Invesco Perpetual UK Smaller Co's Investment Trust Plc - Half-year Report
LEGAL ENTITY IDENTIFIER: 549300K1D1P23R8U4U50
Half-Yearly Financial Report for the Six Months to
The following text is extracted from the Half-Yearly Financial Report for the Six Months to
Investment Objective
The Company's shares qualify to be considered as a mainstream investment product suitable for promotion to retail investors and are eligible for investment in an ISA.
Financial Information and Performance Statistics
Total Return Statistics
(with dividends reinvested)
For Six For Year
Months to Ended
31 July 31 January
2024 2024
Net asset value(1)(2) +13.8 -4.1
Share price(1)(2) +13.3 -1.8
Benchmark Index(2)(3) +12.1 -3.3
Capital Statistics
At At
31 July 31 January
Period End Date 2024 2024 Change
Total shareholders' funds (£'000) 180,163 161,395 +11.6%
Net asset value (`NAV') per share 532.60p 477.12p +11.6%
Share price(2) 470.00p 424.00p +10.8%
Discount(1) (11.8)% (11.1)%
Gearing(1):
- gross gearing 4.6% 5.4%
- net gearing 4.5% 5.4%
- net cash nil nil
Maximum authorised gearing 11.1% 9.3%
Six Six
months months
ended ended
31 July 31 July
Return and dividend per ordinary share 2024 2023
Return(1)
- revenue 7.33p 8.17p
- capital 57.41p (43.56)p
- Total 64.74p (35.39)p
First interim dividend 3.85p 3.85p
Notes:
(1) Alternative Performance Measures (`APM'). See pages 16 and 18 for the explanation and calculation of APMs. Further details are provided in the Glossary of Terms and Alternative Performance Measures in the Company's 2024 Annual Financial Report.
(2) Source: LSEG Data & Analytics.
(3) The benchmark index of the Company is the Deutsche Numis Smaller Companies + AIM (excluding Investment Companies) Index with dividends reinvested.
Chairman's Statement
Highlights
· Net asset value (`NAV') total return of +13.8% in excess of benchmark index total return of +12.1%.
·
Special dividend paid to shareholders who have elected to receive it on 8
· First interim dividend paid of 3.85p (2023: 3.85p), maintaining the target dividend yield of 4%.
· New eNewsletter available to sign up to for free, for regular Company and sector insights.
Dear Shareholders
As my first full year as Chairman has come to a close, there is a significant amount to reflect on, in regards to your Company and the
Firstly, I am pleased to report that at the Annual General Meeting (`AGM') held on Thursday 6
Secondly, the
Thirdly, we proposed and recently paid a special dividend in October to shareholders who opted to receive it. This option provided shareholders with the opportunity to realise a part of their holding at close to NAV. Further details are included below and on the Company's website.
Performance
In my last statement in
At that point, the Portfolio Managers' performance was slightly behind its benchmark (Deutsche Numis Smaller Companies + AIM (excluding Investment Companies) Index with dividends reinvested, with both delivering a negative return for the year ended 31
Over the past six months ended
To receive regular updates on the trust's performance, portfolio activity and insights into the
Dividends & Dividend Policy
The Company's dividend policy is to target a dividend yield of 4% of the year end share price, paid from income earned within the portfolio and enhanced, as necessary, through the use of realised capital profits. In accordance with this policy, on
Special Dividend
On
On
Outlook
At the time of writing, your Company's discount is wider than its 12-month average, and with the improving sentiment to the sector, this should be a good time to be invested in our Company.
After many years of poor investor sentiment towards the
Chairman
Portfolio Managers' Report
Q What were the key influences on the market over the period?
A
The
Takeover activity remained a feature of the
On a more global level, the industrial sector struggled, as the easing of post pandemic supply chain disruption allowed businesses to reduce their inventory levels. Whilst there are now signs of ordering patterns normalising, the period of adjustment led to lower demand across the sector.
Q How did the portfolio perform over the period?
A The NAV total return for the portfolio over the period was +13.8%, which is an outperformance of 1.7% when compared with the benchmark index, the Deutsche Numis Smaller Companies + AIM (excluding Investment Companies) Index with dividends reinvested, which returned +12.1% on the same basis.
Q Which sectors contributed to and detracted from performance?
A An improving consumer outlook meant that the consumer discretionary sector was the most positive contributor to portfolio performance, with leisure and media stocks performing well. We also benefitted from our exposure to financials, with rising markets driving the outperformance. The sector that detracted the most from performance was industrials, where ongoing destocking continued to weigh on profitability.
