To: PR
Newswire
From: Capital
Gearing Trust P.l.c.
LEI:
213800T2PJTPVF1UGW53
Date: 13
November 2023
Capital
Gearing Trust P.l.c. (the “Company”)
Announcement
of the Half-Year Financial Report for the six months ended
30 September 2023
Chairman’s
Statement
Investment
Performance
At the
half year to 30 September 2023, the
net asset value per share (‘NAV’) was 4,674.9p, compared to
4,797.3p at 31 March 2023. This
represents a NAV total return of -1.3% over the past six months.
This return was better than the global aggregate bond index and the
investment trust index which returned -3.8% and -1.7% respectively
in Sterling terms. Whilst it is always disappointing to report
negative returns the defensive orientation of the portfolio did
provide some protection from simultaneously weak bond and equity
markets. The returns lagged Consumer Price Index (‘CPI’) inflation
of 2.4% in the period.
The share
price ended the half year at 4,585p, a fall of 1.8%. During the
period 2,218,929 shares, with an aggregate value of £102.1m, were
bought back under the Company’s discount control policy
(‘DCP’).
Discount
Control Policy Update
Since 2015
the Company has operated the DCP which aims to ensure that, in
normal market conditions, the shares trade consistently close to
their underlying NAV.
As
announced on 31 October 2023, the
Company was in the process of seeking approval from the Northern
Irish Courts to reclassify its share premium account as a
distributable reserve to continue to support the DCP. In our
announcement, we referred to this process having been subject to
significant delays as a result of various “technical and
administrative issues”. It is now clear that these issues comprise
a series of errors and omissions on the part of third parties. As a
result, the Board has decided to take direct control over this
process and has agreed a revised timetable to take this through to
a successful conclusion. This will start with refreshing the
requisite shareholder authority at a soon to be convened General
Meeting and should result in the reserves being created in the
early part of next year. The Board is extremely frustrated by the
delay caused in the process and the fact that it was not made aware
of this until very recently. The Board intends to investigate
matters further and seek compensation for any costs incurred whilst
reserving all the Company’s other rights.
Following
the cancellation of the share premium account the Company will have
very significant headroom in its reserves to support the DCP for
the foreseeable future. Shareholders should be assured that the
Board remains fully committed to the DCP and any temporary
modifications will be reversed as soon as the Northern Irish Court
process is concluded.
Performance
Comparators
The
Company does not have a formal benchmark but over the years has
compared its performance against Retail Price Index (‘RPI’)
inflation and the MSCI UK index. RPI inflation is no longer
classified as a national statistic by the Office for National
Statistics due to methodological flaws. It has been replaced by CPI
inflation, which we will now refer to as a comparator. As a number
of shareholders have pointed out, neither our investment objective
nor our portfolio construction reflect the UK equity market, so the
Company will no longer use the MSCI UK index as a comparator but
may refer to equity indices more generally when looking at specific
components of performance.
Board
Update
We are
pleased to welcome Ravi Anand as a
non-executive Director with effect from 1
August 2023. Ravi has already made a positive impact on our
discussions pulling on his experience of investment trusts and
financial services more generally.
Wendy Colquhoun has been appointed as Chair of the
Nominations Committee to lead our Board succession planning.
Robin Archibald will retire at the
2024 AGM after nine years on the Board. As noted in the Annual
Report, to avoid two long standing Directors departing at the same
time, it has been agreed that I will remain on the Board for a
further period of one or two years beyond 2024 to enable a further
Board member to be recruited and to oversee an orderly handover to
a new Chairman.
Outlook
It seems
likely that the second half of the year will continue to be
challenging, as all asset markets are buffeted by a deteriorating
geopolitical backdrop, high interest rates and lingering inflation.
Against this backdrop the Company remains defensively positioned,
with a relatively constrained allocation to equities and
significant exposure to short duration high quality bonds. However,
with volatile markets come opportunities and the investment manager
will seek to exploit falling prices in the bond and equity markets
when values become compelling.
Jean Matterson
Chairman
10 November 2023
Investment
Manager’s Report
Investment
Review
The first
half of the financial year has proven challenging with a negative
return of 1.3%. The six month period was characterised by rising
interest rates in developed markets which proved a headwind to our
bond portfolios and rising investment trust discounts, particularly
in the alternatives sector, which were a challenge to our risk
assets.
