CT UK CAP AND INC INV TRUST PLC

Quarterly Report • May 27, 2022

National Storage Mechanism | Additional information

RNS Number : 0851N

BMO Capital & Income Inv Tst PLC

27 May 2022

Date:                      27 May 2022

Contact:                 Julian Cane                                                                       

BMO Investment Business Limited                              

020 7628 8000                                                               

LEI:                         21380052ETTRKV2A6Y19

BMO Capital and Income Investment Trust PLC

Unaudited Statement of Results

for the half-year ended 31 March 2022

Highlights for the half-year ended 31 March 2022:

·    The dividend(1) for this half-year of 5.30p represents an increase of 1% in comparison to the six-months ended 31 March 2021 and provides Shareholders with an annual yield(2) of 3.6%. The Company is recognised as a "Dividend Hero" by the Association of Investment Companies having increased its dividend every year since launch in 1992.  The Company will strive to extend its dividend record further.

·    Share price total return(3) was 2.1%. The share price ended the period at 325p.

·    The Company's Net Asset Value ("NAV") total return(3) was -1.3%, underperforming the FTSE All-Share Index (the "Benchmark") which returned 4.7% over the same period.

"Just as the outlook was starting to appear relatively benign, a combination of increasing macro-economic and geopolitical uncertainty was unleashed during the first quarter of calendar 2022. The set-back in our relative performance is clearly unwelcome, but the overall performance of the majority of our investments is encouraging and it is our Investment Manager's belief that the share prices of those investments will recover over the medium term to reflect better their long-term prospects.

There is a great deal of uncertainty at present and the current environment makes it very complex for companies to plan and operate. But it does appear that there are still interesting opportunities to invest for the longer term in high quality companies with robust balance sheets at attractive valuations."

Jonathan Cartwright

Chairman

SUMMARY OF RESULTS

	Half-year ended 31 March 2022	Half-year ended 31 March 2021
Share price total return(3)	+2.1%	+26.0%
Net Asset Value total return(3)	-1.3%	+25.4%
FTSE All-Share Index total return	+4.7%	+18.5%
Dividends per ordinary share
First interim dividend in respect of year to 30 September 2022	(1) 2.65p	-
30 September 2021	-	2.65p
Second interim dividend in respect of year to 30 September 2022	(1) 2.65p	-
30 September 2021	-	2.60p
Total interim dividends relating to the period	5.30p	5.25p

(1)      The first interim dividend of 2.65 pence per share was paid on 31 March 2022 and the second interim dividend of 2.65 pence per share is payable on 30 June 2022 to Shareholders registered on 10 June 2022 with an ex-dividend date 9 June 2022.

(2)      Calculated as the total of the four most recent quarterly dividends declared divided by the period end share price.

(3)      Total Return - the return to Shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in the Share Price or Net Asset Value in the period. The dividends are assumed to have been re-invested in the form of shares or net assets, respectively, on the date on which the shares were quoted ex-dividend.

The Chairman, commenting on the results, said:

Dear Shareholder,

I report below on the progress of your Company over the first half-year to 31 March 2022 and am pleased to announce another increase in dividend payment.

Total Return and Share Price Performance:

An analysis of the performance of the UK stock market and the Company would separate the six month period neatly into two calendar quarters. During the first quarter, from 1 October 2021 to 31 December 2021, the stock market experienced some recovery as the economies of the western world continued their rebound from the COVID-19 pandemic. During this period the Company's performance was a little ahead of our benchmark, the FTSE All-Share Index.

Just as the outlook was starting to appear relatively benign, a combination of increasing macro-economic and geopolitical uncertainty was unleashed during the first quarter of calendar 2022. Inflation had been edging higher throughout 2021, largely a function of economic recovery and compromised supply chains, but the hope that it would prove to be transitory has been shown

