Source - LSE Regulatory
RNS Number : 7858C
Murray Income Trust PLC
25 February 2022
 

MURRAY INCOME TRUST PLC

LEGAL ENTITY IDENTIFIER (LEI): 549300IRNFGVQIQHUI

 

Half-Yearly Report for the six months ended 31 December 2021

 

The Directors of Murray Income Trust PLC report the unaudited results for the six months ended 31 December 2021.

 

PERFORMANCE HIGHLIGHTS

 

Net asset value total return {A}

 

 

Share price total return {A}

 

Six months ended 31 December 2021

+7.2%

 

Six months ended 31 December 2021

+7.5%

 

 

 

 

 

Year ended 30 June 2021

+20.6%

 

Year ended 30 June 2021

+18.5%

 

 

 

 

 

Benchmark total return

 

 

Ongoing charges {A,B}

 

 

 

 

 

 

Six months ended 31 December 2021

+6.5%

 

Forecast year to 30 June 2022

0.48%

 

 

 

 

 

Year ended 30 June 2021

+21.4%

 

Year ended 30 June 2021

0.46%

 

 

 

 

 

Earnings per share (revenue)

 

 

Dividend per Ordinary share

 

 

 

 

 

 

Six months ended 31 December 2021

17.7p

 

Year ended 30 June 2021

 34.50p

 

 

 

 

 

Six months ended 31 December 2020

13.5p

 

Year ended 30 June 2020

34.25p

 

 

 

 

 

Discount to net asset value {A}

 

 

Dividend yield {A}

 

 

 

 

 

 

As at 31 December 2021

6.7%

 

As at 31 December 2021

 3.8%

 

 

 

 

 

As at 30 June 2021

6.8%

 

As at 30 June 2021

4.0%

 

 

{A} Considered to be an Alternative Performance Measure

 

{B} In the year ended 30 June 2021 this was lower than would normally be expected due to the management fee waiver in respect of net assets transferred from Perpetual Income and Growth Investment Trust plc in November 2020.

 

FINANCIAL CALENDAR AND DIVIDENDS

 

Financial Calendar

 

Payment dates of quarterly dividends

Dec, Mar, Jun, Sep

Financial year end

30 June

Expected announcement date of annual results

Sep

Annual General Meeting (London)

1 November 2022

 

Dividends

 

Rate

XD date

Record date

Payment date

First interim

8.25p

25 Nov 2021

26 Nov 2021

22 Dec 2021

Second interim

8.25p

17 Feb 2022

18 Feb 2022

17 Mar 2022

Third interim

8.25p

19 May 2022

20 May 2022

16 Jun 2022

 

CHAIRMAN'S STATEMENT

"The really interesting story is one of dividend recovery."  Neil Rogan, Chairman

Performance was ahead of the FTSE All-Share Index (the Company's "Benchmark"), over the six months ended 31 December 2021. Shareholders continue to benefit from the enlarged scale of the Company following the merger with Perpetual Income & Growth Investment Trust (the "Merger") with net assets now £1.15bn, a lower blended annualised management fee rate of 0.33%, a lower forecast ongoing charges ratio of 0.48% (based on the Company's net asset value ("NAV") as at 31 December 2021) plus additional liquidity and lower bid-offer spreads when trading.

 

This is all good news. However, the really interesting story is one of dividend recovery.

 

The UK Equity Income sector was already out of favour when Covid-19 hit and caused many companies to slash or suspend their dividends. There have been net redemptions of over £2bn from the open-ended funds in the sector in each of the last two years, partly in response to Covid-19 but also due to a preference for growth and technology stocks elsewhere, particularly in the United States, although this has started to reverse in early 2022.

 

Link reports that calendar year 2020 dividends for the UK market as a whole fell 44% on 2019 levels while 2021 dividends (on an underlying basis) were up 22% on 2020. Link forecast dividends to fall 7% in 2022, which would leave them still 21% below 2019 levels. The Company's focus on quality companies has produced a very different experience and outlook: our Manager reported a 13% reduction in our portfolio income in 2020, followed by an 11% recovery in 2021, and now projects portfolio income levels to reach new highs later in 2022. This is not necessarily repeatable, but places us well ahead of our original forecasts.

 

We are not allowed to give dividend forecasts but it does look as if later this year the Board will be once again in the fortunate position of having to decide how much of this year's income to pay out as a higher dividend and how much to put into revenue reserves for future rainy days. That is from a starting point whereby our full year dividend per share of 34.50p for the year to 30 June 2021 represented a yield of 3.8% on the 31 December 2021 share price of 918.0p. By comparison the Benchmark's dividend yield at the same date was 3.2%.

 

Performance

Over the six months ended 31 December 2021, the Company's NAV per share rose 7.2% in total return terms, ahead of 6.5% for the Benchmark. The share price total return was 7.5% with the discount closing the period at 6.7%, almost the same level at which it started. For the full calendar year 2021, the NAV total return was 18.4%, the Benchmark returned 18.3% and the share price total return was 14.1%.

 

Looking over longer periods to the end of 31 December 2021, performance is also significantly ahead of the Benchmark over three, five and ten years. At the same time, we continue to grow our dividend with an increase chalked up in every one of the past 48 years. This puts us into the top ten on the AIC's list of 'Dividend Heroes' (the investment trusts with the longest records of consecutive annual dividend growth) as measured by the number of years of dividend growth.

 

Cumulative Performance

1 year

3 years

5 years

10 years

 

 (%)

(%)

(%)

(%)

Share Price

14.1

42.9

56.8

127.7

NAVA

18.4

42.4

47.3

135.8

FTSE All-Share

18.3

27.2

30.2

110.7

FTSE 350 Higher Yield

20.5

13.8

14.1

76.9

{A} Considered to be an Alternative Performance Measure

Source: abrdn, Morningstar & Lipper

 

Investment Objective

The Company aims for a high and growing income combined with capital growth through investment in a portfolio principally of UK equities. Plain vanilla if you like, it is a diversified portfolio of quality companies.

 

Investment Process

Our Manager's investment process is best summarised as a search for good quality companies at attractive valuations. The Manager defines a quality company as one capable of strong and predictable cash generation, sustainably high returns on capital and with attractive growth opportunities. These typically result from a sound business model, a robust balance sheet, good management and strong environmental, social and governance characteristics. These qualities helped avoid the worst of the dividend shocks during the pandemic.

 

Investment People

abrdn is our appointed investment management company. Charles Luke has been our portfolio manager since 2006. His deputy is Iain Pyle and they are members of the now seven-strong UK Equity Income pod which itself is part of the fourteen-strong UK Equity Team headed by Andrew Millington.

 

Annual General Meeting ("AGM")

We were delighted to have held our AGM on 2 November 2021 as normal in London and to have had so many shareholders attend, ask questions and stay for lunch afterwards. This year's AGM will be on 1 November 2022, also in London, before we have our centenary AGM in 2023 in Glasgow, where the Company was founded.

 

Dividend Policy

With the Merger complete, the Company has reverted to its normal practice of announcing in October each year, the first three interim dividends for the financial year. On 4 November 2021 we announced first, second and third interim dividends, each of 8.25p per share, to be paid on 22 December 2021, 17 March 2022 and 16 June 2022, respectively. The aggregate of the three interim dividends is 24.75p per share which is the same as that paid for the three interim dividends in respect of the previous year ended 30 June 2021. The Board expects that the fourth interim dividend per share, to be announced in August 2022 with payment due in September 2022, will be at least 10.00p per share as compared to 9.75p per share in the previous year.

