Interim Results
Glasgow Income Trust PLC
10 May 2001
News Release
10 May 2001
GLASGOW INCOME TRUST
INTERIM RESULTS FOR THE
SIX MONTHS ENDED 31 MARCH 2001
* Total return on net assets was 11.5%, significantly ahead of the
return of -9.4% on the FTSE All-Share Index, the company's benchmark.
* The total return to shareholders was 14.6%, higher than the return on
net assets because the discount fell from 5.8% at 30 September 2000 to 3.4%
at 31 March 2001.
* Hedging of the ordinary share portfolio was introduced - to limit the
impact on gearing of a significant fall in ordinary share prices - and
contributed 4.6% to the portfolio return in the recent period of stockmarket
weakness.
* A second interim dividend of 1.0p per ordinary share has been declared. A
first interim dividend of 1.0p per share was declared for payment on 31 May
2001. Dividends paid and declared in 2001 to date thus total 2.0p, compared
with 1.25p last year.
* It remains the intention of the Board to pay total dividends of not less than
4.7p per share in respect of the year to 30 September 2001, an increase in
total dividends of 27% compared with last year and equivalent to a yield of
6.1% on the share price of 77.5p on the share price on 31 March 2001.
* In the recent uncertainty in world stockmarkets equity prices have fallen to
valuation levels previously seen in 1998 and 1980. On these lower ratings
equities offer higher yields than for some time, presenting attractive
opportunities to invest for a trust with an income objective.
For further information please contact:
David Williams, Managing Director
Glasgow Investment Managers 0141 572 2700
Glasgow Income Trust plc
Interim Report - 2001
Chairman's Statement
Background
The half year to 31 March 2001 was a period of marked weakness in stockmarkets
around the world. Investors retreated from exotic to more defensive stocks as
the technology bubble continued to deflate and the rate of growth of the US
economy fell sharply.
Investment Returns
The Company's portfolio performed well and the total return on net assets was
11.5%, significantly ahead of the returns of -9.4% on the FTSE All-Share
Index, the company's benchmark, and 5.4% on the FTSE Actuaries Higher Yield
Index.
The total return to shareholders, at 14.6%, exceeded the return on net assets,
due to a further fall in the discount at which the share price stood to net
asset value per share.
Share Price Rating
The introduction of the new strategy last year, raising the prospective yield
while retaining the growth characteristics of the portfolio, has contributed
to lowering the discount. The discount was 14.6% on 31 May 2000, immediately
before the strategy was introduced, 5.8% on 30 September 2000, the beginning
of the half year under review, and 3.4% at 31 March 2001.
Dividends
The Board has declared a second interim dividend of 1.0p per ordinary share,
to be paid on 31 August 2001 to shareholders on the register at close of
business on 3 August 2001. A first interim dividend of 1.0p per share was
declared for payment on 31 May 2001. Dividends paid and declared in 2001 to
date thus total 2.0p, compared with 1.25p last year.
It remains the intention of the Board to pay total dividends of not less than
4.7p per share in respect of the year to 30 September 2001, an increase in
total dividends of 27% compared with last year. At the share price of 77.5p
on 31 March 2001 this dividend forecast represents a net yield of 6.1%.
Portfolio Profile
In the first three months of 2001 the exposure to ordinary shares was raised,
to 104.3% of net assets at 31 March 2001, while the exposure to fixed income
securities was reduced, to 49.7%. The additional investment in equities was
financed with short-term bank borrowings and total gearing rose to 54.0% of
net assets from 49.7% at 30 September 2000.
Portfolio Hedging
The high-yielding strategy introduced last year involved raising the gearing
of the Trust to around 50% of net assets. To limit the major further rise in
gearing - with attendant erosion of net assets - which could result from a
significant fall in ordinary share prices on the stockmarket, the Board
decided to put in place low cost partial hedging of the Company's ordinary
share portfolio.
This hedge came into play when the UK stockmarket fell sharply in March and
the profit realised from that strategy contributed 4.6% to the return on net
assets. At the same time the hedge was reinstated to provide protection in
the event of further equity price weakness.
Outlook
In response to the recent precipitate slowdown in the US economy interest
rates have been cut both there and in the UK. There are already signs that
this relaxation of monetary policy has led to an improvement in confidence and
output growth rates on both sides of the Atlantic are expected to recover in
2002. Meanwhile in the recent uncertainty in world stockmarkets equity prices
have fallen to valuation levels previously seen in 1998 and 1980. On these
lower ratings equities offer higher yields than for some time, presenting
attractive opportunities to invest for a Trust with an income objective.
The Interim Report will be mailed to shareholders on 15 May 2001. Copies may
be obtained from the Managers, Glasgow Investment Managers Limited, Sutherland
House, 149 St Vincent Street, Glasgow G2 5DR after that date.
