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City of London IT (CTY)

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Friday 19 February, 2010

City of London IT

Half Yearly Report

RNS Number : 3942H
City of London Investment Trust PLC
19 February 2010
 



 

19 February 2010

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year Ended 31 December 2009

 

This announcement contains regulated information

 

 

Total Returns

Six Months to

31 December 2009

Net asset value per ordinary share ("NAV")*

31.5%

Average UK Growth & Income Investment Trust NAV * †

30.6%

NAV outperformance

0.9%

Ordinary share price *

27.0%

FTSE All-Share 4% Capped Index #

28.5%

FTSE All-Share Index #

29.1%



Sources: * AIC Information Services Limited

              # Thomson Financial, Datastream

               † size weighted average

 

 

INTERIM MANAGEMENT REPORT

 

Performance

 

Net Asset Value Total Return

It is pleasing to be able to report on a strong performance for the six months to 31 December 2009.   City of London's net asset value total return was 31.5% which was slightly ahead of the size weighted average for the UK Growth & Income Investment Trust sector which was up 30.6%.  City of London was also ahead of the FTSE All-Share and FTSE All-Share 4% Capped Indices.

 

The equity market responded well to the continuing exceptional policy response to the financial crisis with ultra low interest rates and quantitative easing.  Investors were encouraged by signs of economic recovery although these were much stronger in overseas economies, such as China, than in the UK which barely came out of recession.

 

City of London's gearing was a contributor to performance during this period.  Sectors that were notable outperformers included:  food manufacturing, where there was a large uplift in value for our long standing holding in Cadbury after the takeover bid by Kraft; industrial engineering, which is benefiting from sterling's devaluation; and Real Estate Investment Trusts, which recovered from oversold levels.  In addition, our below average exposure to the underperforming banking sector helped.

 

Earnings and Dividends

Earnings per share, for this period, have been adversely affected by significant dividend cuts across the UK equity market compared with a year ago.  In addition, portfolio changes have led to a greater proportion of our dividends occurring in the second half of our financial year. 

 

The Board has been cautious in its dividend distribution policy over the last five years which has led to a significant increase in revenue reserves to £27.9 million or 13.36p per share at 30 June 2009.  It is likely that we will need to utilise part of the revenue reserve in this financial year.  The minimum forecast dividend per share of 12.32p gives a yield of approximately 5%.  The Board is keen to continue our forty-three year record of dividend increases and the Manager's focus continues to be to invest in quality companies with good dividend prospects as well as capital growth potential.

 

- MORE -

 

                                                                                                                                                         Page 2 of 10

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year Ended 31 December 2009

 

Interim Management Report (continued)

 

Material Events and Transactions during the period

Our gearing declined from 10.1% to 8.3% as at 31 December 2009.  Our Manager increased exposure to defensive stocks with significant additions to the holdings of AstraZeneca, in pharmaceuticals, and Centrica, the gas and electricity supplier, and a new holding was purchased in Imperial Tobacco.  Profits were taken in a range of cyclical stocks that had recovered well.  The holding in Barclays was halved after a particularly sharp share price rise.

 

Banking and Custody Arrangements

I am pleased to announce a new relationship with HSBC Bank, who will be the new custodian of our securities in succession to BNP Paribas Securities Services.  Furthermore, HSBC has agreed to grant the Company a borrowing facility of £50m on attractive terms.  The maximum potential gearing level remains at 20% and this facility will only be used if it is deemed to be in the interests of shareholders.

 

Expenses

As a result of significant outperformance against the AIC UK Growth & Income sector over the thirty months to 31 December 2009, and the positive move in the share price since end June 2009, a performance fee of £816,000 has been accrued for the full year 2009/2010.  This has been charged 100% to capital.  The performance fee actually charged to the full year accounts will depend on the degree of outperformance achieved over the three years to 30 June 2010, and the movement in the share price over the year to the same date.   The Total Expense Ratio (TER), which is the investment management fee and other non-interest expenses as a percentage of shareholders' funds, remains low compared with most other equity savings products.  The TER for the six months is equivalent to a full year rate of approximately 0.51% of net assets.

 

The Board

Anita Frew will be stepping down from the Board at the end of March.  I would like to express our gratitude for her excellent contribution since she joined the Board in 2006.  We expect to make at least one new appointment to the Board before the end of our financial year.