 

In the year ended 30 June 2021 the Company was able to increase our full year dividend per share from 34.25p to 34.50p which represents a yield of 3.8% on the 31 December 2021 share price of 918.0p. We accomplished this by paying out 33.70p from last year's revenue earnings, supplemented by 0.80p from the Company's revenue reserves. This resulted in revenue reserves per share of 12.9p available to support future dividends, equivalent to over 37% of the last year's dividend of 34.50p.

 

Discount

Although the discount was almost the same at the start and end of the six months under review, this masked some volatility during the period. As a result, the Company bought back 340,015 shares during the six months ended 31 December 2021, representing 0.3% of the shares in issue (excluding treasury shares) as at 30 June 2021. These were the first shares bought back by the Company since 2018. The Board continues to monitor the discount regularly and will take appropriate action, where warranted, to reduce discount volatility.

 

As at 31 December 2021, and the date of approval of this Report, there were 116,705,472 Ordinary 25p shares in issue with voting rights and an additional 2,824,060 shares held in treasury.

 

Gearing

The Company's long-term borrowings of £100m comprise of £40m 2.51% Senior Loan Notes 2027 and £60m 4.37% Senior Loan Notes 2029, resulting in a blended borrowing cost of 3.6% per annum. Together with £30m increase to the Company's £50m multicurrency bank loan facility in October 2021, this provides for potential total borrowings of £150m, which is equivalent to 13.1% of net assets at 31 December 2021. With the beta of the investment portfolio currently running at 0.91 (meaning that, in statistical terms, the portfolio is expected to capture 91% of any market movement) the Board presently believes that the appropriate neutral gearing rate is 10%. At 31 December 2021 the actual amount of total borrowings was £119.3m, equivalent to 10.4% of net assets. The annualised cost of the Company's current borrowings is 0.20% of NAV.

 

Board

Shareholders will be aware that we operate normally as a Board of six Directors but, temporarily, moved to a higher number as a result of the Merger. Jean Park and Donald Cameron retired from the Board at the end of our AGM after each completing nine years of service. We thank them both for their hard work on behalf of shareholders and wish them well for the future.

 

As explained in my Chairman's Statement within the 30 June 2021 Annual Report, we appointed Trust Associates to help identify a new director to return us to a Board of six members. The Company announced the appointment of Nandita Sahgal Tully on 3 November 2021. I, and my fellow Directors, are delighted to welcome Nandita to the Board, bringing more than 25 years' experience in financial services including UK and Emerging markets, ESG and impact investing.

 

Environmental, Social and Governance ("ESG")

One of the outcomes of the global climate summit, COP-26, held in November 2021 in our home city of Glasgow was a renewed focus on net zero in the Glasgow Climate Pact: where countries and companies are signing up to time commitments as to when their operations will become net zero in terms of carbon emissions and on what basis they will be measured. We can apply this focus to the Company also: 80% of the portfolio by value, by number 45 out of 61 companies held in the portfolio on 31 December 2021 have set out a net zero target date. The breakdown is shown in the following table:

 

 

% of Portfolio by Value

Number of Companies

2030

37

21

2040

9

5

2050

34

19

Not yet committed

20

16

Total

100

61

Source: abrdn

 

 

 

 

Our Manager continues to engage with those companies that have not yet set a timeframe as well as holding to account or pressing further those that have committed. From the numbers we can infer an average net zero date for the Company's portfolio of 2039. That number is a snapshot, it could move up or down if the portfolio changes and the outcomes are not in any case within our control. But it will be a useful number for comparison over time, while remembering that net zero is just one of the environmental factors within ESG.

 

ESG considerations are deeply embedded into the company analysis carried out by our Manager who is able to draw on the expertise of more than 30 in-house ESG specialists.  This aims to mitigate risk and enhance returns, results in frequent dialogue with investee companies and helps to ensure that the companies in the portfolio are acting in the best long term interests of their shareholders and society at large.

 

The Investment Manager's Report contains further information on how ESG factors are incorporated into the Managers' investment approach. For more detailed information we would refer you to our 2021 Annual Report (pages 88 to 90) and to our website (www.murray-income.co.uk).

 

Update

From 31 December 2021 to 22 February 2022, the latest practicable date, the NAV per share total return and share price total return were -6.9% and -6.5%, respectively, while the discount had narrowed from 6.7% to 6.5%. The FTSE All-Share Index total return was -0.7%.

 

Outlook

The wall of worry is still very high. There is bad news everywhere you look and we are repeatedly told that the only way to fix it is to change the people in charge. Yet having a more popular leader does not seem to have made much of a difference to the sum of the United States' problems. Indeed, President Biden no longer seems to be more popular. It is not clear how much the UK experience would change under a new Prime Minister, even a Labour one.

 

We will most likely have to look elsewhere for solutions but, fascinatingly, potential solutions are often initially identified as new problems. It has always been thus: it is simply very difficult to agree what leads us out of a crisis except with hindsight. There are several emerging possibilities right now that are worth tracking:

 

-    One way for pandemics to end is for variants to emerge that are ever more transmissible and less lethal. As they sweep through the population they eventually reach what used to be called "herd immunity" - until that became a contentious phrase two years ago. Contentious or not, it might have already happened in the UK thanks to the vaccine programme.

 

-     Alarm bells are ringing about rising wage growth and its effects on inflation. Headlines tell us we have a cost of living crisis. But if the wage growth is largely confined to low and middle incomes, this becomes the mechanism that delivers lower inequality. And if wages outstrip inflation then the resultant real wage growth is likely to be positive for living standards and consumer spending. In 2021, wage growth was in line with rising inflation in the UK.  Real wage growth in the next 12 months would be a significant positive surprise.

 

-    Inflation out of control would be a serious problem but if a country starts from a position of very high net debt, then a sustained period of moderate inflation could actually be a solution: The nominal value of the debt does not change but the tax raised on rising incomes, spending and profits would grow. It is like having a mortgage and a pay rise every year to help pay it off. Inflation above the Bank of England's target of 2% for a few years could be beneficial.

 

-   Monetary tightening, that is raising interest rates or reducing money supply growth, is commonly seen as negative for financial markets. Yet it should really depend on the starting point. As we have been through a long period of near-zero interest rates and rapid monetary expansion, if the economy starts to grow again it would be absolutely normal for interest rates to rise and money supply growth to reduce. Even if the pendulum swings too far, it will take a few years to reach there.

 

-    In stock markets, there has been a big style rotation out of growth and momentum stocks, particularly in the technology and internet sectors. This has actually been happening for about 15 months but has become particularly noticeable so far in 2022. Cue headlines about bubbles bursting or the end of an era. Growth and momentum stocks do look expensive in an era of rising interest rates and recovering economic growth. But does it mean a new bear market? It is interesting that value and quality stocks still look reasonably attractive in absolute terms. The Company's quality portfolio stands on a 2022 price to earnings multiple of 16x times, clearly not a bubble rating. Maybe it's just a big rotation.

 

There are still so many fast moving influential variables that it remains very difficult to forecast the residual outcome with any true confidence. Known unknowns and unknown unknowns will undoubtedly cause setbacks. War in Ukraine is the most obvious source of volatility.

