Announcement
ANNREP: BIT: BIT- Annual Financial Report
08:30am
BIT
16/01/2020 08:30
ANNREP
PRICE SENSITIVE
REL: 0830 HRS The Bankers Investment Trust Plc
ANNREP: BIT: BIT- Annual Financial Report
LEGAL ENTITY IDENTIFIER: 213800B9YWXL3X1VMZ69
THE BANKERS INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 October 2019
This announcement contains regulated information
Performance Highlights 31 October 2019 31 October 2018
Net Asset Value per ordinary share
- With debt at par 948.7p 865.8p
- With debt at market value 945.7p 862.8p
Share price at year end(1) 927.5p 835.0p
Dividend per share for year(2) 20.90p 19.72p
31 October 2019
31 October 2018
Dividend growth 6.0% 6.0%
Ongoing charge for year 0.52% 0.50%
Discount at year end(3) 2.2% 3.6%
Net (cash)/gearing at year end(4) (3.0%) 2.4%
Long term growth record to 31 October 2019 1 year
% 3 years
% 5 years
% 10 years
%
Capital return(5)
Net asset value 9.6 25.8 59.0 140.1
Share price 11.0 34.4 64.7 166.8
FTSE World Index(6) 8.9 21.6 30.7 77.2
Total return(7)
Net asset value 12.1 34.6 78.7 208.7
Share price 13.6 43.9 85.7 248.3
FTSE World Index(6) 11.7 32.6 53.3 146.8
Dividend 6.0 22.9 41.2 81.7
Retail Price Index 2.1 9.7 12.7 34.4
(1) Share price is the mid-market closing price
(2) This represents the four ordinary dividends recommended or paid for the
year (see the Annual Report for more details)
(3) Based on the mid-market closing price
(4) Net (cash)/gearing is calculated in accordance with the gearing
definition in the alternative performance measures in the Annual Report
(5) Capital return excludes all dividends
(6) For the 3, 5 and 10 years this is a composite of the FTSE World Index
and the FTSE All-Share Index
(7) Total return assumes dividends reinvested
Sources: Morningstar for the AIC, Janus Henderson, Datastream.
CHAIRMAN'S STATEMENT
o Net asset value total return increase of 12.1%.
o Share price total return increase of 13.6%.
o Average discount to net asset value of 1.5%.
o Dividend increase of 6% to 20.90p per share.
o Forecast increase in 2020 dividend of 3%.
Performance
I am pleased to report, for the year ended 31 October 2019, strong absolute
returns for shareholders. The Company's net asset value per share ('NAV')
increased by 9.6% in capital terms over the year. With dividends reinvested,
the NAV total return per share was 12.1%, marginally outperforming the FTSE
World Index total return of 11.7% (in sterling terms). Our share price total
return was higher, at 13.6%, due to the narrowing of the discount to NAV at
which our shares traded. At 31 October 2019, the discount stood at 2.2%
(2018: 3.6%), having averaged 1.5% over the year.
It was a challenging year for investment with a variety of macro factors and
geopolitical tensions resulting in significant volatility in global equity
markets. Early in the financial year, the US Federal Reserve's hawkish
policy, which suggested further interest rates rises were likely in 2019, led
to a sharp sell-off, although this was quickly reversed when the US Federal
Reserve back-tracked in late December. More dovish central bank policy
followed in 2019, including three US Federal Reserve interest rate cuts and
indications of the willingness of major central banks to resume or continue
supplying liquidity, which provided further support for real asset prices.
The US-China trade dispute oscillated between positive indications that an
agreement would be reached and further escalation of the dispute. There were
signs of slowing global economic growth, with weakened global activity,
mainly in the manufacturing sector of the advanced economies, leading to
gross domestic product growth forecasts for the calendar year being
downgraded on several occasions. The Eurozone and UK were particularly
affected and only narrowly avoided technical recessions. When the yield on
long-term US Treasury bonds fell below that for short-term ones concerns grew
that a US recession was on its way. However, these concerns began to subside
later in the year as investors questioned whether, with accommodative central
bank policy, yield inversion was still a reliable indicator of a forthcoming
recession. Over the financial year, the US equity market was the strongest
performing market, whilst the UK market was one of the weakest, as the
ongoing uncertainty regarding the UK's exit from the European Union continued
to weigh on business prospects and investor sentiment.
Given the relatively high valuations of most equity markets, our Manager took
the opportunity to realise some profits. In addition, as explained in the
Interim Report, we concluded that our direct Emerging Markets (excluding
emerging Asia) portfolio had not contributed meaningfully to the Company's
returns and should be sold down. This was completed before the financial year
end, raising cash ultimately for reallocation to other regions. Since the
financial year end, our Manager has begun reinvesting our cash when suitable
opportunities have arisen.
All of our continuing regional portfolios delivered strong absolute returns
and outperformed their respective local benchmarks over the financial year.
Notwithstanding this, our allocations, relative to the FTSE World Index, of
being overweight UK (with its higher dividend yield) and underweight the US,
held back the Company's relative performance in the final quarter of our
financial year, giving up much of our relative outperformance earlier in the
year.
Further details of the performance of the Company and its regional portfolios
during the year are included in the Fund Managers' reports in the Annual
Report.
Revenue and dividends
It was another solid year for our revenue account. Earnings per share
increased by 4.0% to 21.61p (2018: 20.78p), driven principally by continuing
dividend growth and further special dividends from the Company's investments.
