TIDMSAIN
RNS Number : 3636B
Scottish American Investment Co PLC
11 February 2022
RNS Announcement: Results
Legal Entity Identifier code: 549300NF03XVC5IFB447
The following is the results announcement for the year to 31
December 2021 which was approved by the Board on
10 February 2022.
Results for the year to 31 December 2021
3/4 Dividend - The full year dividend, including a recommended
final dividend of 3.375p, is 12.675p per share. This is 5.6% higher
than the 2020 dividend, extending the Company's record of dividend
increases to forty eight consecutive years. The increase is above
the rate of UK CPI inflation over the same period, which was
5.4%.
3/4 Revenues - Income was GBP28.0m (2020 - GBP23.6m) and
earnings per share were 12.79p (2020 - 12.00p).
3/4 Total return (*) - Net Asset Value total return (capital and
income with borrowings at fair value) for the year was 21.5%, ahead
of the total return from global equities of 20.0%. The share price
total return was 19.5%. Returns were assisted by the resilient
operational performance of many of the companies in which SAINTS
invests, and also by a strong return from the Company's property
investments.
3/4 Peer Group performance - SAINTS remains the best performing
fund in its Global Equity Income peer group, in terms of NAV total
return, over the past five years.
3/4 Outlook - The Board remain of the view that a long-term
approach based on investing globally for sustainable growth is the
best route to achieving SAINTS' aim of growing the dividend ahead
of inflation over time. It has great confidence in SAINTS'
managers, and this confidence has been further strengthened by the
experiences of the past year. In the immediate future, the Board
looks forward to the refinancing of the Company's debentures in
April, which will reduce the cost of its borrowings to below
3%.
* See Glossary of Terms and Alternative Performance Measures at the end of this announcement.
10 February 2022
SAINTS' objective is to deliver real dividend growth by
increasing capital and growing income. Its policy is to invest
mainly in equity markets, but other investments may be held from
time to time including bonds, property and other asset classes.
The Company is managed by Baillie Gifford, the Edinburgh based
fund management group with around GBP294 billion under management
and advice as at 10 February 2021.
Past performance is not a guide to future performance. SAINTS is
a listed UK company. As a result, the value of its shares and any
income from those shares is not guaranteed and could go down as
well as up. You may not get back the amount you invested. As SAINTS
invests in overseas securities, changes in the rates of exchange
may also cause the value of your investment (and any income it may
pay) to go down or up. You can find up to date performance
information about SAINTS on the SAINTS page of the Managers'
website saints-it.com . 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.
For further information please contact:
James Dow and Toby Ross, Managers, The Scottish American
Investment Company P.L.C.
Tel: 0131 275 2000
James Budden, Baillie Gifford & Co
Tel: 0131 275 2816 or 07507 201208
Mark Knight, Four Communications
Tel: 0203 697 4200 or 07803 758810
Chairman's Statement
SAINTS' objective is to deliver real dividend growth by
increasing capital and growing income. The Company continues to
meet its objective, and total dividends for the year of 12.675p
(2020: 12.00p) will extend the Company's record of raising its
dividend to forty eight consecutive years.
Overview
2021 has been an immensely challenging year for the world, one
in which people, companies and economies have borne up to continued
shockwaves from the Covid-19 pandemic. Economic recovery has
generally been strong, due in no small part to the efforts of
medical staff, scientists, vaccine manufacturers and countless
others, and the spectre of inflation has returned. Although the
mood of the market has vacillated, economically sensitive sectors
have generally led the market's continued progress. The importance
of climate change was highlighted by the COP 26 summit and, even if
concrete progress was limited, we may come to look back on the year
as one in which momentum shifted and the need for significant
action to limit global warming was generally recognised.
Having weathered last year's storm well, your Company has had
another notably successful year in 2021. It is perhaps
unsurprising, given Baillie Gifford's focus on dependable, growing
streams of income, that the performance of SAINTS' holdings has
again been strong. SAINTS' revenues have grown healthily in 2021,
following a year of remarkable resilience in 2020.
The managers have maintained their focus on long term growth and
have not been tempted to invest in lower quality companies whose
short-term prospects have improved of late. Given this
self-discipline, it is pleasing that over the year SAINTS' NAV
total return (with borrowings at fair) has once again exceeded that
of the market and the peer group, helped by operational progress
and the strong performance of the property portfolio. More
importantly, the Company has also delivered strong absolute and
relative performance over longer periods - and NAV total returns
remain at the top of our Global Equity Income peer group over the
past five years. These healthy returns, together with continued
issuance, are reflected in the growth in the Company's total
assets, which exceeded GBP1billion by the end of the year.
Dividend and Inflation
A final dividend of 3.375p is recommended which will take the
full year dividend to 12.675p per share, 5.6% higher than the 2020
dividend of 12.00p.
The strong growth in SAINTS' revenues over the past year means
that the Board has been able to grow the dividend faster than
inflation compared to the annual rate of inflation of 5.4% (as
measured by CPI), and that the dividend is fully covered by current
year earnings.
Over the last ten years the Company's dividends have increased
well above the rate of inflation.
The Board aims to grow the dividend ahead of inflation over the
long term, and ideally also over shorter periods such as calendar
years. This is the forty-eighth year in a row that we have
increased the dividend and our aim will be to do that again in the
year ahead and beyond. We would emphasise, however, that we do not
necessarily expect to exceed or match the level of the previous
quarter's dividend in each successive quarter. It is quite
possible, therefore, that not all dividends next year will match or
exceed this year's final dividend.