 

But the news is not all bad and there are some interesting potential solutions out there. While you wait, Murray Income Trust PLC allows you to own a diversified portfolio of quality companies, overseen by an active and engaged fund manager, with a dividend yield of 3.8% and a track record of 48 years of consecutive dividend growth.

 

 

Neil Rogan,

Chairman
24 February 2022

 

 

 

INVESTMENT MANAGER'S REPORT

 

The portfolio outperformed the FTSE All-Share Index (the "Benchmark") during the six months ended 31 December 2021 with the NAV per Ordinary share rising by 7.2% compared to an increase in the Benchmark of 6.5% (both figures calculated on a total return basis).

 

The portfolio's overweight positions in the electricity and real estate sectors benefited performance. In contrast, the underweight position in oil and gas, and the overweight exposure to the medical equipment and services sector detracted from relative performance. The holdings in Safestore, VAT and Croda were the most beneficial to relative returns while the three non-holdings of Royal Dutch Shell, Glencore and Experian detracted the greatest, relatively.

 

Five new holdings were purchased for the portfolio during the six months. The first purchase was Watkin Jones, a developer with a market-leading position which provides exposure to the attractive build to rent and purpose built student accommodation markets (see the Case Studies for further information).  The second new entrant was Drax, the renewable energy company which uses waste wood products, where we see upside potential from BECCS (bioenergy with carbon capture and storage) which now has robust political backing, support from higher UK power prices and an attractive dividend yield. The third purchase was Nordea which we view as a higher returning bank operating in the Nordic region with an attractive dividend yield. The fourth new entrant was insurer Hiscox (please see Case studies for further information) where we believe the strength of the retail business is underappreciated and the company should benefit from a stronger rate environment. Finally, we participated in the IPO of private equity firm Bridgepoint, which we believe has an experienced management team and good client relationships which sets the company up well to continue its strong track record.

 

We increased exposure to a number of our existing holdings which we believe have high quality characteristics with attractive growth prospects including: Marshalls, OSB, Unite and Moonpig.

 

We sold five holdings during the period. Firstly, LondonMetric, as we believed that after a period of strong performance, the valuation and dividend yield of the company was no longer compelling.  Secondly, the small holding in Telecom Plus was exited given the uncertain industry backdrop. Thirdly, the very small holding in Jackson Financial shares that were received when the business was demerged from Prudential were sold. Finally, both John Laing and Sanne were sold at a pleasing profit following bids.

 

Profits were taken in a number of holdings that had performed strongly and where the valuation had started to look less attractive such as Dechra Pharmaceuticals, Croda, Nestle and VAT.

 

We continued our measured option-writing programme which is based on our fundamental analysis of holdings in the portfolio.  We believe that the option-writing strategy, which we have now employed for over 10 years, is of benefit to the Company by diversifying and increasing the level of income generated, providing headroom to invest in companies with lower starting yields but better dividend and capital growth prospects.

 

Environmental, Social and Governance ("ESG")

ESG engagement issues are often addressed as part of our regular meetings with management.  However, we also engage on a variety of specific issues outside our regular meetings cycle. It should be noted that given the quality threshold inherent in the portfolio, these meetings are rarely about issues for which we hold significant concerns. To provide a couple of examples of our engagement during the period. Firstly, we held a meeting with the Chair and Head of Sustainability of Marshalls around the reduction of emissions and work with the Carbon Trust to update carbon labelling together with governance issues for which we were reassured that the company remains engaged and receptive to our suggestions. Secondly, we conducted a meeting with Novo Nordisk's Vice President for Sustainability to discuss the company's strategic environmental aspirations. The company has a strong track record of integrating sustainability but we suggested more disclosure around Scope 3 emissions.

 

Market and Economic Background

The UK equity market rose by 6.5% on a total return basis over the six month period. Sentiment was influenced by concerns around the virus (in particular the delta variant in July and the omicron variant in November) together with the prospects for inflation and higher interest rates. Despite these concerns the market made good progress aided by robust earnings delivery and supportive oil prices.

 

Performance at a sector level was mixed. Beverages and oil and gas companies performed well but travel and leisure companies struggled. The FTSE100 Index and the Mid Cap Index performed in line with each other.

 

Domestic economic data published across the period reflected the circuitous return to more normal economic conditions. After surprising investors in November by maintaining rates at the all-time low of 0.1%, The Bank of England ("BoE") raised interest rates to 0.25% at its December meeting, the first rate hike in over three years (subsequently increased to 0.5% in February 2022).

 

The BoE acted to control inflation, which hit a near two decade high of 5.4% (year on year) in December. Energy prices, as well as clothing, food and second-hand car prices, were major factors, compounded by ongoing global supply chain problems. This calendar year we are expecting three 0.25% rate increases from the BoE, which would see rates reach 1% by the end of 2022. We then expect a further two increases in 2023, taking rates to 1.5%. In October, updated forecasts from the UK's Office for Budget Responsibility reduced the permanent scarring estimate, due to Covid, from a 3% hit to GDP to 2%.  In November, GDP breached the pre-pandemic level for the first time. The latest estimate from the International Monetary Fund is for GDP growth in the UK of 4.7% in 2022 and although this represents a 0.3% reduction from their previous forecast it is still stronger growth than any other G7 country.  The OECD also recognises the UK as the fastest growing G7 economy this year.

 

Overseas, recent data has suggested that the global economy continues its recovery but the progression of the omicron variant has diminished the pace of the upturn to varying degrees with supply bottlenecks also weighing on activity. In the Eurozone the most recent Purchasing Managers' Index data suggested slowing growth with the pace of expansion hitting a near 12 month low given virus restrictions. In the United States, upside surprises in inflation and mounting evidence of labour market tightness exacerbated by omicron heralds the start of a period of rate hikes likely from March of perhaps 100bps this year. In China, economic activity is on a generally firm footing but a continued downturn in the property sector and uncertainty around omicron has tempered growth rates more recently.

 

Outlook

Catalysed by hawkish signals from the Fed given concerns around the inflation outlook, real bond yields have risen since the start of the calendar year. This has resulted in a sharp style rotation within the equity market favouring value at the expense of quality and growth companies which tend to have a longer duration of earnings while 'concept' stocks (mostly in the technology sector) with little or no cashflows have been particularly affected.  Macro influences can have a salient impact on share prices in the short term but we are reminded of the saying attributed to the famous investor Benjamin Graham that 'in the short run the market is a voting machine, but in the long run it is a weighing machine' or in other words long term share price performance will reflect the fundamentals of the businesses that we invest in and that is certainly borne out empirically.

 

At the time of writing, the Russian invasion of Ukraine has just commenced for which the outcome and consequences are currently unknown. However, for now, our baseline forecasts are for global growth to remain above trend in 2022, helped by a rebound from the Omicron headwind. For the UK, in particular, the backdrop is generally supportive with pent-up demand and a fast booster rollout, albeit the prospect of higher utility bills weighing on consumer disposable income and other less benign inflationary pressures are increasingly areas of concern.

 

We take comfort that the valuations of UK-listed companies remain attractive on a relative basis and as such we think a fair proportion of the portfolio may be vulnerable to corporate activity. Moreover, the dividend yield of the UK market remains at an appealing premium to other regional equity markets let alone other asset classes. Furthermore, international investors remain underweight the UK providing a further underpin. Therefore, we feel very comfortable maintaining our long term focus on investments in high quality companies capable of sustainable earnings and dividend growth.