This performance has enabled the Board to recommend a final quarterly
dividend of 5.35p per share, to be paid on 28 February 2020 to shareholders
on the register of members at close of business on 24 January 2020. If
approved by shareholders at the forthcoming AGM, this will result in a total
dividend payment for the year of 20.90p (2018: 19.72p), an increase of 6.0%,
which is in line with our forecast for the year, compares very favourably
with the 2.1% rise in the Retail Price Index and extends our long record of
dividend growth in real terms.
After taking into account the recommended final 2019 dividend payment, if
approved, approximately ?0.7 million will be transferred to our revenue
reserve, which, at the year-end, after payment of the third interim and final
dividends, represented 1.2 times the cost of the 2019 annual dividend. The
revenue reserve enables the Company to hold back some income in years of
strong corporate dividend growth to pay it out in leaner ones when corporate
profits are under pressure (and, hence, dividend payments from our
investments may be lower).
The Company has grown its annual dividend for each of the last 53 financial
years, making it one of the leading AIC 'dividend heroes'. The Board
recognises the importance of delivering a reliable and growing income to
shareholders. The Board intends to use the revenue reserve when required to
continue to achieve this, as it has done from time to time over the past 53
years. This will allow, in leaner years, our Manager to continue to invest
the Company's portfolio with the objective of achieving the best NAV total
return for shareholders.
Lower corporate earnings growth and any significant increase in the value of
sterling are headwinds that may result in the Company's earnings per share in
the current financial year being less than last year. The revenue reserve
gives the Board confidence, despite these headwinds, to forecast dividend
growth of approximately 3% for the current financial year.
Borrowings
As stated in the Interim Report, the Company refinanced its short-term
borrowings by agreeing a new two year ?20 million borrowing facility with
Sumitomo Mitsui Banking Corporation Europe Ltd in February 2019. The Company
continually reviews opportunities to deploy gearing and the short-term
facility gives our Manager additional flexibility to invest and create
returns for shareholders. The facility remained undrawn throughout the year,
and currently remains undrawn.
Share issues and buy-backs
The Company did not issue or buy back any shares during the financial year.
Since the year end, the shares reverted to trading at a premium and we have
sold all of the shares held in treasury and issued new shares to meet market
demand (see the Annual Report for details).
The Company will only issue shares (or sell shares out of treasury) at a
premium (after costs) to net asset value. The Company remains prepared to buy
back shares, taking account of prevailing market conditions (which are not
under the Board's control), the level of the discount (both absolute and
relative to the Company's closest peers) and the impact on the net asset
value per share.
Board changes
As mentioned in the Interim Report, Richard Killingbeck retired as Chairman
and stepped down from the Board at the conclusion of the Annual General
meeting in February 2019 following 15 years as a Director. The Board is in
the final stages of an extensive process, carried out in conjunction with an
experienced independent external search consultancy, to recruit a new
non-executive Director to provide additional investment knowledge and expects
to announce an appointment shortly.
Annual General Meeting ('AGM')
This year's AGM will again be held at Trinity House, London, EC3N 4DH on 26
February 2020 at 12 noon. Full details of the business to be conducted at the
meeting are set out in the Notice of Meeting which has been sent to
shareholders with the Annual Report. Directions and a map showing the
location of the AGM can also be found in the Notice of Meeting. In addition
to the formal part of the meeting, Alex Crooke will present his investment
views and how these are reflected in the portfolio and there will be an
opportunity for shareholders to ask questions. Light refreshments will be
served following the conclusion of the meeting. The Board looks forward to
seeing many of you at the AGM.
Outlook
Since the end of our last financial year, and particularly in December,
global equity markets have rallied strongly and achieved record highs. This
further upward momentum has been driven primarily by the announcement of the
first phase of a trade deal between the US and China lifting prospects for
the global economy, in conjunction with the expectation that major central
banks will continue to pursue loose monetary policy. In addition, the
Conservative Party's convincing win in the December general election provided
some relief for investors in UK equities. However, some of the key
geopolitical tensions and macro factors that influenced global equity markets
during the last financial year remain unresolved.
A final resolution of the US-China trade dispute still seems some way off,
despite their interim trade deal announced in December 2019. Until a final
resolution has been reached, the dispute is likely to continue to be a
significant driver of investor sentiment. President Trump is unpredictable
and up for re-election this year, so further escalations of trade tensions
cannot be ruled out.
The UK is now set to leave the European Union at the end of this month, but
the nature of any trading arrangement between the UK and the European Union
has still to be agreed and a 'hard Brexit' when the transitional period
expires on 31 December 2020 remains a real possibility. Accordingly, Brexit
is likely to remain a major concern for UK markets and a driving factor for
sterling.
Global economic growth remains positive, but appears to be slowing. Corporate
earnings growth stalled in 2019, but is currently expected to regain some
momentum in 2020. Central banks have adopted a more accommodative stance to
counter rising risks to growth and elusive inflationary pressures, but they
cannot remain accommodative indefinitely and the long term consequences of
their policies are unknown. The risk of an imminent recession now seems low,
but cannot be completely discounted.
