TIDMSTS
RNS Number : 7053W
STS Global Income & Growth Trust
14 December 2023
To: RNS
From: STS Global Income & Growth Trust plc
LEI: 549300UZ1Y7PPQYJGE19
Date: 14 December 2023
Half-year financial report
Six months to 30 September 2023
FINANCIAL HIGHLIGHTS
Total return ^ Six months ended Six months ended
(including reinvested dividends) 30 September 30 September 2022
2023
% %
------------------------------------ ------------------ -------------------
Net asset value per share 0.7 (2.7)
Lipper Global - Equity Global
Income Index 0.5 (5.9)
Share price 3.2 (1.4)
------------------------------------ ------------------ -------------------
Key data As at As at
30 September 31 March 2023
2023
--------------------------- --------------- ---------------
Net asset value per share
(cum income) 220.09p 220.37p
Net asset value per share
(ex income) 216.67p 218.37p
Share price 219.00p 214.00p
Discount (0.49%) (2.89%)
Net assets GBP206,657,000 GBP219,235,000
--------------------------- --------------- ---------------
Income Six months ended Six months ended
30 September 30 September 2022
2023
-------------------- ----------------- -------------------
Revenue per share 3.31p 3.43p
Dividend per share 3.05p 2.90p
-------------------- ----------------- -------------------
^ For details of all Alternative Performance Measures refer to
the half-year report.
INTERIM MANAGEMENT REPORT
Chairman's statement
Introduction
For the six-month period to 30 September 2023 the net asset
value total return for your Company was +0.7%, in line with the
+0.5% total return from the benchmark, the Lipper Global - Equity
Global Income Index.
There was a slight narrowing of the discount to net asset value
at which the share price traded over the period from 2.9% to 0.5%
which resulted in a share price total return of +3.2%.
Equity and more recently bond markets around the world have
faced a challenging background, during the period under review.
Short term interest rates continued to rise. The debate has moved
on from how high would rates go, to how long rates will remain at
current levels - suggesting that we are close to or at the peak in
the current rate cycle. In the US, in particular, stubbornly
resilient growth in the economy is forcing the Federal Reserve to
signal a 'higher for longer' stance on rates, as the strength of
demand continues to present inflationary pressures on the economy.
By contrast, in the UK and Europe where growth is weaker the rate
of inflation appears to have peaked, but the rate of decline is
disappointing and likewise leading to rates predicted to remain at
current levels for some time.
Financial markets have also had to cope with an increasingly
uncertain geopolitical backdrop, due to the ongoing conflicts in
Ukraine and the Middle East.
Consequently, the low nominal returns detailed above are no
surprise and equity markets have struggled to generate consistent
positive returns in the face of economic and political
uncertainty.
More recently, bond markets in the US and UK have seen yields
rise to in excess of 5% - comfortably the highest level since 2008.
The medium term implication of such rises in yields are seen in
higher financing cost for companies and financial investors
(including venture capital and private equity funds). After a
prolonged period of (what can now be described as) abnormally low
rates, it remains to be seen how markets adapt to a return to what
was normality ahead of the financial crash in 2007/08.
Revenue and earnings
Total revenue for the period was GBP4.0m and Revenue earnings
per share were 3.31p. These earnings are lower than the previous
comparable period. As discussed in the statement last year,
movements in GBP/US$ exchange rate can have an impact on the level
of revenue earned in sterling terms. The average GBP/US$ rate in
this first half has been 1.259 compared with 1.217 in the previous
comparable period.
Underlying dividends declared by your Company's investments have
been encouraging and this is a sound indicator of the quality of
the companies which the Manager has chosen to invest in.
A first quarterly dividend of 1.525p per share was paid to
shareholders on 27 October 2023. This represented a 5.2% increase
on the equivalent payment in 2022. The Board's policy is to declare
three equal dividends for the first three quarterly payments and
consider the fourth quarterly dividend once clarity on earnings for
the full year is available around the time of the year end.
Proposed merger with Troy Income & Growth Trust plc
On 28 November 2023 it was announced that agreement had been
reached between the Boards of your Company and Troy Income &
Growth Trust plc ('TIGT') for a proposed combination of STS with
the assets of TIGT. This combination is subject to approval by the
shareholders of both companies, and you will receive documents in
respect of this transaction in February 2024.