to be wishful thinking from Central Banks. The prospect of higher interest rates, together with a cost-of-living squeeze from higher food and energy prices are negative for economies and markets. In addition, of course, there is the tragedy of the Russian invasion of Ukraine. The suffering and loss for those involved is clearly unimaginable for those of us not directly affected, but during the period, many financial markets have responded better than might have been expected. This is particularly true in the UK. The direct impact of the Russian invasion is very limited for most companies, but it has had a significant impact on commodity prices and hence a much greater effect on some areas of the market than others. Rising commodity prices are proving to be favourable for the earnings of both the oil and mining companies and hence the share price performances of these two sectors have been strongly positive. Although your Company has investments in BP, Rio Tinto and Shell, in aggregate these are considerably less than the weighting of the oil and mining companies in the FTSE All-Share Index. Therefore, the strength of the share prices of companies in these sectors was overall a negative factor for the performance of the portfolio relative to its benchmark. Our holding in Coca-Cola HBC is directly impacted by the war in Ukraine as previously around 20% of group sales were in Russia and Ukraine; the fall in its share price has been far in excess of the loss of sales.

Our own results over the six months to 31 March 2022 show a decline in Net Asset Value (NAV) total return per share of 1.3% and a gain in the share price total return of 2.1%. This compares to a total return of 4.7% from our benchmark.

The set-back in our relative performance over the six months is clearly unwelcome, but the overall performance of the majority of our investments is encouraging and it is our Investment Manager's belief that the share prices of those investments will recover over the medium term to reflect better their long-term prospects. Our longer-term performance record clearly shows there are shorter-term periods when our progress is adrift from that of our benchmark. In an actively managed fund, this is only to be expected. Over the longer-term, we can show that our investment approach has been beneficial for Shareholders as the Company's performance remains ahead of our benchmark over longer time periods. We have also been able to maintain our record of unbroken annual dividend increases.

Share Price Premium / Discount:

During the six months under review, the share price traded at an average discount to the underlying NAV per share of 1.8%. This is similar to our experience during the previous year and reflects, at least in part our belief that the share price should not become too detached from the underlying NAV per share. At the close of business on 31 March 2022, the share price was trading at a premium of 1.4% to underlying NAV per share.

Share Issuance and Buy-backs:

To put our beliefs into action, we are willing and able to buy or sell the Company's own shares when they trade too far away from the underlying NAV per share. In the first six months of this financial year, we bought just over 320,000 shares and we sold 175,000. As we have reassured investors in the past, the shares were bought at a discount and were sold at a premium to their concurrent NAV. This process helps to add some liquidity to the market, adds marginally to NAV per share and also helps to reduce the risk that the share price may come adrift from the underlying NAV per share. For these reasons, we believe this process is advantageous for the Company and Shareholders.

Revenue, Earnings and Dividends:

Since early 2020, our income, which is the dividends we receive from our investments, has been disrupted by COVID-19. In this report, there is still a legacy impact, but a strong rebound is very clear as most companies have now started to pay dividends again to their shareholders. The Company's income increased more than 60% compared to the same period in the previous financial year and our Earnings Per Share increased by almost 70% to 5.34 pence per share. This figure is just 4% below the rate recorded for the six months from 30 September 2018 to 31 March 2019, the last directly comparable period before the impact of COVID-19, thus suggesting that the most obvious elements of income disruption have dissipated.

We paid an unchanged dividend for our first quarter of 2.65 pence per share and with this set of results I am pleased to announce an increase in the second quarterly dividend from 2.60 pence in 2021 to 2.65 pence per share for 2022. The combined dividend for the first half of 5.30 pence per share represents an increase of 1% compared to the same period last year.

Dividend Cover and Revenue Reserve:

The Revenue Reserve was accumulated in previous years when not all our net earnings were paid to Shareholders as dividends and we have drawn on this over the last two years to fill the gap created by the COVID-19-driven dip in portfolio income. Positively, the strong rebound in our income over the last six months has helped to build our Revenue Reserve. As of 31 March 2021, the Revenue Reserve was £8.4m and it has now increased to £9.6m.

Having increased our dividend to Shareholders every year since launch in 1992, we are proud of our record of dividend growth and that the Company is recognised as a "Dividend Hero" by the Association of Investment Companies. We will strive to extend our dividend record further.

Balance Sheet and Gearing:

In March 2021 we entered into a one-year loan facility with The Bank of Nova Scotia, London Branch. This was extended on revised terms in March 2022 for a further one-year period. We started the financial year having borrowed £25m and this was increased to £27m during the six months, giving gearing as at 31 March 2022 of 7.7%.