Sue Inglis
Chairman
15 January 2020
FUND MANAGER'S REPORT
Performance
The year has turned out well with positive returns from all major equity
markets despite predictions from many that share prices were expensive. At
the start of our financial year in November 2018 stock markets were weak and
fell sharply before turning more positive in late December. The stimulus for
the market's positive momentum came initially from the US Federal Reserve's
('Fed') statement in December 2018 signalling that risks were now balanced
within the US economy and that they were prepared to react to any economic
weakness ahead. Ultimately the Fed cut interest rates three times in 2019 and
the resulting injection of liquidity into bond markets was followed by the
European Central Bank resuming bond purchases which forced long term interest
rates lower lending support to real asset prices around the world.
My own forecast was for a year of two halves with many of the uncertainties
that were troubling investors getting resolved from the summer onwards. My
optimism proved premature, while there were plenty of tweets from the US
President about the state of trade discussions between the US and China,
there were no formal agreements by our year end. Similarly Brexit
negotiations within the UK parliament could find no consensus between
politicians and the UK stock market's relatively lacklustre performance
reflected investors frustrations. The lack of progress on both fronts clearly
had a real economic impact during the year, as evidenced by stagnation in
Chinese industrial orders and companies in Europe and the UK citing the
uncertainty for delaying investment decisions.
Ironically the two best performing regions of the portfolio, being the US and
China, were the two embroiled in establishing their future trading
relationship. Our stock selection in these two markets has been a significant
contributor to performance both last year and in recent years; however the US
performance could have been better but for under performance in September and
October following an apparent shift in sentiment from growth investing to
value. Our view is that this was not a shift to value but an indication that
investors were questioning the growth at any price strategy, typified by the
office space letting company WeWork. Although we experienced some relative
underperformance in our US investments, we have limited exposure to such
companies in the portfolio and prefer companies with a solid path to
profitability. Overall we had another good year for stock picking with all
our regional portfolios beating their benchmarks. The NAV total return for
the year was also ahead of the FTSE World benchmark despite giving up some
relative performance in the last quarter.
Asset Allocation
The sharp increase in share prices over the year was not matched by higher
corporate profits meaning that share price valuations were stretched higher.
Our managers are sensitive to the value of investments and as price targets
are exceeded it is natural to see them to be selling holdings. As indicated
in the Interim Report we also began divesting the holdings in the Latin
American and African regions and all had been sold by the year end, however
we continue to retain significant investments in emerging Asia, including
China. It has been taking a little longer this year to find new investments
to replace these holdings and therefore we have ended the year with a net
cash position within the Company of 3%.
In terms of the investment team, James Ross has settled in well and has had a
successful year outperforming his European benchmark by 4.1%. Additionally, I
am pleased to welcome Gordon Mackay who has taken over the US portfolio from
Ian Warmerdam following his retirement from the industry. Gordon has over 20
years of investment experience and worked alongside Ian for the last three
years. There will be no change to the investment process that we have been
employing to select US stocks.
Outlook
Markets have a habit of discounting both good and bad news well before events
unfold. So while the outlook for the year ahead has improved in recent months
much of this is priced into shares given market movements since our year end.
We expect corporate earnings to resume growth on the back of a resolution of
US trade discussions and greater certainty around the United Kingdom's status
outside Europe. With little prospect of interest rates rising and further
support from central banks, it seems likely that corporates will continue
using cheap borrowings to buy ever more of their stock for cancellation. The
supply of new equity remains low by historical standards and the wall of
money that is committed by private equity investors must surely start to be
deployed taking listed companies private. It is therefore not difficult to
paint a positive story of increasing demand over supply
for listed equities.
Dividend growth from our investments has slowed in the past year reflecting
lower corporate earnings and we may experience a further headwind if sterling
returns to its pre referendum levels. We have built revenue reserves in
recent years to cope with the fluctuations of currencies or the need to
prioritise asset allocation decisions towards lower yielding markets.
Overall we see the supportive background for equities, both from a liquidity
point of view and increased earnings, being countered by the elevated level
of valuations relative to history. There is certainly potential for the cash
we currently hold to be positively deployed and we will continue to focus our
efforts on not overpaying for investments while seeking out companies with
genuine prospects for profit growth.
