Fidelity Special Values PLC
Half-Yearly Results for the six months ended 29 February 2024
(unaudited)
Financial
Highlights:
-
The
Board of Fidelity Special Values PLC (the “Company”) recommends an
interim dividend of 3.24 pence per
share, an increase of 28.1% from last year’s interim
dividend.
-
During the six months ended 29
February 2024, the Company reported a Net Asset Value (NAV)
of +4.0% and ordinary share price total return of
+4.8%.
-
The
Benchmark, the FTSE All-Share Index, had a total return of +3.9%
over the same period.
-
Mergers and acquisitions activity contributed to
performance with five of the top ten contributors to performance
attracting bids.
Contacts
For further information, please
contact:
Smita Amin
Company Secretary
01737 836347
FIL Investments International
Portfolio Manager’s Half-Yearly Review
Performance
In the six month reporting period to 29
February 2024, the Company recorded a net asset value
(“NAV”) per ordinary share return of +4.0% and a share price return
of +4.8%, compared to a +3.9% return for the Benchmark FTSE
All-Share Index (all on a total return basis). This report seeks to
summarise the period, highlight the key drivers of performance and
set out the Portfolio Manager’s forward-looking views.
Stock Market and Portfolio Review
UK equities advanced during the period despite persistent global
challenges including geopolitical tensions, economic uncertainty,
high borrowing costs and China’s sluggish post pandemic economy.
Nevertheless, the market narrative was supported by decelerating
inflationary pressures that allowed the Bank of England (“BoE”) to keep interest rates
unchanged during the review period after fourteen successive rate
hikes. This has led to expectations that we may have reached the
peak of rate increases, while improving economic data increased
conviction in the soft-landing narrative, providing a tailwind for
equities.
From a sector perspective, market gains were led by technology,
industrials and consumer discretionary, while basic materials and
consumer staples were the biggest detractors. While both the value
and growth segments showed gains, the technology-led rally from
November meant that growth outperformed over the period. Similarly,
small cap stocks rebounded strongly following two years of
significant underperformance.
The period started with UK equities posting gains in September as
easing inflation prompted the BoE to keep its policy interest rate
unchanged at 5.25%. The decision to leave rates unchanged surprised
the market, as previous expectations factored in a high likelihood
of an imminent rate hike. Encouragingly, positive inflationary
developments extended beyond the UK, with the eurozone and the US
also reporting decelerating price pressures, which heightened
investor optimism over a soft landing. By the end of November,
markets had priced in a peak in current interest rates, with
expectations of cuts in 2024, both at home and abroad.
However, equities started off 2024 on a weak note. This shift was
underpinned by investors recalibrating their expectations for
imminent and substantial interest rate cuts by major central banks.
A desire for firmer evidence that inflation was under control and
the lack of commitment on the timing of rate adjustments by central
banks contributed to an atmosphere of uncertainty among market
participants. Meanwhile, geopolitical concerns remained centre
stage as a result of disruption of commercial shipping in the Red
Sea, leading to some supply chain bottlenecks.
Economic indicators in the UK painted a mixed picture. Preliminary
estimates revealed a 0.3% contraction in UK GDP
(quarter-on-quarter) in the fourth quarter of 2023, driven by
declines in both consumer and government spending. While this
marked the second consecutive quarter of contraction (defined as a
technical recession), nevertheless, GDP is estimated to have
increased overall in 2023 but only by 0.1%. On a positive note, the
preliminary data for January was more encouraging showing a 0.2%
month-on-month GDP expansion. UK inflation has also fallen rapidly
from its peak of more than 11% in late 2022 to just 3.4% in
February, but it is still above the Bank of England’s 2% target and
wage inflation remains stubbornly higher than the headline
rate.
Over the period, the Company’s NAV marginally outperformed its
Benchmark. Irish support services group DCC was the leading
contributor as its shares benefited from an improving outlook,
delivering on ambitious new targets for its energy division. Its
aim to evolve its strategy towards lower carbon energy solutions
was underlined by its acquisition of Progas GmbH, a leading
distributor of LPG in Germany,
considerably expanding its customer base in the country. Ryanair
Holdings continued to benefit from the post-pandemic recovery in
demand for international travel, as a strong Easter, record summer
traffic and the growth in air fares offset higher fuel costs. The
company also announced it would pay its first ever dividend, as it
continued to benefit from the constrained supply environment and
higher cost of new planes. Similarly, defence contractor Babcock
International Group paid its first dividend in four years, as it
reaped the benefits of a turnaround plan, becoming a more
predictable business, that is well placed for higher military
spending amid rising geopolitical tensions.
Mergers and acquisitions (“M&A”) activity continued to be a
significant performance driver during the period with five of the
top ten contributors attracting bids, or becoming subject to
takeover speculation. Smart Metering Systems agreed to a £1.3
billion deal from US private equity firm KKR (Kohlberg Kravis
Roberts) while ten-pin bowling operator Ten Entertainment Group was
taken over by another US private equity firm Trive Capital. Shares
in Direct Line Insurance Group rose on news that Belgian insurer
Ageas was considering making a takeover offer. Meanwhile, shares in
Aviva, the UK’s biggest insurer, rose after reports that it could
be the target of a takeover by a foreign buyer. Media and events
company Ascential also added value after the company agreed to sell
its digital commerce business to Omnicom Group and its product
design business to funds advised by Apax Partners. Once the
transactions are complete, Ascential intends to distribute £850
million to its shareholders.
Conversely, the holding in Swiss pharmaceuticals group Roche
Holdings detracted from performance, as investors weighed the
company’s more modest than expected 2024 outlook. Group sales,
which include diagnostics, were expected to grow by a mid-single
digit percentage, when adjusted for currency swings, but the
projections were lower than consensus estimates. Nevertheless,
results showed the company was overcoming a slump in demand for its
COVID-19 products and a decline in sales of a trio of established
cancer drugs.
Shares in merchant banking group Close Brothers declined sharply
after the Financial Conduct Authority announced that it would
review historic claims of unfair costs on discretionary car finance
commissions and ensure that consumers received compensation if it
uncovers evidence of widespread misconduct. Although we had
significantly reduced our holding having identified this risk, the
estimated fines are likely to be higher than previously thought and
the residual position proved a drag on returns given the
significant sell-off.