Q Which stocks contributed to and detracted from performance?
A
The best performing stocks over the period included: financial administration business,
JTC
(+31%), our largest holding, continued its impressive long-term record of organic growth. This was augmented with a number of acquisitions, most notably in the US, where management see a significant opportunity for growth. Investment platform,
AJ Bell
(+45%), gained as stronger stock markets boosted its fee income, and it benefitted as fears about the impact of new Consumer Duty regulations receded.
Keywords Studios
(+44%), and
By far the biggest detractor from performance in the period was veterinary company
CVS
(-32%). The shares fell following the commencement of a Competition and Markets Authority (`CMA') investigation into the sector triggered by rising vets bills. There is a structural undersupply of vets in the
Q What is the current portfolio strategy?
A
Our investment philosophy remains unchanged. The current portfolio is comprised of 60-70 stocks with the sector weightings being determined by where we are finding attractive companies at a given time, rather than by allocating assets according to a "top down" view of the economy. We continue to seek growing businesses, which have the potential to be significantly larger in the medium term. These tend to be companies that either have great products or services, that can enable them to take market share from their competitors, or companies that are exposed to higher growth niches within the
The sustainability of returns and profit margins is vital for the long-term success of a company. The assessment of the position of a business within its supply chain and a clear understanding of how work is won and priced are key to determining if a company has "pricing power". It is also important to determine which businesses possess unique capabilities, in the form of intellectual property, specialist know-how or a scale advantage in their chosen market. We conduct around 300 company meetings and site visits a year, and these areas are a particular focus for us on such occasions.
In terms of portfolio construction, we continue to favour a mix of both cyclical (economically sensitive) stocks, and more defensive businesses. We believe that the outlook for both the consumer and industrial sectors has improved, and we have reflected this with a tilt towards more cyclically exposed stocks over the 6 months.
Q What are the major holdings in the portfolio?
A The 5 largest holdings in the portfolio at the end of the period were:
· JTC (4.5% of the portfolio) is a financial administration business providing services to real estate and private equity funds, multinational companies, and high net worth individuals. The business has a strong culture, a reputation for quality and has augmented its organic growth with acquisitions. Margins and returns on capital are strong and the business benefits from long term contracts, giving it excellent earnings visibility.
· 4imprint (3.9% of the portfolio) sells promotional materials such as pens, bags and clothing which are emblazoned with company logos. The business gathers orders through online and catalogue marketing, which are then routed to their suppliers who produce and dispatch the products to customers. As a result of outsourcing most of the manufacturing, the business has a relatively low capital requirement and can focus on marketing and customer service. Continual reinvestment of revenue into marketing campaigns has enabled the business to generate an enviable long term growth record whilst maintaining margins.
·
Hill & Smith
(3.4% of the portfolio) is a supplier of products and services into the infrastructure sectors in the US and
·
AJ Bell
(3.3% of the portfolio) is an investment platform offering share dealing, custody and other investment services to both financial advisors and retail investors in the
·
Hilton Food
(3.2% of the portfolio) partners with major supermarkets across the world to supply their prepacked meat, fish, and plant-based products on a long-term "cost plus" basis. This model reduces the volatility in profits typically seen in food businesses by allowing them to pass changes in the cost of raw materials on to their customers. The business has benefitted from the global trend in supermarkets moving from in-store to centralised packing and relying on a reduced number of trusted suppliers.
Q What were the new holdings added over the period?
A New stocks that we added to the portfolio in the period include:
· GlobalData (£1,800 million market cap) provides data and analytics to businesses in the healthcare, technology and consumer sectors. The business benefits from a high level of recurring revenue, with 85% of sales coming via subscriptions. The company owns over 290 proprietary data sets including medical/drug data, pricing indices and industry sales data, which it packages and sells to companies in different ways. The business has an enviable growth record, with revenue increasing 80% over the last 5 years, and is highly profitable, with margins in excess of 25%. The business recently sold a 40% share of its healthcare division for £434 million. The company will use the proceeds to accelerate the growth of the business investing in people, acquisitions, and Artificial Intelligence (`AI') tools to make its data more useable.
· Oxford Instruments (£1,340 million market cap) provides high technology products and services to industrial businesses and scientific research organisations in the healthcare, life sciences, semiconductor, and communications sectors. Its product range includes optical spectroscopy, X-ray, atomic force microscopy, nuclear magnetic resonance, electron microscopy, and low-temperature systems, which customers use for materials analysis, life sciences, astronomy, quantum technology etc. It generates attractive margins, has a good long term growth record, and a cash balance sheet.
