16th Aug 2022 07:00
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
SUMMARY
• Witan's NAV total return was -14.3%, 4.7% behind our composite global benchmark
• Most of the underperformance (-4.4%) was during Q1, when the markets began to react to the consequences of the Russian invasion of Ukraine
• The discount widened, along with others in the sector; 4.2% of our shares were bought into treasury, at an average discount of 7.6%
• Our revenue earnings for the first half rose 39% on the corresponding period of 2021
• A second interim quarterly dividend of 1.40p per ordinary share will be paid in September. Total dividends paid in respect of the period are 2.80p per ordinary share (2021: 2.72p)
Key data | ||
| (Unaudited) 30 June 2022 | (Audited) 31 December 2021 |
Share price | 206.0p | 252.0p |
Net asset value per ordinary share (debt at fair value) (3) | 226.2p | 267.4p |
Discount (NAV including income, debt at fair value) (3) | 8.9% | 5.8% |
| ||
(Unaudited) 30 June 2022 | (Unaudited) 30 June 2021 | |
Dividend per share | 2.80p | 2.72p |
Total return performance |
| |||
| 6 months return % | 1 year return % | 5 years return % | 10 years return % |
Share price total return (1)(3) | -17.1 | -12.6 | 16.2 | 187.5 |
Net asset value total return (1)(3) | -14.3 | -11.7 | 23.5 | 171.3 |
Witan benchmark (1) | -9.6 | -2.6 | 42.7 | 169.9 |
MSCI ACWI Index(2) | -10.7 | -3.7 | 53.8 | 214.9 |
MSCI UK IMI Index(2) | -2.9 | 3.7 | 17.0 | 90.4 |
(1) | Source: Morningstar. |
(2) | Source: Morningstar. See also MSCI for conditions of use (www.msci.com). |
(3) | Alternative performance measures The financial statements (on pages 11 to 19) set out the required statutory reporting measures of the Company's financial performance. In addition, the Board assesses the Company's performance against a range of criteria which are viewed as particularly relevant for investment trusts. Definition of the terms used and the Witan benchmark are set out in the Half Year Report. |
(4) | 30 June 2022 data is unaudited. |
Page 2 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Percentage of total funds as at 30 June 2022 | % |
North America | 37 |
United Kingdom | 20 |
Europe | 17 |
Asia | 5 |
Japan | 3 |
Other | 4 |
Unquoted Funds | 2 |
Investment Companies | 12 |
Sector breakdown of the portfolio as at 30 June 2022(5) | % |
Industrials | 14 |
Information Technology | 12 |
Healthcare | 11 |
Consumer Staples | 11 |
Financials | 9 |
Communication Services | 8 |
Consumer Discretionary | 8 |
Materials | 7 |
Energy | 4 |
Other | 2 |
Unquoted Funds | 2 |
Investment Companies | 12 |
Company size breakdown of the portfolio as at 30 June 2022(5) | % |
Large Cap | 72 |
Mid Cap | 10 |
Small Cap | 4 |
Unquoted Funds | 2 |
Investment Companies | 12 |
(5) Source: BNP Paribas as at 30 June 2022
Page 3 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
INTERIM MANAGEMENT REPORT
Investment backdrop and performance
The first half of 2022 was an unusually tough environment for investors, with both equity and bond markets registering significant falls. US equities on Wall Street exceeded the 20% fall often viewed as defining a "bear" market, fuelled by apprehension over how far inflation and interest rates would rise, as well as the energy crisis and geopolitical tensions following the Russian invasion of Ukraine. In these circumstances, Witan's employment of gearing, while historically beneficial, proved a drag on returns, while our managers' expectations for a post-pandemic reopening of economies were also stymied by the impact of higher inflation and interest rates.
As a result, Witan experienced a total NAV return of -14.3% and a share price total return of -17.1% (owing to a widening of the discount), compared with a return of -9.6% in our benchmark. For perspective, the AIC's Global Equity sector experienced an average -19% NAV total return, or -24% weighted for the size of the constituents (source: Morningstar).
For Witan, the underperformance was concentrated in Q1, with a 6.3% fall compared with a 1.9% fall in Witan's benchmark. In Q2, Witan's NAV total return performance of -8.6% was closer to the benchmark's -7.8%, with the managers performing in line at the portfolio level, offset by the impact of our gearing.
Economic developments
Inflation has provided an unfamiliar shock this year. The post-lockdown bounce-back in growth created a surge in demand which a still-disrupted global economy was unable to meet, leading to pressures that the world's central banks were initially slow to recognise. Their suggestion that inflation was transitory has itself proved transitory. Energy shortages were particularly evident, as growing investment in sustainable energy has so far been insufficient to fill the gap arising from underinvestment in oil and gas production. The resulting rise in energy prices was a major reason inflation hit multi-decade highs in early 2022, prompting a worldwide shift towards monetary tightening.
Initially, this created a rotation from highly rated growth stocks towards more lowly-valued sectors sensitive to economic recovery. However, the invasion of Ukraine created a further surge in energy as well as food commodity prices. This increased the urgency for interest rates to rise, dampening recovery hopes for cyclical sectors as well as further derating growth stocks. In this environment, energy stocks stood out with positive returns, while losses were widespread across the rest of the equity universe, as well as the bond markets.