 

Outlook for the six months to 30 June 2010

After such a strong move in the equity market, it would be reasonable to expect some consolidation in the second half of our financial year.  The UK economy faces a number of major challenges with a particularly high level of consumer debt and a public sector deficit estimated to be about 12.5% of GDP, the highest of the G7 economies.  In addition, there is political uncertainty with a general election imminent.  However, our portfolio is biased towards companies with relatively defensive profits and, in many cases, significant overseas exposure.  Higher yielding equities with growing dividends remain attractive given low interest rates in deposit accounts and compared with the yields available in fixed interest securities.

 

 

 

S M de Zoete

Chairman

 

 

- MORE -

 

 

                                                                                                                                                         Page 3 of 10

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year Ended 31 December 2009

 

 Income Statement

 for the half year ended 31 December 2009

 


(Unaudited)

Half year ended

31 December 2009

(Unaudited)

Half year ended

31 December 2008

(Audited)

Year ended

30 June 2009


Revenue

Return

Capital

Return

 

Total

Revenue

Return

Capital

Return

 

Total

Revenue

Return

Capital

Return

 

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000











Return/(losses) on investments held at fair value through profit or loss

-

118,528

118,528

-

(103,187)

(103,187)

-

(140,426)

(140,426)











Income from investments held at fair value through profit or loss

10,478

-

10,478

13,674

-

13,674

28,374

-

28,374











Other interest receivable and similar income

1,072

-

1,072

424

-

424

977

-

977


--------

--------

--------

--------

--------

--------

--------

--------

--------

Gross revenue and

capital gains/(losses)

11,550

118,528

130,078

14,098

(103,187)

(89,089)

29,351

(140,426)

(111,075)


--------

----------

----------

--------

----------

----------

--------

----------

----------

Management fees

(278)

(649)

(927)

(233)

(544)

(777)

(436)

(1,018)

(1,454)

Performance fee

-

(816)

(816)

(25)

(202)

(227)

-

-

-

Write back of VAT (note 6)

-

-

-

53

181

234

538

410

948

Other administrative expenses

(308)

-

(308)

(251)

-

(251)

(535)

-

(535)


--------

--------

--------

--------

--------

--------

--------

--------

--------

Net return/(loss) on ordinary activities before finance costs and taxation

10,964

117,063

128,027

13,642

(103,752)

(90,110)

28,918

(141,034)

(112,116)











Finance costs

(721)

(1,499)

(2,220)

(789)

(1,656)

(2,445)

(1,510)

(3,157)

(4,667)

--------

--------

--------

--------

--------

--------

--------

--------

--------

Net return/(loss) on ordinary activities before taxation

10,243

115,564

125,807

12,853

(105,408)

(92,555)

27,408

(144,191)

(116,783)











Taxation on net return on ordinary activities

(30)

-

(30)

(5)

-

(5)

(126)

-

(126)

--------

--------

--------

--------

--------

--------

--------

--------

--------

Net return/(loss) on ordinary activities after taxation

10,213

115,564

125,777

12,848

(105,408)

(92,560)

27,282

(144,191)

(116,909)

=====

=====

=====

=====

=====

=====

=====

======

======











Return/(loss) per ordinary share - basic (note 2)

4.90p

55.39p

60.29p

6.20p

(50.87p)

(44.67p)

13.15p

(69.49)p

(56.34)p

=====

=====

=====

=====

=====

=====

=====

======

======

 

 

The total columns of this statement represent the Income Statement of the Company.    All revenue and capital items derive from continuing operations.  No operations were acquired or discontinued during the year.  The Company has no recognised gains or losses other than those recognised in the Income Statement and the Reconciliation of Movements in Shareholders' Funds.

 

- MORE -



                                                                                                                                                                           

Page 4 of 10

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year ended 31 December 2009

 

 

Reconciliation of Movements in Shareholders' Funds

for the half years ended 31 December 2009 and 2008 and year ended 30 June 2009

 

 

 

 

Half  year ended 31 December 2009 (unaudited)

Called-up share capital

£'000

Share premium account

£'000

Other

capital reserves

£'000

 

Revenue reserve £'000

 

 

Total

£'000







At 30 June 2009

52,130

36,893

312,007

27,852

428,882

Net return on ordinary activities after taxation

-

-

115,564

10,213

125,777

Issue of 100,000 new ordinary shares

25

186

-

-

211

Fourth interim dividend (3.08p per share) for year  ended 30 June 2009 paid 28 August 2009

-

-

-

(6,422)

(6,422)

First interim dividend (3.08p per share) for year   ended 30 June 2010 paid 30 November 2009

-

-

-

(6,426)

(6,426)