Q What is the Managers approach to gearing?
A Gearing decisions are taken after reviewing a variety of metrics including valuations, earnings momentum, market momentum, bond spreads and a range of economic indicators. After analysing this data, we have moved the Company to a geared position of around 4.5%.
The valuation of the
Q How does ESG factor in the investment process?
A Environment, Social and Governance (`ESG') issues are increasingly a focus for many investors and analysis of these factors has always been a core part of our investment process. Invesco has significant resources focussed on ESG, both at a group and individual team level. Our proprietary ESGintel system draws in company specific data from a broad range of sources and enables ESG related metrics to be quantified. This provides fund managers with clear overview of areas of concern, allowing targeted engagement with businesses to bring about positive change.
Environmental liabilities, socially dubious business practises and poor corporate governance, can have a significant impact on share prices. We assess environmental risks within a business, and analyse the steps being taken to reduce its environmental impact. We like businesses with strong cultures and engaged employees, and avoid businesses, which, whilst acting within the law, run the risk of a public backlash, or being constrained by new legislation. We believe that governance, board structure and incentivisation, are by far the most important factors within ESG in determining shareholder returns. The importance of businesses being managed by good quality people, with appropriate incentivisation should not be underestimated. Therefore, we proactively consult with all the businesses we own on these matters and vote against resolutions where standards fall short of our expectations.
Q What is the dividend policy of the Company?
A The Company pays out all the income earned within the portfolio and enhances it using a small amount of realised capital profits to target a dividend yield of 4% based on the year end share price. This provides shareholders with an attractive and consistent yield whilst allowing us to target businesses that we believe will deliver the best total return, without having to compromise on quality to hit an income target.
Q What are your expectations for the year ahead?
A
Despite the protestations of the new government, the
The industrial sector has struggled over the last year, as businesses reduced inventories following the period of post pandemic supply chain disruption. Conversations with businesses suggest that in many cases inventories have returned to historic levels and ordering patterns are normalising. We are hopeful that this will herald a return to growth for the industrial sector over the coming year.
So, with an improving economic outlook, a continued high level of take-over activity, and the relatively low valuation of
Portfolio Managers
Principal Risks and Uncertainties
The Directors confirm that they have carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. Most of these risks are market related and are similar to those of other investment trusts investing primarily in listed markets. The Audit Committee reviews the Company's risk control summary at each meeting, and as part of this process, gives consideration to identify emerging risks. Emerging risks, such as evolving cyber threat, geo-political tension and climate related risks, have been considered during the period as part of the Directors' assessment.
Principal Risk Description Mitigating Procedures and Controls
Market (Economic) Risk The Directors have assessed the market
impact of the ongoing uncertainty from
Factors such as fluctuations in stock the conflicts in the Middle East and
markets, interest rates and exchange Ukraine and the resulting sanctions
rates are not under the control of the imposed on Russia through regular
Board or the Portfolio Managers, but discussions with the Portfolio Managers
may give rise to high levels of and the Corporate Broker. The Company's
volatility in the share prices of current portfolio consists of companies
investee companies, as well as listed on the main UK equity market and
affecting the Company's own share price those listed on AIM. The Company does
and the discount to its NAV. The risk not have direct investments in Russia or
could be triggered by unfavourable hold stocks with significant links to
developments globally and/or in one or Russia . To a limited extent, futures can
more regions, contemporary examples be used to mitigate against market
being the market uncertainty in (economic) risk, as can the judicious
relation to the wider political holding of cash or other very liquid
developments in Ukraine and the Middle assets. Futures are not currently being
East. used.
The Portfolio Managers' approach to
investment is one of individual stock
selection. Investment risk is mitigated
via the stock selection process,
together with the slow build-up of
holdings rather than the purchase of
large positions outright. This allows
the Portfolio Managers, cautiously, to
observe more data points from a company
Investment Risk before adding to a position. The overall
portfolio is well diversified by company
The Company invests in small and and sector. The weighting of an
medium-sized companies traded on the investment in the portfolio tends to be
London Stock Exchange or on AIM. By loosely aligned with the market
their nature, these are generally capitalisation of that company. This
considered riskier than their larger means that the largest holdings will
counterparts and their share prices can often be amongst the larger of the
be more volatile, with lower liquidity. smaller companies available. The
In addition, as smaller companies may Portfolio Managers are relatively risk
not generally have the financial averse, look for lower volatility in the
strength, diversity and resources of portfolio and seek to outperform in more
larger companies, they may find it more challenging markets. The Portfolio
difficult to overcome periods of Managers remain cognisant at all times
economic slowdown or recession. of the potential liquidity of the
portfolio. There can be no guarantee
Furthermore, the risk of climate change that the Company's strategy and business
and matters concerning ESG could affect model will be successful in achieving
the valuation of companies held in the its investment objective. The Board
portfolio. monitors the performance of the Company,
giving due consideration to how the
Manager has incorporated ESG
considerations including climate change
into their investment process. The Board
also has guidelines in place to ensure
that the Portfolio Managers adhere to
the approved investment policy. The
continuation of the Manager's mandate is
reviewed annually.