Industrial threads maker Coats Group was another detractor. The
company has seen a decline in trading revenues, but there are signs
of a gradual recovery, while its balance sheet and cash generation
remain strong. Elsewhere, Victrex was weighed down by weakness
across the chemical sector.
Meanwhile, shares in health and beauty products company PZ Cussons
fell following the devaluation of Nigeria’s currency, the naira,
before the company’s results announcement in February and this led
to a reduction in its dividend and a paring back of profit
forecasts. The company counts Nigeria as one of its four major markets,
although it now only represents 15% of profits. PZ Cussons is
undergoing a turnaround having reinvested in its core brands,
professionalised the organisation and has started to simplify its
operations.
Use of gearing
During the review period, we continued to use contracts for
difference to gear the portfolio’s long exposure and eliminate some
of the currency exposure for those holdings listed outside the UK.
Overall, there was a small reduction in the Company’s gearing level
over the period. Gearing remains low at 5.9% at the end of February
(compared to 6.5% at the end of August
2023). While valuations are attractive and we are finding
new ideas, we are conscious of the increased cost of borrowing and
want to retain some dry powder to take advantage of opportunities
and any short-term volatility.
Outlook
While there continues to be a degree of economic and geopolitical
uncertainty, the attractiveness of UK valuations versus history and
compared to other markets, as well as the large divergence in
performance between different parts of the market, continue to
create good opportunities for attractive returns from UK stocks on
a three-to-five-year view. Their unloved status means we continue
to find overlooked companies with good upside potential across
industries and the market cap spectrum. What is more, the lack of
interest from other investors means that, despite our focus on
attractive valuations, we do not have to compromise on
quality.
While the value in the UK market is not being recognised by
investors, it is being acknowledged by other market participants.
Overseas corporates and private equity firms are seeing the value
and are taking advantage of those attractive valuations. As noted
previously, we have had a lot of success with M&A across the
portfolio in the last six months. After a lull in the middle of
last year, activity has picked up. The low valuations are also
reflected in the substantial buyback activity among UK
corporates.
From a portfolio perspective, we remain disciplined, taking profits
in stocks that have performed well and where the risk/reward is no
longer as attractive. We are particularly wary of stocks where
fundamentals and margins have been strong, and a deterioration is
not priced in. A stock we sold after strong returns was Marks &
Spencer, where we felt the investment thesis had played out. The
stock had doubled having taken market share in the clothing, home
and food segments which had benefited from the exit of the likes of
New Look, Arcadia and Debenhams, favourable weather conditions as
well as a switch from shopping online back to shops after the
pandemic. Market sentiment was becoming overwhelmingly positive and
after such a strong run, we felt the risk/return was more skewed to
the downside given a wide range of scenarios in a relatively weak
economic environment. Elsewhere, higher interest rates have
benefited sectors such as banks and life insurers, which had been
shunned since the global financial crisis. While they continue to
be well represented in our portfolios, we have taken some profits
following strong returns, and changed some of our positions, for
instance reducing our NatWest Group position in favour of Standard
Chartered, given better revenue growth prospects, and switching
some of our Phoenix Group Holdings exposure into Just Group, a move
that paid off handsomely in light of the very strong set of results
they recently announced.
Conversely, we have been on the lookout for companies that have
seen their earnings rebased and which trade on low valuations with
limited downside and the potential for significant upside once the
environment normalises. We have been finding new ideas in cyclical
areas such as industrials, media, and staffing and adding back into
some UK housing related names of late, where demand appears to be
stabilising and valuations remain low.
Overall, we continue to see potential for attractive returns given
the upside/downside profile of our portfolio. We are encouraged by
the performance of our holdings in the recent reporting season. We
have seen a strong full year 2023 reporting season, and in
particular excellent results from some of our financials positions.
With the exception of high-end and big-ticket consumer goods, where
spend is under pressure, generally the results season has painted a
fairly robust economic picture, with things actually starting to
look more positive in most areas into the fourth quarter of 2023
and first quarter of 2024, compared to 2023 as a whole. The one
exception is China where poor
economic conditions on the ground appear to be deteriorating
further. Our holdings have low revenue exposure to China (much lower than the UK market) given
our low exposure to big staples, financials and mining companies
that are driven primarily by Chinese demand. Overall, we have been
encouraged by the robustness of earnings in the portfolio and
indeed the market as a whole.
Alex
Wright
Portfolio Manager
25 April 2024
Twenty Largest Investments as at 29
February 2024
The Asset Exposures shown below measure exposure to market price
movements as a result of owning shares, bonds and derivative
instruments. The Fair Value is the actual value of the portfolio as
reported in the Balance Sheet. Where a contract for difference
(“CFD”) is held, the Fair Value reflects the profit or loss on the
contract since it was opened and is based on how much the share
price of the underlying share has moved.