Despite
the headwinds, corporate bonds and risk assets made positive
contributions to the portfolio. Detracting from performance were
nominal government bonds, index-linked bonds, and gold. The
Company’s nominal government bonds comprise treasury bills and
short duration bonds. A significant majority of these are
denominated in Sterling and generated positive returns. However,
the holdings of Japanese treasury bills (2%) and Swedish government
bonds (2%) both made negative contributions as sterling appreciated
by 10.1% and 3.6% against the Japanese Yen and Swedish Krona,
respectively.
Since the
start of 2021, the Yen has risen from 141 to the pound to 182.
Adjusting for relative inflation, it has depreciated by over 30%.
We remain convinced of the Yen’s attraction and have a 9% weighting
to the currency. This is both on valuation grounds and portfolio
composition. On all purchasing power parity (‘PPP’) measures, the
Yen appears to be extraordinarily cheap. The portfolio role for the
Yen is also important. Japan is
the single largest overseas holder of US government bonds. There is
a concern, justified in our view, that a change in Japanese
monetary policy could result in huge sales of treasuries and
repatriation of the proceeds. Were this to happen, rising yields on
US government bonds should be accompanied by gains on the
Yen.
Index-linked
bonds were the other source of negative returns. The Company’s
holdings of UK index-linked bonds (23% of the portfolio) made
positive contributions, helped by the very short duration. We took
advantage of weakness over the summer to lengthen duration adding
to 5 year bonds on very attractive yields. US TIPS were the chief
detractor during the period as 10 year yields rose by around 100
basis points.
Corporate
bonds delivered positive returns of 1.9% over the six months. Gains
were broad based. The portfolio currently has a duration of around
2.5 years and yields around 7% with the vast majority carrying an
investment grade credit rating. While pleased with the performance
of our credit portfolio, with credit spreads tight and a
deteriorating macroeconomic environment, we are reluctant to
increase the Company’s allocation to the asset class or take on
additional duration risk.
Risk
assets contributed positively over the six-month period with
conventional equities returning over 5%. Our two largest holdings
the SPDR Europe Energy ETF and the iShares MSCI Japan ESG ETF
returned 13.6% and 5.9% respectively. Our property holdings
contributed 6.5%, buoyed by Civitas Social Housing being subject to
a takeover bid. The only significant drag on return was our
infrastructure holdings which delivered a negative return of 11%.
We have taken the opportunity to add to our infrastructure holdings
on the back of share price weakness. They offer, based on
conservative assumptions, prospective real returns of mid-single
digits: equal or higher than the long-term return on equities with
considerably lower risk. Such returns are very
appetising.
With
discounts so wide in the alternatives sector it is reasonable to
ask whether the stated NAVs can be relied upon. Our answer is a
cautious “yes”. The evidence of solidity is mounting with asset
disposals at or above book value being announced across many trusts
in multiple sectors. If the valuations can be relied upon why are
so many trusts trading at large discounts? It is simply a question
of supply, demand and the quantity theory of asset prices. Huge
amounts of capital have been raised in the alternative space in
recent years. Over the last 18 months
multi-asset funds have seen large redemptions and wealth managers
have switched their focus to highly tax efficient low coupon gilts.
With demand falling and the supply remaining constant, the
balancing variable – price – must take the strain, with all too
painful consequences. The diagnosis reveals the cure. With no
prospect for a change in demand, supply needs to be withdrawn from
the sector. For now the only contraction comes from takeovers. It
would be preferable for the sector to help itself by selling assets
and buying-back shares or returning capital to shareholders. We see
precious little evidence of this to date and have generally been
frustrated by the attitudes of boards and management teams. We will
continue to engage with boards and hope to report greater progress
to you in the full year results.
Outlook
The key
feature of the last six months has been the surprising resilience
of the US economy (and, to a lesser extent, Europe and the UK). This has resulted in the
market coming to believe the Federal Reserve when they said that
rates needed to be “higher for longer”. Accompanying this
realisation is a growing chorus of voices calling for a “soft
landing”. We remain sceptical of this outcome: the effects of the
rate hiking cycle have not fully flowed into the economy, credit
availability is falling rapidly, and the money supply is shrinking.
As Niall Ferguson recently put it
“The US economy’s not a plane and it won’t land gently”. Nor is
history on the side of the optimists, indeed the swelling chorus
may itself be a siren song. There was a huge spike in the number of
articles containing the phrase “soft landing” in both 1999/2000 and
2007/08. We worry that history will repeat itself.