The Board reviews regularly the
Company's investment objective and
strategy to ensure that it remains
relevant, as well as reviewing the
Shareholders' Risk composition of the shareholder register,
peer group performance on both a share
The value of an investment in the price and NAV basis, and the Company's
Company may go down as well as up and share price discount to NAV per share.
an investor may not get back the amount The Board and the Portfolio Managers
invested. maintain an active dialogue with the aim
of ensuring that the market rating of
the Company's shares reflects the
underlying NAV; both share buy back and
issuance facilities are in place to help
the management of this process.
Reliance on the Manager and other
Third-Party Service Providers
The Company has no employees and the
Board comprises non-executive directors
only. The Company is therefore reliant
upon the performance of third-party Third-party service providers are
service providers for its executive subject to ongoing monitoring by the
function and service provisions. The Manager and the Board.
Company's operational structure means
that all cyber risk (information and The Manager reviews the performance of
physical security) arises at its all third-party providers regularly
third-party service providers, through formal and informal meetings.
including fraud, sabotage or crime
against the Company. The Company's The Audit Committee reviews regularly
operational capability relies upon the the performance and internal controls of
ability of its third-party service the Manager and all third-party
providers to continue working providers through audited service
throughout the disruption caused by a organisation control reports together
major event such as the Covid-19 with updates on information security,
pandemic. Failure by any service the results of which are reported to the
provider to carry out its obligations Board.
to the Company in accordance with the
terms of its appointment could have a The Manager's business continuity plans
materially detrimental impact on the are reviewed on an ongoing basis and the
operation of the Company and could Directors are satisfied that the Manager
affect the ability of the Company to has in place robust plans and
successfully pursue its investment infrastructure to minimise the impact on
policy. The Company's main service its operations so that the Company can
providers, of which the Manager is the continue to trade, meet regulatory
principal provider, are listed on page obligations, report and meet shareholder
19. The Manager may be exposed to requirements. The Board receives regular
reputational risks. In particular, the update reports from the Manager and
Manager may be exposed to the risk that third-party service providers on
litigation, misconduct, operational business continuity processes and has
failures, negative publicity and press been provided with assurance from them
speculation, whether or not it is all insofar as possible that measures
valid, will harm its reputation. Damage are in place for them to continue to
to the reputation of the Manager could provide contracted services to the
potentially result in counterparties Company.
and third parties being unwilling to
deal with the Manager and by extension
the Company, which carries the
Manager's name. This could have an
adverse impact on the ability of the
Company to pursue its investment policy
successfully.
Regulatory Risk
The Company is subject to various laws The Manager reviews the level of
and regulations by virtue of its status compliance with tax and other financial
as an investment trust, its listing on regulatory requirements on a regular
the London Stock Exchange and being an basis. The Board regularly considers all
Alternative Investment Fund under the risks, the measures in place to control
UK AIFMD regime. A loss of investment them and the possibility of any other
trust status could lead to the Company risks that could arise. The Manager's
being subject to corporation tax on the Compliance and Internal Audit team
chargeable capital gains arising on the produce annual reports for review by the
sale of its investments. Other control Company's Audit Committee. Further
failures, either by the Manager or any details of risks and risk management
other of the Company's service policies as they relate to the financial
providers, could result in operational assets and liabilities of the Company
or reputational problems, erroneous are detailed in note 16 of the Company's
disclosures or loss of assets through 2024 Annual Financial Report.
fraud, as well as breaches of
regulations.
In the view of the Board, these principal risks and uncertainties are as much applicable to the remaining six months of the financial year as they were to the six months under review.