Page 4 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
INTERIM MANAGEMENT REPORT continued
Investment managers: Assets under management and investment performance as at 30 June 2022
|
|
| Witan assets managed as at 30.06.22 | Performance in 2022 (%) | Annualised performance since appointment (%) | |||
Investment manager | Mandate | Appoint-ment date | £m | (%)(1) | Manager | Benchmark | Manager | Benchmark |
CORE | ||||||||
Jennison | Global | 31.08.20 | 109.8 | 6.1 | (30.4) | (10.7) | (7.9) | 8.8 |
Lansdowne | Global | 14.12.12 | 309.4 | 17.1 | (15.8) | (10.7) | 12.5 | 12.0 |
Lindsell Train | Global | 31.12.19 | 289.2 | 16.0 | (11.8) | (10.7) | 1.6 | 8.0 |
Veritas | Global | 11.11.10 | 351.7 | 19.4 | (8.1) | (10.7) | 12.5 | 10.7 |
WCM | Global | 31.08.20 | 195.4 | 10.8 | (23.6) | (10.7) | 0.7 | 8.8 |
Artemis | UK | 06.05.08 | 115.5 | 6.4 | (13.6) | (2.9) | 7.8 | 5.4 |
SPECIALIST | ||||||||
GMO | Climate Change | 05.06.19 | 92.3 | 5.1 | (9.0) | (10.7) | 16.3 | 9.6 |
GQG | Emerging Markets | 16.02.17 | 117.7 | 6.5 | (8.8) | (8.0) | 8.0 | 4.4 |
Unquoted Growth | Specialist Funds | 02.07.21 | 34.6 | 1.9 | (8.5) | (10.7) | (13.2) | (4.6) |
Witan Direct Holdings | Specialist Funds | 19.03.10 | 202.2 | 11.2 | (12.7) | (9.6) | 10.3 | 8.7 |
Notes:
1 | Amount of percentage of Witan's investments managed, excluding centrally managed cash. |
Manager performance
The full table of the performance of our incumbent managers as at 30 June is shown above. All the managers suffered falls, particularly those with a growth investment style (Jennison and WCM). Although they had the lowest allocations of our core global managers, the scale of underperformance proved painful. The GMO Climate Change portfolio and Veritas's quality-focused portfolio both outperformed. Artemis lagged the UK market return, as their actively managed portfolio tends to overweight the mid-cap section of the market, whereas the market index was dominated by outperformance of the energy sector. They have outperformed by more than 2% p.a. since 2008 and we expect relative performance to recover. GQG underperformed their emerging market benchmark but outperformed the global market index, so the allocation to emerging markets proved beneficial. Lansdowne's cyclically focused portfolio was ahead for much of the period but ended behind at the mid-year point, which coincided with a peak in recessionary fears. Lindsell Train's performance, whilst behind over the period, showed signs of greater resilience after an uncharacteristically poor 2021.
The Direct Holdings portfolio lagged overall, principally because of the discount widening in the private equity sector, which offset good operational performance across the major holdings. The BlackRock World Mining Trust holding was reduced significantly when the price surged following the Russian invasion, while the Schroder Real Estate Investment Trust holding was also trimmed into strength. We added to our investment in the Victory Hill Sustainable Energy Opportunities company, which has also performed well this year.
Page 5 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
INTERIM MANAGEMENT REPORT continued
A new position was initiated in a specialist biotechnology ETF, giving equally weighted exposure to companies in the S&P Biotechnology index, a sector that has seen significant weakness over the past year and is broadly flat over the past five years. Our longstanding holding in Syncona also gives us exposure to this theme and the shares have recently recovered ground after a volatile performance in the first quarter.
Environmental, Social and Governance policy ('ESG')
Our responsible investment policy is set out in detail in Witan's 2021 Annual Report. We (and, so far, half our managers) have signed the Net Zero Asset Managers' initiative, committing to have a zero net carbon portfolio by 2050 and to report on progress on the way. We have also committed to having a portfolio consisting only of companies with sustainable businesses by 2030. We are continuing to evolve our assessment of corporate sustainability and will report on progress in the 2022 Annual Report.
In the first instance we prefer engagement to divestment when we feel a company is departing from good practice - if we divest, we lose any influence over the Company's direction and the buyer may be less scrupulous. We would also forfeit the potential to benefit (financially) from improvements which such engagement might generate. We do have an exclusion on investment in companies engaged in the manufacture, supply, or use of controversial weapons (such as land mines and cluster munitions).
The Russian invasion of Ukraine (albeit an ESG issue at the government, rather than company, level) highlighted the need to attend to corporate risks that are not purely financial. Witan has negligible direct exposure to Russian investments, with any remaining holdings held at nil value. Whilst the subject of future investment is currently theoretical, given the sanctions on Russia and Russian assets, the bar will be set very high for investors, including Witan, to consider any investment in Russia even when conditions normalise.