Your Board considers the proposed merger to be an excellent
opportunity for your Company and shareholders will benefit from an
increase in scale allowing the enlarged STS to spread its fixed
costs over a larger asset base. It has been agreed that the
management fee charged on the enlarged company will be reduced to
0.55% of shareholders' funds up to GBP250m and 0.50% above GBP250m
(currently the fee is 0.65% of shareholders' funds). Troy is also
making a significant cost contribution in the form of an 18-months
fee waiver on the assets transferred from TIGT to the Company.
It is expected that the transaction will be complete by your
Company's year end on 31 March 2024. When transferred, the assets
of TIGT will be invested in line with the current STS portfolio and
there will be no change to the investment process, philosophy or
personnel managing the portfolio.
Discount Management
Your Board has adopted and implements a formal discount control
mechanism, with the objective of ensuring that the share price
consistently trades close to net asset value per share. Shares are
bought in or sold, at the appropriate times, to manage this
objective. During the period under review, 5,585,197 shares were
purchased at an average discount of 1.9%.
The consistent application of the discount control mechanism
should mean that, over the long term, the net asset per share total
return and the share price total return should be very similar.
However, it is possible that, in the short term, these respective
returns can deviate due to small movements in the discount/premium,
particularly in periods of low nominal returns.
Borrowing facilities
Your Company entered into new borrowing agreements in the period
as the seven year term of the previous agreement expired in
September. A new three year revolving credit facility ('RCF') was
agreed with The Royal Bank of Scotland International for GBP20m
with an additional GBP5m being available, should it be considered
necessary.
Outlook
At the core of your Manager's philosophy is the preservation of
capital and the objective of delivering above average returns with
below average volatility. In particular, the Manager seeks to
provide some protection from significant drawdowns in weaker
markets. The political and economic background around the world
might suggest that higher bond yields and rising political tension
may be a precursor to a period in which equity markets find it hard
to make consistent progress.
In such periods, your Manager's process and consistent
application of their philosophy should stand your Company in a
relatively strong position. Your portfolio consists of a group of
carefully chosen companies that have high and defendable operating
margins, pricing power and in particular strong balance sheets
supported by robust free cash flow.
These attributes should stand the Company in good stead in the
current uncertain world.
John Evans
Chairman
13 December 2023
Manager's review
After a bright start to the year, broader world equity markets
have been meandering over the summer. The MSCI Equal Weighted Net
Total Return Index, used to reduce the distortion of the highly
concentrated MSCI World Index and associated AI excitement,
returned 0.12% in sterling terms over the six month period under
review. The benchmark for the Company did slightly better at 0.5%
and the Company share price better still.
The strongest contributor to performance during the half-year
was Domino's Pizza ('Domino's'). In July the company benefited from
the appointment of a new CEO and strong results. The new CEO,
Andrew Rennie, is a known quantity having been regarded as a
potential leader for the business as early as 2019. Andrew has a
long experience in Domino's Pizza Enterprises in Australia, and we
have no doubt that he is the right person for the role. Meanwhile,
the company continues to grow sales at a healthy pace, supported by
better execution and the collaboration with Just Eat. During
September we started reducing our position in Domino's as the
valuation improved. We currently have a 2.1% position.
Admiral Group ('Admiral') was strong following a positive update
at the half year results. UK car insurers have had a torrid 18
months as high claims inflation combined with record low insurance
premiums following the pandemic have led to a squeeze on
underwriting profits. This has led to competitors such as Direct
Line and Sabre Insurance issuing multiple profit warnings. As it
has done numerous times over its 20+ year history, Admiral executed
exceptionally through this market cycle, raising rates ahead of
peers in the face of rising claims costs, allowing it to protect
profits. In its most recent results, Admiral claimed it has reached
pre-pandemic levels of profitability on policies written in 2023.
As the wider market scrambles to belatedly raise rates, Admiral
should continue to take market share.
Novartis also made a decent contribution, rising strongly in
September following a lacklustre period. This may be explained by
the fact that the company was preparing to spin-off its generic
drug company, named Sandoz. The Company received shares in this
business, which we then sold, favouring the remaining, now more
focussed company which other investors also appear to have
preferred.
ADP appreciated over this time. As investors worry about a
potential spike in unemployment following the Federal Reserve's
tightening cycle, the company was penalised by the market at the
beginning of the year. However, we argue that the pendulum has
swung too far to the pessimistic side and ADP regained some ground.
As the economic horizon darkens, it is useful to remind ourselves
that these companies are less sensitive to unemployment than the
market believes. The company remains a core long term
investment.