 

Charles Luke and Iain Pyle,

Aberdeen Asset Managers Limited

Investment Manager

24 February 2022

 

 

INVESTMENT CASE STUDIES

 

Watkins Jones

Watkin Jones, with a market capitalisation of approximately £700m and listed on the AIM market, is a developer of build to rent and student accommodation. These operations both have significant long term growth potential as institutions increase their exposure to these assets. The company has a capital-light business model allowing it to make very attractive returns on capital as their projects are largely forward-funded by institutional investors. The company is a leading player in this segment with an extensive pipeline of developments (which includes expansion into the affordable homes segment) and significant barriers to entry which revolve around planning expertise, sourcing land, client relationships and a strong track record. The company also has a property management business which is a positive differentiating factor. We think that the earnings growth, very strong net cash balance sheet and quality characteristics are conspicuously under-appreciated by the market given the company's modest price to earnings valuation ratio and attractive dividend yield.

 

Hiscox

Hiscox (with a market capitalisation of approximately £3bn) is a diversified international insurance group with a strong long-term culture. We started a new holding in the company during the six months having previously owned shares which were sold at the end of 2019. At that time we decided to sell the holding given concerns around pricing and social inflation in the company's retail business, coupled with rising catastrophe losses.  We now believe that these issues have ameliorated or have been dealt with through efforts at reinsurance (in the case of claims inflation), repricing or exiting parts of the business. In addition, catastrophe losses seem better priced in as the market has hardened. The growth attractions of the retail business (which represents around 75% of earnings), particularly in the United States with its strong brand resonance serving micro SMEs, do not seem to be reflected in the valuation, nor is the strength of the capital base, which is in very good shape.

 

 

TEN LARGEST INVESTMENTS

 

Diageo

AstraZeneca

Diageo produces, distills and markets alcoholic beverages including vodkas, whiskies, tequilas, gins and beer. The company should benefit from attractive long term drivers such as population and income growth, and premiumisation. The company has a variety of very strong brands and faces very limited private label competition.

AstraZeneca researches, develops, produces and markets pharmaceutical products. The company has a significant focus on oncology which offers significant growth potential over the medium term.

Relx

SSE

Relx is a global provider of information and analytics for professionals and businesses across a number of industries including scientific, technical, medical and law. The company offers resilient earnings combined with long term structural growth opportunities.

SSE is a utility company mostly focused on networks and renewables. The path to net zero will require significant investment in distribution networks and the company should also benefit from its strong position in offshore
wind generation.

Safestore

BHP Group

Safestore is a leading owner and operator of self-storage facilities with a focus on London and Paris.
There is potential to expand in various European countries where the industry is under-developed.

BHP Group (formerly BHP Billiton) is a diversified resources group with a global portfolio of high quality assets particularly iron ore and copper. The company combines an appealing dividend yield combined with a strong balance sheet.

TotalEnergies

Coca-Cola HBC

TotalEnergies is a broad energy company that produces and markets fuels, natural gas, and electricity. It is a leader in the sector's energy transition with an attractive pipeline
of renewable assets.

Coca-Cola HBC is a soft drinks bottler of Coca-Cola product operating mostly in Eastern Europe, Nigeria and Russia. The Company offers attractive earnings growth driven by higher volumes, premiumisation, innovation
and pricing.

Unilever

Rio Tinto

Unilever is a global consumer goods company supplying food, home and personal care products. The company has a portfolio of strong brands including Dove, Knorr, Axe and Persil. Over half of the company's sales are to developing and emerging markets.

Rio Tinto is an international mining company and has interests in mining for a large number of metals and minerals. It has a strong balance sheet and pays an attractive
dividend yield.

 

 

INVESTMENT PORTFOLIO - AS AT 31 DECEMBER 2021

 

As at 31 December 2021

 

 

 

 

 

 

 

Valuation

Total investments

Investment

Sector

Country

£'000

%

Diageo

Beverages

UK

63,256

5.1

AstraZeneca     

Pharmaceuticals and Biotechnology

UK

61,238

4.9

Relx

Media

UK

48,918

3.9

SSE

Electricity

UK

36,132

2.9

Safestore Holdings

Real Estate Investment Trusts

UK

34,907

2.8

BHP Group

Industrial Metals and Mining

UK

34,798

2.8

TotalEnergies

Oil Gas and Coal

France

32,410

2.6

Coca-Cola HBC

Beverages

UK

32,264

2.6

Unilever

Personal Care, Drug and Grocery Stores

UK

31,196

2.5

Rio Tinto

Industrial Metals and Mining

UK

30,411

2.5

Top ten investments

 

 

405,530

32.6

Inchcape

Industrial Support Services

UK

30,296

2.4

Standard Chartered

Banks

UK

30,144

2.4

Close Brothers

Banks

UK

29,922

2.4

Croda International

Chemicals

UK

28,660

2.3

National Grid

Gas Water and Multi-utilities

UK

27,544

2.2

Aveva

Software and Computer Services

UK

25,782

2.1

Howden Joinery

Retailers

UK

23,598

1.9

Sirius Real Estate

Real Estate Investment and Services

UK

22,618

1.8

Rentokil Initial

Industrial Support Services

UK

22,036

1.8

Marshalls

Construction and Materials

UK

21,986

1.7

Top twenty investments

 

 

668,116

53.6

OSB

Finance and Credit Services

UK

20,949

1.7

Countryside Properties

Household Goods and Home Construction

UK

20,170

1.6

Euromoney Institutional Investor

Industrial Support Services

UK

19,545

1.6

Direct Line Insurance

Non-life Insurance

UK

19,390

1.6

BP                           

Oil Gas and Coal

UK

19,252

1.5

Novo-Nordisk

Pharmaceuticals and Biotechnology

Denmark

19,130

1.5

Drax

Electricity

UK

18,972

1.5

GlaxoSmithKline

Pharmaceuticals and Biotechnology

UK

18,263

1.5

M&G

Investment Banking and Brokerage Services

UK

18,112

1.5

Vistry

Household Goods and Home Construction

UK

17,901

1.4

Top thirty investments

 

 

859,800

69.0

Nordea Bank

Banks

Sweden

17,603

1.4

Mondi

General Industrials

UK

17,098

1.4

Microsoft

Software and Computer Services

USA

16,852

1.3

Weir Group

Industrial Engineering

UK

16,846

1.3

Nestle

Food Producers

Switzerland

16,727

1.3

Smith (DS)

General Industrials

UK

15,895

1.3

Genuit

Construction and Materials

UK

15,588

1.3

Prudential                          

Life Insurance

UK

14,949

1.2

Bodycote

Industrial Metals and Mining

UK

14,399

1.2

Sage Group     

Software and Computer Services

UK

14,353

1.2

Top forty investments

 

 

1,020,110

81.9

Convatec

Medical Equipment and Services

UK

14,297

1.2

VAT Group

Electronic and Electrical Equipment

Switzerland

14,086

1.1

Ashmore Group

Investment Banking and Brokerage Services

UK

13,972

1.1

XP Power

Electronic and Electrical Equipment

UK

13,968

1.1

Telenor

Telecommunications Service Providers

Norway

13,543

1.1

Smith & Nephew

Medical Equipment and Services

UK

13,158

1.1

Dechra Pharmaceuticals

Pharmaceuticals and Biotechnology

UK

12,976

1.0

Intermediate Capital

Investment Banking and Brokerage Services

UK

12,791

1.0

Kone

Industrial Engineering

Finland

12,279

1.0

Unite Group

Real Estate Investment Trusts

UK

11,772

1.0

Top fifty investments

 

