
Total comprehensive income for the period	-	-	-	8,033	2,039	10,072
Equity dividends	-	-	-	-	(2,622)	(2,622)
Shares bought back into treasury	-	-	(5,722)	-	-	(5,722)
Shares issued from treasury	-	(13)	334	-	-	321
Costs of cancellation of share premium account	-	-	(20)	-	-	(20)
	______	_______	______	______	_______	______
Balance at 31 March 2014	60,514	36,419	52,755	(4,867)	2,986	147,807
	______	_______	______	______	_______	______
Six months ended 31 March 2013 (unaudited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2012	56,421	30,941	58,163	(23,371)	2,371	124,525
Total comprehensive income for the period	-	-	-	11,464	1,912	13,376
Equity dividends	-	-	-	-	(1,497)	(1,497)
New shares issued	2,483	3,174	-	-	-	5,657
	______	_______	______	______	_______	______
Balance at 31 March 2013	58,904	34,115	58,163	(11,907)	2,786	142,061
	______	_______	______	______	_______	______
Year ended 30 September 2013 (audited)		Share
	Share	premium	Special	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2012	56,421	30,941	58,163	(23,371)	2,371	124,525
Total comprehensive income for the year	-	-	-	10,471	5,194	15,665
Equity dividends	-	-	-	-	(3,996)	(3,996)
New shares issued	4,093	5,491	-	-	-	9,584
	______	_______	______	______	_______	______
Balance at 30 September 2013	60,514	36,432	58,163	(12,900)	3,569	145,778
	______	_______	______	______	_______	______

CASH FLOW STATEMENT
	Six months ended 31 March 2014 (unaudited) £'000	Six months ended 31 March 2013 (unaudited) £'000			Year ended 30 September 2013 (audited) £'000
Cash flows from operating activities
Investment income received	2,391	2,221			5,929
Deposit interest received	-	1			2
Administrative expenses paid	(768)	(649)			(1,401)
	______	______			______
Cash generated from operations	1,623	1,573			4,530
Finance costs paid	-	-			(15)
Taxation	(18)	(32)			(97)
	______	______			______
Net cash inflows from operating activities	1,605	1,541			4,418
	______	______			______
Cash flows from investing activities
Purchases of investments	(8,045)	(13,501)			(21,615)
Sales of investments	12,635	7,902			9,973
	______	______			______
Net cash inflow/ (outflow) from investing activities	4,590	(5,599)			(11,642)
	______	______			______
Net cash inflow/(outflow) before financing	6,195	(4,058)			(7,224)
	______	______			______
Financing activities
Proceeds of issue of shares	321	5,657			9,622
Costs of share buy backs	(5,722)	-			-
Dividends paid	(2,622)	(2,229)			(4,728)
Costs incurred on issue of new shares	-	-			(25)
	______	______			______
Net cash (outflow)/inflow from financing activities	(8,023)	3,428			4,869
	______	______			______
Net decrease in cash and short term deposits	(1,828)	(630)			(2,355)
Cash and short term deposits at the start of the period	4,243	6,596			6,596
Effect of foreign exchange rate changes	(2)	(3)			2
	______	______			______
Cash and short term deposits at the end of the period	2,413	5,963			4,243
	______	_______			______
Reconciliation of operating profit to operating cash flows
Profit before taxation	10,106	13,417			15,760
Add interest payable	-	-			15
Adjustments for:
Gains on investments	(8,393)	(11,788)			(11,157)
Currency losses/(gains)	2	3			(1)
(Increase) in accrued income and prepayments	(86)	(69)			(35)
(Decrease)/increase in trade and other payables	(6)	10			(52)
	______	_______			______
Cash generated from operations	1,623	1,573			4,530
	______	_______			______

Distribution of Assets and Liabilities
	Valuation at 30 September 2013					Valuation at 31 March 2014
			Purchases	Sales	Appreciation/ (depreciation)
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	140,861	96.6	8,045	(12,207)	8,343	145,042	98.1
Other fixed interest	378	0.3	-	(428)	50	-	-
	______	_____	______	______	______	______	_____
	141,239	96.9	8,045	(12,635)	8,393	145,042	98.1
	______	_____	______	______	______	______	_____
Current assets	4,927	3.4				3,168	2.1
Current liabilities	(388)	(0.3)				(403)	(0.2)
	______	_____				______	_____
Net assets	145,778	100.0				147,807	100.0
	______	_____				______	_____
Net asset value per share	60.22p					63.37p
	______					______

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 2013 financial statements.
	(b)	Dividends payable
		Dividends are recognised on the ex-dividend date.