Markets do
not share our concerns: credit spreads and equity risk premia are
low. In the full year results we wrote that the most rapid rate
hiking cycle, following on from an extended period of ultra-cheap
money, might result in the financial system breaking. So far this
has not come to pass. That crises at Credit Suisse and Silicon
Valley Bank were contained does not mean that future crises will be
avoided. To give an example, at the end of Q3 Bank of America’s
losses on its hold to maturity portfolio – mostly comprising agency
mortgage bonds – were $130 bn, around
58% of its tier 1 capital. Given the subsequent moves in rates we
can only assume those losses have grown. This is just one bank and
one part of its balance sheet. The scale of losses throughout the
financial system must be very large indeed.
Ordinarily
a financial crisis or a recession would be bullish for long bonds.
While this may yet occur, it is by no means certain. Short dated
bonds will rally as markets anticipate rate cuts from the Federal
Reserve. What happens to longer dated bonds is less clear. If the
Fed is forced to cut rates before inflation has been brought under
control, then long term interest rates may rise as investors price
higher inflation and demand additional term premium to compensate
for volatility.
Such a
move might be exacerbated by concerns over debt sustainability.
This year the US budget deficit is forecast to be 7.7% of GDP – a
truly staggering $2tn. A recession would only make this figure
worse. As the Federal Government rolls over its debts (around one
third over the next 12 months) it is paying real interest rates of
around 2.5%. This is higher than the trend growth rate of the
economy. The formula r – g(1)
neatly
encapsulates the problem. It shows that the debt to GDP ratio would
rise even if it were to run a balanced primary budget. For the past
two decades the increasing debt stock of the US has been financed
by relatively price insensitive buyers(2).
The appetite of these buyers is waning and new buyers will need to
be found. The price of money may rise to enable the market to
clear. The knock-on impact to other asset classes is unknown but
fiscal dominance and crowding out must be a risk.
Eventually,
these high yields are the source of their own destruction. There
are only two ways in which government borrowings can be made
sustainable. Either countries must run balanced budgets or, through
financial repression, reduce the interest rate they pay on their
debts. With no political constituency for fiscal prudence the
latter becomes the only viable route.
The
destination is clear, but the timing and the path taken are not.
There are only three things of which we can be reasonably certain.
First, the attempt by markets to price a bi-stable regime
(comprising the present regime of rising real yields and a future
regime of financial repression) will bring volatility to bond
markets. Second, long duration nominal bonds are likely to be a
poor investment across both regimes. Third, index-linked bonds will
fair much better than their nominal cousins and thrive when the
financial repression eventually comes. For the time being, we
accept our inability to forecast the future and therefore adopt a
cautious stance, positioning the portfolio to withstand and
ultimately, we hope, profit from what lies ahead.
Peter Spiller
Alastair Laing
Christopher Clothier
10 November 2023
(1) Where
r
is the real
cost of debt and g
the trend
growth of the economy
(2) These have
ranged from global FX reserve managers, yield starved Japanese
pension funds, the Federal Reserve conducting QE and – in recent
years – domestic banks trying to invest a glut of post-Covid
deposits
Interim
Management Report
A review
of the half year and the outlook for the Company can be found in
the Chairman’s Statement and the Investment Manager’s Report
above.
Principal
Risks and Uncertainties
The
principal risks and uncertainties facing the Company were explained
in detail within the Annual Report issued in May 2023.
There
remain heightened uncertainties for global economies and financial
markets, with rapid changes in interest rates, higher levels of
inflation, volatility in bond and equity markets and continued
heightened geopolitical risks impacting on energy supply and costs,
global trade and economic activity. Recent conflict in the
Middle East has heightened
geopolitical risk and is likely to continue to have an adverse
impact on world markets.
As
announced on 31 October 2023, the
Company has placed temporary limits on buy backs under its discount
control policy while it awaits approval from the Northern Irish
Court to cancel the Company’s share premium account and create
additional distributable reserves. While this progresses, there is
heightened risk around the premium and discount at which the shares
will trade, the continued operation of the DCP and the Company’s
third party service providers responsible for monitoring the DCP
and providing administration services. The DCP is expected to be
restored in full following receipt of Court approval.
The
Directors continue to work with the agents and advisers to the
Company to manage the risks, including any emerging risks the best
they can.