Thirty Largest Investments
AT
Ordinary shares unless stated otherwise
Market
Value % of
Company Sector £'000 Portfolio
JTC Investment Banking and Brokerage 8,437 4.5
Services
4imprint Media 7,379 3.9
Hill & Smith Industrial Metals and Mining 6,403 3.4
AJ Bell Investment Banking and Brokerage 6,165 3.3
Services
Hilton Food Food Producers 6,118 3.2
Chemring Aerospace and Defence 5,727 3.0
Advanced Medical Solutionsᴬᴵᴹ Medical Equipment and Services 5,100 2.7
Alfa Financial Software Software and Computer Services 5,088 2.7
Hollywood Bowl Travel and Leisure 5,007 2.7
Coats General Industrials 5,000 2.6
Top Ten Holdings 60,424 32.0
Serco Industrial Support Services 4,260 2.3
Alpha Financial Markets Industrial Support Services 3,981 2.1
Consultingᴬᴵᴹ
Brooks Macdonaldᴬᴵᴹ Investment Banking and Brokerage 3,691 2.0
Services
Mitchells & Butlers Travel and Leisure 3,432 1.8
Volution Construction and Materials 3,361 1.8
Genuit Construction and Materials 3,348 1.8
Essentra Industrial Support Services 3,323 1.8
Marshalls Construction and Materials 3,294 1.7
Avon Protection Aerospace and Defence 3,138 1.7
discoverIE Electronic and Electrical 3,094 1.6
Equipment
Top Twenty Holdings 95,346 50.6
Johnson Serviceᴬᴵᴹ Industrial Support Services 3,066 1.6
Aptitude Software Software and Computer Services 2,995 1.6
The Gym Travel and Leisure 2,991 1.6
Kainos Software and Computer Services 2,988 1.6
CVSᴬᴵᴹ Consumer Services 2,968 1.6
Loungersᴬᴵᴹ Travel and Leisure 2,941 1.5
GlobalDataᴬᴵᴹ Media 2,868 1.5
Energean Oil, Gas and Coal 2,815 1.5
Crest Nicholson Household Goods and Home 2,767 1.5
Construction
Young & Co's Brewery - Travel and Leisure 2,734 1.4
Non-Votingᴬᴵᴹ
Top Thirty Holdings 124,479 66.0
Other Investments (33) 63,987 34.0
Total Investments: 63
(31 January 2024: 66) 188,466 100.0
ᴬᴵᴹ Investments quoted on AIM.
Governance
Going Concern
The financial statements have been prepared on a going concern basis. The portfolio of investments is comprised entirely of quoted securities and the ongoing charges are around 1% of net assets. As at 15
The Directors consider this is the appropriate basis, as the Company has adequate resources to continue in operational existence for the foreseeable future, being taken as at least 12 months after signing the balance sheet. In considering this, the Directors took into account the diversified portfolio of readily realisable securities which can be used to meet funding commitments, and the ability of the Company to meet all of its liabilities, including any borrowing, and ongoing expenses as they fall due.
Related Party Transactions and Transactions with the Manager
Note 20 of the Company's 2024 Annual Financial Report gives details of related party transactions and transactions with the Manager. This report is available on the Company's section of the Manager's website at www.invesco.co.uk/ipukscit.
Directors' Responsibility Statement in respect of the preparation of the Half-Yearly Financial Report
The Directors are responsible for preparing the Half-Yearly Financial Report using accounting policies consistent with applicable law and International Financial Reporting Standards.
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements contained within the Half-Yearly Financial Report have been prepared in accordance with the International Accounting Standards 34 `Interim Financial Reporting';
-
the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the
- the interim management report includes a fair review of the information required on related party transactions.
The Half-Yearly Financial Report has not been audited or reviewed by the Company's auditor.
Signed on behalf of the Board of Directors.