Nintendo is a business which is benefitting from the positively
received launch of several games including The Legend of Zelda:
Tears of the Kingdom and Super Mario Bros. Wonder. This is helping
to underpin profitability while investors wait for the release of a
replacement to the current Switch console. This will be called
Switch Pro and is likely to be launched in 2024. We continue to
believe the company is good value and are excited about the value
of the company's timeless intellectual property and the prospect of
a new hardware cycle in the coming years.
The single biggest detractor was the Link REIT. Investors are
not unreasonably concerned about the effect of the rapid increase
in interest rates on this sector and company. Having been
recapitalised and with underlying exposure to defensive assets we
believe this company is well placed to buy distressed assets as
others seek to reduce debt levels. If interest rates are close to
reaching a peak, as we believe, the shares should perform better in
the coming months.
Next was Diageo, reflecting worries over a potential slowdown in
the US as sales data continues to be soft. Additionally, with a new
CEO (Debra Crew) and an investor day planned for mid-November,
there is a degree of uncertainty around strategy. However, the
first set of results from the new CEO in August was robust. While
there is some weakness in the US, the underlying spirits category
continues to take market share, Diageo remains uniquely positioned
to capture its fair share of growth.
Also within the consumer staples sector, Hershey declined after
years of strong performance. The company has had tremendous success
in increasing prices during 2022 without any significant effect on
volumes. The ability to raise prices to cover inflation is a
testament to the dominant market position of this company as well
as the strength of the brand. As we lap those strong price
increases, sales growth is slowing, and volumes are starting to
turn negative. There have also been some concerns that a new
category of weight-loss drugs may diminish the demand for this
popular but sugary product. We view these concerns as over-stated
given the length of time that such an eventuality becomes
impactful, even if the concerns prove credible.
British American Tobacco was also weak as it was impacted by
ever-present regulatory concerns, as well as softness in demand for
combustibles in the US. This fear was confirmed at the recent
results whereby the company lowered medium term guidance. Further,
and consistent with the company's stated aim to be smoke-free by
2035, the value of the brands in the US acquired from Reynolds in
2016 are to be written down to zero over 30 years. This led to
further share price weakness. We continue to believe the shares
offer exceptional value for what remains a highly cash generative
company. We also note that the brand write down is a non-cash item
that does not impact profitability and therefore the company's
ability to continue to fund its dividend for many years to
come.
Finally, the most recent purchase in the portfolio, Texas
Instruments, lost ground. We established an initial investment in
this business in October 2022 at an attractive valuation. Cognizant
of the inherent cyclicality of the end markets for this business,
which include industrial, automotive and personal electronics, we
allocated 2% of the Company to this holding. The quality of the
business warrants a more substantial investment, in time.
Outlook
While equity markets have lacked direction, government bond
markets have been on the move. Over this period the US 10-year
yield has risen from 3.47% to 4.57%. This updraft may be a result
of several factors, including the influence of other major bond
markets, notably Japan, concerns over large-scale upcoming issuance
and, most likely, a belief that growth is proving impervious to
higher interest rates. Whatever the cause, it represents a
significant change in the relative price of government bonds to
equities. 4.57%, when compared to an historic earnings yield for
the S&P 500 of 4.80%, implies a further compression of the
equity risk premium.
Perhaps more striking has been the move in inflation- linked
bonds. Again, over the same period, the yield on US 30-year US
Treasury Inflation Protected Securities has risen from 1.40% to
2.30%. At the same time, the 30-year break-even inflation rate has
remained remarkably stable at close to the Federal Reserve's
inflation target of 2% (2.40% as at 30 September 2023). At least
according
to markets, this is not about increasing inflation expectations.
It is a function of an expansion in real yields driven by the rise
in the nominal interest rate.
At the same time, not only have equities continued to trade
towards the upper end of historical valuation measures (the US CAPE
remains at 29.3x) but credit spreads have been tightening.
It would seem to us that although a higher cost of capital has
been reflected in government bond markets, it has yet to be for
risk assets. Time will tell how this apparent contradiction
resolves itself - as the effect of the change in interest rates
gradually works its way through the economy, this may change to the
benefit of our quality focussed, conservatively managed
Company.
James Harries
13 December 2023
Statement of Directors' responsibilities
A review of the half year and the outlook for the Company can be
found in the Chairman's statement and Manager's review above.
Risk and mitigation
The Company's business model is longstanding and resilient to
most of the short-term uncertainties that it faces, which the Board
believes are effectively mitigated by its internal controls and the
oversight of the Manager, as described in the latest annual report.