Alex Crooke
Fund Manager
15 January 2020
LARGEST INVESTMENTS at 31 October 2019
Ranking
2019 Ranking
2018
Company
Country Valuation
2018
?'000 Purchases
?'000 Sales proceeds
?'000 Appreciation/ (depreciation)
?'000 Valuation
2019
?'000
1 1 Microsoft US 21,422 - (1,695) 6,563 26,290
2 7 Estee Lauder US 16,930 3,055 (1,553) 6,624 25,056
3 3 American Express US 20,174 - - 2,583 22,757
4 11 American Tower US 14,412 - - 5,510 19,922
5 9 Visa US 14,938 - - 4,207 19,145
6 14 MasterCard US 13,742 - - 5,266 19,008
7 6 Berkshire Hathaway US 18,089 - - 411 18,500
8 8 Alphabet US 15,886 - - 2,394 18,280
9 12 Comcast US 14,272 1,292 - 2,518 18,082
10 17 GlaxoSmithKline UK 12,710 1,858 - 2,323 16,891
11 16 Aptiv US 12,901 - - 1,961 14,862
12 18 Diageo UK 11,987 - - 2,018 14,005
13 21 Intercontinental
Exchange US 11,189 - - 2,331 13,520
14 # Adobe Systems US - 11,144 - 2,031 13,175
15 4 Union Pacific US 19,776 - (8,337) 1,517 12,956
16 10 Royal Dutch Shell UK 14,926 - - (2,020) 12,906
17 22 Xylem US 11,167 - - 1,727 12,894
18 15 ICON US 13,216 3,172 (5,010) 1,341 12,719
19 24 The Cooper Companies US 10,814 - - 1,214 12,028
20 # Intuit US - 12,966 - (1,063) 11,903
21 # Electronic Arts US 8,211 - - 2,912 11,123
22 20 Taiwan Semiconductor Manufacturing Taiwan 11,715 - (3,634) 2,728 10,809
23 2 Apple US 21,285 - (8,031) (2,655) 10,599
24 # Roper Technologies US 8,301 - - 1,464 9,765
25 # Reckitt Benckiser UK 8,217 2,012 - (541) 9,688
----------- ----------- ----------- ----------- -----------
326,280 35,499 (28,260) 53,364 386,883
====== ====== ====== ====== ======
All securities are equity investments
# Not in the top 25 last year
Convertibles and all classes of equity in any one company are treated as one
investment
CHANGES IN INVESTMENTS at 31 October
Valuation
2018
?'000 Purchases
?'000 Sales proceeds
?'000 Appreciation/ (depreciation)
?'000 Valuation
2019
?'000
United Kingdom 273,533 45,584 (40,399) 9,675 288,393
Europe (ex UK) 162,081 53,295 (78,264) 17,435 154,547
North America 343,056 49,525 (61,460) 41,595 372,716
Japan 127,575 30,947 (32,806) 9,682 135,398
Pacific (ex Japan, China) 95,121 54,115 (48,660) 14,393 114,969
China 58,422 41,421 (51,334) 13,987 62,496
Emerging Markets1 27,245 6,447 (32,801) (891) -
-------------- ----------- ------------ ------------ --------------
1,087,033 281,334 (345,724) 105,876 1,128,519
======== ====== ======= ======= ========
(1) The Emerging Markets portfolio was closed during the year
MANAGING OUR RISKS
The Board, with the assistance of Janus Henderson, has carried out a robust
assessment of the principal risks and uncertainties facing the Company that
would threaten its business model, future performance, solvency and
liquidity. This included consideration of the market uncertainty arising from
the United Kingdom's negotiations and now expected conclusion to leave the
European Union ('Brexit').
We regularly consider the principal risks facing the Company and have drawn
up a matrix of risks facing the Company. The Board has put in place a
schedule of investment limits and restrictions, appropriate to the Company's
investment objective and policy, in order to mitigate these risks as far as
practicable. The Board monitors the Manager, its other service providers and
the internal and external environments in which the Company operates to
identify new and emerging risks.
It is the Board's view that the changing nature of the retail shareholder
base, demographical changes (needing to make sure there is demand from the
younger generation), technological changes (primarily artificial
intelligence) and environmental sustainability (shareholder expectations and
regulation affecting portfolio companies/stock selection and the Company's
performance and demand for its shares) are emerging risks.
The Board pro-actively monitors all of these factors and has a strong focus
on continuing to educate itself about any relevant issues. Details of how the
Board monitors the services provided by Janus Henderson and its other
suppliers, and the key elements designed to provide effective internal
control, are explained further in the internal controls section of the
Corporate Governance Statement in the Annual Report. Further details of the
Company's exposure to market risk (including market price risk, currency risk
and interest rate risk), liquidity risk and credit and counterparty risk and
how they are managed are contained in note 16 in the Annual Report.
The Board's policy on risk management has not materially changed during the
course of the reporting period and up to the date of this report. The
principal risks which have been identified and the steps taken by the Board
to mitigate these are as follows:
Principal risks Mitigation measure
Investment Activity and Performance Risks
An inappropriate investment strategy (for example, in terms of asset
allocation or the level of gearing) may result in underperformance against
the Company's benchmark index and the companies in its peer group.
The Board monitors investment performance at each Board meeting and regularly
reviews the extent of the Company's borrowings.
Portfolio and Market Risks
Although the Company invests almost entirely in securities that are listed on
recognised markets, share prices may move rapidly. The companies in which
investments are made may operate unsuccessfully, or fail entirely. Macro
matters (such as trade wars, the conclusion of the UK's negotiations to leave
the European Union and the global economic outlook) are expected to lead to
continued volatility in the markets. This is likely to impact share prices of
investments in the portfolio, to the extent not already factored into current
prices. A fall in the market value of the Company's portfolio would have an
adverse effect on shareholders' funds.
The Fund Manager seeks to maintain a diversified portfolio to mitigate
against this risk. The Board regularly reviews the portfolio, investment
activity and performance.
Tax, Legal and Regulatory Risks
A breach of s.1158/9 could lead to the loss of investment trust status,
resulting in capital gains realised within the portfolio being subject to
corporation tax. A breach of the FCA's Rules could result in suspension of
the Company's shares, while a breach of the Companies Act could lead to
criminal proceedings. All breaches could result in financial or reputational
damage. The Company must also ensure compliance with the Listing Rules of the
New Zealand Stock Exchange.
Janus Henderson has been contracted to provide investment, company
secretarial, administration and accounting services through qualified
professionals. The Board receives internal control reports produced by Janus
Henderson on a quarterly basis, which confirm tax, legal and regulatory
compliance both in the UK and New Zealand.
Financial Risks
By its nature as an investment trust, the Company's business activities are
exposed to market risk (including market price risk, currency risk and
interest rate risk), liquidity risk and credit and counterparty risk.