Chairman
Condensed Statement of Comprehensive Income
For the six months ended For the six months ended
31 July 2024 31 July 2023
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) on
investments held at - 20,361 20,361 - (14,695) (14,695)
fair value
Income 2 2,855 - 2,855 3,074 491 3,565
2,855 20,361 23,216 3,074 (14,204) (11,130)
Investment 3 (98) (553) (651) (92) (523) (615)
management fee
Other expenses (238) (150) (388) (217) (1) (218)
Profit/(loss)
before finance 2,519 19,658 22,177 2,765 (14,728) (11,963)
costs and taxation
Finance costs 3 (41) (236) (277) (1) (8) (9)
Profit/(loss) 2,478 19,422 21,900 2,764 (14,736) (11,972)
before taxation
Taxation 4 - - - - - -
Profit/(loss) after 2,478 19,422 21,900 2,764 (14,736) (11,972)
taxation
Return per ordinary 7.33p 57.41p 64.74p 8.17p (43.56)p (35.39)p
share
Weighted average
number of ordinary
shares in issue 33,826,929 33,826,929
during the period
The total columns of this statement represent the Company's statement of comprehensive income, prepared in accordance with
Condensed Statement of Changes in Equity
Capital
Share Share Redemption Capital Revenue
Capital Premium Reserve Reserve Reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
For the six months
ended 31 July 2024
At 31 January 2024 10,642 22,366 3,386 123,147 1,854 161,395
Total comprehensive - - - 19,422 2,478 21,900
income for the period
Dividends paid 5 - - - (1,278) (1,854) (3,132)
At 31 July 2024 10,642 22,366 3,386 141,291 2,478 180,163
For the six months
ended 31 July 2023
At 31 January 2023 10,642 22,366 3,386 137,004 1,517 174,915
Total comprehensive - - - (14,736) 2,764 (11,972)
loss for the period
Dividends paid 5 - - - (2,048) (1,517) (3,565)
At 31 July 2023 10,642 22,366 3,386 120,220 2,764 159,378
Condensed Balance Sheet
Registered number 02129187
At At
31 July 31 January
2024 2024
Notes £'000 £'000
Non-current assets
Investments held at fair value through profit or 188,466 169,481
loss
Current assets
Amounts due from brokers 13 529
Overseas withholding tax recoverable - 30
Income tax recoverable - 4
Prepayments and accrued income 357 369
Cash and cash equivalents 18 -
388 932
Total assets 188,854 170,413
Current liabilities
Amounts due to brokers (88) (48)
Bank overdraft - (8,753)
Accruals (403) (217)
(491) (9,018)
Total assets less current liabilities 188,363 161,395
Non-current liabilities
Bank facility (8,200) -
Net assets 180,163 161,395
Capital and reserves
Share capital 10,642 10,642
Share premium 22,366 22,366
Capital redemption reserve 3,386 3,386
Capital reserve 141,291 123,147
Revenue reserve 2,478 1,854
Total shareholders' funds 180,163 161,395
Net asset value per ordinary share 532.60p 477.12p
Number of ordinary shares in issue at the period end 6 33,826,929 33,826,929
Condensed Cash Flow Statement
Six months Six months
ended 31 July ended 31 July
2024 2023
Notes £'000 £'000
Cash flow from operating activities
Profit/(loss) before taxation 21,900 (11,972)
Add back finance costs 277 9
Adjustments for:
Purchases of investments (15,495) (9,562)
Sales of investments 17,427 5,920
1,932 (3,642)
(Profit)/loss on investments held at fair (20,361) 14,695
value
Decrease in receivables 46 80
Increase/(decrease) in payables 186 (37)
Net cash inflow/(outflow) from operating 3,980 (867)
activities
Cash flow from financing activities
Finance cost paid (277) (9)
Bank overdraft repayment (8,753) -
Bank facility drawdown 8,200 -
Dividends paid 5 (3,132) (3,565)
Net cash outflow from financing activities (3,962) (3,574)
Net increase/(decrease) in cash and cash 18 (4,441)
equivalents
Cash and cash equivalents at start of the - 5,055
period
Cash and cash equivalents at the end of the 18 614
period
Reconciliation of cash and cash equivalents to
the Balance Sheet is as follows:
Cash held at custodian 18 44
Invesco Liquidity Funds plc - Sterling, money - 570
market fund
Cash and cash equivalents 18 614
Cash flow from operating activities includes:
Dividends received 2,868 3,649
Interest received - 2
As the Company did not have any long term debt at both the current and prior period ends, no reconciliation of the financial liabilities is presented.
Notes to the Condensed Financial Statements
1. Basis of Preparation
The condensed financial statements have been prepared using the same accounting policies as those adopted in the Company's 2024 Annual Financial Report. They have been prepared on an historical cost basis, in accordance with the applicable
2. Income
Six months Six months
ended 31 July ended 31 July
2024 2023
£'000 £'000
Income from investments:
UK dividends
- ordinary 2,643 2,561
- special 150 409
Overseas dividends 62 102
2,855 3,072
Other income:
Deposit interest - 2
2,855 3,074
No special dividends have been recognised in capital during the period (
Overseas dividends include dividends received on
3. Management Fee and Finance Costs
The investment management fee and finance costs are allocated 15% to revenue and 85% to capital.
A base management fee is payable monthly in arrears and is calculated at the rate of 0.75% (
During the period the Company's £15 million overdraft facility was replaced with a new uncommitted £20 million 364 day revolving credit facility.