|
Asset Exposure
|
Fair Value
|
|
£’000
|
%1
|
£’000
|
Long Exposures – shares unless otherwise
stated
|
|
|
|
AIB Group (corporate bond and long CFD)
|
|
|
|
Banks
|
46,005
|
4.8
|
16,597
|
|
---------------
|
---------------
|
---------------
|
DCC
|
|
|
|
Industrial Support Services
|
44,061
|
4.5
|
44,061
|
|
---------------
|
---------------
|
---------------
|
Imperial Brands
|
|
|
|
Tobacco
|
36,957
|
3.8
|
36,957
|
|
---------------
|
---------------
|
---------------
|
Ryanair Holdings (shares and long CFD)
|
|
|
|
Travel & Leisure
|
33,616
|
3.5
|
4,371
|
|
---------------
|
---------------
|
---------------
|
Roche Holdings
|
|
|
|
Pharmaceuticals & Biotechnology
|
32,947
|
3.4
|
32,947
|
|
---------------
|
---------------
|
---------------
|
Aviva
|
|
|
|
Life Insurance
|
32,725
|
3.4
|
32,725
|
|
---------------
|
---------------
|
---------------
|
Mitie Group
|
|
|
|
Industrial Support Services
|
26,649
|
2.8
|
26,649
|
|
---------------
|
---------------
|
---------------
|
GSK
|
|
|
|
Pharmaceuticals & Biotechnology
|
26,453
|
2.7
|
26,453
|
|
---------------
|
---------------
|
---------------
|
Babcock International Group
|
|
|
|
Aerospace & Defense
|
23,265
|
2.4
|
23,265
|
|
---------------
|
---------------
|
---------------
|
Coats Group
|
|
|
|
General Industrials
|
22,821
|
2.4
|
22,821
|
|
---------------
|
---------------
|
---------------
|
NatWest Group
|
|
|
|
Banks
|
22,636
|
2.3
|
22,636
|
|
---------------
|
---------------
|
---------------
|
Glenveagh Properties (shares and long
CFDs)
|
|
|
|
Household Goods & Home Construction
|
22,586
|
2.3
|
19,458
|
|
---------------
|
---------------
|
---------------
|
Standard Chartered
|
|
|
|
Banks
|
21,453
|
2.2
|
21,453
|
|
---------------
|
---------------
|
---------------
|
Direct Line Insurance Group
|
|
|
|
Non-Life Insurance
|
19,414
|
2.0
|
19,414
|
|
---------------
|
---------------
|
---------------
|
Spire Healthcare Group
|
|
|
|
Health Care Providers
|
19,389
|
2.0
|
19,389
|
|
---------------
|
---------------
|
---------------
|
Keller Group (shares and long CFD)
|
|
|
|
Construction & Materials
|
19,326
|
2.0
|
13,011
|
|
---------------
|
---------------
|
---------------
|
OMV
|
|
|
|
Oil, Gas & Coal
|
19,027
|
2.0
|
19,027
|
|
---------------
|
---------------
|
---------------
|
Phoenix Group Holdings
|
|
|
|
Life Insurance
|
19,021
|
2.0
|
19,021
|
|
---------------
|
---------------
|
---------------
|
Conduit Holdings
|
|
|
|
Non-Life Insurance
|
18,572
|
1.9
|
18,572
|
|
---------------
|
---------------
|
---------------
|
Reckitt Benckiser Group
|
|
|
|
Personal Care, Drug & Grocery Stores
|
17,718
|
1.8
|
17,718
|
|
---------------
|
---------------
|
---------------
|
Twenty largest long exposures
|
524,641
|
54.2
|
456,545
|
Other long exposures
|
500,540
|
51.7
|
456,686
|
|
---------------
|
---------------
|
---------------
|
Gross Asset Exposure (96 holdings)
|
1,025,181
|
105.9
|
|
|
=========
|
=========
|
|
Portfolio Fair Value
|
|
|
913,231
|
|
|
|
=========
|
1 Asset
Exposure is expressed as a percentage of Shareholders’
Funds.
Fair Value and Asset Exposure of Investments as at
29 February 2024
|
|
Asset Exposure
|
|
Fair Value
£’000
|
£’000
|
%1
|
Investments
|
912,136
|
912,136
|
94.2
|
Long CFDs
|
1,095
|
113,045
|
11.7
|
|
---------------
|
---------------
|
---------------
|
|
913,231
|
1,025,181
|
105.9
|
|
=========
|
=========
|
=========
|
Cash at bank2
|
66
|
(111,884)
|
(11.6)
|
Bank overdraft
|
(5,260)
|
(5,260)
|
(0.5)
|
Fidelity Institutional Liquidity Fund
|
55,114
|
55,114
|
5.7
|
Other net current assets (excluding derivative assets and
liabilities)
|
5,252
|
5,252
|
0.5
|
|
---------------
|
---------------
|
---------------
|
Shareholders’ Funds
|
968,403
|
968,403
|
100.0
|
|
=========
|
=========
|
=========
|
The Company uses gearing through the use of long CFD positions.
Gross gearing as at 29 February 2024
was 5.9% (31 August 2023: 6.5% and
28 February 2023 5.3%).
1 Asset
Exposure is expressed as a percentage of Shareholders’
Funds.
2 The
asset exposure column for cash at bank has been adjusted to assume
the Company traded direct holdings rather than exposure being
gained through long CFD positions. The amount is derived by taking
the cost of the shares underlying the long CFDs when the contracts
were opened less the cash at bank balance at the period
end.
Interim Management Report and Directors’
Responsibility Statement
Board Changes
Nigel Foster will have completed his
nine year tenure on the Board during this year and will step down
at the conclusion of the Annual General Meeting in December 2024. A recruitment process for his
replacement will be carried out during the course of the
year.
Interim Dividend
Dividends are an important component of long-term returns and the
Board’s policy is to pay dividends twice yearly in order to smooth
the dividend payments for the Company’s financial year.
The Company’s revenue return for the six months to 29 February 2024 was 3.34
pence per share.
The Board has declared an interim dividend of 3.24 pence per share which is 28.1% higher than
the 2.53 pence per share paid as the
interim dividend in 2023. This will be paid on 20 June 2024 to shareholders on the register on
10 May 2024 (ex-dividend date
9 May 2024). Shareholders should note
that the Board will review the final dividend payment later in the
year based on dividend receipts from the companies held in the
portfolio. However, based on current forecasts, the Board would
hope to maintain at least the same level of dividend as paid in the
prior year and would intend to pay it entirely from the revenue
earned in the reporting period.
Discount Management and Share
Repurchases
Investment trust discounts continue to remain wide and the Company
has not been immune to this trend. As at 29
February 2024, the average discount for the companies in the
UK All Companies peer group was 10.8%. However, in the six months
under review, the Company’s discount to NAV has remained relatively
stable beginning the year at 8.8% and ending it at 8.3%. Under the
Company’s discount management policy, the Board seeks to maintain
the discount in single digits in normal market conditions and will
repurchase shares to help stabilise the share price discount. As
the discount remained in single digits in the reporting period, the
Company did not repurchase any shares.
The Board continues to monitor the level of the Company’s discount
closely and will take action when it believes to do so will be
effective and to the benefit of shareholders.