Energy prices have emerged as a political hot potato in 2022. Low levels of investment in fossil fuel capacity, the speed of the recovery from lockdowns and the consequences of the war in Ukraine have led to shortages and high oil and gas prices. This has, perhaps inevitably, led to debate over the pace (if not the direction) of plans to phase out fossil fuels. Policy changes include delays and reversals in phasing out coal generation, more investment in oil and gas production as well as changed attitudes to nuclear power (clean in carbon terms but controversial in other ways). Given the extraordinary events of 2022, steps which are retrograde in climate change terms are not surprising as stopgap measures, but we hope for a positive longer-term outcome in terms of accelerated investment in sustainable energy.
Investment income and expenses
Revenue earnings per share for the period were 2.51 pence per share, a rise of 39% from the level of 1.80 pence per share seen in the first half of 2021. The comparison between early 2022 and early 2021 (when there was a hangover of dividend cuts from 2020 results) may flatter the position but we nonetheless expect a significant rise in revenue earnings this year and further progress towards restoring full dividend cover.
Page 6 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
INTERIM MANAGEMENT REPORT continued
General expenses rose £0.3m to £2.9m, principally due to website investment and increased marketing costs. Investment management base fees declined 8.4% to £4.3m, owing to lower asset levels. Overall investment management costs (which included a performance fee accrual for one manager in 2021) fell by 12.3% to £4.3m, compared with the first half of 2021. First half total expenses of £7.2m were down 3.5% on the comparative 2021 figure of £7.5m. Finance costs rose £0.2m to £2.8m, due to a rise in short-term borrowing costs.
The ongoing charges figure ('OCF'), including performance fees, was 0.42% for the first half of 2022 (2021: 0.40%). The OCF for the whole of 2021 was 0.71% excluding performance fees and 0.73% including performance fees.
Dividend
As already noted, the Company's revenue earnings per share for 2022 are expected to show a significant further recovery. The Company has increased its dividend every year since 1974 (a 47-year record of increases), recognising the importance for investors of a reliable and growing income. The Board's policy remains to grow the dividend each year and the full year's dividend for 2022 is expected to show another year of growth. The Board has stated its willingness to continue to smooth dividend pay-outs using retained revenue reserves, which amounted to £48.9m at the start of 2022.
A second interim dividend of 1.40p per ordinary share (2021: 1.36p) will be paid on 16 September 2022. The ex-dividend date will be 25 August 2022. This dividend is one quarter of the total paid in respect of 2021 (5.60p) and follows the first interim dividend of 1.40p per ordinary share paid on 10 June 2022 (2021: 1.36p).
Gearing
The Company's gearing has been actively managed within a range of 10-14% this year. Due to the falls in markets, the use of gearing has detracted from returns so far in 2022, although it has historically benefited performance. The Company has long-term borrowings of £155m with a blended interest rate of 3%, fixed for an average of 25 years. This provides a very low hurdle for investment of these funds to boost shareholder returns in the future. In addition, the Company has a £150m short-term variable rate facility (current interest rate c 2%), of which £78m was drawn at the period end.
Discount and buybacks
One of the Company's key performance indicators is for its shares to trade at a sustainable low discount or a premium to NAV, subject to market circumstances. This has been difficult to achieve in 2020-22, given market conditions. In 2021, Witan's shares traded at an average discount of 6.9%, ending the year at a 5.8% discount. In 2022, along with others in the sector, our discount has widened, trading at an average of 7.7% and ending the period at 8.9%.
Page 7 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
INTERIM MANAGEMENT REPORT continued
The Company has been active (in absolute terms and relative to its peers) in buying back shares, buying 30.7m shares (4.2% of the total) into treasury in the period, at an average discount of 7.6%. This added £5.7m to the net asset value which, for perspective, more than offset the Company's investment management costs for the period.
The Company remains cognisant of the benefit to shareholders from buying back shares, taking account of prevailing market conditions, the level of the discount and the impact on the NAV per share. The Company will only issue shares at a premium to NAV.
Outlook
The sustained rise in global inflation and the widespread move to higher interest rates have radically altered the outlook for global liquidity and economic growth. This led to extremely negative sentiment mid-year towards bonds (whose yields were too low in real and nominal terms) and equities (due to fears of recession, as well as a valuation squeeze on the more highly rated or speculative sectors).
Inflation remains stubbornly high, for reasons not speedily addressable by higher interest rates, which can do little to boost the supply of oil and wheat, much less push Russia out of Ukraine. It will take time for higher rates to bring supply and demand into balance, with an increased risk of recession. This latter concern has weighed on equity sentiment in recent months, as the central banks prioritise inflation control over responding to financial market volatility.
There are signs that investors in the US are (possibly prematurely) reducing their forecasts of the peak level of interest rates. High debt levels may cause growth to slow even with interest rates at levels that remain lower than were typical prior to 2009. There are also several drivers of both government and private sector spending that are set to increase in coming years - renewing infrastructure, the electrification and decarbonisation of economies and, perhaps less positively, increased defence spending. Technology may now be more cheaply rated in the stock market but will continue to disrupt many sectors, reduce costs, and drive productivity. By focusing on the near-term unfamiliarity of high inflation and rising interest rates, investors may be overlooking the longer-term positives.