Ownership of the Manager:

My statement in the Report and Accounts 2021 noted that the acquisition by Ameriprise Financial, Inc. the parent company of Columbia Threadneedle Investments, of the asset management business of BMO in Europe, the Middle East and Africa ("BMO GAM EMEA") completed on 8 November 2021. BMO GAM EMEA has since announced its intention to bring the combined business under the Columbia Threadneedle brand and your Board will take this as an opportunity to review the name of this Company.  The Board will ensure that Shareholders are kept informed of any changes, including any amendments to the name of this Company, as this new relationship develops.

Outlook:

There is a great deal of uncertainty at present, from inflationary pressures not seen in decades, rising commodity prices, supply-chain disruption and China still struggling with COVID-19, to a nuclear-armed aggressor starting a major war in Europe. It would clearly be foolhardy to try to predict individually how any of these will evolve, but at the same time it is not unreasonable to recognise that these circumstances are exceptional.

These factors make it very complex for companies to plan and operate and we are very mindful of that, but it does appear that there are still interesting opportunities to invest for the longer term in high quality companies with robust balance sheets at attractive valuations.

On behalf of the Board

Jonathan Cartwright

27 May 2022

Forward -looking statements

This half-year report may contain forward-looking statements with respect to the financial condition, results of operations and business of the Company. Such statements involve risk and uncertainty because they relate to future events and circumstances that could cause actual results to differ materially from those expressed or implied by forward-looking statements. The forward-looking statements are based on the Directors' current view and on information known to them at the date of this report. Nothing should be construed as a profit forecast.

Directors' Statement of Principal Risks and Uncertainties

Most of the Company's principal risks and uncertainties are market related and no different from those of other investment trusts investing primarily in listed equities. They are described in more detail under the heading "Principal risks and future prospects" within the Strategic Report in the Company's Annual Report for the year ended 30 September 2021.

The principal risks identified in the Annual Report were:

·      Unfavourable markets or asset allocation, sector and stock selection and use of gearing and derivatives are inappropriate giving rise to investment underperformance as well as impacting capacity to pay dividends;

·      Errors, fraud or control failures at service providers, or loss of data through increasing cyber-threats or business continuity failure could damage reputation or investors interests or result in losses; and

·      An inappropriate business or marketing strategy particularly in relation to investor needs or sentiment giving rise to a share price discount to NAV per share.

At present the global economy continues to suffer considerable disruption due to the effects of the COVID-19 pandemic, inflationary concerns and the war in Ukraine. The Directors continue to review the key risk register for the Company which identifies the risks that the Company is exposed to, the controls in place and the actions being taken to mitigate them.

The Board considers that the principal risks have not changed materially since 24 November 2021, the date of the Company's Annual Report. The Board has also considered these principal risks in relation to going concern.

Directors' Statement of Responsibilities in Respect of the Half-Yearly Financial Report

In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm, that to the best of their knowledge:

·      the condensed set of financial statements have been prepared in accordance with applicable UK Accounting Standards on a going concern basis and give a true and fair view of the assets, liabilities, financial position and return of the Company;

·      the Chairman's Statement and the Directors' Statement of Principal Risks and Uncertainties (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure Guidance and Transparency Rule ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·      the Directors' Statement of Principal Risks and Uncertainties is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

·      the half-yearly report includes a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

Jonathan Cartwright

Chairman

27 May 2022

Condensed Income Statement

Half-year ended 31 March 2022  (Unaudited)	Half-year ended 31 March 2021 (Unaudited)

Note		Revenue	Capital	Total	Revenue	Capital	Total
		£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
	(Losses)/gains on investments	-	(10,402)	(10,402)	-	64,732	64,732
	Foreign exchange (losses)/gains	(2)	(59)	(61)	(2)	20	18
	Income	6,536	-	6,536	4,030	-	4,030
	Management fee	(377)	(377)	(754)	(339)	(339)	(678)
	Other expenses	(356)	-	(356)	(258)	-	(258)
	Net return before finance costs and Taxation	5,801	(10,838)	(5,037)	3,431	64,413	67,844
	Finance costs	(72)	(72)	(144)	(56)	(56)	(112)
	Net return before taxation	5,729	(10,910)	(5,181)	3,375	64,357	67,732
	Taxation	-	-	-	-	-	-
	Net return attributable to Shareholders	5,729	(10,910)	(5,181)	3,375	64,357	67,732
2	Earnings per share - basic and diluted (pence)	5.34	(10.17)	(4.83)	3.15	60.14	63.29

The total column of this statement is the profit and loss account of the Company.  The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. 