Principal Risks and Uncertainties
The Board, with the assistance of the Manager (FIL Investment
Services (UK) Limited), has developed a risk matrix which, as part
of the risk management and internal controls process, identifies
the key existing and emerging risks and uncertainties faced by the
Company.
The Board considers that the principal risks and uncertainties
faced by the Company continue to fall into the following
categories: market, economic and political; investment performance
(including the use of derivatives and gearing); cybercrime and
information security; environmental, social and governance (“ESG”);
competition; business continuity; key person and operational
support; discount control regulatory risks. Information on each of
these risks is given on pages 23 to 25 in the Strategic Report
section of the Annual Report for the year ended 31 August 2023, a copy of which can be found on
the Company’s pages of the Manager’s website at
www.fidelity.co.uk/specialvalues.
While the principal risks and uncertainties are the same as those
at the last year end, the uncertainty continues to be heightened by
the global implications of the ongoing Russia and Ukraine conflict dominating political risks
and industry concerns as well as the Middle East conflict. There is geopolitical
and economic uncertainty, in addition to events currently being
faced globally such as the cost of living, inflation, interest rate
rises, food supply crisis and the threat of cyberattacks on
critical infrastructure. There continues to be tension between
China and the US. The quantum of
risks continues to change and the Board remains vigilant in
monitoring such risks.
Climate change continues to be a key principal risk, that is
confronting asset managers and their investors. Globally, climate
change effects are already being experienced in the form of
changing weather patterns. Climate change patterns can potentially
impact the operations of investee companies, their supply chains
and their customers. Additional risks may also arise from increased
regulations, increased costs and net-zero programmes which can all
impact investment returns. The Board notes that the Manager has
integrated ESG considerations, including climate change, into the
Company’s investment process. The Board will continue to monitor
how this may impact the Company as a risk, the main risk being the
impact on investment valuations and shareholder returns.
Investors should be prepared for market fluctuations and remember
that holding shares in the Company should be considered to be a
long-term investment. Risks are somewhat mitigated by the
investment trust structure of the Company which means that no
forced sales need to take place to deal with any redemptions.
Therefore, investments in the Company’s portfolio can be held over
a longer time horizon.
The Manager has appropriate business continuity and operational
plans in place to ensure the uninterrupted provision of services.
This includes investment team key activities which also covers
portfolio managers, analysts and trading/support functions. The
Manager reviews its operational resilience strategies on an ongoing
basis and continues to take all reasonable steps in meeting its
regulatory obligations, assess its ability to continue operating
and the steps it needs to take to serve and support its clients,
including the Board. It has an appropriate control environment in
place.
The Company’s other third-party service providers also have similar
measures to ensure that business disruption is kept to a
minimum.
Transactions with the Manager and Related
Parties
The Manager has delegated the Company’s portfolio management and
company secretariat services to FIL Investments International.
Transactions with the Manager and related party transactions with
the Directors are disclosed in Note 13 to the Financial Statements
below.
Going Concern Statement
The Directors have considered the Company’s investment objective,
risk management policies, liquidity risk, credit risk, capital
management policies and procedures, the nature of its portfolio,
its expenditure and cash flow projections. The Directors, having
considered the liquidity of the Company’s portfolio of investments
(being mainly securities which are readily realisable) and the
projected income and expenditure, are satisfied that the Company is
financially sound and has adequate resources to meet all of its
liabilities and ongoing expenses and can continue in operational
existence for a period of at least
twelve months from the date of this Half-Yearly Report.
This conclusion also takes into account the Board’s assessment of
the ongoing risks as outlined above.
Accordingly, the Financial Statements of the Company have been
prepared on a going concern basis.
Continuation votes are held every three years and the next
continuation vote will be put to shareholders at the AGM in
2025.
By Order of the Board
FIL Investments International
25 April 2024
Directors’ Responsibility Statement
The Disclosure and Transparency Rules (“DTR”) of the UK Listing
Authority require the Directors to confirm their responsibilities
in relation to the preparation and publication of the Interim
Management Report and Financial Statements.
The Directors confirm to the best of their knowledge
that:
a) the
condensed set of Financial Statements contained within the
Half-Yearly Report has been prepared in accordance with the
Financial Reporting Council’s Standard: FRS 104: Interim Financial
Reporting; and
b) the
Portfolio Manager’s Half-Yearly Review and the Interim Management
Report above, include a fair review of the information required by
DTR 4.2.7R and 4.2.8R.
In line with previous years, the Half-Yearly Report has not been
audited by the Company’s Independent Auditor.
The Half-Yearly Report was approved by the Board on 25 April 2024 and the above responsibility
statement was signed on its behalf by Dean
Buckley, Chairman.
Financial Statements
Income Statement for the six months ended 29 February 2024
|
|
Six months ended 29 February 2024
unaudited
|
Year ended 31 August 2023
audited
|
Six months ended 28 February 2023
unaudited
|
|
Notes
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Gains/(losses) on investments
|
|
–
|
20,869
|
20,869
|
–
|
(12,021)
|
(12,021)
|
–
|
52,800
|
52,800
|
Gains on long CFDs
|
|
–
|
5,742
|
5,742
|
–
|
35,770
|
35,770
|
–
|
34,556
|
34,556
|
Investment and derivative income
|
4
|
15,462
|
–
|
15,462
|
43,717
|
–
|
43,717
|
13,700
|
–
|
13,700
|
Other interest
|
4
|
1,861
|
–
|
1,861
|
2,971
|
–
|
2,971
|
1,438
|
–
|
1,438
|
Investment management fees
|
5
|
(2,863)
|
–
|
(2,863)
|
(5,698)
|
–
|
(5,698)
|
(2,806)
|
–
|
(2,806)
|
Other expenses
|
|
(468)
|
–
|
(468)
|
(948)
|
–
|
(948)
|
(459)
|
–
|
(459)
|
Foreign exchange gains/(losses)
|
|
–
|
220
|
220
|
–
|
(4,032)
|
(4,032)
|
–
|
(2,131)
|
(2,131)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Net return on ordinary activities before finance costs and
taxation
|
|
13,992
|
26,831
|
40,823
|
40,042
|
19,717
|
59,759
|
11,873
|
85,225
|
97,098
|
Finance costs
|
6
|
(2,994)
|
–
|
(2,994)
|
(4,774)
|
–
|
(4,774)
|
(1,996)
|
–
|
(1,996)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Net return on ordinary activities before
taxation
|
|
10,998
|
26,831
|
37,829
|
35,268
|
19,717
|
54,985
|
9,877
|
85,225
|
95,102
|
Taxation on return on ordinary activities
|
7
|
(154)
|
–
|
(154)
|
(672)
|
–
|
(672)
|
(8)
|
–
|
(8)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Net return on ordinary activities after taxation for the
period
|
|
10,844
|
26,831
|
37,675
|
34,596
|
19,717
|
54,313
|
9,869
|
85,225
|
95,094
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Return per ordinary share
|
8
|
3.34p
|
8.28p
|
11.62p
|
10.67p
|
6.08p
|
16.75p
|
3.04p
|
26.30p
|
29.34p
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
The Company does not have any other comprehensive income.