4. Taxation and Investment Trust Status
No tax liability arises on capital gains because the Company has been accepted by HMRC as an approved investment trust and it is the intention of the Directors to conduct the affairs of the Company so that it continues to satisfy the conditions for this approval.
5. Dividends paid on Ordinary Shares
Six months Six months
ended ended
31 July 31 July 2023
2024
Rate £'000 Rate £'000
Third interim (prior year) 3.85p 1,302 3.75p 1,269
Final (prior year) 5.41p 1,830 6.79p 2,296
Total 9.26p 3,132 10.54p 3,565
The first interim dividend of 3.85p per ordinary share (
As set out in the Company's circular dated
A second interim dividend of 3.85p (2023: 3.85p) has been declared and will be paid on
6. Share Capital, including Movements
Share capital represents the total number of shares in issue, including treasury shares.
Six months Year ended
ended 31 July 31 January
2024 2024
Share capital:
Ordinary shares of 20p each (£'000) 6,765 6,765
Treasury shares of 20p each (£'000) 3,877 3,877
10,642 10,642
Number of ordinary shares in issue: 33,826,929 33,826,929
Number of shares held in treasury: 19,382,155 19,382,155
Total 53,209,084 53,209,084
The elective special dividend paid on
7. Classification Under Fair Value Hierarchy
Note 16 of the Company's 2024 Annual Financial Report sets out the basis of classification.
As at
8. Status of Half-Yearly Financial Report
The financial information contained in this Half-Yearly Financial Report, which has not been reviewed or audited by an independent auditor, does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information for the half years ended
By order of the Board
Company Secretary
Glossary of Terms and Alternative Performance Measures
Alternative Performance Measure (`APM')
An APM is a measure of performance or financial position that is not defined in applicable accounting standards and cannot be directly derived from the financial statements. The calculations shown in the corresponding tables are for the six months ended
Benchmark (or Benchmark Index)
A market index, which averages the performance of companies in any sector, giving a good indication of any rises or falls in the market. The benchmark used in these accounts is the Deutsche Numis Smaller Companies + AIM (excluding Investment Companies) Index, with dividends reinvested.
(Discount)/Premium (APM)
Discount is a measure of the amount by which the mid-market price of an investment company share is lower than the underlying net asset value (`NAV') of that share. Conversely, premium is a measure of the amount by which the mid-market price of an investment company share is higher than the underlying net asset value of that share. In this Half-Yearly Financial Report the discount is expressed as a percentage of the net asset value per share and is calculated according to the formula set out below. If the shares are trading at a premium the result of the below calculation will be positive and if they are trading at a discount it will be negative.
31 July 31 January
2024 2024
Share price a 470.00p 424.00p
Net asset value per share b 532.60p 477.12p
Discount c = (a-b)/b (11.8)% (11.1)%
Gearing (APM)
The gearing percentage reflects the amount of borrowings that a company has invested. This figure indicates the extra amount by which net assets, or shareholders' funds, would move if the value of a company's investments were to rise or fall. A positive percentage indicates the extent to which net assets are geared; a nil gearing percentage, or `nil', shows a company is ungeared. A negative percentage indicates that a company is not fully invested and is holding net cash as described below.
There are several methods of calculating gearing and the following has been used in this report:
Gross Gearing (APM)
This reflects the amount of gross borrowings in use by a company and takes no account of any cash balances. It is based on gross borrowings as a percentage of net assets. As at
31 July 31 January
2024 2024
£'000 £'000
Bank facility 8,200 -
Bank overdraft facility - 8,753
Gross borrowings a 8,200 8,753
Net asset value b 180,163 161,395
Gross gearing c = a/b 4.6% 5.4%
Net gearing reflects the amount of net borrowings invested, i.e. borrowings less cash and cash equivalents (incl. investments in money market funds). It is based on net borrowings as a percentage of net assets. Net cash reflects the net exposure to cash and cash equivalents, as a percentage of net assets, after any offset against total borrowings.