----------

-----------

------------

----------

------------

At 31 December 2009

52,155

37,079

427,571

25,217

542,022

======

=======

=======

======

=======








Called-up

Share

Other



share

premium

capital

Revenue



capital

account

reserves

reserve

Total

Half  year ended 31 December 2008 (unaudited)

£'000

£'000

£'000

£'000

£'000







At 30 June 2008

51,894

35,309

455,638

25,879

568,720

Net (loss)/return on ordinary activities after taxation

-

-

(105,408)

12,848

(92,560)

Buy-back of 50,000 ordinary shares

-

-

(110)

-

(110)

Fourth interim dividend (2.96p per share) for year ended 30 June 2008 paid 29 August 2008

-

-

-

(6,134)

(6,134)

First interim dividend (3.08p per share) for year ended 30 June 2009 paid 28 November 2008

-

-

-

(6,382)

(6,382)

--------

--------

----------

--------

----------

At 31 December 2008

51,894

35,309

350,120

26,211

463,534

=====

=====

======

=====

======








Called-up

Share

Other




share

premium

capital

Revenue



capital

account

reserves

reserve

Total

Year ended 30 June 2009 (audited)

£'000

£'000

£'000

£'000

£'000







At 30 June 2008

51,894

35,309

455,638

25,879

568,720

Net (loss)/return on ordinary activities after taxation

-

-

(144,191)

27,282

(116,909)

Buy-back of 50,000 ordinary shares

-

-

(110)

-

(110)

Sale of 358,090 shares out of treasury

-

-

670

-

670

Issue of 945,000 new ordinary shares

236

1,621

-

-

1,857

Issue expenses incurred

-

(37)

-

-

(37)

Fourth interim dividend (2.96p per share) for year ended 30 June 2008 paid 29 August 2008

-

-

-

(6,134)

(6,134)

First, second and third interim dividends (3.08p each per share) for year ended 30 June 2009 paid 28 November 2008, 27 February 2009 and 29 May 2009

-

-

-

(19,175)

(19,175)

--------

--------

--------

--------

----------

At 30 June 2009

52,130

36,893

312,007

27,852

428,882

=====

======

======

======

======

 

 

- MORE -

                                                                                                                                                         Page 5 of 10

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year ended 31 December 2009

 

 

Balance Sheet

at 31 December 2009

 


(Unaudited)

31 December

2009

£'000

(Unaudited)

31 December

2008

£'000

(Audited)

30 June

2009

£'000





Investments held at fair value through

profit or loss




Listed at market value in the United Kingdom

561,243

485,528

439,741

Listed at market value overseas

25,787

26,468

32,552

Shares in subsidiary undertakings

378

378

378

----------

----------

----------


587,408

512,374

472,671

----------

----------

----------

Current assets




Debtors

2,891

5,490

7,167

Bank balances and short term deposits

2,520

2,602

750

--------

--------

----------


5,411

8,092

7,917

--------

--------

----------

Creditors: amounts falling due within one year

(3,398)

(9,533)

(4,307)

----------

----------

----------

Net current assets/(liabilities)

2,013

(1,441)

3,610

----------

----------

----------

Total assets less current liabilities

589,421

510,933

476,281





Creditors: amounts falling due after more

than one year

(47,399)

(47,399)

(47,399)

----------

----------

----------

Total net assets

542,022

463,534

428,882

======

======

======

Capital and reserves




Called-up share capital (note 3)

52,155

51,894

52,130

Share premium account

37,079

35,309

36,893

Other capital reserves

427,571

350,120

312,007

Revenue reserve

25,217

26,211

27,852

----------

----------

----------

Shareholders' funds

542,022

463,534

428,882

======

======

======



Net asset value per ordinary share (note 4)

259.81p

223.70p

205.68p

======

======

======

 

 

 

 

 

- MORE -



                                                                                                                                                                           

Page 6 of 10

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year ended 31 December 2009

 

 

Cash Flow Statement

for the half year ended 31 December 2009

 


(Unaudited)

Half year ended

31 December 2009

£'000

(Unaudited)

Half year ended

31 December 2008

£'000

(Audited)

Year ended

30 June 2009

£'000





Net cash inflow from operating activities

12,819

13,312

28,416

Net cash outflow from servicing of finance

(2,220)

(2,451)

(4,681)

Total tax recovered

136

-

2

Net cash inflow from financial investment

5,693

11,025

11,533

Equity dividends paid

(12,848)

(12,516)

(25,309)

Net cash outflow from financing

(1,789)

(7,053)

(9,576)