R G Hanna
(Chairman)
Consolidated Statement of Total Return
(incorporating the Revenue Account)
for the half year ended 31 March 2001
Half year to 31 March 2001
(unaudited)
£000 £000 £000
Revenue Capital Total
Gains/(Losses) on investments - 1,911 1,911
Dividends and interest receivable 920 - 920
Profits less losses of 1 - 1
dealing subsidiary
Traded option premiums - - -
Investment management fee (49) (49) (98)
Other administrative expenses (83) - (83)
Net return before finance
costs and taxation 789 1,862 2,651
Finance costs of borrowings 20 20 40
Return on ordinary
activities before taxation 769 1,842 2,611
Taxation 95 (95) -
Return on ordinary activities
after taxation for the period 674 1,937 2,611
Dividends on equity shares 621 - 621
Transfer to reserves 53 1,937 1,990
Return per ordinary share 2.17p 6.24p 8.41p
Dividends per ordinary share 2.00p
Half year to 31 March 2000 Year to 30 September 2000
(unaudited) (audited)
£000 £000 £000 £000 £000 £000
Revenue Capital Total Revenue Capital Total
Gains/(Losses)
on investments - (284) (284) - (970) (970)
Dividends and
interest 513 - 513 1,415 - 1,415
receivable
Profits less losses
of dealing 21 - 21 50 - 50
subsidiary
Traded option
premiums 136 - 136 165 - 165
Investment
management fee (36) (36) (72) (80) (80) (160)
Other
administrative (77) - (77) (158) - (158)
expenses
Net return
before finance
costs and
taxation 557 (320) 237 1,392 (1,050) 342
Finance costs
of borrowings 63 63 126 102 102 204
Return on
ordinary
activities
before taxation 494 (383) 111 1,280 (1,152) 138
Taxation - - - 10 - 10
Return on
ordinary
activities
after taxation for 494 (383) 111 1,280 (1,152) 128
the period
Dividends on
equity shares 388 - 388 1,148 - 1,148
Transfer to
reserves 106 (383) (277) 132 (1,152) (1,020)
Return per
ordinary share 1.59p (1.24p) 0.35p 4.12p (3.71p) 0.41p
Dividends per
ordinary share 1.25p 3.70p
Note: These are not statutory accounts under section 240 of the Companies Act
1985 and are unaudited. The information relating to the group balance sheets
as at 30 September 2000 is an extract from the latest audited accounts which
have been delivered to the Registrar of Companies; the report of the auditors
on these accounts was unqualified and did not contain a statement under
Section 237 (2) or (3) of the Companies Act 1985.
Group Balance Sheet
as at 31 March 2001
31 March 30 September
2001 2000
(unaudited) (audited)
£000 % £000 %
Fixed assets
Investments listed on
the London Stock
Exchange
- ordinary
shares 25,975 104.3 22,261 97.2
- convertibles 1,999 8.0 2,089 9.1
Corporate bonds 10,368 41.7 9,949 43.4
38,342 154.0 34,299 149.7
Current assets
Debtors 614 1,417
Cash at bank and on
short-term deposit 441 200
Investments of dealing
subsidiary undertaking - -
1,055 1,617
Creditors: amounts
falling due within one 3,248 2,675
year
Net current
liabilities (2,193) (8.8) (1,058) (4.6)
Total assets less
current liabilities 36,149 145.2 33,241 145.1
Creditors: amounts
falling due after
more than one year
Zero coupon finance 11,250 (45.2) 10,332 (45.1)
Net assets 24,899 100.0 22,909 100.0
Capital and reserves
Called up share
capital 7,761 7,761
Share premium account 2,061 2,061
Special reserve 5,000 5,000
Realised capital
reserve 7,115 5,622
Unrealised capital
reserve 1,959 1,515
Revenue reserve 1,003 950
Equity shareholders'
funds 24,899 22,909
Net asset value per
ordinary share 80.21p 73.80p
Consolidated Cash Flow Statement
for the half year ended 31 March 2001
Half year to Half year to 31 Year to 30
31 March 2001 March 2000 September
2000
(unaudited) (unaudited) (audited)
£000 £000 £000
Net cash inflow 616 614 1,137
from operating activities
Servicing of finance
Interest paid (22) (128) (217)
Investing activities
Purchases of investments (13,232) (2,919) (20,110)
Sales of 11,932 3,966 14,241
investments
(1,300) 1,047 (5,869)
Equity dividends paid (760) (543) (931)
Net cash (1,466) 990 (5,880)
(outflow)/inflow
before financing
Financing
Zero coupon finance - - 9,881
Debt due within one year
- increase/(decrease) 2,500 1,093 (3,004)
in short-term borrowings
2,500 1,093 6,877
Increase in cash 1,034 2,083 997
Analysis of changes in net debt
At 30 Other At 31
September Cash non-cash March
2000 flows changes 2001
£000 £000 £000 £000
Short-term deposits 200 (200) - -
Cash at bank - 441 - 441
Bank overdrafts (793) 793 - -
Short-term borrowings - (2,500) - (2,500)
Zero coupon finance (10,332) (918) (11,250)
(10,925) (1,466) (918) (13,309)
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