 

1,152,952

92.6

Fevertree

Beverages

UK

11,563

0.9

Assura

Real Estate Investment Trusts

UK

11,044

0.9

Electrocomponents

Industrial Support Services

UK

10,561

0.9

Industrials REIT

Real Estate Investment Trusts

UK

10,202

0.8

Watkin Jones

Household Goods and Home Construction

UK

9,213

0.7

Moonpig

Retailers

UK

8,902

0.7

Bridgepoint

Investment Banking and Brokerage Services

UK

8,061

0.7

Chesnara

Life Insurance

UK

7,389

0.6

Mowi

Food Producers

Norway

7,331

0.6

Accton Technology

Telecommunications Equipment

Taiwan

5,551

0.4

Hiscox

Non-life Insurance

UK

2,796

0.2

Total investments (61)

 

 

1,245,565

100.0

 

 

 

 

INTERIM BOARD REPORT

 

Principal Risks and Uncertainties

The Board regularly reviews the principal risks and uncertainties which it has identified, together with the delegated controls it has established to manage the risks and address the uncertainties. These are considered to be unchanged as at 31 December 2021, as compared to 30 June 2021, other than in relation to the Board's perception of heightened interest rate risk and geopolitical uncertainty, noting the potential volatility associated with the conflict in Ukraine, which the Board anticipates will persist over the six months to 30 June 2022. The principal risks and uncertainties are set out in detail on pages 18 to 21 of the Company's Annual Report for the year ended 30 June 2021 ("Annual Report 2021") which is available on the Company's website. The Annual Report 2021 also contains, in note 17 to the Financial Statements, an explanation of other risks relating to the Company's investment activities, specifically market risk, liquidity risk and credit risk, and a note of how these risks are managed.

 

Related Party Transactions

Under Generally Accepted Accounting Practice (UK Accounting Standards and applicable law), the Company has identified the Directors as related parties. No other related parties have been identified. There have been no related party transactions that have had a material effect on the financial position of the Company.

 

Going Concern

The factors which have an impact on the Company's status as a going concern are set out in the Going Concern section of the Directors' Report on page 42 of the Annual Report 2021. As at 31 December 2021, there had been no significant changes to these factors.

 

The Board has set limits for borrowing and regularly reviews the level of any gearing, cash flow projections and compliance with covenants associated with the Senior Loan Notes and bank facilities. As at 31 December 2021, in addition to the £40m 10 year Senior Loan Notes 2027 and £60m 10 year Senior Loan Notes 2029, £6.3m of the Company's three-year £50m multi-currency revolving bank credit facility (the "Facility") was drawn down. On the expiry of the Facility in October 2024, the Company would expect to continue to access a credit facility.  However, should acceptable terms for a new credit facility not be forthcoming at that time, any outstanding borrowing will be repaid through the proceeds of equity sales.

 

The Directors are mindful of the principal risks and uncertainties disclosed above and, having reviewed forecasts detailing revenue and liabilities, they believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis of accounting in preparing the Financial Statements.

 

US Executive Order No. 14032

The Board confirms that the Company has not and does not intend to invest in any of the companies designated as "Chinese Military-Industrial Complex Companies" by the US Executive Order No. 14032.

 

Statement of Directors' Responsibilities

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 Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

 

-   the Half-Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

 

-   the Half-Yearly Board Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

 

The Half-Yearly Financial Report for the six months ended 31 December 2021 comprises the Half-Yearly Board Report, the Directors' Responsibility Statement and the condensed set of Financial Statements.

 

For and on behalf of the Board

Neil Rogan,

Chairman
24 February 2022

 

 

 

 

 

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

 

 

 

Six months ended

 

 

31 December 2021

 

 

Revenue

Capital

Total

 

Notes

£'000

£'000

£'000

Gains on investments

 

-

59,821

59,821

Currency (losses)/gains

 

-

(19)

(19)

Income

2

22,562

-

22,562

Investment management fees

4, 13

(611)

(1,425)

(2,036)

Administrative expenses

 

(748)

-

(748)

Net return before finance costs and taxation

 

21,203

58,377

79,580

 

 

 

 

 

Finance costs

 

(344)

(802)

(1,146)

Net return before taxation

 

20,859

57,575

78,434

 

 

 

 

 

Taxation

5

(130)

-

(130)

Net return after taxation

 

20,729

57,575

78,304

 

 

 

 

 

Return per Ordinary share

6

17.7p

49.2p

66.9p

 

 

 

 

  

The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital columns are both prepared under guidance issued by the Association of Investment Companies.

 

A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Condensed Statement of Comprehensive Income.

 

All revenue and capital items in the above statement derive from continuing operations.

 

The accompanying notes are an integral part of the condensed financial statements. 

 

 

 

 

 

 

 

 

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (unaudited) (Cont'd)

 

 

 

Six months ended

 

 

31 December 2020

 

 

Revenue

Capital

Total

 

Notes

£'000

£'000

£'000

Gains on investments

 

-

47,935

47,935

Currency (losses)/gains

 

-

103

103

Income

2

11,852

-

11,852

Investment management fees

4, 13

(365)

(851)

(1,216)

Administrative expenses

 

(648)

-

(648)

Net return before finance costs and taxation

 

10,839

47,187

58,026

 

 

 

 

 

Finance costs

 

(218)

(509)

(727)

Net return before taxation

 

10,621

46,678

57,299

 

 

 

 

 

Taxation

5

(13)

-

(13)

Net return after taxation

 

10,608

46,678

57,286

 

 

 

 

 

Return per Ordinary share

6

13.5p

59.4p

72.9p

 

The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital columns are both prepared under guidance issued by the Association of Investment Companies.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Condensed Statement of Comprehensive Income.

All revenue and capital items in the above statement derive from continuing operations.

The accompanying notes are an integral part of the condensed financial statements.

 

 

 

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF FINANCIAL POSITION (unaudited)

 

 

 

As at

As at

 

 

31 December 2021

30 June 2021

 

Notes

£'000

£'000

Non-current assets

 

 

 

Investments at fair value through profit or loss

 

                  1,245,565

             1,202,290

 

 

 

 

Current assets

 

 

 

Other debtors and receivables

 

                         5,298

                    8,345

Cash and cash equivalents

 

                       17,352

                    4,493

 

 

                       22,650

                  12,838

 

 

 

 

Creditors: amounts falling due within one year

 

 

 

Derivative financial instruments

 

(865)

-

Other payables

 

                      (1,563)

                  (2,749)

Bank loans

7

                      (6,257)

                  (6,241)

 

 

                      (8,685)

                  (8,990)

Net current assets

 

                      13,965

                    3,848

Total assets less current liabilities

 

                  1,259,530

             1,206,138

 

 

 

 

Creditors: amounts falling due after one year

 

 

 

2.51% Senior Loan Notes 2027

7

                    (39,924)

                (39,918)

4.37% Senior Loan Notes 2029

7

                    (71,571)

                (72,361)

 

 

                  (111,495)

               (112,279)

Net assets

 

                  1,148,035

             1,093,859

 

 

 

 

Capital and reserves

 

 

 

Share capital

8

                       29,882

                  29,882

Share premium account

 

                     438,213

                438,213

Capital redemption reserve

 

                         4,997

                    4,997

Capital reserve

 

                     648,782

                594,282

Revenue reserve

 

                       26,161

                  26,485

Total Shareholders' funds

 

                  1,148,035

             1,093,859

 

 

 

 

Net asset value per Ordinary share

9

 

 

Debt at par value

 

983.7p

934.6p

 

 

 

 

The accompanying notes are an integral part of the condensed financial statements. 