The principal and emerging risks and uncertainties are therefore
largely longer-term and driven by the inherent uncertainties of
investing in global equity markets. The Board believes that it is
able to respond to these longer-term risks and uncertainties with
effective mitigation so that both the potential impact and the
likelihood of these seriously affecting shareholders' interests are
materially reduced.
Risks are regularly monitored at Board meetings and the Board's
planned mitigation measures are described in the latest annual
report. The Board maintains a risk register and also carries out a
risk review as part of its annual strategy meeting.
A detailed explanation of the principal risks and uncertainties
facing the Company and how the Board manages them can be found in
the 2023 annual report, which can be found on the Company's website
www.stsplc .co .uk . In the view of the Board, these principal
risks and uncertainties at the year end remain. The Board continue
to work with the agents and advisers to the Company to manage these
risks. The risks identified are as applicable to the remaining six
months of the year as they were to the six months under review.
Going concern status
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
are continually monitored by the Board.
The financial position of the Company as at 30 September 2023 is
shown on the unaudited statement of financial position . The
unaudited statement of cash flow of the Company is set out
below.
The Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern. The Company's assets
consist primarily of a diverse portfolio of listed equity shares
which, in most circumstances, are realisable within a very short
timescale. The Directors are mindful of the principal risks
disclosed above. They have reviewed revenue forecasts and the
financial position of the Company. They believe that the Company
has adequate financial resources and a suitably liquid investment
portfolio to continue its operational existence for the foreseeable
future and for at least one year from the date of signing of these
financial statements. Accordingly, the Directors consider it
appropriate to continue to adopt the going concern basis in
preparing these financial statements.
Related party transactions
During the first six months of the year, no transactions with
related parties have taken place which have materially affected the
financial position or performance of the Company. There have been
no material changes in any related party transaction described in
the annual report for the year ended 31 March 2023.
Directors' responsibility statement
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 financial statements have been prepared in accordance
with United Kingdom Generally Accepted Accounting Practice, in
particular with Financial Reporting Standard 104 "Interim Financial
Reporting" and with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture
Capital Trusts" issued by the AIC in July 2022;
-- the interim management 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 year); and
-- the interim management report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.8R (disclosure of related party transactions and charges
therein).
By order of the Board
John Evans, Chairman
13 December 2023
Portfolio Summary
Portfolio distribution as at 30 September 2023
By region (excluding As at 30 September As at 31 March
cash) 2023 2023
% %
--------------------- ------------------- --------------
North America 52.8 52.9
Europe 41.4 41.0
Asia 5.8 6.1
100.0 100.0
--------------------- ------------------- --------------
By sector (excluding As at 30 September As at 31 March
cash) 2023 2023
% %
----------------------- ------------------- --------------
Consumer staples 38.2 39.9
Industrials 16.2 6.2
Healthcare 14.1 12.9
Information technology 10.6 20.2
Financials 8.1 6.7
Consumer discretionary 7.0 7.1
Communication services 3.5 3.1
Real estate 2.3 3.9
100.0 100.0
----------------------- ------------------- --------------
By asset class
(including cash and As at 30 September As at 31 March
borrowings) 2023 2023
% %
--------------------- -------------------- ----------------
Equities 106.6 106.5
Cash 1.1 0.7
Borrowings (7.7) (7.2)
--------------------- -------------------- ----------------
100.0 100.0
--------------------- -------------------- ----------------
Ten Largest holdings 30 September 30 September 31 March 31 March
2023 2023 2023 2023
Market value % of total Market value % of total
GBP000 portfolio GBP000 portfolio
--------------------- ------------ ------------ ------------ ----------
Paychex 11,891 5.4 12,274 5.3
Unilever 11,491 5.2 12,081 5.2
Reckitt Benckiser 11,448 5.2 11,824 5.1
British American
Tobacco 11,295 5.1 13,070 5.6
PepsiCo 11,054 5.0 11,984 5.1
CME Group 11,039 5.0 9,934 4.2
Philip Morris 9,830 4.5 10,402 4.4
Novartis 9,784 4.5 9,235 3.9
ADP 9,737 4.4 9,294 4.0
Relx 8,885 4.0 9,002 3.8
--------------------- ------------ ------------ ------------ ----------