Accordingly, the net return on ordinary activities after taxation
for the period is also the total comprehensive income for the
period and no separate Statement of Comprehensive Income has been
presented.
The total column of this statement represents the Income Statement
of the Company. The revenue and capital columns are supplementary
and presented for information purposes as recommended by the
Statement of Recommended Practice issued by the AIC.
No operations were acquired or discontinued in the period and all
items in the above statement derive from continuing
operations.
Statement of Changes in Equity for the six months ended
29 February 2024
|
Notes
|
Share
capital
£’000
|
Share
premium
account
£’000
|
Capital
redemption
reserve
£’000
|
Other non-
distributable
reserve
£’000
|
Capital
reserve
£’000
|
Revenue
reserve
£’000
|
Total
shareholders’
funds
£’000
|
Six months ended 29 February 2024
(unaudited)
|
|
|
|
|
|
|
|
|
Total shareholders’ funds at 31 August
2023
|
|
16,205
|
238,442
|
3,256
|
5,152
|
648,795
|
39,199
|
951,049
|
Net return on ordinary activities after taxation for the
period
|
|
–
|
–
|
–
|
–
|
26,831
|
10,844
|
37,675
|
Dividend paid to shareholders
|
9
|
–
|
–
|
–
|
–
|
–
|
(20,321)
|
(20,321)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total shareholders’ funds at 29 February
2024
|
|
16,205
|
238,442
|
3,256
|
5,152
|
675,626
|
29,722
|
968,403
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Year ended 31 August 2023 (audited)
|
|
|
|
|
|
|
|
|
Total shareholders’ funds at 31 August
2022
|
|
16,205
|
238,442
|
3,256
|
5,152
|
629,078
|
30,466
|
922,599
|
Net return on ordinary activities after taxation for the
year
|
|
–
|
–
|
–
|
–
|
19,717
|
34,596
|
54,313
|
Dividends paid to shareholders
|
9
|
–
|
–
|
–
|
–
|
–
|
(25,863)
|
(25,863)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total shareholders’ funds at 31 August
2023
|
|
16,205
|
238,442
|
3,256
|
5,152
|
648,795
|
39,199
|
951,049
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Six months ended 28 February 2023
(unaudited)
|
|
|
|
|
|
|
|
|
Total shareholders’ funds at 31 August
2022
|
|
16,205
|
238,442
|
3,256
|
5,152
|
629,078
|
30,466
|
922,599
|
Net return on ordinary activities after taxation for the
period
|
|
–
|
–
|
–
|
–
|
85,225
|
9,869
|
95,094
|
Dividend paid to shareholders
|
9
|
–
|
–
|
–
|
–
|
–
|
(17,663)
|
(17,663)
|
|
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
---------------
|
Total shareholders’ funds at 28 February
2023
|
|
16,205
|
238,442
|
3,256
|
5,152
|
714,303
|
22,672
|
1,000,030
|
|
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
=========
|
Balance Sheet as at 29 February
2024 Company number 2972628
|
Notes
|
29.02.24
unaudited
£’000
|
31.08.23
audited
£’000
|
28.02.23
unaudited
£’000
|
Fixed assets
|
|
|
|
|
Investments
|
10
|
912,136
|
882,692
|
904,659
|
|
|
---------------
|
---------------
|
---------------
|
Current assets
|
|
|
|
|
Derivative instruments
|
10
|
2,675
|
1,769
|
2,631
|
Debtors
|
|
5,908
|
8,937
|
4,942
|
Amounts held at futures clearing houses and brokers
|
|
775
|
–
|
425
|
Cash and cash equivalents
|
|
55,180
|
59,460
|
89,441
|
|
|
---------------
|
---------------
|
---------------
|
|
|
64,538
|
70,166
|
97,439
|
|
|
=========
|
=========
|
=========
|
Current liabilities
|
|
|
|
|
Derivative instruments
|
10
|
(1,580)
|
(949)
|
(888)
|
Bank overdraft
|
|
(5,260)
|
–
|
–
|
Other creditors
|
|
(1,431)
|
(860)
|
(1,180)
|
|
|
---------------
|
---------------
|
---------------
|
|
|
(8,271)
|
(1,809)
|
(2,068)
|
|
|
=========
|
=========
|
=========
|
Net current assets
|
|
56,267
|
68,357
|
95,371
|
|
|
=========
|
=========
|
=========
|
Net assets
|
|
968,403
|
951,049
|
1,000,030
|
Capital and reserves
|
|
|
|
|
Share capital
|
11
|
16,205
|
16,205
|
16,205
|
Share premium account
|
|
238,442
|
238,442
|
238,442
|
Capital redemption reserve
|
|
3,256
|
3,256
|
3,256
|
Other non-distributable reserve
|
|
5,152
|
5,152
|
5,152
|
Capital reserve
|
|
675,626
|
648,795
|
714,303
|
Revenue reserve
|
|
29,722
|
39,199
|
22,672
|
|
|
---------------
|
---------------
|
---------------
|
Total shareholders’ funds
|
|
968,403
|
951,049
|
1,000,030
|
|
|
=========
|
=========
|
=========
|
Net asset value per ordinary share
|
12
|
298.80p
|
293.44p
|
308.56p
|
|
|
=========
|
=========
|
=========
|
Cash Flow Statement for the six months ended 29 February 2024
|
29.02.24
unaudited
£’000
|
31.08.23
audited
£’000
|
28.02.23
unaudited
£’000
|
Operating activities
|
|
|
|
Investment income received
|
18,069
|
39,436
|
15,650
|
Net derivative income
|
859
|
5,934
|
3,479