Once a peak in inflation comes into view, or there is a reduction in international tensions, investors are likely to switch from risk aversion to looking for the opportunities thrown up by lower valuations. Timing such changes can be a conundrum, as nobody rings a fire alarm at the top of the market nor does a dinner gong sound at the bottom. Notwithstanding the frustrations of the past two years, Witan's managers will continue to select companies with sound business strategies, resilient finances, and good management, on the basis that companies that grow the fundamental value of their business will eventually see their share prices follow that growth.
Page 8 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
INTERIM MANAGEMENT REPORT continued
The mid-year period end coincided with a low point in market sentiment and performance. Between then and 12 August (the latest practicable date before the publication of this report), the NAV rose 11.4% to 252p and the share price by 14.1% to 235p, ahead of the benchmark's return of 9.9%. While noting that there remains ground to make up, there is reassurance for shareholders that absolute performance significantly recovered and the Company outperformed during the summer rally.
For and on behalf of the Board
Andrew Ross
Chairman
15 August 2022
Page 9 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
REGULATORY DISCLOSURES
Principal risks and uncertainties
The principal risks and uncertainties associated with the Company's business can be divided into various areas:
· market and investment portfolio (including political and macro-economic topics such as miliary conflict);
· operational and cyber;
· compliance and regulatory change;
· accounting, taxation and legal;
· liquidity;
· COVID-19 global pandemic; and
· Environmental, social and governance factors.
Information on these risks and other risks is given in the Strategic Report and in the Notes to the Financial Statements in the Company's Annual Report for the year ended 31 December 2021.
In the view of the Board, these principal risks and uncertainties are applicable to the remaining six months of the financial year, as they were to the six months under review.
Directors' responsibility statement
The directors confirm that, to the best of their knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34;
(b) the Interim Management Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (an indication of important events that have occurred during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six months of the financial year); and
(c) 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 changes therein).
For and on behalf of the Board
Andrew Ross
Chairman
15 August 2022
Page 10 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
REGULATORY DISCLOSURES continued
Going concern
The assets of the Company consist mainly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for at least the next 12 months.
The Company has at all times traded, and remains, well clear of all financial covenants on its borrowings (which are detailed in note 13 of its 2021 Annual Report).
Therefore, the Board has determined that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. In reviewing the position as at the date of this report, the Board has considered the guidance on this matter issued by the Financial Reporting Council.
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. Details of related party transactions during 2021 are contained in the Company's Annual Report for the year ended 31 December 2021.
Page 11 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Consolidated Statement of Comprehensive Income
| (Unaudited) Half year ended 30 June 2022 | (Unaudited) Half year ended 30 June 2021 | (Audited) Year ended 31 December 2021 | ||||||
Revenue return £'000
| Capital return £'000
|
Total £'000
| Revenue return £'000
| Capital return £'000
|
Total £'000
| Revenue return £'000
| Capital return £'000
|
Total £'000
| |
Investment income | 23,684 | - | 23,684 | 19,371 | - | 19,371 | 37,443 | - | 37,443 |
Other income | 158 | - | 158 | 88 | - | 88 | 129 | - | 129 |
(Losses)/gains on investments held at fair value through profit or loss (Note 2) | - | (341,325) | (341,325) | - |
198,197 | 198,197 | - | 248,107 | 248,107 |
Foreign exchange gains/(losses) on cash and cash equivalents | - | 966 | 966 | - | (718) | (718) | - | (1,178) | (1,178) |
---------- | ---------- | ----------- | --------- | ---------- | ----------- | --------- | ----------- | ----------- | |
Total income | 23,842 | (340,359) | (316,517) | 19,459 | 197,479 | 216,938 | 37,572 | 246,929 | 284,501 |
Expenses | |||||||||
Management and performance fees | (1,066) | (3,197) | (4,263) | (1,164) | (3,695) | (4,859) | (2,331) |
(7,383) | (9,714) |
Other expenses | (2,875) | (51) | (2,926) | (2,543) | (51) | (2,594) | (4,815) | (101) | (4,916) |
---------- | ---------- | ---------- | --------- | ---------- | ----------- | --------- | ----------- | ----------- | |
Profit/(loss) before finance costs and taxation | 19,901 | (343,607) | (323,706) | 15,752 | 193,733 | 209,485 | 30,426 | 239,445 | 269,871 |
Finance costs | (704) | (2,109) | (2,813) | (691) | (1,946) | (2,637) | (1,366) | (3,842) | (5,208) |
---------- | ---------- | ----------- | --------- | ---------- | ----------- | --------- | ----------- | ----------- | |
Profit/(loss) before taxation | 19,197 | (345,716) | (326,519) | 15,061 | 191,787 | 206,848 | 29,060 | 235,603 | 264,663 |
Taxation | (1,004) | 229 | (775) | (969) | (240) | (1,209) | (1,432) | (488) | (1,920) |
---------- | ---------- | ----------- | --------- | ---------- | ----------- | --------- | ----------- | ----------- | |
Profit/(loss) attributable to equity shareholders of the parent company | 18,193 | (345,487) | (327,294) | 14,092 | 191,547 | 205,639 | 27,628 | 235,115 | 262,743 |
====== | ====== | ====== | ===== | ====== | ====== | ===== | ====== | ====== | |
Earnings per ordinary share (Note 3) | 2.51p | (47.75p) | (45.24p) | 1.80p | 24.41p | 26.21p | 3.59p | 30.53p | 34.12p |
===== | ====== | ====== | ===== | ====== | ====== | ===== | ====== | ====== | |
The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with UK-adopted International Accounting Standards.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
The Group does not have any other comprehensive income and hence the total profit, as disclosed above, is the same as the Group's total comprehensive income. All items in the above statement derive from continuing operations. All income is attributable to the equity holders of Witan Investment Trust plc, the parent company. There are no non-controlling interests.