Unaudited Statement of Comprehensive Income
Six months to Six months to
30 September 2023 30 September 2022
Note Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ----- -------- -------- -------- -------- -------- --------
Net losses on investments 5 - (1,204) (1,204) - (7,283) (7,283)
Net currency (losses)/gains (22) (66) (88) 24 (1,946) (1,922)
Income 3 4,034 - 4,034 4,269 266 4,535
Investment management
fee (247) (459) (706) (266) (494) (760)
Other expenses (287) - (287) (295) - (295)
----------------------------- ----- -------- -------- -------- -------- -------- --------
Net return before
finance costs and taxation 3,478 (1,729) 1,749 3,732 (9,457) (5,725)
Finance costs (83) (153) (236) (85) (158) (243)
----------------------------- ----- -------- -------- -------- -------- -------- --------
Net return on ordinary
activities before taxation 3,395 (1,882) 1,513 3,647 (9,615) (5,968)
Taxation 4 (192) - (192) (215) - (215)
----------------------------- ----- -------- -------- -------- -------- -------- --------
Net return attributable
to ordinary shareholders 3,203 (1,882) 1,321 3,432 (9,615) (6,183)
----------------------------- ----- -------- -------- -------- -------- -------- --------
Net return per ordinary
share 2 3.31p (1.94p) 1.37p 3.43p (9.61p) (6.18p)
----------------------------- ----- -------- -------- -------- -------- -------- --------
(Audited)
Year to 31 March 2023
Revenue Capital Total
Note GBP000 GBP000 GBP000
---------------------------- ---- ------- -------- -------
Net losses on investments 5 - (8,800) (8,800)
Net currency losses (4) (869) (873)
Income 3 8,238 266 8,504
Investment management
fee (531) (985) (1,516)
Other expenses (625) - (625)
---------------------------- ---- ------- -------- -------
Net return before
finance costs and taxation 7,078 (10,388) (3,310)
Finance costs (171) (318) (489)
---------------------------- ---- ------- -------- -------
Net return on ordinary
activities before taxation 6,907 (10,706) (3,799)
Taxation 4 (566) - (566)
---------------------------- ---- ------- -------- -------
Net return attributable
to ordinary shareholders 6,341 (10,706) (4,365)
---------------------------- ---- ------- -------- -------
Net return per ordinary
share 2 6.34p (10.70p) (4.36p)
---------------------------- ---- ------- -------- -------
The total columns of this statement are the profit and loss
accounts of the company.
The revenue and capital items are presented in accordance with
the Association of Investment Companies ('AIC') Statement of
Recommended Practice ('SORP 2022').
All revenue and capital items in the above statement derive from
continuing operations.
No operations were acquired or discontinued during the
period.
Unaudited Statement of Financial Position
(Audited)
As at As at As at
30 September 30 September 31 March 2023
2023 2022
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ----- --------- --------- --------- --------- --------- ---------
Fixed assets
Investments at fair value
through profit or loss 5 219,848 235,338 234,362
--------- --------- ---------
Current assets
Trade and other receivables 1,260 3,415 1,113
Cash and cash equivalents 2,210 4,414 1,570
----------------------------- ----- --------- --------- --------- --------- --------- ---------
3,470 7,829 2,683
Current liabilities
Bank loans 6 (15,855) (16,878) (15,795)
Trade payables (806) (2,848) (572)
Dividend payable - - (1,443)
----------------------------- ----- --------- --------- --------- --------- --------- ---------
Total current liabilities (16,661) (19,726) (17,810)
Net current liabilities (13,191) (11,897) (15,127)
----------------------------- ----- --------- --------- --------- --------- --------- ---------
Total net assets 206,657 223,441 219,235
----------------------------- ----- --------- --------- --------- --------- --------- ---------
Capital and reserves
Called up share capital 8 1,223 1,223 1,223
Capital redemption reserve 78 78 78
Share premium account 31,808 31,571 31,808
Special distributable
reserve 58,813 72,837 70,924
Capital reserve 110,023 112,996 111,905
Revenue reserve 4,712 4,736 3,297
----------------------------- ----- --------- --------- --------- --------- --------- ---------
Total shareholders'
funds 206,657 223,441 219,235
----------------------------- ----- --------- --------- --------- --------- --------- ---------
Net asset value per
ordinary share 2 220.09p 222.86p 220.37p
----------------------------- ----- --------- --------- --------- --------- --------- ---------
Unaudited Statement of Changes in Equity
For the period Called Capital Share Special
ended 30 September up share redemption premium distributable Capital Revenue
2023 capital reserve account reserve* reserve* reserve* Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- ------------ --------- --------------- ----------- ----------- ---------
As at 1 April
2023 1,223 78 31,808 70,924 111,905 3,297 219,235