---------

---------

----------

Increase in cash

1,791

2,317

385

=====

=====

======

Reconciliation of operating revenue to net cash inflow from operating activities

 

 

 

 

 

 

Total return/(loss) before finance costs and taxation

128,027

(90,110)

(112,116)

(Less)/add: capital (return)/loss before finance costs

and taxation

(117,063)

103,752

141,034

-----------

-----------

-----------

Net revenue return before finance costs and taxation

10,964

13,642

28,918

Decrease/(increase) in accrued income

1,595

664

(175)

Decrease/(increase) in other debtors

714

(233)

927

Increase/(decrease) in other creditors

1,091

152

(53)

Expenses charged to other capital reserves

(1,465)

(565)

(608)

Overseas withholding tax

(80)

(93)

(337)

Stock dividends included in investment income

-

(255)

(256)

--------

--------

----------

Net cash inflow from operating activities

12,819

13,312

28,416

 =====

 =====

======

Reconciliation of net cash inflow to movement in

net debt




Increase in cash as above

1,791

2,317

385

Cash outflow from movement in loans

2,000

6,943

11,956

Exchange movements

(21)

(65)

15

Net debt at beginning of the period

(48,649)

(61,005)

(61,005)

----------

----------

----------

Net debt at end of the period

(44,879)

(51,810)

(48,649)

======

======

======

Represented by:




Cash at bank and short term deposits less bank overdrafts

2,520

2,602

750

Debt falling due within one year

-

(7,013)

(2,000)

Debt falling due after more than one year

(47,399)

(47,399)

(47,399)

----------

----------

----------

(44,879)

(51,810)

(48,649)

======

======

======





 

 

- MORE -



                                                                                                                                                                           

Page 7 of 10

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year ended 31 December 2009

 

Notes

 

1.


Accounting policy - Basis of preparation



The condensed set of financial statements has been prepared using the same accounting policies as are set out in the Company's Annual Report and Financial Statements for the year ended 30 June 2009.

 

The condensed set of financial statements has not been audited or reviewed by the Company's auditors.







2.


Return per ordinary share









(Unaudited)

Half year ended

31 December 2009

£'000


(Unaudited)

Half year ended

31 December

2008

£'000


(Audited)

Year ended

30 June 2009 £'000



The return/(loss) per ordinary share is based on the following figures:








Revenue return

10,213


12,848


27,282



Capital return/(loss)

115,564


(105,408)


(144,191)



----------


----------


----------



Total

125,777


(92,560)


(116,909)



======


======


======



Weighted average number of ordinary shares in issue for each period

208,607,911


207,220,603


207,522,950











Revenue return per ordinary share

4.90p


6.20p


13.15p



Capital return/(loss) per ordinary share

55.39p


(50.87p)


(69.49p)




----------


----------


----------



Total

60.29p


(44.67p)


(56.34p)




======


======


======



The Company does not have any dilutive securities.













3.


Called-up share capital



During the half year ended 31 December 2009, 100,000 ordinary shares were allotted for total proceeds of £211,000 (half year ended 31 December 2008: 50,000 ordinary shares bought back for a total cost of £110,000; year ended 30 June 2009: 50,000 ordinary shares bought back for a total cost of £110,000, 358,090 ordinary shares sold out of treasury for total proceeds of £670,000 and 945,000 ordinary shares issued for total proceeds of £1,857,000).  The number of ordinary shares in issue at 31 December 2009 was 208,619,868.




4.


Net asset value per ordinary share



The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of  £542,022,000 (31 December 2008: £463,534,000; 30 June 2009: £428,882,000) and on 208,619,868 ordinary shares (31 December 2008: 207,216,778; 30 June 2009: 208,519,868) being the number of ordinary shares in issue at the end of the period.




 

 

 

- MORE -



 

                                                                                                                      Page 8 of 10

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year ended 31 December 2009

 

Notes (continued)

 

5.    Transaction costs

Purchase transaction costs for the half year ended 31 December 2009 were £220,000 (half year ended 31 December 2008: £115,000; year ended 30 June 2009: £208,000). These comprise mainly stamp duty and commissions. Sale transaction costs for the half year ended 31 December 2009 were £62,000 (half year ended 31 December 2008: £61,000; year ended 30 June 2009: £107,000).

 

6.    VAT on management fees

While the Company has received back from HMRC 100% of the VAT which had been charged between 1990 and 1996 and 2000 and 2007 as well as simple interest on those amounts, there remains a substantial amount outstanding relating to both VAT reclaims for 1996 to 2000 and compound interest for 1990 to 2007.  Accordingly, because of the amounts involved the Board has decided to join a legal action being led by PricewaterhouseCoopers LLP to recover these amounts.  No recognition of the possible outcome of this action has been included in these half year accounts because of the uncertainty and length of time likely to be involved in this action.