Page 12 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Consolidated Statement of Changes in Equity
| (Unaudited) Half year ended 30 June 2022 | |||||
| Ordinary share capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Other capital reserves £'000 |
Revenue reserve £'000 |
Total £'000 |
Total equity at 31 December 2021 | 50,018 | 99,251 | 46,498 | 1,747,379 | 48,895 | 1,992,041 |
Total comprehensive income: (Loss)/profit for the period | - | - | - | (345,487) | 18,193 | (327,294) |
Transactions with owners, recorded directly to equity: Ordinary dividends paid | - | - | - | - | (21,150) | (21,150) |
Buybacks of ordinary shares (held in treasury) (Note 6) | - | - | - | (68,960) | - | (68,960) |
| ----------- | ----------- | ------------- | ------------- | ----------- | ------------- |
Total equity at 30 June 2022 | 50,018 | 99,251 | 46,498 | 1,332,932 | 45,938 | 1,574,637 |
| ======= | ======= | ======== | ======== | ======= | ======== |
| (Unaudited) Half year ended 30 June 2021 | |||||
| Ordinary share capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Other capital reserves £'000 |
Revenue reserve £'000 |
Total £'000 |
Total equity at 31 December 2020 | 50,018 | 99,251 | 46,498 | 1,665,775 | 63,666 | 1,925,208 |
Total comprehensive income: Profit for the period | - | - | - | 191,547 | 14,092 | 205,639 |
Transactions with owners, recorded directly to equity: Ordinary dividends paid | - | - | - | - | (21,870) | (21,870) |
Buyback of ordinary shares (held in treasury) (Note 6) | - | - | - | (76,097) | - | (76,097) |
----------- | ----------- | ------------- | ------------- | ----------- | ------------- | |
Total equity at 30 June 2021 | 50,018 | 99,251 | 46,498 | 1,781,225 | 55,888 | 2,032,880 |
======= | ======= | ======== | ======== | ======= | ======== | |
| (Audited) Year ended 31 December 2021 | |||||
| Ordinary share capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Other capital reserves £'000 |
Revenue reserve £'000 |
Total £'000 |
Total equity at 31 December 2020 | 50,018 | 99,251 | 46,498 | 1,665,775 | 63,666 | 1,925,208 |
Total comprehensive income: Profit for the year | - | - | - | 235,115 | 27,628 | 262,743 |
Transactions with owners, recorded directly to equity: Ordinary dividends paid | - | - | - | - | (42,399) | (42,399) |
Buyback of ordinary shares (held in treasury) (Note 6) | - | - | - | (153,511) | - | (153,511) |
----------- | ----------- | ------------- | ------------- | ----------- | ------------- | |
Total equity at 31 December 2021 | 50,018 | 99,251 | 46,498 | 1,747,379 | 48,895 | 1,992,041 |
======= | ======= | ======== | ======== | ======= | ======== | |
Page 13 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Consolidated Balance Sheet
| (Unaudited) 30 June 2022 £'000 | (Unaudited) 30 June 2021 £'000 | (Audited) 31 December 2021 £'000 |
Non current assets |
| ||
Investments held at fair value through profit or loss | 1,771,175 | 2,240,560 | 2,217,455 |
Right-of-use asset: property | 215 | 282 | 249 |
--------------- | --------------- | ------------- | |
| 1,771,390 | 2,240,842 | 2,217,704 |
|
| ||
Current assets |
| ||
Other receivables | 14,607 | 11,163 | 5,840 |
Cash and cash equivalents | 38,493 | 30,060 | 34,590 |
--------------- | --------------- | ------------- | |
| 53,100 | 41,223 | 40,430 |
| --------------- | --------------- | ------------- |
Total assets | 1,824,490 | 2,282,065 | 2,258,134 |
| |||
Current liabilities |
| ||
Other payables | (14,599) | (8,574) | (10,347) |
Bank loans | (78,000) | (83,000) | (98,000) |
| --------------- | --------------- | ------------- |
| (92,599) | (91,574) | (108,347) |
| --------------- | --------------- | ------------- |
Total assets less current liabilities | 1,731,891 | 2,190,491 | 2,149,787 |
| --------------- | --------------- | ------------- |
Non current liabilities |
| ||
Other payables | (231) | (415) | (287) |
Deferred tax liability on Indian capital gains | (441) | (638) | (886) |
Borrowings: |
| ||
Secured debt (Note 5) | (154,027) | (154,003) | (154,018) |
3.4 per cent. cumulative preference shares of £1 | (2,055) | (2,055) | (2,055) |
2.7 per cent. cumulative preference shares of £1 | (500) | (500) | (500) |
--------------- | --------------- | ------------- | |
(157,254) | (157,611) | (157,746) | |
--------------- | --------------- | ------------- | |
Net assets | 1,574,637 | 2,032,880 | 1,992,041 |
========= | ========= | ======== | |
| |||
Equity attributable to equity holders |
| ||
Ordinary share capital (Note 6) | 50,018 | 50,018 | 50,018 |
Share premium account | 99,251 | 99,251 | 99,251 |
Capital redemption reserve | 46,498 | 46,498 | 46,498 |
Retained earnings: |
| ||
Other capital reserves | 1,332,932 | 1,781,225 | 1,747,379 |
Revenue reserve | 45,938 | 55,888 | 48,895 |
| --------------- | --------------- | ------------- |
Total equity | 1,574,637 | 2,032,880 | 1,992,041 |
========= | ========= | ======== | |