|
Interest received
|
1,861
|
2,971
|
1,438
|
Investment management fee paid
|
(2,887)
|
(5,699)
|
(2,831)
|
Directors’ fees paid
|
(85)
|
(173)
|
(91)
|
Other cash payments
|
(332)
|
(777)
|
(416)
|
|
---------------
|
---------------
|
---------------
|
Net cash inflow from operating activities before finance
costs and taxation
|
17,485
|
41,692
|
17,229
|
|
=========
|
=========
|
=========
|
Finance costs paid
|
(3,040)
|
(4,622)
|
(1,925)
|
Overseas taxation incurred
|
216
|
(1,119)
|
51
|
|
---------------
|
---------------
|
---------------
|
Net cash inflow from operating
activities
|
14,661
|
35,951
|
15,355
|
|
=========
|
=========
|
=========
|
Investing activities
|
|
|
|
Purchases of investments
|
(133,738)
|
(429,178)
|
(210,375)
|
Sales of investments
|
124,932
|
368,171
|
192,392
|
Receipts on long CFDs
|
23,200
|
70,856
|
47,093
|
Payments on long CFDs
|
(17,719)
|
(45,085)
|
(23,445)
|
Movement on amounts held at futures clearing houses and
brokers
|
(775)
|
8,190
|
7,765
|
|
---------------
|
---------------
|
---------------
|
Net cash (outflow)/inflow from investing
activities
|
(4,100)
|
(27,046)
|
13,430
|
|
=========
|
=========
|
=========
|
Net cash inflow before financing
activities
|
10,561
|
8,905
|
28,785
|
|
=========
|
=========
|
=========
|
Financing activities
|
|
|
|
Dividends paid
|
(20,321)
|
(25,863)
|
(17,663)
|
Net cash outflow from financing
activities
|
(20,321)
|
(25,863)
|
(17,663)
|
Net (decrease)/increase in cash and cash
equivalents
|
(9,760)
|
(16,958)
|
11,122
|
Cash and cash equivalents at the beginning of the
period
|
59,460
|
80,450
|
80,450
|
Effect of movement in foreign exchange
|
220
|
(4,032)
|
(2,131)
|
|
---------------
|
---------------
|
---------------
|
Cash and cash equivalents at the end of the
period
|
49,920
|
59,460
|
89,441
|
|
---------------
|
---------------
|
---------------
|
Represented by:
|
|
|
|
Cash at bank
|
66
|
2,028
|
2,868
|
Bank overdraft
|
(5,260)
|
–
|
–
|
Amount held in Fidelity Institutional Liquidity Fund
|
55,114
|
57,432
|
86,573
|
|
---------------
|
---------------
|
---------------
|
|
49,920
|
59,460
|
89,441
|
|
=========
|
=========
|
=========
|
Notes to the Financial Statements
1 Principal Activity
Fidelity Special Values PLC is an Investment Company incorporated
in England and Wales with a premium listing on the London
Stock Exchange. The Company’s registration number is 2972628, and
its registered office is Beech Gate, Millfield Lane, Lower Kingswood, Tadworth,
Surrey KT20 6RP. The Company has been approved by HM Revenue
& Customs as an Investment Trust under Section 1158 of the
Corporation Tax Act 2010 and intends to conduct its affairs so as
to continue to be approved.
2 Publication of Non-statutory Accounts
The Financial Statements in this Half-Yearly Report have not been
audited by the Company’s Independent Auditor and do not constitute
statutory accounts as defined in section 434 of the Companies Act
2006 (the “Act”). The financial information for the year ended
31 August 2023 is extracted from the
latest published Financial Statements of the Company. Those
Financial Statements were delivered to the Registrar of Companies
and included the Independent Auditor’s Report which was unqualified
and did not contain a statement under either section 498(2) or
498(3) of the Act.
3 ACCOUNTING POLICIES
(i) Basis of Preparation
The Company prepares its Financial Statements on a going concern
basis and in accordance with UK Generally Accepted Accounting
Practice (“UK GAAP”) and FRS 102: The Financial Reporting Standard
applicable in the UK and Republic of
Ireland, issued by the Financial Reporting Council. The
Financial Statements are also prepared in accordance with the
Statement of Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital Trusts (“SORP”)
issued by the Association of Investment Companies (“AIC”) in
July 2022. FRS 104: Interim Financial
Reporting has also been applied in preparing this condensed set of
Financial Statements. The accounting policies followed are
consistent with those disclosed in the Company’s Annual Report and
Financial Statements for the year ended 31
August 2023.
(ii) Going Concern
The Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for a
period of at least twelve months from the date of approval of these
Financial Statements. Accordingly, the Directors consider it
appropriate to adopt the going concern basis of accounting in
preparing these Financial Statements. This conclusion also takes
into account the Directors’ assessment of the risks faced by the
Company as detailed in the Interim Management Report
above.