Related
Party Transactions
Details of
related party transactions are contained in the Annual Report
issued in May 2023. There have been
no material changes to be reported.
Going
Concern
The
Company’s investment objective and business activities, together
with the main trends and factors likely to affect its development
and performance are monitored continuously by the Board. The
Directors believe that the Company is reasonably well placed to
manage its business risks and, having reassessed the principal
risks, consider it appropriate to continue to adopt the going
concern basis of accounting in preparing the interim financial
information.
Statement
of Directors’ Responsibilities
Each
Director confirms that, to the best of their knowledge:
(i)
the
condensed set of financial statements has been prepared in
accordance with Financial Reporting Standard 104 (Interim Financial
Reporting);
(ii)
the
Half-Year Report includes a fair review of the information required
by Disclosure Guidance and Transparency Rule 4.2.7R (indication of
important events during the first six months of the financial year
and description of principal risks and uncertainties for the
remaining six months of the financial year) and includes a fair
review of the information required by Disclosure Guidance and
Transparency Rule 4.2.8R (disclosure of related party transactions
and changes therein); and
(iii)
the
Half-Year Report, taken as a whole, is fair, balanced and
understandable and provides information necessary for shareholders
to access the Company’s performance, position and
strategy.
For and on
behalf of the Board
Jean Matterson
Chairman
10 November 2023
Investments
of the Company
|
|
|
at
30 September 2023
|
|
|
The
top ten investments in each asset category are listed
below.
|
|
30
September 2023
£'000
|
31 March
2023
£'000
|
|
|
Index-Linked
Government Bonds
|
|
|
|
|
Index-Linked
Bonds - United Kingdom
|
257,996
|
267,376
|
|
|
Index-Linked
Bonds - United States
|
177,113
|
248,154
|
|
|
Index-Linked
Bonds - Japan
|
27,553
|
29,840
|
|
|
Index-Linked
Bonds - Canada
|
15,036
|
16,693
|
|
|
Index-Linked
Bonds - Sweden
|
11,003
|
10,997
|
|
|
Index-Linked
Bonds - Australia
|
4,414
|
4,834
|
|
|
Index-Linked
Bonds - Germany
|
-
|
5,236
|
|
|
|
493,115
|
583,130
|
|
|
|
|
|
|
|
Conventional
Government Bonds
|
|
|
|
|
Conventional
Government Bonds - United Kingdom
|
104,392
|
95,319
|
|
|
Conventional
Government Bonds - Sweden
|
23,399
|
19,304
|
|
|
Conventional
Government Bonds - Japan
|
22,783
|
34,978
|
|
|
Conventional
Government Bonds - United States
|
-
|
5,638
|
|
|
|
150,574
|
155,239
|
|
|
|
|
|
|
|
Preference
Shares / Corporate Debt
|
|
|
|
|
Grainger
3.375% 2028
|
7,824
|
7,484
|
|
|
Akelius
Residential Property 2.375% 2025
|
6,252
|
5,123
|
|
|
BP Capital
Perpetual Bond
|
5,277
|
-
|
|
|
Burford
Capital 6.125% 2025
|
5,170
|
4,878
|
|
|
Network
Rail 1.75% 2027
|
4,715
|
-
|
|
|
Liberty
Living Finance 2.625% 2024
|
4,648
|
3,179
|
|
|
Land
Securities 1.974% 2026
|
4,631
|
-
|
|
|
RMS IL
2.8332% 2035
|
4,364
|
3,074
|
|
|
NB Private
Equity Partners ZDP 2024
|
4,213
|
-
|
|
|
Deutsche
Pfandbriefbank 7.625% 2025
|
4,155
|
4,207
|
|
|
Other
Preference Shares/Corporate Debt Investments
|
114,517
|
145,842
|
|
|
|
165,766
|
171,787
|
|
|
|
|
|
|
|
Funds
/ Equities
|
|
|
|
|
iShares
MSCI Japan ESG Screened UCITS ETF
|
42,855
|
46,301
|
|
|
SPDR MSCI
Europe Energy UCITS ETF
|