Net asset value per ordinary share (Note 7) | 222.64p | 264.31p | 269.93p |
| ========= | ========= | ======== |
Page 14 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Consolidated Cash Flow Statement
(Unaudited) 30 June 2022 | (Unaudited) 30 June 2021 | (Audited) 31 December 2021 | |
£'000 | £'000 | £'000 | |
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Cash flows from operating activities |
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Dividend income received | 21,825 | 19,374 | 37,986 |
Interest received | 17 | 31 | 149 |
Other income received | 141 | 276 | 361 |
Operating expenses paid | (6,584) | (8,068) | (15,430) |
Taxation on overseas income | (1,137) | (1,033) | (3,794) |
Taxation recovered | 2,379 | 61 | 81 |
------------- | ------------- | ------------- | |
Net cash inflow from operating activities | 16,641 | 10,641 | 19,353 |
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Cash flows from investing activities |
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Purchases of investments | (423,431) | (578,049) | (1,004,934) |
Sales of investments | 526,540 | 687,467 | 1,194,779 |
Capital gains tax on sales | (178) | - | - |
------------- | ------------- | ------------- | |
Net cash inflow from investing activities | 102,931 | 109,418 | 189,845 |
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Cash flow from financing activities |
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Equity dividends paid | (21,116) | (21,858) | (42,399) |
Buybacks of ordinary shares | (72,612) | (74,934) | (150,942) |
Interest paid | (2,840) | (2,606) | (5,167) |
Repayment of lease liability | (67) | (28) | (67) |
Drawdown of bank loans | 77,500 | 78,750 | 176,250 |
Repayment of bank loans | (97,500) | (104,750) | (187,250) |
------------- | ------------- | ------------- | |
Net cash outflow from financing activities | (116,635) | (125,426) | (209,575) |
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Increase/(decrease) in cash and cash equivalents | 2,937 | (5,367) | (377) |
Cash and cash equivalents at the start of the period | 34,590 | 36,145 | 36,145 |
Effect of foreign exchange rate changes | 966 | (178) | (1,178) |
------------- | ------------- | ------------- | |
Cash and cash equivalents at the end of the period | 38,493 | 30,060 | 34,590 |
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Page 15 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Notes to the Financial Statements
1 | Basis of preparation The condensed set of financial statements for the half year ended 30 June 2022 has been prepared on a going concern basis and in accordance with UK-adopted International Accounting Standards ('IAS') and with the Statement of Recommended Practice of Investment Trust Companies and Venture Capital Trusts (the 'SORP') issued by the Association of Investment Companies (the 'AIC') in April 2021, where the SORP is consistent with the requirements of IAS.
In assessing going concern, the directors have considered the risks noted in the Annual Report and Notes to the Financial Statements for the year ended 31 December 2021. The directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for at least a period of 12 months from the date of this report. For this reason, the Company continues to adopt the going concern basis of accounting in preparing the financial statements.
The condensed set of financial statements for the half year ended 30 June 2022 has been prepared on the basis of the accounting policies set out in the audited consolidated financial statements for the year ended 31 December 2021.
These condensed financial statements have not been audited or reviewed by the Company's Auditor.
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2 | Transaction costs The (losses)/gains on investments held at fair value through profit or loss include purchase transaction costs of £726,000 (half year ended 30 June 2021: £1,104,000; year ended 31 December 2021: £3,246,000) and sale transaction costs of £293,000 (half year ended 30 June 2021: £460,000; year ended 31 December 2021: £706,000). The purchase and sale transaction costs comprise mainly stamp duty and commissions.
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3 | Earnings per ordinary share The earnings per ordinary share figure is based on the net loss for the half year of £327,294,000 (half year ended 30 June 2021: profit of £205,639,000; year ended 31 December 2021: profit of £262,743,000) and on 723,512,428 ordinary shares (half year ended 30 June 2021: 784,730,376; year ended 31 December 2021: 770,137,797) being the weighted average number of ordinary shares in issue during the period.
The earnings per ordinary share figure detailed above can be further analysed between revenue and capital, as below. The Company has no securities in issue that could dilute the return per ordinary share. Therefore, the basic and diluted earnings per ordinary share are the same.