31 July 31 January
2024 2024
£'000 £'000
Bank facility 8,200 -
Bank overdraft facility - 8,753
Less: cash and cash equivalents (18) -
Net borrowings a 8,182 8,753
Net asset value b 180,163 161,395
Net gearing c = a/b 4.5% 5.4%
Maximum Authorised Gearing
This reflects the maximum authorised borrowings of the Company taking into account both any gearing limits laid down in the investment policy and the maximum borrowings laid down in covenants under any borrowing facility and is calculated as follows:
31 July 31 January
2024 2024
£'000 £'000
Maximum authorised borrowings as laid down in:
Investment policy:
- lower of 30% of net asset value; and a = 30% x e 54,049 48,419
- £25m b 25,000 25,000
Bank facility covenants: lower of 30% of net
asset value and £20m
(31 January 2024 : bank overdraft facility
covenants: lower of 30% of net asset
value and £15m) c 20,000 15,000
Maximum authorised borrowings (d = lower of a, b d 20,000 15,000
and c)
Net asset value e 180,163 161,395
Maximum authorised gearing f = d/e 11.1% 9.3%
Net Asset Value (`NAV')
Also described as shareholders' funds, the NAV is the value of total assets less liabilities. Liabilities for this purpose include current and long-term liabilities. The NAV per share is calculated by dividing the net assets by the number of ordinary shares in issue (excluding shares held in treasury). For accounting purposes assets are valued at fair (usually market) value and liabilities are valued at amortised cost (their repayment - often nominal - value).
Return
The return generated in a period from the investments including the increase and decrease in the value of investments over time and the income received.
Total Return
Total return is the theoretical return to shareholders that measures the combined effect of any dividends paid together with the rise or fall in the share price or NAV. In this Half-Yearly Financial Report these return figures have been sourced from LSEG Data & Analytics who calculate returns on an industry comparative basis.
Net Asset Value Total Return (APM)
Total return on net asset value per share, assuming dividends paid by the Company were reinvested into the shares of the Company at the NAV per share at the time the shares were quoted ex-dividend.
Share Price Total Return (APM)
Total return to shareholders, on a mid-market price basis, assuming all dividends received were reinvested, without transaction costs, into the shares of the Company at the time the shares were quoted ex-dividend.
Net Asset Share
Six months ended 31 July 2024 Value Price
As at 31 July 2024 532.60p 470.00p
As at 31 January 2024 477.12p 424.00p
Change in period a 11.6% 10.8%
Impact of dividend reinvestments(1) b 2.2% 2.5%
Total return for the period c = a+b 13.8% 13.3%
Net Asset Share
Year ended 31 January 2024 Value Price
As at 31 January 2024 477.12p 424.00p
As at 31 January 2023 517.09p 451.00p
Change in year a -7.7% -6.0%
Impact of dividend reinvestments(1) b 3.6% 4.2%
Total return for the year c = a+b -4.1% -1.8%
(1)
Total dividends paid during the six months to
Benchmark Index
Total return on the benchmark index is on a mid-market value basis, assuming all dividends received were reinvested, without transaction costs, into the shares of the underlying companies at the time the shares were quoted ex-dividend.
Directors, Investment Manager and Administration
Directors
Registered Office and Company Number
Registered in
Number 02129187
Company Secretary and Correspondence Address
020 3753 1000
Company Secretarial Contact:
Invesco Client Services
Invesco has a Client Services Team available from
Monday to Friday (excluding
0800 085 8677
www.invesco.co.uk/investmenttrusts
Depositary, Custodian and Banker
Independent Auditor
Corporate Broker
Registrar
0371 664 0300
If you hold your shares directly as a paper share certificate and not through an investment platform or savings scheme and have queries relating to your shareholding you should contact the company's Registrar,
Platforms generally charge fees for holding and trading shares. You can find a list of the major platforms at: https://www.invesco.com/uk/en/investment-trusts/invesco-insights/how-to-invest-in-investment-trusts.html
Manager's Website
Information relating to the Company can be found on the Company's section of the Manager's website, which can be located at www.invesco.co.uk/ipukscit .
The contents of websites referred to in this document, or accessible links within those websites, are not incorporated into, nor do they form part of, this financial report.
General Data Protection Regulation (`GDPR')
The Company has a privacy notice which sets out what personal data is collected and how and why it is used. The privacy notice can be found at www.invesco.co.uk/ipukscit under the `Literature' section, or a copy can be obtained from the Company Secretary whose correspondence address is found above.
Investor Warning
The Company, Invesco and the Registrar would never contact members of the public to offer services or require any type of upfront payment. If you suspect you have been approached by fraudsters, please contact the
Further details for reporting frauds, or attempted frauds, can be found below.
National Storage Mechanism
A copy of the Half-Yearly
Financial Report will be
submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
.
Hard copies of the Half-Yearly Financial Report will be posted to shareholders and can be requested from the Company Secretary by email at
investmenttrusts@invesco.com
or
at the Company's correspondence address, 2nd
Floor,
For further information, please contact:
For and on behalf of
Corporate Secretary to Invesco Select Trust plc
Email: investmenttrusts@invesco.com
Head of Specialist Funds - Invesco
Email: will.ellis@invesco.com