Net return attributable
to shareholders** - - - - (1,882) 3,203 1,321
Shares bought
back into treasury - - - (12,111) - - (12,111)
Dividends paid - - - - - (1,788) (1,788)
As at 30 September
2023 1,223 78 31,808 58,813 110,023 4,712 206,657
------------------------- ---------- ------------ --------- --------------- ----------- ----------- ---------
For the period Called Capital Share Special
ended 30 September up share redemption premium distributable Capital Revenue
2022 capital reserve account reserve* reserve* reserve* Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- ------------ --------- --------------- ----------- ----------- ---------
As at 1 April
2022 1,223 78 30,762 71,925 122,611 3,058 229,657
Net return attributable
to shareholders** - - - - (9,615) 3,432 (6,183)
Shares issued
from treasury - - 809 1,906 - - 2,715
Shares bought
back into treasury - - - (994) - - (994)
Dividends paid - - - - - (1,754) (1,754)
As at 30 September
2022 1,223 78 31,571 72,837 112,996 4,736 223,441
------------------------- ---------- ------------ --------- --------------- ----------- ----------- ---------
For the year
ended 31 March
2023 Share
(Audited) premium Capital Revenue
Called Capital Special
up share redemption distributable
capital reserve account reserve* reserve* reserve* Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---------- ------------ --------- --------------- ---------- ----------- --------
As at 1 April
2022 1,223 78 30,762 71,925 122,611 3,058 229,657
Net return attributable
to shareholders** - - - - (10,706) 6,341 (4,365)
Shares issued
from treasury - - 1,046 2,585 - - 3,631
Shares bought
back into treasury - - - (3,586) - - (3,586)
Dividends paid - - - - - (6,102) (6,102)
As at 31 March
2023 1,223 78 31,808 70,924 111,905 3,297 219,235
------------------------- ---------- ------------ --------- --------------- ---------- ----------- --------
*These reserves are distributable with the exception of the
unrealised portion of the capital reserve (GBP25,529,000; 31 March
2023: GBP27,700,000; 30 September 2022: GBP25,784,000), which is
non-distributable.
**The company does not have any other income or expenses that
are not included in the 'Net return attributable to shareholders'
as disclosed in the condensed statement of comprehensive income
above, and therefore this is also the 'Total comprehensive income'
for the period.
Unaudited Statement of Cash Flow
(Audited)
Six months to Six months to Year to
30 September 30 September 2022 31 March 2023
2023
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ---- -------- -------- --------- -------- -------- -------
Cashflows from operating
activities
Net return on ordinary
activities before taxation 1,513 (5,968) (3,799)
Adjustments for:
Losses on investments 5 1,204 7,283 8,800
Finance costs 236 243 489
Exchange movement on
bank borrowings 7 60 1,877 794
Purchases of investments* (2,851) (7,401) (22,917)
Sales of investments* 16,106 9,312 24,316
Dividend income 3 (4,029) (4,533) (8,496)
Other income 3 (5) (2) (8)
Dividend income received 3,950 4,615 8,523
Other income received 5 2 8
Decrease/(increase)
in receivables 15 14 (5)
(Decrease)/increase
in payables (97) (12) 70
Overseas withholding
tax deducted (161) (240) (612)
14,433 11,158 10,962
---------------------------- ---- -------- -------- --------- -------- -------- -------
Net cash flows from
operating activities 15,946 5,190 7,163
---------------------------- ---- -------- -------- --------- -------- -------- -------
Cash flows from financing
activities
Repurchase of ordinary
share capital (11,786) (994) (3,586)
Issue of ordinary share
capital from treasury - 2,715 3,631
Equity dividends paid
from revenue (3,231) (3,122) (6,027)
Interest and fees paid
on borrowings (289) (240) (476)
---------------------------- ---- -------- -------- --------- -------- -------- -------
Net cash flows from
financing activities (15,306) (1,641) (6,458)
---------------------------- ---- -------- -------- --------- -------- -------- -------
Net increase in cash
and cash equivalents 640 3,549 705
Cash and cash equivalents
at the start of the
period 1,570 865 865
---------------------------- ---- -------- -------- --------- -------- -------- -------
Cash and cash equivalents
at the end of the period 7 2,210 4,414 1,570
---------------------------- ---- -------- -------- --------- -------- -------- -------
*Receipts from the sale of, and payments to acquire investment
securities, have been classified as components of cash flows from
operating activities because they form part of the company's
dealing operations.
Notes to the Financial Statements
Note 1: Accounting policies
For the period ended 30 September 2023 (and the year ended 31
March 2023), the company is applying The Financial Reporting
Standard applicable in the UK and Republic of Ireland ('FRS 102'),
which forms part of Generally Accepted Accounting Practice ('UK
GAAP') issued by the Financial Reporting Council ('FRC') in
2015.