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(Unaudited) Half year ended 30 June 2022 £'000 | (Unaudited) Half year ended 30 June 2021 £'000 | (Audited) Year ended 31 December 2021 £'000 | ||
Net revenue profit | 18,193 | 14,092 | 27,628 | |
Net capital (loss)/profit | (345,487) | 191,547 | 235,115 | |
-------------- | -------------- | -------------- | ||
Net total (loss)/profit | (327,294) | 205,639 | 262,743 | |
======== | ======== | ======== | ||
Weighted average number of ordinary shares in issue during the period | 723,512,428 | 784,730,376 | 770,137,797 | |
Page 16 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Notes to the Financial Statements continued
3 | Earnings per ordinary share (continued) | |||
Pence | Pence | Pence | ||
Revenue earnings per ordinary share | 2.51 | 1.80 | 3.59 | |
Capital earnings per ordinary share | (47.75) | 24.41 | 30.53 | |
-------------- | -------------- | -------------- | ||
Total earnings per ordinary share | (45.24) | 26.21 | 34.12 | |
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4 | Interim dividend The directors have declared a second interim dividend of 1.40p per ordinary share (2021: 1.36p), payable on 16 September 2022 to shareholders registered on 26 August 2022. The shares will be quoted ex-dividend on 25 August 2022. A first interim dividend of 1.40p (2021: 1.36p) was paid on 10 June 2022. |
5 | Secured debt |
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| (Unaudited) 30 June 2022 £'000 | (Unaudited) 30 June 2021 £'000 | (Audited) 31 December 2021 £'000 | |
| 3.29 per cent. secured notes due 2035 | 20,894 | 20,888 | 20,891 | |
| 3.47 per cent. secured notes due 2045 | 53,679 | 53,671 | 53,677 | |
| 2.39 per cent. secured notes due 2051 | 49,689 | 49,683 | 49,686 | |
| 2.74 per cent. secured notes due 2054 | 29,765 | 29,761 | 29,764 | |
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| -------------- | -------------- | -------------- | |
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| 154,027 | 154,003 | 154,018 | |
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6 | Ordinary share capital At 30 June 2022 there were 707,268,687 ordinary shares in issue (30 June 2021: 769,127,886; 31 December 2021: 737,975,867) and 293,086,313 shares held in treasury (30 June 2021: 231,227,114; 31 December 2021: 262,379,133). During the half year ended 30 June 2022, the Company bought back 30,707,180 of its own ordinary shares (half year ended 30 June 2021: 32,585,401; year ended 31 December 2021: 63,737,420). The costs of the share buybacks were £68,960,000 (half year ended 30 June 2021: £76,097,000; year ended 31 December 2021: £153,511,000).
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7 | Net asset value per ordinary share The net asset value per ordinary share is based on the net assets (valuing prior charges at par) attributable to the equity shareholders of £1,574,637,000 (30 June 2021: £2,032,880,000; 31 December 2021: £1,992,041,000) and on 707,268,687 (30 June 2021: 769,127,886; 31 December 2021: 737,975,867) ordinary shares, being the number of ordinary shares in issue at the period end.
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8 | Subsidiary undertaking The Company has an investment in the issued ordinary share capital of its wholly owned subsidiary undertaking, Witan Investment Services Limited, which was incorporated on 28 October 2004, is registered in England and Wales, operates in the United Kingdom and is regulated by the Financial Conduct Authority.
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Page 17 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Notes to the Financial Statements continued
9 | Financial instruments | |||||||
| Balance Sheet amount versus fair value At the period end, the carrying value of financial assets and financial liabilities approximates their fair value, with the exception of the non current liabilities as detailed below:
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Financial liabilities measured using effective interest method: |
Fair value £'000 | Balance Sheet amount £'000 | |||||
| Non current liabilities | |||||||
| Preference shares | 1,354 | 2,555 | |||||
| Secured notes | 130,474 | 154,027 | |||||
| -------------- | -------------- | ||||||
| 131,828 | 156,582 | ||||||
| -------------- | -------------- | ||||||
| Fair value hierarchy |
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| The table above analyses recurring fair value measurements for financial liabilities. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels are defined as follows: Level 1 financial liabilities: The Company's preference shares are actively traded on a recognised stock exchange. Their fair value has therefore been deemed to be Level 1. Level 3 financial liabilities: The Company's secured notes are not traded on a recognised stock exchange and so the fair value is calculated by using a discount rate which reflects the yield on a UK gilt of similar maturity plus a credit spread of 1.40%. Their fair value has therefore been deemed to be Level 3.
The table below analyses fair value measurements for financial assets. |
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| Financial assets at fair value through profit or loss at 30 June 2022 | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 |
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| Investments including derivatives: |
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| Equity securities designated at fair value through profit or loss | 1,643,204 | - | - | 1,643,204 |
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| Warrants | - | 1,117 | - | 1,117 |
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| Investments in other funds | - | 92,277 | 34,577 | 126,854 |
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| ------------ | ---------- | --------- | ------------ |
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| Total financial assets carried at fair value | 1,643,204 | 93,394 | 34,577 | 1,771,175 |
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| ======= | ====== | ===== | ======= |
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| There have been no transfers between levels of the fair value hierarchy during the period. Transfers between levels of fair value hierarchy are deemed to have occurred at the date of the event or change in circumstances that caused the transfer.