All revenue and capital items in the above statement derive from continuing operations.

A Statement of Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above statement.

Condensed Statement of Changes in Equity

		Share	Capital				Total
	Share	premium	redemption	Special	Capital	Revenue	Shareholders'
Half-year ended 31 March 2022 (Unaudited)	Capital	account	reserve	Reserve	Reserves	reserve	Funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 September 2021	26,822	141,374	4,146	4,432	168,366	10,735	355,875
Movements during the half-year ended 31 March 2022
Dividends paid	-	-	-	-	-	(6,860)	(6,860)
Ordinary shares issued from treasury	-	21	-	567	-	-	588
Ordinary shares bought back and held in treasury	-	-	-	(1,036)	-	-	(1,036)
Costs relating to broker	-	(8)	-	-	-	-	(8)
Net return attributable to Shareholders	-	-	-	-	(10,910)	5,729	(5,181)
Balance at 31 March 2022	26,822	141,387	4,146	3,963	157,456	9,604	343,378
Half-year ended 31 March 2021 (Unaudited)
Balance at 30 September 2020	26,677	139,814	4,146	4,434	79,475	11,849	266,395
Movements during the half-year ended 31 March 2021
Dividends paid	-	-	-	-	-	(6,844)	(6,844)
Ordinary shares issued	120	1,250	-	-	-	-	1,370
Ordinary shares bought back and held in treasury	-	-	-	(445)	-	-	(445)
Net return attributable to Shareholders	-	-	-	-	64,357	3,375	67,732
Balance at 31 March 2021	26,797	141,064	4,146	3,989	143,832	8,380	328,208
Year ended 30 September 2021 (Audited)
Balance at 30 September 2020	26,677	139,814	4,146	4,434	79,475	11,849	266,395
Movements during the year ended 30 September 2021
Dividends paid	-	-	-	-	-	(12,424)	(12,424)
Ordinary shares issued	145	1,549	-	-	-	-	1,694
Ordinary shares issued from treasury	-	29	-	443	-	-	472
Ordinary shares bought back and held in treasury	-	-	-	(445)	-	-	(445)
Costs relating to broker	-	(18)	-	-	-	-	(18)
Net return attributable to Shareholders	-	-	-	-	88,891	11,310	100,201
Balance at 30 September 2021	26,822	141,374	4,146	4,432	168,366	10,735	355,875

Condensed Balance Sheet

	31 March 2022	31 March 2021	30 September 2021
	(Unaudited)	(Unaudited)	(Audited)
	£'000s	£'000s	£'000s
Fixed assets
Investments	366,869	347,692	378,420
Current assets
Debtors	3,308	2,012	1,087
Cash and cash equivalents	643	3,889	1,813
Total current assets	3,951	5,901	2,900
Current liabilities
Creditors: amounts falling within one year	(442)	(385)	(445)
Loan	(27,000)	(25,000)	(25,000)
Total current liabilities	(27,442)	(25,385)	(25,445)
Net current liabilities	(23,491)	(19,484)	(22,545)
Net assets	343,378	328,208	355,875
Capital and reserves
Share capital	26,822	26,797	26,822
Share premium account	141,387	141,064	141,374
Capital redemption reserve	4,146	4,146	4,146
Special reserve	3,963	3,989	4,432
Capital reserves	157,456	143,832	168,366
Revenue reserve	9,604	8,380	10,735
Total Shareholders' funds	343,378	328,208	355,875
Net Asset Value per ordinary share - pence	320.49	306.62	331.70