 

 

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF CHANGES IN EQUITY (unaudited)

 

Six months ended 31 December 2021

 

 

 

 

 

 

Share

Capital

 

 

 

 

Share

premium

redemption

Capital

Revenue

 

 

capital

account

reserve

reserve

reserve

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2021

29,882

438,213

4,997

594,282

26,485

1,093,859

Net return after tax

-

-

-

57,575

20,729

78,304

Buyback of shares

-

-

-

(3,075)

-

(3,075)

Dividends paid (note 3)

-

-

-

-

(21,053)

(21,053)

Balance at 31 December 2021

29,882

438,213

4,997

648,782

26,161

1,148,035

 

 

 

 

 

 

 

Six months ended 31 December 2020

 

 

 

 

 

 

 

Share

Capital

 

 

 

 

Share

premium

redemption

Capital

Revenue

 

 

capital

account

reserve

reserve

reserve

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 July 2020

17,148

24,020

4,997

466,001

22,195

534,361

Net return after tax

-

-

-

46,678

10,608

57,286

Issue of shares on merger

12,734

414,486

-

-

-

427,220

Cost of shares issued in respect of the combination

-

(293)

-

-

-

(293)

Dividends paid (note 3)

-

-

-

-

(14,577)

(14,577)

Balance at 31 December 2020

29,882

438,213

4,997

512,679

18,226

1,003,997

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed financial statements.

 

 

 

MURRAY INCOME TRUST PLC

CONDENSED STATEMENT OF CASH FLOWS (unaudited)

 

 

 

Six months ended

Six months ended

 

 

31 December 2021

31 December 2020

 

Notes

£'000

£'000

Operating activities

 

 

 

Net return before finance costs and taxation

 

79,580

58,026

Increase in accrued expenses

 

445

535

Overseas withholding tax

 

(648)

(13)

Dividend income

 

(21,566)

(10,929)

Dividends received

 

22,382

9,764

Interest paid

 

(1,131)

(392)

Amortisation of Loan Notes

 

(784)

(185)

Foreign exchange losses/(gains)

 

19

(103)

Gains on investments

 

(59,821)

(47,935)

Increase in other debtors

 

(165)

(1,843)

Stock dividends included in investment income

 

(2,696)

(245)

Net cash inflow from operating activities

 

15,615

6,680

 

 

 

 

Investing activities

 

 

 

Purchases of investments

 

(95,243)

(54,759)

Sales of investments

 

116,577

24,025

Costs associated with the combination

 

-

(635)

Net cash inflow from investing activities

 

21,334

(31,369)

 

 

 

 

Financing activities

 

 

 

Dividends paid

3

(21,053)

(14,577)

Buyback of shares for treasury

 

(3,034)

-

Cost of shares issued in respect of the combination

 

-

(293)

Net cash acquired and received following the combination

 

-

40,248

Repayment of bank loans

 

(6,290)

(6,582)

Drawdown of bank loans

 

6,258

6,568

Net cash outflow from financing activities

 

(24,119)

25,364

Increase in cash

 

12,830

675

 

 

 

 

Analysis of changes in cash during the period

 

 

 

Opening balance

 

4,493

16,365

Effect of exchange rate fluctuations on cash held

 

29

(45)

Increase in cash as above

 

12,830

675

Closing balance

 

17,352

16,995

 

 

 

 

The accompanying notes are an integral part of the condensed financial statements.

 

 

 

 

Notes to the Financial Statements

 

 

1.

Accounting policies

 

Basis of preparation. The condensed financial statements have been prepared in accordance with Financial Reporting Standard ("FRS") 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in April 2021. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.

 

The condensed financial statements have been prepared using the same accounting policies as the preceding annual financial statements.

 

2.

Income

 

 

 

 

Six months ended

Six months ended

 

 

31 December 2021

31 December 2020

 

 

£'000

£'000

 

Investment income

 

 

 

UK dividends

14,927

8,960

 

Overseas dividends

3,698

1,117

 

Property income dividends

245

607

 

Stock dividends

2,696

245

 

 

21,566

10,929

 

Other income

 

 

 

Traded option premiums

996

923

 

 

996

923

 

Total income

22,562

11,852

 

 

3.

Dividends

 

 

 

Dividends paid on Ordinary shares deducted from the revenue reserve:

 

 

 

 

 

 

Six months ended

Six months ended

 

 

31 December 2021

31 December 2020

 

 

 £'000

 £'000

 

2020 fourth interim dividend - 9.50p

-

6,280

 

2021 first interim dividend - 12.55p

-

8,297

 

2021 fourth interim dividend - 9.75p

11,412

-

 

2022 first interim dividend - 8.25p

9,641

-

 

 

21,053

14,577

 

 

 

 

 

The first interim dividend for 2022 of 8.25p (2021 - 12.55p) was paid on 22 December 2021 to shareholders on the register on 26 November 2021. The ex-dividend date was 25 November 2021.

 

 

A second interim dividend for 2022 of 8.25p (2021 - 3.95p) will be paid on 17 March 2022 to shareholders on the register on 18 February 2022. The ex-dividend date is 17 February 2022.

 

 

A third interim dividend for 2022 of 8.25p (2021 - 8.25p) will be paid on 16 June 2022 to shareholders on the register on 20 May 2022. The ex-dividend date is 19 May 2022.

 

 

4.

Management fee and finance costs

 

 

The management fee and finance costs are as reported in the Annual Report 2021 being a tiered fee based on net assets and calculated as follows:

 

 

 

 

 

Fee rate

Net

 

 

per annum

assets

£'million

 

0.55%

less than

350

 

0.45%

within the range

350-450

 

0.25%

greater than

450

 

 

 

 

 

Aberdeen Standard Fund Managers Limited agreed to waive the management fee payable by the Company in respect of the net assets transferred to the Company for a period of 182 days following completion of the merger on 17 November 2020. This approximated to £199,000 for the period to 31 December 2020.

 

5.

Taxation

 

The expense for taxation reflected in the Condensed Statement of Comprehensive Income is based on the estimated annual tax rate expected for the full financial year. The estimated annual corporation tax rate used for the year to 30 June 2022 is an effective rate of 19% (2021 - 19%).

 

During the period the Company suffered withholding tax on overseas dividend income of £130,000 (31 December 2020 - £13,000).

 

6.

Return per Ordinary share

 

 

 

 

 

 

 Six months ended

 Six months ended

 

 

31 December 2021

31 December 2020

 

 

 £'000

 p

 £'000

 p

 

Revenue return

20,729

              17.7

10,608

                 13.5

 

Capital return

57,575

              49.2

46,678

                 59.4

 

Total return

78,304

              66.9

57,286

                 72.9

 

 

 

 

 

 

 

Weighted average number of Ordinary shares in issue

116,964,663

 

78,567,605

 

 

7.