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 as follows:
Level 1: valued using quoted prices in an active market for identical assets. Level 2: valued by reference to valuation techniques using observable inputs other than quoted prices within Level 1. Level 3: valued by reference to valuation techniques using inputs that are not based on observable market data.
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Page 18 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Notes to the Financial Statements continued
| Level 2 Financial assets Level 2 Financial assets refer to investments in GMO Climate Change Fund (December 2021: GMO Climate Change Fund) and warrant holdings in Kweichow Moutai (December 2021: Wulliangye Yibin and Kweichow Moutai).
Level 3 A reconciliation of fair value movements within Level 3 is set out below:
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Level 3 Investments at fair value through profit or loss | (Unaudited) Half year ended 30 June 2022 £'000 | (Audited) Year ended 31 December 2021 £'000 | |
| Opening balance | 37,774 | - | |
| Acquisitions | - | 38,138 | |
| Total losses included in the Statement of Comprehensive Income - on assets held at year end | (3,197) | (364) | |
| -------------- | -------------- | ||
| Closing balance | 34,577 | 37,774 | |
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As in 2021, the key inputs to the valuation of the two Level 3 unquoted investments (i.e. the unquoted growth funds with Greenoaks (Lindenwood) and the Lansdowne Developed Markets Opportunities fund) are the fair value net asset value statements provided by the investee entities.
10 | Segment reporting |
As detailed in the Company's Annual Report for the year ended 31 December 2021, geographical segments are considered to be the Group's primary reporting segment and business segments the secondary reporting segment. The Group has two business segments: (i) its activity as an investment trust, which is the business of the parent company; and (ii) the provision of alternative investment fund manager, executive and marketing management services, which is the business of the subsidiary, Witan Investment Services Limited, and recorded in the accounts of that company. The investment trust is managed by reference to a geographical benchmark; the geographical allocation of the portfolio, as at 30 June 2022, is set out on page 2. The schedule on page 4 summarises the assets under management and investment performance relating to each investment manager. This information is updated and reviewed regularly for internal management purposes and is essential for assessing the structure of the overall portfolio and the performance of each investment manager.
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Page 19 of 19
WITAN INVESTMENT TRUST PLC
Financial Report for the Half Year ended 30 June 2022
Notes to the Financial Statements continued
10 Segment reporting (continued)
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| (Unaudited) Half year ended 30 June 2022 | (Unaudited) Half year ended 30 June 2021 | (Audited) Year ended 31 December 2021 | |||||||
| Invest-ment trust £'000 | Manage-ment services £'000 | Total £'000 | Invest-ment trust £'000 | Manage-ment services £'000 | Total £'000 | Invest-ment trust £'000 | Manage-ment services £'000 | Total £'000 | |
External revenue
| 23,842 | - | 23,842 | 19,459 | - | 19,459 | 37,572 | - | 37,572 | |
Other revenue
| (340,359) | - | (340,359) | 197,479 | - | 197,479 | 246,929 | - | 246,929 | |
Segment expenses |
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-Management expenses |
(4,263) |
- |
(4,263) |
(4,859) |
- |
(4,859) |
(9,714) |
- |
(9,714) | |
-Other expenses | (2,670) | (256) | (2,926) | (2,352) | (242) | (2,594) | (4,437) | (479) | (4,916) | |
-Finance costs
| (2,813) | - | (2,813) | (2,637) | - | (2,637) | (5,208) | - | (5,208) | |
Segment (loss)/profit before taxation
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(326,263) |
(256) |
(326,519) |
207,090 |
(242) |
206,848 |
265,142 |
(479) |
264,663 | |
Segment assets
| 1,573,486 | 1,151 | 1,574,637 | 2,031,747 | 1,133 | 2,032,880 | 1,990,925 | 1,116 | 1,992,041 | |
11 | Comparative information |
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The financial information contained in this half year financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half years ended 30 June 2022 and 30 June 2021 has not been audited or reviewed by the Auditor.
The figures and financial information for the year ended 31 December 2021 are extracted from the latest published audited financial statements of the Company and do not constitute the statutory accounts for that year. The audited financial statements for the year ended 31 December 2021 have been filed with the Registrar of Companies. The report of the independent auditors on those accounts contained no qualification or statement under section 498(2) or section 498(3) of the Companies Act 2006.
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Financial report for the half year ended 30 June 2022 A copy of the financial report for the half year ended 30 June 2022 has been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the Company's website, www.witan.com.
Printed copies or electronic notification will be sent to shareholders in August 2022 and will be available thereafter from the Secretary at the Company's registered office, 14 Queen Anne's Gate, London SW1H 9AA. |
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- ENDS -
For further information please contact:
Andrew Bell Chief Executive Officer Witan Investment Trust plc Telephone: 020 7227 9770
| Alexis Barling Director of Marketing Witan Investment Trust plc Telephone: 020 7227 9770 |
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.
Related Shares:
Witan