4 Income
|
Six months
ended
29.02.24
unaudited
£’000
|
Year
ended
31.08.23
audited
£’000
|
Six months
ended
28.02.23
unaudited
£’000
|
Investment income
|
|
|
|
UK dividends
|
10,044
|
29,189
|
10,736
|
UK scrip dividends
|
526
|
–
|
–
|
Interest on securities
|
785
|
805
|
109
|
Overseas dividends
|
3,096
|
10,543
|
2,234
|
|
---------------
|
---------------
|
---------------
|
|
14,451
|
40,537
|
13,079
|
|
=========
|
=========
|
=========
|
Derivative income
|
|
|
|
Dividends received on long CFDs
|
1,011
|
3,180
|
621
|
|
---------------
|
---------------
|
---------------
|
Investment and derivative income
|
15,462
|
43,717
|
13,700
|
|
=========
|
=========
|
=========
|
Other interest
|
|
|
|
Interest received on bank deposits, collateral and money market
funds
|
1,861
|
2,965
|
1,438
|
Interest received on tax reclaims
|
–
|
6
|
–
|
|
---------------
|
---------------
|
---------------
|
|
1,861
|
2,971
|
1,438
|
|
=========
|
=========
|
=========
|
Total income
|
17,323
|
46,688
|
15,138
|
|
=========
|
=========
|
=========
|
No special dividends have been recognised in capital during the
period (year ended 31 August 2023:
£1,904,000 and six months ended 28 February
2023: £nil).
5 Investment Management Fees
|
Six months
ended
29.02.24
unaudited
£’000
|
Year
ended
31.08.23
audited
£’000
|
Six months
ended
28.02.23
unaudited
£’000
|
Investment management fees
|
2,863
|
5,698
|
2,806
|
|
=========
|
=========
|
=========
|
FIL Investment Services (UK) Limited is the Company’s Alternative
Investment Fund Manager and has delegated portfolio management to
FIL Investments International (“FII”). Both companies are Fidelity
group companies.
FII charges investment management fees at an annual rate of 0.60%
of net assets. Fees are accrued on a daily basis and payable
monthly.
6 Finance Costs
|
Six months
ended
29.02.24
unaudited
£’000
|
Year
ended
31.08.23
audited
£’000
|
Six months
ended
28.02.23
unaudited
£’000
|
Interest paid on long CFDs
|
2,992
|
4,761
|
1,995
|
Interest on bank overdrafts
|
2
|
13
|
1
|
|
---------------
|
---------------
|
---------------
|
|
2,994
|
4,774
|
1,996
|
|
=========
|
=========
|
=========
|
7 Taxation on Return on Ordinary
Activities
|
Six months
ended
28.02.24
unaudited
£’000
|
Year
ended
31.08.23
audited
£’000
|
Six months
ended
28.02.23
unaudited
£’000
|
Overseas taxation
|
154
|
672
|
8
|
|
---------------
|
---------------
|
---------------
|
Total taxation charge for the period
|
154
|
672
|
8
|
|
=========
|
=========
|
=========
|
8 Return per Ordinary Share
|
Six months
ended
29.02.24
unaudited
|
Year
ended
31.08.23
audited
|
Six months
ended
28.02.23
unaudited
|
Revenue return per ordinary share
|
3.34p
|
10.67p
|
3.04p
|
Capital return per ordinary share
|
8.28p
|
6.08p
|
26.30p
|
|
---------------
|
---------------
|
---------------
|
Total return per ordinary share
|
11.62p
|
16.75p
|
29.34p
|
|
=========
|
=========
|
=========
|
The return per ordinary share is based on the net return on
ordinary activities after taxation for the period divided by the
weighted average number of ordinary shares held outside of Treasury
during the period, as shown below:
|
£’000
|
£’000
|
Net revenue return on ordinary activities after taxation
|
10,844
|
34,596
|
Net capital return on ordinary activities after taxation
|
26,831
|
19,717
|
|
---------------
|
---------------
|
Net total return on ordinary activities after taxation
|
37,675
|
54,313
|
|
=========
|
=========
|
|
Number
|
Number
|
Weighted average number of ordinary shares held outside of
Treasury
|
324,098,920
|
324,098,920
|
|
===========
|
===========
|
9 Dividends Paid to Shareholders
|
Six months
ended
29.02.24
unaudited
£’000
|
Year
ended
31.08.23
audited
£’000
|
Six months
ended
28.02.23
unaudited
£’000
|
Final dividend of 6.27 pence per ordinary share paid for the year
ended 31 August 2023
|
20,321
|
–
|
–
|
Interim dividend of 2.53 pence per ordinary share paid for the year
ended 31 August 2023
|
–
|
8,200
|
–
|
Final dividend of 5.45 pence per ordinary share paid for the year
ended 31 August 2022
|
–
|
17,663
|
17,663
|
|
---------------
|
---------------
|
---------------
|
|
20,321
|
25,863
|
17,663
|
|
=========
|
=========
|
=========
|
The Company has declared an interim dividend for the six month
period to 29 February 2024 of
3.24 pence per ordinary share (2023:
2.53 pence). The interim dividend
will be paid on 20 June 2024 to
shareholders on the register at the close of business on
10 May 2024 (ex-dividend date
09 May 2024). The total cost of this
interim dividend, which has not been included as a liability in
these Financial Statements, is £10,501,000 (2023: £8,200,000). This
amount is based on the number of ordinary shares in issue held at
the date of this report.
10 Fair Value Hierarchy
The Company is required to disclose the fair value hierarchy that
classifies its financial instruments measured at fair value at one
of three levels, according to the relative reliability of the
inputs used to estimate the fair values.