Senior Loan Notes and bank loans

 

Senior Loan Notes 

 

The Company has in issue £40,000,000 of 10 year Senior Loan Notes at a fixed rate of 2.51%. Interest is payable in half yearly instalments in May and November and the Loan Notes are due to be redeemed at par on 8 November 2027. The Loan Notes are secured by a floating charge over the whole of the assets of the Company. The Company has complied with the Note Purchase Agreement that the ratio of net assets to gross borrowings must be greater than 3.5:1 and that net assets must not be less than £550,000,000. The fair value of the 2.51% Senior Loan Notes as at 31 December 2021 was £40,000,000 (30 June 2021 - £40,000,000), the value being calculated by aggregating the expected future cash flows discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time.

 

 

As a result of the combination with Perpetual Income and Growth Investment Trust plc on 17 November 2020, £60,000,000 of 15 year Senior Loan Notes at a fixed rate of 4.37% issued on 8 May 2014 were novated to the Company. Under FRS 102 the loan notes are required to be recorded initially at their fair value of £73,344,000 in the Company's financial statements and are amortised over the remaining life of the loan. The amortisation of the fair value adjustment is presented as a finance cost, split 70% to capital and 30% to revenue. Interest is payable in half yearly instalments in May and November and the Loan Notes are due to be redeemed at par on 8 May 2029. The Loan Notes are secured by a floating charge over the whole of the assets of the Company. The Company has complied with the Note Purchase Agreement that the ratio of net assets to gross borrowings must be greater than 2:1 and that net assets must not be less than £550,000,000. The fair value of the 4.37% Senior Loan Notes as at 31 December 2021 was £69,508,000 (30 June 2021 - £70,893,000), the value being based on a comparable quoted debt security.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 December 2021

30 June 2021

 

 

 

 

 

 

£'000

£'000

 

 2.51% Senior Loan Notes

40,000

40,000

 

 Unamortised 2.51% Senior Loan Notes issue expenses

(76)

(82)

 

 4.37% Senior Loan Notes at fair value

73,344

73,344

 

 Amortisation of 4.37% Senior Loan Note  

 

(1,773)

(983)

 

 

 

 

 

 

111,495

112,279

 

 

 

 

 

 

 

 

 

Bank loans

 

 

 

 

 

 

 

The Company's one year £20 million multi-currency unsecured revolving bank credit facility with Scotiabank Europe expired during the period and was replaced by a new three year £50 million multi-currency unsecured revolving bank credit facility with Bank of Nova Scotia Limited, committed until October 2024. At 31 December 2021 the Company had drawn down £6,257,000 (30 June 2021 - £6,241,000) of the facility.

 

 

 

 

31 December 2021

30 June 2021

 

 

Rate

Currency

£'000

Rate

Currency

£'000

 

Euro

1.15%

  2,326,000

         1,953

0.95%

    2,326,000

      1,997

 

Swiss Franc

1.35%

  2,500,000

         2,026

0.95%

    2,500,000

      1,958

 

US Dollar

1.38%

     768,000

            567

1.03%

       768,000

         556

 

Danish Krona

1.15%

  5,410,000

            611

0.95%

    5,410,000

         624

 

Norwegian Krone

1.84%

13,145,000

         1,100

1.13%

  13,145,000

      1,106

 

 

 

 

         6,257

 

 

      6,241

                       

 

 

 

 

 

8.

Share capital

Six months ended

Year ended

 

 

31 December 2021

30 June 2021

 

Ordinary shares of 25p each: publicly held

 

 

 

Opening balance

117,046,487

66,110,413

 

Issue of shares on combination

-

50,936,074

 

Buyback of shares for treasury

(341,015)

-

 

 

117,046,487

 

 

 

 

 

Ordinary shares of 25p each; held in treasury

 

 

 

Opening balance

2,483,045

2,483,045

 

Buyback of shares for treasury

341,015

-

 

 

2,824,060

2,483,045

 

Total issued share capital

119,529,532

119,529,532

 

 

 

 

 

 

During the period 341,015 Ordinary shares were bought back for treasury at a cost of £3,075,000. There have been no shares bought back since 31 December 2021, as at the date of approval of this Report.

 

9.

Net asset value per Ordinary share  

 

 

 

The net asset value and the net asset value attributable to the Ordinary shares at the end of the period follow. These were calculated using 116,705,472 (30 June 2021 - 117,046,487) Ordinary shares in issue at the period end (excluding treasury shares).

 

 

 

 

 

 

 

 

 

31 December 2021

 

30 June 2021

 

 

 

Net Asset Value

 

Net Asset Value

 

 

 

Attributable

 

Attributable

 

 

£'000

pence

£'000

pence

 

Net asset value - debt at par

1,148,035

983.7

1,093,859

934.6

 

Add: amortised cost of 2.51% Senior Loan Notes

39,924

34.2

39,918

34.1

 

Less: fair value of 2.51% Senior Loan Notes

(40,000)

(34.3)

(40,000)

(34.2)

 

Add: amortised cost of 4.37% Senior Loan Notes

71,571

61.3

72,361

61.8

 

Less: fair value of 4.37% Senior Loan Notes

(69,508)

(59.6)

(70,893)

(60.6)

 

Net asset value - debt at fair value

1,150,022

985.3

1,095,245

935.7

 

 

10.

Transaction costs

 

 

 

During the period, expenses were incurred in acquiring or disposing of investments classified at fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:

 

 

 

 

 

 

Six months ended

Six months ended

 

 

31 December 2021

31 December 2020

 

 

£'000

£'000

 

Purchases{A}

                           315

                           224

 

Costs associated with the combination{B}

                                -

                         2,519

 

Sales{A}

                             58

                                7

 

 

                           373

                         2,750

 

 

{A} Costs associated with the purchases and sale of portfolio investments in the normal course of the Company's business comprising stamp duty, financial transaction taxes and brokerage.

 

 

{B} Costs associated with the acquisition of assets from Perpetual Income and Growth Investment Trust plc, comprising £1,863,000 relating to stamp duty and financial transaction taxes and £656,000 relating to professional fees.

 

11.

Fair value hierarchy 

 

FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

 

 

Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date;

 

Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly; and

 

Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

 

 

The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:

 

 

 

 

Level 1

Level 2

Level 3

Total

 

As at 31 December 2021

Note

£'000

£'000

£'000

£'000

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

Quoted equities

a)

1,245,565

-

-

1,245,565

 

Financial liabilities at fair value through profit or loss

 

 

 

 

 

 

Derivatives

b)

(291)

(574)

-

(865)

 

Net fair value

 

1,245,274

(574)

-

1,244,700

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

As at 30 June 2021

Note

£'000

£'000

£'000

£'000

 

Financial assets at fair value through profit or loss

 

 

 

 

 

 

Quoted equities

a)

1,202,290

-

-

1,202,290

 

Net fair value

 

1,202,290

-

-

1,202,290

 

 

 

 

 

 

 

 

 

a)

Quoted equities. The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.

 

b)

Derivatives. The fair value of the Company's investments in Exchange Traded Options has been determined using observable market inputs on an exchange traded basis and therefore has been included in Fair Value Level 1.

 

 

The fair value of the Company's investments in Over the Counter Options (where the underlying equities are also held) has been determined using observable market inputs other than quoted prices of the underlying equities (which are included within Fair Value level 1) and therefore determined as Fair Value Level 2.

 

 

 

The fair value of the 2.51% Senior Loan Notes have been calculated as £40,000,000 (30 June 2021 - £40,000,000), determined by aggregating the expected future cash flows for that loan discounted at a rate comprising the borrower's margin plus an average of market rates applicable to loans of a similar period of time, compared to carrying amortised cost of £39,924,000 (30 June 2021 - £39,918,000).