These condensed financial statements have been prepared on a
going concern basis in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority, FRS 102 the
Financial Reporting Standard applicable in the UK and Republic of
Ireland, FRS 104 Interim Financial Reporting, and the Statement of
Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" ('SORP') issued by the AIC in
July 2022.
The accounting policies applied for the condensed set of
financial statements are set out in the Company's annual report for
the year ended 31 March 2023.
Note 2: Returns and net asset value
(Audited)
Six months Six months to Year to
to 30 September 31 March
30 September 2022 2023
2023
--------------------------- --------------- ---------------- ------------
Returns per share
Revenue return (GBP000) 3,203 3,432 6,341
Capital return (GBP000) (1,882) (9,615) (10,706)
--------------------------- --------------- ---------------- ------------
Total (GBP000) 1,321 (6,183) (4,365)
--------------------------- --------------- ---------------- ------------
Weighted average number
of ordinary shares
in issue 96,715,825 100,054,419 100,005,571
Revenue return per
ordinary share 3.31p 3.43p 6.34p
Capital return per
ordinary share (1.94p) (9.61p) (10.70p)
--------------------------- --------------- ---------------- ------------
Total return per ordinary
share 1.37p (6.18p) (4.36p)
--------------------------- --------------- ---------------- ------------
Net asset value per
share
Net assets attributable
to shareholders (GBP000) 206,657 223,441 219,235
Number of shares in
issue at period end 93,898,378 100,260,575 99,483,575
Net asset value per
share 220.09p 222.86p 220.37p
--------------------------- --------------- ---------------- ------------
Note 3: Income
Six months Six months to Year to
to 30 September 31 March
30 September 2022 2023
2023 GBP000 GBP000
GBP000
------------------------- --------------- ---------------- -----------
From listed investments
UK - equities 1,968 1,932 2,973
Overseas - equities 2,061 2,335 5,257
------------------------- --------------- ---------------- -----------
4,029 4,267 8,230
------------------------- --------------- ---------------- -----------
Other income
Deposit interest 5 2 8
4,034 4,269 8,238
------------------------- --------------- ---------------- -----------
During the six months to 30 September 2023 the Company did not
receive any special dividends which were treated as capital (30
September 2022 and year to 31 March 2023: special dividends of
GBP266,000 received from Admiral Group, which were treated as
capital).
Note 4: Taxation
(Audited)
Six months Six months to Year to
to 30 September 31 March
30 September 2022 2023
2023 GBP000 GBP000
GBP000
Irrecoverable overseas
withholding tax 192 215 566
------------------------ --------------- ---------------- ----------
Note 5: Investments at fair value through profit or loss
(Audited)
As at As at As at
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
----------------------- --------------- --------------- ----------
Opening book cost 206,662 209,480 209,480
Opening investment
holding gains 27,700 35,081 35,081
----------------------- --------------- --------------- ----------
Opening market value 234,362 244,561 244,561
----------------------- --------------- --------------- ----------
Acquisitions at cost 2,851 9,769 22,917
Disposal proceeds
received (16,161) (11,709) (24,316)
Losses on investments (1,204) (7,283) (8,800)
----------------------- --------------- --------------- ----------
Closing market value
of investments 219,848 235,338 234,362
----------------------- --------------- --------------- ----------
Closing book cost 194,319 209,554 206,662
Closing investment
holding gains 25,529 25,784 27,700
----------------------- --------------- --------------- ----------
Closing market value 219,848 235,338 234,362
----------------------- --------------- --------------- ----------
The company received GBP16,161,000 (six months ended 30
September 2022: GBP11,709,000; year ended 31 March 2023:
GBP24,316,000) from investments sold in the six months ended 30
September 2023. The average book cost of these investments when
they were purchased was GBP15,194,000 (six months ended 30
September 2022: GBP9,695,000; year ended 31 March 2023:
GBP25,735,000). These investments have been revalued over time and
until they were sold any unrealised gains/losses were included in
the fair value of investments.