32,622
|
34,236
|
|
|
Lyxor
STOXX Europe 600 Basic Resources UCITS ETF
|
17,707
|
18,670
|
|
|
North
Atlantic Smaller Companies Investment Trust
|
16,078
|
15,335
|
|
|
Greencoat
UK Wind
|
14,801
|
14,815
|
|
|
Grainger
|
10,887
|
11,327
|
|
|
iShares
S&P 500 Energy Sector UCITS ETF
|
8,392
|
7,795
|
|
|
International
Public Partnerships
|
7,023
|
7,558
|
|
|
GCP
Infrastructure Investments
|
6,053
|
7,618
|
|
|
Aker
Asa
|
6,048
|
8,838
|
|
|
Other
Fund/Equity Investments
|
144,877
|
156,104
|
|
|
|
307,343
|
328,597
|
|
|
|
|
|
|
|
Gold
|
|
|
|
|
Wisdomtree
Physical Swiss Gold
|
11,250
|
13,048
|
|
|
|
|
|
|
|
Total
investments
|
1,128,048
|
1,251,801
|
|
|
Cash
|
5,006
|
13,766
|
|
|
|
|
|
|
|
Total
|
1,133,054
|
1,265,567
|
|
|
|
|
|
|
|
|
Income
Statement
|
|
|
|
|
|
|
|
|
|
Six months
ended 30 September 2023 (unaudited)
|
|
|
|
Revenue
|
|
Capital
|
|
Total
|
|
|
|
£’000
|
|
£’000
|
|
£’000
|
|
|
|
|
|
|
|
|
Net losses
on investments
|
-
|
|
(27,390)
|
|
(27,390)
|
|
Net
currency losses
|
-
|
|
(82)
|
|
(82)
|
|
Investment
income (note 2)
|
13,627
|
|
-
|
|
13,627
|
|
Other
income
|
160
|
|
-
|
|
160
|
|
Gross
return
|
13,787
|
|
(27,472)
|
|
(13,685)
|
|
Investment
management fee
|
(2,188)
|
|
-
|
|
(2,188)
|
|
Other
expenses
|
(538)
|
|
-
|
|
(538)
|
|
Net
return before tax
|
11,061
|
|
(27,472)
|
|
(16,411)
|
|
Tax charge
on net return
|
(1,818)
|
|
-
|
|
(1,818)
|
|
Net
return attributable to equity shareholders
|
9,243
|
|
(27,472)
|
|
(18,229)
|
|
Net
return per
Ordinary
Share (note 3)
|
36.47p
|
|
(108.40)p
|
|
(71.93)p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
Statement
|
|
|
|
|
|
|
Six months
ended 30 September 2022 (unaudited)
|
|
|
|
Revenue
|
|
Capital
|
|
Total
|
|
|
£’000
|
|
£’000
|
|
£’000
|
|
|
|
|
|
|
|
Net losses
on investments
|
|
-
|
|
(59,969)
|
|
(59,969)
|
Net
currency gains
|
|
-
|
|
131
|
|
131
|
Investment
income (note 2)
|
|
12,711
|
|
-
|
|
12,711
|
Other
income
|
|
-
|
|
-
|
|
-
|
Gross
return
|
|
12,711
|
|
(59,838)
|
|
(47,127)
|
Investment
management fee
|
|
(2,247)
|
|
-
|
|
(2,247)
|
Other
expenses
|
|
(482)
|
|
-
|
|
(482)
|
Net return
before tax
|
|
9,982
|
|
(59,838)
|
|
(49,856)
|
Tax charge
on net return
|
|
(656)
|
|
-
|
|
(656)
|
Net return
attributable to equity shareholders
|
|
9,326
|
|
(59,838)
|
|
(50,512)
|
Net return
per
Ordinary
Share (note 3)
|
|
39.75p
|
|
(255.07)p
|
|
(215.32)p
|
|
|
|
|
|
|
|
|
|
Income
Statement
|
|
|
|
|
|
|
Year ended
31 March 2023 (audited)
|
|
|
Revenue
|
|
Capital
|
Total
|
|
|
£’000
|
|
£’000
|
£’000
|
|
|
|
|
|
|
Net losses
on investments
|
|
-
|
|
(68,449)
|
(68,449)
|
Net
currency losses
|
|
-
|
|
(547)
|
(547)
|
Investment
income (note 2)
|
|
24,846
|
|
-
|
24,846
|
Other
income
|
|
93
|
|
-
|
93
|
Gross
return
|
|
24,939
|
|
(68,996)
|
(44,057)
|
Investment
management fee
|
|
(4,620)
|
|
-
|
(4,620)
|
Other
expenses
|
|
(974)
|
|
-
|
(974)
|
Net return
before tax
|
|
19,345
|
|
(68,996)
|
(49,651)
|
Tax charge
on net return
|
|
(1,739)
|
|
-
|
(1,739)
|
Net return
attributable to equity shareholders
|
|
17,606
|
|
(68,996)
|
(51,390)
|
Net return
per
Ordinary
Share (note 3)
|
|
70.67p
|
|
(276.96)p
|
(206.29)p
|
|
|
|
|
|
|
The total
column of this statement represents the Income Statement of the
Company. The Revenue return and Capital return columns are
supplementary to this and are prepared under guidance issued by the
Association of Investment Companies.