 

 

The fair value of the 4.37% Senior Loan Notes, have been calculated as £69,508,000 (30 June 2021 - £70,893,000), the value being based on a comparable debt security, compared to carrying amortised cost of £71,571,000 (30 June 2021 - £72,361,000).

 

 

All other financial assets and liabilities of the Company are included in the Condensed Statement of Financial Position at their book value which in the opinion of the Directors is not materially different from their fair value.

                 

 

 

12.

Analysis of changes in net debt 

 

 

 

 

 

 

At

30 June 2021

Currency

differences

Cash flows

Non-cash

movements

At

31 December 2021

 

 

 

 

£000

£000

£000

£000

£000

 

Cash and cash equivalents

4,493

29

12,830

-

17,352

 

Debt due within one year

(6,241)

(48)

32

-

(6,257)

 

Debt due after one year

(112,279)

-

-

784

(111,495)

 

Total

(114,027)

(19)

12,862

784

(100,400)

 

 

 

 

 

 

 

 

 

At

Currency

 

Non-cash

At

 

 

30 June 2020

differences

Cash flows

movements{A}

31 December 2020

 

 

£000

£000

£000

£000

£000

 

Cash and cash equivalents

16,365

(45)

675

-

16,995

 

Debt due within one year

(6,667)

148

14

-

(6,505)

 

Debt due after one year

(39,904)

-

-

(73,159)

(113,063)

 

 

(30,206)

103

689

(73,159)

(102,573)

 

{A} As a result of the combination with Perpetual Income and Growth Investment Trust plc on 17 November 2020, £60,000,000 of 15 year Senior Loan Notes at a fixed rate of 4.37% issued on 8 May 2014 were novated to the Company. Under FRS 102 the loan notes are required to be recorded initially at their fair value of £73,344,000 in the Company's Financial Statements and are then amortised over the remaining life of the loan towards their redemption value of £60,000,000.

 

 

13.

Transactions with the Manager

 

 

 

The Company has delegated the provision of investment management, secretarial, accounting and administration and promotional services to Aberdeen Standard Fund Managers Limited ("ASFML" or the "Manager").

 

 

The amounts charged for the period are set out below: 

 

 

Six months ended

Six months ended

 

 

31 December 2021

31 December 2020

 

 

£'000

£'000

 

Management fees

2,036

1,216

 

Promotional activities

240

241

 

Secretarial fees

45

45

 

 

2,321

1,502

 

 

 

 

 

The amounts payable at the period end are set out below:

 

 

 

Six months ended

Six months ended

 

 

31 December 2021

31 December 2020

 

 

£'000

£'000

 

Management fees

675

373

 

Promotional activities

120

94

 

Secretarial fees

23

23

 

 

818

490

 

 

 

 

 

No fees are charged in the case of investments managed or advised by the abrdn Group. There were no commonly managed funds held in the portfolio during the six months to 31 December 2021 (2020 - one). The management agreement may be terminated by either party on the expiry of three months written notice. On termination the Manager would be entitled to receive fees which would otherwise have been due up to that date.

 

14.

Segmental Information

 

The Directors are of the opinion that the Company is engaged in a single segment of business activity, being investment business. Consequently, no business segmental analysis is provided.

15.

The financial information in this report does not comprise statutory accounts within the meaning of Section 434 - 436 of the Companies Act 2006. The financial information for the year ended 30 June 2021 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and contained no statement under Section 498 of the Companies Act 2006.

 

 

16.

This Half-Yearly Financial Report was approved by the Board on 24 February 2022.

 

 

 

ALTERNATIVE PERFORMANCE MEASURES

Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS102 and the AIC SORP. The Directors assess the Company's performance against a range of criteria which are reviewed as particularly relevant for closed-end investment companies.

 

Total return.

 

 

 

Total return is considered to be an alternative performance measure. Share price and NAV total returns show how the NAV and share price has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. Share price and NAV total returns are monitored against open-ended and closed-ended competitors, and the FTSE All-Share Index, respectively.

 

 

 

 

 

 

Share price

NAV

Opening at 1 July 2021

a

871.0p

934.6p

Closing at 31 December 2021

b

918.0p

983.7p

Price movements

c=(b/a)-1

5.4%

5.3%

Dividend reinvestment{A}

d

2.1%

1.9%

Total return

c+d

7.5%

7.2%

{A} Share price total return involves reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend. NAV total return involves investing the net dividend in the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend.

 

 

 

 

Discount to net asset value per Ordinary share.

 

 

 

The discount is the amount by which the share price is lower than the net asset value per share, expressed as a percentage of the net asset value.

 

 

 

 

 

 

31 December 2021

30 June 2021

NAV per Ordinary share (p)

a

983.7p

934.6p

Share price (p)

b

918.0p

871.0p

Discount

(b-a)/a

(6.7%)

(6.8%)

 

 

 

 

Dividend yield.

 

 

 

The annual dividend per Ordinary share divided by the share price, expressed as a percentage.

 

 

 

 

 

 

31 December 2021

30 June 2021

Dividends per share (p)

a

34.50p

34.50p

Share price (p)

b

918.0p

871.0p

Dividend yield

a/b

3.8%

4.0%

 

 

 

 

Net gearing.

 

 

 

Net gearing measures the total borrowings less cash and cash equivalents dividend by shareholders' funds, expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due to and from brokers at the year end as well as cash and cash equivalents.

 

 

 

 

 

 

31 December 2021

30 June 2021

Borrowings (£'000)

a

                  117,752

          118,520

Cash (£'000)

b

                    17,352

              4,493

Amounts due to brokers (£'000)

c

                           42

              1,191

Amounts due from brokers (£'000)

d

                           -  

              2,914

Shareholders' funds (£'000)

e

               1,148,035

        1,093,859

Net gearing

(a-b+c-d)/e

8.7%

10.3%

 

 

 

 

Ongoing charges.

 

 

 

The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC as the total of investment management fees and administrative expenses and expressed as a percentage of the average daily net asset values with debt at fair value published throughout the period. The ratio for 31 December 2021 is based on forecast ongoing charges for the year ending 30 June 2022.

 

 

 

 

 

 

31 December 2021

30 June 2021

Investment management fees (£'000)

a

                       4,096

            2,512

Administrative expenses (£'000)

b

                       1,456

            1,443

Less: non-recurring charges{A} (£'000)

c

                          (22)

             (115)

Ongoing charges (£'000)

a+b+c

                      5,530

            3,840

Average net assets (£'000)

d

               1,141,122

        841,850

Ongoing charges ratio

(a+b+c)/d

0.48%      

0.46%

{A} 31 December 2021 comprises £20,000 relating to recruitment costs and £2,000 relating to legal fees unlikely to recur. 30 June 2021 comprises £18,000 for legal fees and £6,000 for audit fees relating to the combination and £91,000 relating to HMRC penalty for late payment of stamp duty associated with the combination.

 

 

 

 

The ongoing charges ratio provided in the Company's Key Information Document is calculated in line with the PRIIPs regulations, which includes financing and transaction costs.

         

 

END

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
IR PPUMAPUPPPUC
Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJ Bell logo

Related Charts

Murray Income Trust PLC (MUT)

+11.00p (+1.34%)
delayed 17:51PM