Classification
|
Input
|
Level 1
|
Valued using quoted prices in active markets for identical
assets
|
Level 2
|
Valued by reference to inputs other than quoted prices included in
level 1 that are observable (i.e. developed using market data) for
the asset or liability, either directly or indirectly
|
Level 3
|
Valued by reference to valuation techniques using inputs that are
not based on observable market data
|
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset. The valuation techniques
used by the Company are as disclosed in the Company’s Annual Report
for the year ended 31 August 2023
(Accounting Policies Notes 2 (k) and 2 (l) on pages 60 and 61). The
table below sets out the Company’s fair value hierarchy:
29 February 2024 (unaudited)
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
Financial assets at fair value through profit or
loss
|
|
|
|
|
Investments
|
884,245
|
23,919
|
3,972
|
912,136
|
Derivative instrument assets
|
–
|
2,675
|
–
|
2,675
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
884,245
|
26,594
|
3,972
|
914,811
|
|
=========
|
=========
|
=========
|
=========
|
Financial liabilities at fair value through profit or
loss
|
|
|
|
|
Derivative instrument liabilities
|
–
|
(1,559)
|
(21)
|
(1,580)
|
|
=========
|
=========
|
=========
|
=========
|
31 August 2023 (audited)
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
Financial assets at fair value through profit or
loss
|
|
|
|
|
Investments
|
857,351
|
23,246
|
2,095
|
882,692
|
Derivative instrument assets
|
–
|
1,769
|
–
|
1,769
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
857,351
|
25,015
|
2,095
|
884,461
|
|
=========
|
=========
|
=========
|
=========
|
Financial liabilities at fair value through profit or
loss
|
|
|
|
|
Derivative instrument liabilities
|
–
|
(949)
|
–
|
(949)
|
|
=========
|
=========
|
=========
|
=========
|
28 February 2023 (unaudited)
|
Level 1
£’000
|
Level 2
£’000
|
Level 3
£’000
|
Total
£’000
|
Financial assets at fair value through profit or
loss
|
|
|
|
|
Investments
|
896,737
|
7,426
|
496
|
904,659
|
Derivative instrument assets
|
–
|
2,631
|
–
|
2,631
|
|
---------------
|
---------------
|
---------------
|
---------------
|
|
896,737
|
10,057
|
496
|
907,290
|
|
=========
|
=========
|
=========
|
=========
|
Financial liabilities at fair value through profit or
loss
|
|
|
|
|
Derivative instrument liabilities
|
–
|
(888)
|
–
|
(888)
|
|
=========
|
=========
|
=========
|
=========
|
11 Share Capital
|
29 February 2024
unaudited
|
31 August 2023
audited
|
28 February 2023
unaudited
|
Number of
shares
|
£’000
|
Number of
shares
|
£’000
|
Number of
shares
|
£’000
|
Issued, allotted and fully paid ordinary shares of 5 pence
each
|
|
|
|
|
|
|
Total share capital
|
|
|
|
|
|
|
Beginning of the period
|
324,098,920
|
16,205
|
324,098,920
|
16,205
|
324,098,920
|
16,205
|
Ordinary shares issued/repurchased
|
–
|
–
|
–
|
–
|
–
|
–
|
|
-----------------
|
-----------------
|
-----------------
|
-----------------
|
-----------------
|
-----------------
|
End of the period
|
324,098,920
|
16,205
|
324,098,920
|
16,205
|
324,098,920
|
16,205
|
|
==========
|
==========
|
==========
|
==========
|
==========
|
==========
|
During the period, no new ordinary shares were issued (year ended
31 August 2023: nil shares and six
months to 28 February 2023: nil
shares). At 29 February 2024, no
shares were held in Treasury.
12 Net Asset Value per Ordinary Share
The calculation of the net asset value per ordinary share is based
on the total shareholders’ funds divided by the number of ordinary
shares held outside of Treasury.
|
29.02.24
unaudited
|
31.08.23
audited
|
28.02.23
unaudited
|
Total shareholders’ funds
|
£968,403,000
|
£951,049,000
|
£1,000,030,000
|
Ordinary shares held outside of Treasury at the period
end
|
324,098,920
|
324,098,920
|
324,098,920
|
Net asset value per ordinary share
|
298.80p
|
293.44p
|
308.56p
|
|
=========
|
=========
|
=========
|
It is the Company’s policy that shares held in Treasury will only
be reissued at net asset value per ordinary share or at a premium
to net asset value per ordinary share and, therefore, shares held
in Treasury have no dilutive effect.
13 Transactions with the Manager and Related
Parties
FIL Investment Services (UK) Limited is the Company’s Alternative
Investment Fund Manager and has delegated portfolio management and
the role of Company Secretary to FIL Investments International
(“FII”). Both companies are Fidelity group companies.
Details of the fee arrangements are given in Note 5 above. During
the period, fees payable to FII for portfolio management services
of £2,863,000 (year ended 31 August
2023: £5,698,000 and six months ended 28 February 2023: £2,806,000). At the Balance
Sheet date, fees for portfolio management services of £459,000
(year ended 31 August 2023: £483,000
and six months ended 28 February
2023: £459,000).
FII also provides the Company with marketing services. The total
amount payable for these services during the period was £132,000
(year ended 31 August 2023: £303,000
and six months ended 28 February
2023: £134,000). At the Balance Sheet date, marketing
services of £98,000 (year ended 31 August
2023 and six months ended 28 February
2023: £nil) were accrued and included in other
creditors.
As at 29 February 2024, the Board
consisted of five Non-Executive Directors (as shown in the
Directory in the Half-Yearly Report), all of whom are considered to
be independent. None of the Directors have a service contract with
the Company. The Chairman receives an annual fee of £44,500, the
Audit Committee Chairman an annual fee of £35,000, the Senior
Independent Director receives an annual fee of £31,500 and each
other Director an annual fee of £29,500.
As at the date of this report, the following members of the Board
held ordinary shares in the Company: Claire
Boyle 7,466 shares, Dean
Buckley 50,000 shares, Nigel
Foster 88,000 shares, Ominder Dhillon 7,750 shares and
Alison McGregor 30,000
shares.
The financial information contained in this Half-Yearly Results
Announcement does not constitute statutory accounts as defined in
section 435 of the Companies Act 2006. The financial information
for the six months ended 29 February
2024 and 28
February 2023 has not been audited or
reviewed by the Company’s Independent Auditor.
The information for the year ended 31 August
2023 has been extracted from the latest published audited
financial statements, which have been filed with the Registrar of
Companies, unless otherwise stated. The report of the Auditor on
those financial statements contained no qualification or statement
under sections 498(2) or (3) of the Companies Act 2006.
Neither the contents of the Company's website nor the contents of
any website accessible from hyperlinks on the Company's website (or
any other website) is incorporated into, or forms part of, this
announcement.
A copy of the Half-Yearly Report will shortly be submitted to the
National Storage Mechanism and will be available for inspection at
www.morningstar.co.uk/uk/NSM
The Half-Yearly Report will also be available on the Company's
website at
www.fidelity.co.uk/specialvalues
where up to date information on the Company, including daily NAV
and share prices, factsheets and other information can also be
found.