2.	Income	Six months ended 31 March 2014 £'000	Six months ended 31 March 2013 £'000	Year  ended 30 September 2013 £'000
	Income from listed investments
	UK dividend income	2,256	2,052	5,365
	Overseas dividend income	223	280	634
		______	______	______
		2,479	2,332	5,999
		______	______	______
	Other income from investment activity
	Deposit interest	-	1	2
		______	______	______
	Total income	2,479	2,333	6,001
		______	______	______

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 2014A £'000	Six months ended 31 March 2013B £'000	Year  ended  30 September 2013C £'000
	Revenue	2,039	1,912	5,194
	Dividends declared	(2,575)	(2,452)	(5,045)
		______	______	______
		(536)	(540)	149
		______	______	______
	A Dividends declared relate to the first two interim dividends (both 0.55p each) declared in respect of the financial year 2013/2014.
	B Dividends declared relate to the first two interim dividends (both 0.525p each) declared in respect of the financial year 2012/2013.
	C Dividends declared relate to the four interim dividends declared in respect of the financial year 2012/2013 totalling 2.125p.

		Six months ended 31 March 2014	Six months ended 31 March 2013	Year  ended 30 September 2013
5.	Return and net asset value per share	p	p	p
	Revenue return	0.87	0.82	2.21
	Capital return	3.42	4.92	4.45
		______	______	______
	Total return	4.29	5.74	6.66
		______	______	______
	The figures above are based on the following:
		£'000	£'000	£'000
	Revenue return	2,039	1,912	5,194
	Capital return	8,033	11,464	10,471
		______	______	______
	Total return	10,072	13,376	15,665
		______	______	______
	Weighted average number of Ordinary shares
	in issue	235,027,963	233,223,870	235,342,418
		__________	__________	__________
	The net asset value per share is based on net assets attributable to shareholders of £147,807,000 (31 March 2013 - £142,061,000; 30 September 2013 - £145,778,000) and on 233,248,445 (31 March 2013 - 235,614,445; 30 September 2013 - 242,057,445) Ordinary shares in issue at the period end.

		As at 31 March 2014 (unaudited)	As at 31 March 2013 (unaudited)	As at 30 September 2013 (audited)
6.	Ordinary Share Capital
	Ordinary Shares of 25p each	No. of shares	No. of shares	No. of shares
	Allotted, called up and fully paid	233,248,445	235,614,445	242,057,445
	Held in treasury	8,809,000	-	-
		__________	__________	__________
		242,057,445	235,614,445	242,057,445
		__________	__________	__________
	During the six months ended 31 March 2014 there were 9,359,000 Ordinary shares of 25p each repurchased by the Company at a total cost of £5,721,941 and placed in treasury. During the six months ended 31 March 2013 and the year ended 30 September 2013 there were no shares repurchased. During the six months ended 31 March 2014 there were 550,000 Ordinary shares re-issued from treasury for proceeds totalling £338,850. During the six months ended 31 March 2013 and the year ended 30 September 2013 there were no Ordinary shares re-issued from treasury. During the six months ended 31 March 2014 there were no new Ordinary shares of 25p each issued by the Company. During the six months ended 31 March 2013 there were 9,930,000 new Ordinary shares of 25p each issued for proceeds totalling £5,657,000. During the year to 30 September 2013 there were 16,373,000 new Ordinary shares of 25p each issued by the Company for proceeds totalling £9,621,817.

7.	Capital reserve
	The capital reserve reflected in the Balance Sheet at 31 March 2014 includes gains of £27,721,000 (31 March 2013 - gains of £23,857,000; 30 September 2013 - gains of £23,300,000) which relate to the revaluation of investments held at the reporting date.

8.	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 Consolidated Income Statement. The total costs were as follows:
				Six months ended 31 March 2014 £'000	Six months ended 31 March 2013 £'000		Year  ended 30 September 2013 £'000
	Purchases			45	82		120
	Sales			14	13		16
				______	______		______
				59	95		136
				______	______		______

9.	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 2014 and 31 March 2013 has not been audited.
	The information for the year ended 30 September 2013 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.

10.	This Half-Yearly Financial Report was approved by the Board on 6 May 2014.

.

11.	This Half-Yearly Financial Report will shortly be available for viewing on the Company's web site (www.tigt.co.uk) and will be posted to shareholders in May 2014.

For Troy Income & Growth Trust plc Steven Cowie, C.A., Secretary 7 May 2014 Enquiries: 0131 538 6610

 

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