All
revenue and capital items in the above statement derive from
continuing operations.
There are
no gains or losses other than those recognised in the Income
Statement.
|
|
|
|
|
|
|
|
|
Statement
of Changes in Equity (unaudited)
for
the six months ended 30 September 2023
|
|
|
Called-up
share capital
|
Share
premium account
|
|
Capital
re-demption reserve
|
Unrealised
capital
reserve
|
Realised
capital
reserve*
|
Revenue
reserve*
|
Total
|
|
|
£’000
|
£’000
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance at 1 April 2023
|
6,645
|
1,101,753
|
|
16
|
(7,973)
|
140,426
|
18,852
|
1,259,719
|
Net return
attributable to equity shareholders and total comprehensive income
for the period
|
-
|
-
|
|
-
|
(24,365)
|
(3,107)
|
9,243
|
(18,229)
|
Shares
bought back (note 6)
|
-
|
-
|
|
-
|
-
|
(102,065)
|
-
|
(102,065)
|
Dividends
paid (note 4)
|
-
|
-
|
|
-
|
-
|
-
|
(15,577)
|
(15,577)
|
Total
transactions with owners recognised directly in equity
|
-
|
-
|
|
-
|
-
|
(102,065)
|
(15,577)
|
(117,642)
|
Closing
balance at 30 September 2023
|
6,645
|
1,101,753
|
|
16
|
(32,338)
|
35,254
|
12,518
|
1,123,848
|
|
|
|
|
|
|
|
|
|
|
for the
six months ended 30 September
2022
|
Called-up
share capital
|
Share
premium account
|
|
Capital
re-demption reserve
|
Unrealised
capital
reserve
|
Realised
capital
reserve*
|
Revenue
reserve*
|
Total
|
|
£’000
|
£’000
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
|
|
|
|
|
|
|
|
Opening
balance at 1 April 2022
|
5,223
|
816,009
|
|
16
|
57,222
|
159,561
|
11,804
|
1,049,835
|
Net return
attributable to equity shareholders and total comprehensive income
for the period
|
-
|
-
|
|
-
|
(72,894)
|
13,056
|
9,326
|
(50,512)
|
New shares
issued (note 6)
|
1,198
|
242,390
|
|
-
|
-
|
-
|
-
|
243,588
|
Dividends
paid (note 4)
|
-
|
-
|
|
-
|
-
|
-
|
(10,558)
|
(10,558)
|
Total
transactions with owners recognised directly in equity
|
1,198
|
242,390
|
|
-
|
-
|
-
|
(10,558)
|
233,030
|
Closing
balance at 30 September 2022
|
6,421
|
1,058,399
|
|
16
|
(15,672)
|
172,617
|
10,572
|
1,232,353
|
|
|
|
|
|
|
|
|
|
|
|
*These
reserves are regarded as being available for
distribution.