The Company has a diversified portfolio which comprises mainly investments in
large and medium-sized companies and mitigates the Company's exposure to
liquidity risk. The Company minimises the risk of a counterparty failing to
deliver securities or cash by dealing through organisations that have
undergone rigorous due diligence by Janus Henderson. Further information on
the mitigation of financial risks is included in note 16 in the Annual
Report.
Operational and Cyber Risks
Disruption to, or failure of, Janus Henderson's accounting, dealing or
payment systems or the Depositary's records could prevent the accurate
reporting and monitoring of the Company's financial position. The Company is
also exposed to the operational and cyber risks that one or more of its
service providers may not provide the required level of service.
The Board monitors the services provided by Janus Henderson, the Depositary
and its other suppliers and receives reports on the key elements in place to
provide effective internal control.
THE COMPANY'S VIABILITY
The UK Corporate Governance Code requires the Board to assess the future
prospects for the Company, and report on the assessment within the Annual
Report.
The Board considered that certain characteristics of the Company's business
model and strategy were relevant to this assessment:
o The Board looks to ensure the Company seeks to only deliver positive long
term performance.
o The Company's investment objective, strategy and policy, which are subject
to regular Board monitoring, mean that the Company is invested normally only
in readily realisable, listed securities and that the level of borrowings is
restricted.
o The Company is a closed-ended investment company and therefore does not
suffer from the liquidity issues arising from unexpected redemptions.
Also relevant were a number of aspects of the Company's operational
arrangements:
o The Company retains title to all assets held by the Custodian under the
terms of formal agreements with the Custodian and Depositary.
o Long term borrowing is in place, being the ?15 million 8% debenture stock
2023 and ?50 million 3.68% loan notes 2035 which are also subject to formal
agreements, including financial covenants with which the Company complied in
full during the year. The value of long term borrowing is relatively small in
comparison to the value of net assets being 5.6%.
o Short term borrowing of ?20 million with Sumitomo Mitsui Banking
Corporation Europe Ltd. The facility was not drawn down at the year end and
expires in February 2021.
o Revenue and expenditure forecasts are reviewed by the Directors at each
Board meeting.
o Cash is held with approved banks.
In addition, the Directors carried out a robust assessment of the principal
risks and uncertainties which could threaten the Company's business model,
including future performance, liquidity and solvency. These risks, their
mitigations and processes for monitoring them are set out in the Annual
Report.
The principal risks identified as relevant to the viability assessment were
those relating to investment portfolio performance and its effect on the net
asset value, share price and dividends, and threats to security over the
Company's assets. The Board took into account the liquidity of the Company's
portfolio, the existence of the long term fixed rate borrowings, the effects
of any significant future falls in investment values and income receipts on
the ability to repay and re-negotiate borrowings, growing dividend payments,
the desire to retain investors and the potential need for share buy backs.
The Directors assess viability over three year rolling periods, taking
account of foreseeable severe but plausible scenarios. The Directors believe
that a rolling three year period best balances the Company's long term
objective, its financial flexibility and scope with the difficulty in
forecasting economic conditions affecting the Company and its shareholders.
Based on their assessment, and in the context of the Company's business
model, strategy and operational arrangements set out above, the Directors
have a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the three year
period to October 2022.
RELATED PARTY TRANSACTIONS
The Company's transactions with related parties in the year were with its
Directors and Janus Henderson. There were no material transactions between
the Company and its Directors during the year other than the amounts paid to
them in respect of Directors' remuneration for which there were no
outstanding amounts payable at the year end. In relation to the provision of
services by the Manager, other than fees payable by the Company in the
ordinary course of business and the provision of marketing services, there
were no transactions with the Manager affecting the financial position of the
Company during the year. More details on transactions with the Manager,
including amounts outstanding at the year end, are given in the Annual
Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES UNDER DISCLOSURE GUIDANCE AND
TRANSPARECY RULE 4.1.12
Each of the Directors confirms that, to the best of his or her knowledge:
o the Company's financial statements, which have been prepared in accordance
with IFRSs as adopted by
the EU, give a true and fair view of the assets, liabilities, financial
position and profit of the Company; and
o the Strategic Report in the Annual Report and financial statements
includes a fair review of the development and performance of the business and
the position of the Company, together with a description of the principal
risks and uncertainties that it faces.
For and on behalf of the Board
Sue Inglis
Chairman
15 January 2020
STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 October 2019 Year ended 31 October 2019
Notes Revenue return ?'000 Capital return ?'000 Total return
?'000 Revenue return ?'000 Capital return ?'000 Total return
?,000
Gains/ (losses) on investments held at fair value through profit or loss
- 105,376 105,376 - (12,611) (12,611)
Investment income 2 31,483 - 31,483 30,321 - 30,321
Other operating income 3 269 - 269 226 - 226
--------- --------- --------- --------- --------- ---------
Total income 31,752 105,376 137,128 30,547 (12,611) 17,936
--------- --------- --------- --------- --------- ---------
Expenses
Management fees 4 (1,437) (3,352) (4,789) (1,344) (3,136) (4,480)
Other expenses (1,009) - (1,009) (990) - (990)
--------- --------- --------- --------- --------- ---------
Profit/(loss) before finance costs and taxation 29,306 (102,024) 131,330
28,213 (15,747) 12,466
Finance costs (911) (2,126) (3,037) (917) (2,141) (3,058)
--------- ---------- --------- --------- ---------- ---------
Profit/(loss) before taxation 28,395 99,898 128,293 27,296 (17,888) 9,408
--------- ---------- --------- --------- ---------- ---------
Taxation 5 (1,898) (3) (1,901) (1,823) - (1,823)
--------- --------- --------- --------- --------- ---------
Profit/(loss) for the year and total comprehensive income 26,497 99,895
126,392 25,473 (17,888) 7,585
===== ====== ====== ===== ====== ======
Earnings per ordinary share - basic and diluted 6 21.61p 81.48p 103.09p
20.78p (14.59p) 6.19p
The total columns of this statement represent the Statement of Comprehensive
Income, prepared in accordance with IFRSs as adopted by the European Union.