Transaction costs
During the period, expenses were incurred in acquiring or
disposing of investments classified as fair value though profit or
loss. These have been expensed through capital and are included
within losses on investments in the statement of comprehensive
income. The total costs were as follows:
Six months (Audited)
to Six months to Year to
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
-------------- -------------- -------------- ----------
Acquisitions 4 43 68
Disposals 6 4 11
-------------- -------------- -------------- ----------
10 47 79
-------------- -------------- -------------- ----------
Note 6: Bank loans
(Audited)
As at As at As at
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
--------------------------- --------------- --------------- ----------
Bank borrowings repayable
within one year 15,855 16,878 15,795
15,855 16,878 15,795
--------------------------- --------------- --------------- ----------
During the period, the Company arranged a new GBP20m
multi-currency revolving credit facility with The Royal Bank of
Scotland International Limited, which expires on 19 September 2026.
As at 30 September 2023 GBP15,855,000 was drawn down until 19
December 2023. The amount has been drawn in the same currency split
as borrowed under the previous term loan facility at 30 September
2022 and 31 March 2023 - GBP1,500,000; EUR4,500,000; and
US$12,750,000.
Interest is payable at the aggregate of the compounded Risk Free
Rate ("RFR") for the relevant currency and loan period, plus a
margin of 1.55%, totalling 6.74%, 5.24% and 6.85% on the GBP, EUR
and USD balances respectively (30 September 2022 and 31 March 2023:
interest was charged at a fixed rate of 2.1408%, 1.4175% and
3.1925% on the GBP, EUR and USD balances respectively).
Note 7: Analysis of net debt
(Audited)
As at As at
31 March Exchange 30 September
2023 Cash flow movements 2023
GBP000 GBP000 GBP000 GBP000
----------------- ---------- ---------- ----------- ---------------
Cash at bank 1,570 640 - 2,210
Bank borrowings (15,795) - (60) (15,855)
(14,225) 640 (60) (13,645)
----------------- ---------- ---------- ----------- ---------------
Note 8: Called up share capital
(Audited)
As at As at As at
30 September 30 September 31 March
2023 2022 2023
No. of shares No. of shares No. of shares
-------------------- ---------------- ---------------- ---------------
Ordinary shares of
1p
Shares in issue 93,898,378 100,260,575 99,483,575
Held in treasury 28,400,770 22,038,573 22,815,573
-------------------- ---------------- ---------------- ---------------
122,299,148 122,299,148 122,299,148
-------------------- ---------------- ---------------- ---------------
During the six months ended 30 September 2023 there were
5,585,197 shares bought back into treasury at a cost of
GBP12,111,000 (six months ended 30 September 2022: 429,500 shares
bought back into treasury at a cost of GBP994,000; year ended 31
March 2023: 1,616,500 shares bought back into treasury at a cost of
GBP3,586,000).
During the six months ended 30 September 2023 no shares were
issued from treasury (six months ended 30 September 2022: 1,165,000
shares were issued from treasury for net proceeds of GBP2,715,000;
year ended 31 March 2023: 1,575,000 shares were issued from
treasury for net proceeds of GBP3,631,000).
No shares were purchased for cancellation or cancelled from
treasury in the current or prior periods.
Note 9: Fair value hierarchy
Under FRS 102, the company is required 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 shall have the following levels:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2: other significant observable inputs (including quoted
prices for similar investments, interest rates, prepayments, credit
risk, etc); or
- Level 3: significant unobservable input (including the
company's own assumptions in determining the fair value of
investments).
The financial assets measured at fair value through profit and
loss are grouped into the fair value hierarchy as follows:
(Audited)
As at As at As at
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
-------------------------- --------------- --------------- ----------
Financial assets at
fair value through
profit or loss - Quoted
equities
Level 1 219,848 235,338 234,362
Level 2 - - -
Level 3 - - -
-------------------------- --------------- --------------- ----------
219,848 235,338 234,362
-------------------------- --------------- --------------- ----------
There have been no transfers between levels 1, 2, or 3 during
the period (period to 30 September 2022 and year to 31 March 2023:
nil).
Note 10: Interim financial report
The financial information contained in this half-yearly
financial report does not constitute statutory accounts as defined
in s434 - 6 of the Companies Act 2006. The financial information
for the six months ended 30 September 2023 and 30 September 2022
has not been audited or reviewed.
The information for the year ended 31 March 2023 has been
extracted from the latest published audited financial statements
which have been filed with the Registrar of Companies. The report
of the auditors on those accounts contained no qualification or
statement under s498 (2), (3) or (4) of the Companies Act 2006.
A copy of the half-year report can shortly be downloaded at
www.stsplc.co.uk .
Enquiries:
Juniper Partners Limited
Company Secretary
Email: companysecretary@stsplc.co.uk
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END
IR BRBDDDXBDGXX
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December 14, 2023 02:00 ET (07:00 GMT)
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