Condensed Statement of Cash Flows

	Half-year ended	Half-year ended
	31 March 2022 (Unaudited)	31 March 2021 (Unaudited)
	£'000s	£'000s
Cash flows from operating activities before dividends received and interest	(1,128)	(1,033)
Dividends received	4,318	2,781
Interest received Interest paid	1 (139)	- (109)
Cash flows from operating activities	3,052	1,639
Investing activities
Purchase of investments	(1,892)	(22,152)
Sale of investments	3,047	24,120
Cash flows from investing activities	1,155	1,968
Cash flows before financing activities	4,207	3,607
Financing activities
Equity dividends paid	(6,860)	(6,844)
Net proceeds from issuance of new shares	-	1,370
Net proceeds from issuance of shares held in treasury	588	-
Costs associated with share issues	(8)	-
Costs of shares bought back and held in treasury	(1,036)	(445)
Drawdown of bank loan	2,000	5,000
Cash flows from financing activities	(5,316)	(919)
Net movement in cash and cash equivalents	(1,109)	2,688
Cash and cash equivalents at the beginning of the period	1,813	1,183
Effect of movement in foreign exchange	(61)	18
Cash and cash equivalents at the end of the period	643	3,889
Represented by:
Cash at bank	13	9
Short term deposits	630	3,880
	643	3,889

Notes

1      Basis of preparation

These condensed financial statements, which are unaudited, have been prepared on a going concern basis in accordance with the Companies Act 2006, FRS 102, Interim Financial Reporting (FRS104) and the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") issued by the AIC.

The accounting policies applied in the condensed set of financial statements are set out in the Company's annual report for the year ended 30 September 2021.

2      Earnings per ordinary share

Earnings per ordinary share attributable to Shareholders reflects the overall performance of the Company in the period.  Net revenue recognised in the first six months is not necessarily indicative of the total likely to be received in the full accounting year.

	Half-year ended 31 March 2022 £'000s	Half-year ended 31 March 2021 £'000s
Revenue return	5,729	3,375
Capital return	(10,910)	64,357
Total return	(5,181)	67,732
	Number	Number
Weighted average ordinary shares in issue	107,210,621	107,026,853
Total return per share - pence	(4.83)	63.29

3      Dividend

The second interim dividend of 2.65 pence per share in respect of the year ending 30 September 2022 will be paid on 30 June 2022 to all Shareholders on the register at close of business on 10 June 2022, with an ex-dividend date of 9 June 2022. The total cost of this dividend, based on 107,141,203 shares in issue, and entitled to the dividend on 25 May 2022, being the last practicable date before publication, is £2,839,000.

4      Going concern

In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. They have also considered the Company's objective, strategy and policy, the current cash position of the Company, the availability of the loan facility and compliance with its covenants and the operational resilience of the Company and its service providers.

The global economy continues to suffer considerable disruption due to the effects of the COVID-19 pandemic, inflationary concerns and the war in Ukraine and the Directors have given careful consideration to the consequences for this Company. The Company has a number of banking covenants and at present the Company's financial position does not suggest that any of these are close to being breached.

The primary risk is that there is a very substantial decrease in the Net Asset Value of the Company in the short to medium term. The Directors have considered the remedial measures that are open to the Company if such a covenant breach appears possible. As at 25 May 2022, the last practicable date before publication of this report, borrowings amounted to £25 million. This is in comparison to a Net Asset Value of £336.8 million. In accordance with its investment policy the Company is mainly invested in readily realisable, FTSE All-Share listed securities. These can be realised, if necessary, to repay the loan facility and fund the cash requirements for future dividend payments.

The Company operates within a robust regulatory environment. The Company retains title to all assets held by the Custodian. Cash is held with banks approved and regularly reviewed by the Manager and the Board.

Based on this information the Directors believe that the Company has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of these financial statements. Accordingly, these financial statements have been prepared on a going concern basis.

5      Results

The results for the half-year ended 31 March 2022 and 31 March 2021, which are unaudited, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 September 2021; the report of the independent auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 September 2021 are an extract from those accounts.

6      Half-yearly report and accounts

The Company's report and accounts are available on the internet at www.bmocapitalandincome.com.

Printed copies may be obtained by contacting the Company Secretary at the Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY.

By order of the Board

BMO Investment Business Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

27 May 2022

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