The revenue return and capital return columns are supplementary to this and
are prepared under guidance published by the Association of Investment
Companies.
STATEMENT OF CHANGES IN EQUITY
Year ended 31 October 2019
Called-up
share capital
?'000 Share premium
account
?'000 Capital redemption
reserve
?'000 Other capital
reserves
?'000
Revenue reserve
?'000
Total
?'000
Total equity at 1 November 2018 30,986 78,541 12,489 897,318 42,249 1,061,583
Total comprehensive income:
profit for the year - - - 99,895 26,497 126,392
Ordinary dividends paid - - - - (24,766) (24,766)
---------- ---------- ---------- ---------- ---------- -------------
Total equity at 31 October 2019 30,986 78,541 12,489 997,213 43,980 1,163,209
====== ====== ====== ====== ====== =======
Year ended 31 October 2018
Year ended
31 October 2018 Called-up
share
capital
?'000 Share premium
account
?'000 Capital redemption
reserve
?'000 Other capital
reserves
?'000
Revenue reserve
?'000
Total
?'000
Total equity at 1 November 2017 30,986 78,541 12,489 915,206 40,341 1,077,563
Total comprehensive income:
(Loss)/Profit for the year - - - (17,888) 25,473 7,585
Ordinary dividends paid - - - - (23,565) (23,565)
---------- ---------- ---------- ---------- ---------- -------------
Total equity at 31 October 2018 30,986 78,541 12,489 897,318 42,249 1,061,583
====== ====== ====== ====== ====== =======
STATEMENT OF FINANCIAL POSITION
At 31 October
2019
?'000 At 31 October
2018
?'000
Non-current assets
Investments held at fair value through profit or loss 1,128,519 1,087,033
-------------- --------------
Current assets
Investments held at fair value through profit or loss 44,993 18,005
Other receivables 4,134 4,667
Cash and cash equivalents 54,944 20,075
-------------- --------------
104,071 42,747
-------------- --------------
Total assets 1,232,590 1,129,780
-------------- --------------
Current liabilities
Other payables (4,558) (3,370)
------------ ------------
(4,558) (3,370)
------------- -------------
Total assets less current liabilities 1,228,032 1,126,410
-------------- --------------
Non-current liabilities
Debenture stock (15,000) (15,000)
Unsecured loan notes (49,823) (49,827)
-------------- --------------
(64,823) (64,827)
-------------- --------------
Net assets 1,163,209 1,061,583
======== ========
Equity attributable to equity shareholders
Share capital 30,986 30,986
Share premium account 78,541 78,541
Capital redemption reserve 12,489 12,489
Retained earnings:
Other capital reserves 997,213 897,318
Revenue reserve 43,980 42,249
------------- -------------
Total equity 1,163,209 1,061,583
======= =======
Net asset value per ordinary share 948.7p 865.8p
======= =======
CASH FLOW STATEMENT
Reconciliation of profit before taxation to
net cash flow from operating activities Year ended 31 October
2019
?'000 Year ended 31 October
2018
?'000
Operating activities
Profit before taxation 128,293 9,408
Add back interest payable ('finance costs') 3,037 3,058
Less/add: (losses)/gains on investments held at fair value through profit or
loss (105,376) 12,611
(Increase)/decrease in accrued income (42) 113
Increase in other receivables (46) (12)
Increase in other payables 253 82
Purchases of investments (281,334) (335,454)
Sales of investments 345,724 337,755
Purchases of current asset investments (66,609) (46,003)
Sales of current asset investments 39,621 51,250
Decrease/(Increase) in securities sold for future settlement 854 (1,834)
Increase/(decrease) in securities purchased for future settlement 935 (6,163)
-------------- --------------
Net cash inflow from operating activities before interest and taxation1
65,310
-------------- 24,811
--------------
Interest paid (3,037) (3,058)
Taxation on investment income (2,138) (2,083)
-------------- --------------
Net cash inflow from operating activities 60,135 19,670
-------------- --------------
Financing activities
Equity dividends paid (net of refund of unclaimed distributions) (24,766)
(23,565)
Drawdown of bank loan - 2,005
Repayment of bank loan - (2,005)
------------- -------------
Net cash outflow from financing activities (24,766) (23,565)
------------- -------------
Increase/(decrease) in cash 35,369 (3,895)
Cash and cash equivalents at the start of the year 20,075 24,102
Exchange movements (500) (132)
----------- -----------
Cash and cash equivalents at the end of the year 54,944 20,075
======= =======
1 In accordance with IAS 7.31 cash inflow from dividends was ?31,164,000
(2018: ?30,398,000) and cash inflow from interest was ?158,000 (2018:
?62,000).