 

7.    Interim dividends

A first interim dividend of 3.08p was paid on 30 November 2009. The second interim dividend of 3.08p (declared on 10 December 2009) will be paid on 26 February 2010 to shareholders on the register on 22 January 2010.

 

8.    Related party transactions

Details of related parties are contained in the Annual Report. Other than fees paid in the ordinary course of business, there have been no material transactions with our related parties affecting the financial position or performance of the Company during the six months.

 

9.    Going concern

The directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements.  The assets of the Company consist mainly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.

 

10.  Financial information

The financial information contained in this half year report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

 

The figures and financial information for the year ended 30 June 2009 have been extracted from the latest published audited accounts of the Company. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors, which was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

 

11.  Half year report

A copy of the Company's report for the half year ended 31 December 2009 will be posted to shareholders on 3 March 2010 and will be available on our website (www.cityinvestmenttrust.com) from 26 February 2010.  Copies can also be requested thereafter from the Secretary at the Registered Office, 201 Bishopsgate, London EC2M 3AE.

 

 

 

 

 

 

 

- MORE -



                                                                                                                                                                           

Page 9 of 10

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year ended 31 December 2009

 

 

Largest Investments

The 60 largest investments, convertibles and all classes of equity in any one company being treated as one investment, were as follows:

 

Market value

31 December 2009

£'000


Market value

31 December 2009

£'000

BP

39,600


Pennon

4,031

Royal Dutch Shell

35,324


Weir

3,946

British American Tobacco

35,289


RWE

3,931

GlaxoSmithKline

31,668


Greene King

3,917

Vodafone

29,842


Rolls-Royce

3,868

HSBC

29,415


Morrison (W) Supermarkets

3,745

Diageo

28,726


Hiscox

3,576

Scottish & Southern Energy

17,415


Swisscom

3,555

Tesco

17,120


Standard Chartered

3,544

National Grid

16,975


Spirax-Sarco Engineering

3,410

BHP Billiton

15,960


Novartis

3,382

AstraZeneca

15,135


G4S

3,258

Unilever

13,958


Legal & General

3,224

Land Securities

10,960


Halfords

3,194

Rio Tinto

9,261


Severn Trent

3,149

Pearson

8,910


Next

3,124

Britvic

8,568


Smiths Group

3,042

Aviva

8,356


Deutsche Telekom

3,026

Cadbury

7,975


Admiral

2,972

Reckitt Benckiser

7,551


Schroders

2,943

BAE Systems

7,190


Imperial Tobacco

2,940

Barclays

6,762


BBA Aviation

2,870

Centrica

6,746


Meggitt

2,860

Reed Elsevier

6,642


United Utilities

2,850

Croda

5,600


British Sky Broadcasting

2,810

France Telecom

5,109


Marks & Spencer

2,714

IMI

4,926


Segro

2,507

Amlin

4,663


Arriva

2,486

Smiths News

4,476


Whitbread

2,469

Provident Financial

4,176


William Hill

2,414

 

These investments total £540,055,000 or 92.0% of the portfolio.

 

 

 

 

 

 

 

 

- MORE -



 

                                                                                                                      Page 10 of 10

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Unaudited Results for the Half Year ended 31 December 2009

 

 

Sector Analysis of Portfolio as at 31 December 2009

 

 

%

Oil & Gas

13.6

Basic Materials

5.8

Industrials

9.7

Consumer Goods

18.5

Health Care

8.5

Consumer Services

11.9

Telecommunications

7.1

Utilities

9.4

Financials

14.8

Technology

0.7

 

--------

Total

100.0

 

=====

 

Directors' Responsibility Statement

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

 

a)         the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement "Half-Yearly Financial Reports";

 

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

 

c)         this 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).

 

S M de Zoete, Chairman

 

 

For further information please contact:

 

Job Curtis

Portfolio Manager, The City of London Investment Trust plc

Telephone: 020 7818 4367

 

James de Sausmarez

Head of Investment Trusts, Henderson Global Investors

Telephone: 020 7818 3349

 

Sarah Gibbons-Cook

Investor Relations and PR Manager, Henderson Global Investors

Telephone: 020 7818 3198

 

 

- ENDS -


This information is provided by RNS
The company news service from the London Stock Exchange
 
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