Statement
of Financial Position (unaudited)
at
30 September 2023
|
(unaudited)
|
|
(unaudited)
|
|
(audited)
|
|
30
September 2023
|
|
30
September 2022
|
|
31
March
2023
|
|
£’000
|
|
£’000
|
|
£’000
|
|
|
|
|
|
|
Fixed
assets
|
|
|
|
|
|
Investments
held at fair value through profit or loss
|
1,128,048
|
|
1,211,490
|
|
1,251,801
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Debtors
|
4,276
|
|
8,045
|
|
7,892
|
Cash at
bank and in hand
|
5,006
|
|
42,578
|
|
13,766
|
|
9,282
|
|
50,623
|
|
21,658
|
Creditors:
amounts falling due within one year
|
(13,482)
|
|
(29,760)
|
|
(13,740)
|
|
|
|
|
|
|
Net
current (liabilities)/assets
|
(4,200)
|
|
20,863
|
|
7,918
|
|
|
|
|
|
|
Total
assets less current liabilities
|
1,123,848
|
|
1,232,353
|
|
1,259,719
|
|
|
|
|
|
|
Capital
and reserves
|
|
|
|
|
|
Called-up
share capital
|
6,645
|
|
6,421
|
|
6,645
|
Share
premium account
|
1,101,753
|
|
1,058,399
|
|
1,101,753
|
Capital
redemption reserve
|
16
|
|
16
|
|
16
|
Capital
reserve
|
2,916
|
|
156,945
|
|
132,453
|
Revenue
reserve
|
12,518
|
|
10,572
|
|
18,852
|
|
|
|
|
|
|
Total
equity shareholders’ funds
|
1,123,848
|
|
1,232,353
|
|
1,259,719
|
|
|
|
|
|
|
Net
asset value per Ordinary Share
|
4,674.9p
|
|
4,798.4p
|
|
4,797.3p
|
The
Half-Year Financial Report for the six months ended 30 September 2023 was approved by the Board of
Directors on 10 November 2023 and
signed on its behalf by:
Jean Matterson
Chairman
10 November 2023
Cash
Flow Statement (unaudited)
for
the six months ended 30 September
2023
|
(unaudited)
|
|
(unaudited)
|
|
(audited)
|
|
6 months
ended
30
September 2023
|
|
6 months
ended
30
September 2022
|
|
Year
ended
31
March
2023
|
|
£’000
|
|
£’000
|
|
£’000
|
Net
cash inflow from operating activities (note 5)
|
5,821
|
|
7,767
|
|
16,499
|
Payments
to acquire investments
|
(339,122)
|
|
(522,583)
|
|
(1,037,482)
|
Receipts
from sale of investments
|
440,413
|
|
264,802
|
|
713,875
|
Net
cash inflow/(outflow) from investing activities
|
101,291
|
|
(257,781)
|
|
(323,607)
|
Equity
dividends paid
|
(15,577)
|
|
(10,558)
|
|
(10,558)
|
Repurchase
of Ordinary shares
|
(100,185)
|
|
-
|
|
(15,315)
|
Proceeds
from the issue of Ordinary shares
|
-
|
|
253,075
|
|
297,172
|
Cost of
shares issues
|
-
|
|
(536)
|
|
(1,036)
|
Cost of
share buybacks
|
(110)
|
|
-
|
|
-
|
Net
cash (outflow)/inflow from financing activities
|
(115,872)
|
|
241,981
|
|
270,263
|
Decrease
in cash and cash equivalents
|
(8,760)
|
|
(8,033)
|
|
(36,845)
|
Cash and
cash equivalents at start of period
|
13,766
|
|
50,611
|
|
50,611
|
Cash
and cash equivalents at end of period
|
5,006
|
|
42,578
|
|
13,766
|
Notes
to the Financial Statements
1 Basis
of preparation
The
condensed Financial Statements for the six months to 30 September 2023 comprise the Income Statement,
the Statement of Changes in Equity, the Statement of Financial
Position and the Cash Flow Statement, together with the notes set
out below. They have been prepared in accordance with FRS 104
‘Interim Financial Reporting’, the AIC’s Statement of Recommended
Practice issued in 2022 (“SORP”), UK Generally Accepted Accounting
Principles (“UK GAAP”) and using the same accounting policies as
set out in the Company’s Annual Report and Accounts at 31 March 2023.
2 Investment
income
|
(unaudited)
|
(unaudited)
|
(audited)
|
|
6
months
ended
30
September
2023
|
6
months
ended
30
September
2022
|
Year
ended
31
March
2023
|
|
£’000
|
£’000
|
£’000
|
Income
from investments
|
|
|
|
Interest
from UK bonds
|
5,116
|
2,570
|
6,049
|
Income
from UK equity and non-equity investments
|
4,740
|
6,375
|
11,057
|
Interest
from overseas bonds
|
3,474
|
1,505
|
4,973
|
Income
from overseas equity and non-equity investments
|
297
|
2,261
|
2,767
|
Total
income
|
13,627
|
12,711
|
24,846
|
3 Net
return per Ordinary share
The
calculation of return per Ordinary share is based on results after
tax divided by the weighted average number of shares in issue
during the period, excluding shares held in treasury, of 25,344,195
(30 September 2022: 23,459,021,
31 March 2023:
24,912,016).