NOTES:
1. Accounting policies
The Bankers Investment Trust PLC is a company incorporated and domiciled in
the United Kingdom under the Companies Act 2006. The financial statements of
the Company for the year ended 31 October 2019 have been prepared in
accordance with International Financial Reporting Standards ('IFRSs') as
adopted by the European Union and with those parts of the Companies Act 2006
applicable to companies reporting under IFRSs. These comprise standards and
interpretations approved by the International Accounting Standards Board
('IASB'), together with interpretations of the International Accounting
Standards and Standing Interpretations Committee approved by the IFRS
Interpretations Committee ('IFRS IC') that remain in effect, to the extent
that IFRSs have been adopted by the European Union.
The financial statements have been prepared on a going concern basis and on
the historical cost basis, except for the revaluation of certain financial
instruments held at fair value through profit or loss. The principal
accounting policies adopted are set out in the Annual Report. These policies
have been applied consistently throughout the year. Where presentational
guidance set out in the Statement of Recommended Practice (the 'SORP') for
investment companies issued by the Association of Investment Companies (the
'AIC') in November 2014 and updated in February 2018 is consistent with the
requirements of IFRSs, the Directors have sought to prepare the financial
statements on a basis consistent with the recommendations of the SORP.
The assets of the Company consist mainly of securities that are listed and
readily realisable and, accordingly, the Directors believe that the Company
has adequate financial resources to continue in operational existence for at
least twelve months from the date of approval of the financial statements.
Having assessed these factors, the principal risks and other matters
discussed in connection with the Viability Statement, the Directors have
decided that it is appropriate for the financial statements to be prepared on
a going concern basis.
2019 2018
2. Investment income ?'000 ?'000
UK dividend income - listed 11,751 10,718
UK dividend income - special dividends 430 329
Overseas dividend income - listed 18,692 18,930
Overseas dividend income - special dividends 460 205
Property income distributions 150 139
----------- -----------
31,483 30,321
====== ======
Analysis of investment income by geographical region:
UK 12,876 11,641
Europe (ex UK) 4,956 5,215
North America 3,151 3,077
Japan 3,112 2,825
China 1,734 1,413
Pacific (ex Japan, China) 5,070 5,183
Emerging Markets 584 967
----------- -----------
31,483 30,321
====== ======
2019 2018
3. Other operating income ?'000 ?'000
Bank interest 181 64
Underwriting income 3 24
Stock lending revenue 72 135
Other income 13 3
----- -----
269 226
=== ===
At 31 October 2019 the total value of securities on loan by the Company for
stock lending purposes was ?65,895,000 (2018: ?42,093,000). The maximum
aggregate value of securities on loan at any one time during the year ended
31 October 2019 was ?104,529,000 (2018: ?159,687,000). The Company's agent
(BNP Paribas Securities Services) held collateral at 31 October 2019 with a
value of ?69,457,000 (2018: ?44,402,000) in respect of securities on loan.
The value of securities held on loan, comprising Corporate and Government
Bonds with a minimum market value of 105% (2018: 105%) of the market value of
any securities on loan, is reviewed on a daily basis.
2019 2018
4.
Management fees Revenue return
?'000 Capital
return
?'000 Total return
?'000 Revenue return
?'000 Capital
return
?'000 Total
return
?'000
Investment management 1,437 3,352 4,789 1,344 3,136 4,480
------- ------- ------- ------- ------- -------
1,437 3,352 4,789 1,344 3,136 4,480
==== ==== ==== ==== ==== ====
A summary of the terms of the management agreement is given in the Annual
Report.
2019 2018
5.
Taxation Revenue return
?'000 Capital
return
?'000 Total return
?'000 Revenue return
?'000 Capital
return
?'000 Total
return
?'000
a) Analysis of the charge for the year
Overseas tax suffered 2,291 3 2,294 2,121 - 2,121
Overseas tax reclaimable (393) - (393) (295) - (295)
Income tax recovered - - - (3) - (3)
------- ------- ------- ------- ------- -------
Total tax charge for the year 1,898 3 1,901 1,823 - 1,823
==== ==== ==== ==== ==== ====
b) Factors affecting the tax charge for the year
The differences are explained below:
2019 2018
Revenue return
?'000 Capital
return
?'000 Total return
?'000 Revenue return
?'000 Capital
return
?'000 Total
return
?'000
Profit/(loss) before taxation 28,395 99,898 128,293 27,296 (17,888) 9,408
Corporation tax for the year at 19.00% (2018: 19.00%) 5,395 18,981 24,376
5,186 (3,400) 1,786
Non taxable UK dividends (2,281) - (2,281) (2,112) - (2,112)
Overseas income and non taxable scrip dividends (3,414) - (3,414) (3,493) -
(3,493)
Overseas withholding tax suffered 1,898 3 1,901 1,826 - 1,826
Income tax recovered - - - (3) - (3)
Excess management expenses and loan relationships 259 956 1,215 371 897
1,268
Interest capping restriction 41 85 126 48 106 154
Capital (gains)/ losses not subject to tax - (20,022) (20,022) - 2,397 2,397
-------- ----------- ----------- -------- ----------- -----------
1,898 3 1,901 1,823 - 1,823
===== ====== ===== ===== ====== =====
c) Provision for deferred taxation
No provision for deferred taxation has been made in the current year or in
the prior year.
The Company has not provided for deferred tax on capital gains or losses
arising on the revaluation or disposal of investments as it is exempt from
tax on these items because of its status as an investment trust, which it
intends to maintain for the foreseeable future.
d) Factors that may affect future tax charges
The Company has not recognised a deferred tax asset totalling ?9,432,000
(2018: ?8,263,000) based on a prospective corporation tax rate of 17.0%
(2018: 17.0%). The deferred tax asset arises as a result of having unutilised
management expenses and unutilised non-trade loan relationship deficits.
These expenses will only be utilised, to any material extent, if the Company
has profits chargeable to corporation tax in the future because changes are
made either to the tax treatment of the capital gains made by investment
trusts or to the Company's investment profile which require them to be used.
6. Earnings per ordinary share
The total earnings per ordinary share is based on the net profit attributable
to the ordinary shares of ?126,392,000 (2018: ?7,585,000) and on 122,606,783
ordinary shares (2018: 122,606,783), being the weighted average number of
shares in issue during the year. The total earnings can be further analysed
as follows:
2019 2018
?'000 ?'000
Revenue profit 26,497 25,473
Capital (loss)/profit 99,895 (17,888)
---------------- ----------------
Profit for the year 126,392 7,585
---------------- ----------------
Weighted average number of ordinary shares 122,606,783 122,606,783
----------------- -----------------
Revenue earnings per ordinary share 21.61p 20.78p
Capital earnings per ordinary share 81.48p (14.59p)
------------- -------------
Earnings per ordinary share 103.09p 6.19p
======= =======
The Company does not have any dilutive securities, therefore basic and
diluted earnings are the same.
7.
Called up share capital Number of
shares held in treasury Number of
shares entitled
to dividend Total n
Total number
of shares
Nominal value
of shares
?'000
Ordinary shares of 25p each
At 1 November 2018 1,338,509 122,606,783 123,945,292 30,986
----------------- ----------------- ----------------- -----------
At 31 October 2019 1,338,509 122,606,783 123,945,292 30,986
========= ========== =========== ======
Number of
shares held in treasury
Number of
shares entitled
to dividend Total n
Total
number
of shares
Nominal value
of shares
?'000
Ordinary shares of 25p each
At 1 November 2017 1,338,509 122,606,783 123,945,292 30,986
----------------- ----------------- ----------------- -----------
At 31 October 2018 1,338,509 122,606,783 123,945,292 30,986
========== ========== ========== ======
During the year, no ordinary shares were issued or purchased. In the year
ended 31 October 2019, no ordinary shares were issued or purchased.
Since the year end, the Company has sold out of treasury 1,338,509 shares and
has issued 1,011,491 new shares for a total consideration of ?23,481,000.
8. Net asset value per ordinary share
The net asset value per ordinary share is based on net assets attributable to
ordinary shares of ?1,163,209,000 (2018: ?1,061,583,000) and on 122,606,783
ordinary shares in issue at 31 October 2019 (2018: 122,606,783). The Company
has no securities in issue that could dilute the net asset value per ordinary
share.
The movements during the year in net assets attributable to the ordinary
shares were as follows:
2019 2018
?'000 ?'000
Net assets attributable to ordinary shares at start of year 1,061,583
1,077,563
Total net profit on ordinary activities after taxation 126,392 7,585
Dividends paid (24,766) (23,565)
------------- -------------
Net assets attributable to ordinary shares at end of year 1,163,209
1,061,583
======= ======
9. Dividend
A final dividend of 5.35p per share, if approved by shareholders at the
Annual General Meeting, will be paid on 28 February 2020 to shareholders on
the register on 24 January 2020. The shares go ex-dividend on 23 January
2020. This final dividend, together with the three interim dividends already
paid brings the total dividend for the year to 20.90p.
10. 2019 Financial Information
The figures and financial information for the year ended 31 October 2019 are
extracted from the Company's annual financial statements for that period and
do not constitute statutory accounts. The Company's annual financial
statements for the year to 31 October 2019 have been audited but have not yet
been delivered to the Registrar of Companies. The Auditor's report on the
2019 annual financial statements was unqualified, did not include a reference
to any matter to which the Auditor drew attention without qualifying the
report, and did not contain any statements under Section 498 of the Companies
Act 2006.
11. 2018 Financial Information
The figures and financial information for the year ended 31 October 2018 are
compiled from an extract of the published accounts for that year and do not
constitute statutory accounts. Those accounts have been delivered to the
Registrar of Companies and included the report of the Auditor which was
unqualified and did not contain a statement under Sections 498(2) or 498(3)
of the Companies Act 2006.
12. Annual Report
Copies of the Annual Report will be posted to shareholders by the end of
January 2020 and will be available on the Company's website
(www.bankersinvestmenttrust.com) or in hard copy format from the Registered
Office, 201 Bishopsgate, London EC2M 3AE.
13. Annual General Meeting
The Annual General Meeting will be held on Wednesday 26 February 2020 at 12
noon at Trinity House, London, EC3N 4DH.
For further information contact:
Alex Crooke
Fund Manager
The Bankers Investment Trust PLC
Telephone: 020 7818 4447
Sue Inglis
Chairman
The Bankers Investment Trust PLC
Telephone: 020 7818 4233
James de Sausmarez
Director and Head of Investment Trusts
Janus Henderson Investors
Telephone: 020 7818 3349 Laura Thomas
Investment Trust PR Manager
Janus Henderson Investors
Telephone: 020 7818 2636
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.
End CA:00347145 For:BIT Type:ANNREP Time:2020-01-16 08:30:55
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