The
revenue, capital and total return per Ordinary share is shown in
the Income Statement.
4 Dividends
paid
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
|
|
6 months
ended
30
September
2023
|
6 months
ended
30
September
2022
|
Year
ended
31
March
2023
|
|
|
£’000
|
£’000
|
£’000
|
2022
dividend paid 15 July 2022 (46.0p per share)
|
-
|
10,558
|
10,558
|
2023
dividend paid 10 July 2023 (60.0p per share)
|
15,577
|
-
|
-
|
|
|
|
|
|
5 Reconciliation
of net return on ordinary activities before tax to net cash inflow
from operating activities
|
|
(unaudited)
|
(unaudited)
|
(audited)
|
|
|
6
months
ended
30
September
2023
|
6
months
ended
30
September
2022
|
Year
ended
31
March
2023
|
|
|
£’000
|
£’000
|
£’000
|
Net return
before tax
|
(16,411)
|
(49,856)
|
(49,651)
|
Adjustments
for:
|
|
|
|
Capital
return before tax
|
27,472
|
59,838
|
68,996
|
Decrease/(increase)
in prepayments
|
16
|
28
|
(5)
|
Increase
in accruals and deferred income
|
16
|
102
|
39
|
Overseas
withholding tax paid
|
(29)
|
(59)
|
(115)
|
Decrease/(increase)
in recoverable tax
|
3
|
(10)
|
(10)
|
UK
Corporation tax paid
|
(1,006)
|
(243)
|
(874)
|
(Increase)/decrease
in dividends receivable
|
(326)
|
(307)
|
186
|
Increase
in accrued interest
|
(3,832)
|
(1,857)
|
(1,520)
|
Realised
(losses)/gains on foreign currency transactions
|
(82)
|
131
|
(547)
|
Net cash
inflow from operating activities
|
5,821
|
7,767
|
16,499
|
|
|
|
|
|
6 Ordinary
Shares
During the
period, the Company bought back 2,218,929 Ordinary shares (six
months to 30 September 2022: nil and
year to 31 March 2023: 321,500) for a
cash consideration totalling £102,065,000 (six months to
30 September 2022: nil and year to
31 March 2023:
£15,334,000).
During the
period, the Company issued no new Ordinary shares and no Ordinary
shares were issued from treasury (six months to 30 September 2022: 4,790,460 new Ordinary shares
issued for proceeds totalling £243,588,000 and no Ordinary shares
were issued from treasury, year to 31 March
2023: 5,688,288 new Ordinary shares issued for proceeds
totalling £287,166,000 and no Ordinary shares were issued from
treasury).
At
30 September 2023, there were
26,580,263 Ordinary shares in issue (30
September 2022: 25,682,435 and 31
March 2023: 26,580,263). At 30
September 2023 2,540,429 Ordinary shares were held in
treasury (30 September 2022: nil and
31 March 2023: 321,500).
7 Fair
value of financial assets and liabilities
Financial
Reporting Standard 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:
valued using unadjusted quoted prices in active markets for
identical assets;
Level 2:
valued using observable inputs other than quoted prices included
within Level 1; and
Level 3:
valued using inputs that are unobservable and are valued by the
Directors using International Private Equity and Venture Capital
Valuation (‘IPEV’) guidelines, such as earnings multiples, recent
transactions and net assets, which equate to their fair
values.
The
financial assets and liabilities measured at fair value in the
Statement of Financial Position are grouped into the fair value
hierarchy at 30 September 2023 as
follows:
Financial
assets at fair value through profit or loss
|
Level
1
£000
|
Level
2
£000
|
Level
3
£000
|
2023
Total
£000
|
Quoted
securities
|
1,127,386
|
–
|
–
|
1,127,386
|
Delisted
equities
|
–
|
–
|
662
|
662
|
Net fair
value
|
1,127,386
|
–
|
662
|
1,128,048
|
8 General
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 financial information for the half-years
ended 30 September 2023 and
30 September 2022 have not been
audited. The abridged financial information for the year ended
31 March 2023 has been extracted from
the Company’s statutory accounts for that period, which have been
filed with the Registrar of Companies. The report of the Auditors
on those accounts was unqualified and did not contain a statement
under either section 498(2) or section 498(3) of the Companies Act
2006.
Enquiries:
Juniper
Partners Limited
Company
Secretary
Email:
company.secretary@capitalgearingtrust.com