Revenues
Earnings per share have risen to 12.79p over the year, an
increase of 12.1%, and investment income has risen to GBP28m.
Income from equities has been helped by operational progress at
many of the Company's investments and by increases in their
dividends. The sale of a property led to a reduction in rental
income, whilst additional investments have been made in other
income producing assets such as infrastructure equity
investments.
Both managers (Baillie Gifford and, for the Company's property
investments, OLIM) continue to focus on supporting the
dependability and the future growth of the Company's dividend in
line with its objective.
Total Return Performance
Over the year your investment in SAINTS delivered a share price
total return of 19.5% and the net asset value total return (capital
and income with borrowing at fair) was 21.5%. The Net Asset Value
return once again exceeded that from global equities which rose
20.0% over 2021, and the unweighted average Net Asset Value return
of SAINTS' peer group in the Global Equity Income sector which was
18.6%.
As always, we would caution against reading too much into
short-term relative performance. The Managers and your Board have a
long-term perspective and the Company's portfolio of investments
differs markedly from the make-up of the global equity index
against which performance is often compared. This differentiated
portfolio is necessary and appropriate in order for SAINTS to
deliver a high and growing income stream, as well as growth in the
Company's assets. Nonetheless, it is worth highlighting that the
Company's equity portfolio outperformed the global equity market,
which is notable in a year of recovery when many economically
sensitive but less reliable assets which the Company chooses not to
own were strong performers. SAINTS' returns from equities were
helped by the generally encouraging operational performance
delivered by the individual companies in which the portfolio is
invested.
In addition, the Company's property investments delivered a very
strong return of over 25% for the year, some 9% ahead of the MSCI
UK Quarterly Property Index. Performance was helped by the property
manager's emphasis on strength of covenant. It was also supported
by growth in demand for the longer length, inflation protected and
quality assets on which SAINTS' portfolio has been concentrated,
and by the sale of a significant asset at well above the most
recent valuation.
The principal contributors to and detractors from performance
and the changes to the equity, property and bond investments are
explained in more detail in the Managers' Review.
Borrowings and Debt Refinancing
At the start of 2021 SAINTS' borrowings took the form of a
single GBP80m debenture. These arrangements dated from a time when
the prevailing interest rates were much higher than today, and
those borrowings bear a coupon of 8%. During the year, a further
GBP15m of borrowings were added. Over 2021, SAINTS' borrowings were
used to fund a range of higher yielding commercial property and, to
a lesser extent, some fixed income and infrastructure equity
investments.
The book value of the total borrowings is GBP95.2m which, at the
year end, was equivalent to approximately 10.2% of shareholders'
funds. The estimated market or fair value of the borrowings was
GBP97.4m, an increase from the previous year's value of GBP86.9m
due to the additional borrowings. However, the book value of the
original GBP80m debenture fell from GBP81.1m to GBP80.2m over the
period.
The existing debenture will mature in April 2022, and the market
value of the Company's original borrowings will fall modestly over
the first part of the year as the redemption date approaches. This
will enhance returns. Thereafter, as previously announced, the
Company has agreed to issue GBP80m of long-term private placement
debt to refinance our long-term borrowings. At this time, the
overall cost of the Company's borrowings, including the additional
GBP15m raised last year, will fall just below 3% per annum.
Environmental, Social and Governance (ESG)
The Board of SAINTS recognises the importance of considering
Environmental, Social and Governance (ESG) factors when making
investments, and in acting as a responsible steward of capital. We
consider that Board oversight of such matters is an important part
of our responsibility to shareholders, and the Board has adopted an
ESG Policy which is available to view on the Company's website
(saints-it.com).
The Board has been strongly supportive of the Managers'
constructive engagement with the companies you own over the course
of the pandemic, and in their engagement with holdings and
potential holdings in relation to other areas including climate
change. I would encourage shareholders to read SAINTS' annual
Stewardship Report which can also be accessed on the Company's
website (saints-it.com). There is also further detail in the
Managers' Review.
Issuance and Fees
Over the year the Company has raised over GBP63m from new share
issuance, at a premium to net asset value prevailing from time to
time, in order to satisfy investor demand. Issuance serves the
interests of existing shareholders by enhancing net asset value,
reducing costs per share and helping further to improve
liquidity.
Last year the Board and Baillie Gifford agreed a reduction in
the fees the Company pays to Baillie Gifford on relevant assets
above GBP500m. As the Company's assets have grown significantly it
is already benefitting from this change to a considerable extent,
and further issuance is enhancing the benefit from the new fee
arrangements.
The Board
As planned, Eric Hagman stepped down from the Board at the
conclusion of last year's AGM. We once again thank him for his many
years of invaluable service, both as a Director and as Chair of the
Audit Committee.
As previously announced, I will be stepping down as Chairman of
SAINTS, and from the Board, at the conclusion of the Company's AGM
in April and the Board have chosen Lord Macpherson of Earl's Court,
GCB to take over as Chairman. Lord Macpherson joined the Board in
2016 and was appointed Senior Independent Director in 2019. Lord
Macpherson was Permanent Secretary to the Treasury from 2005 to
2016. I am pleased to say that Bronwyn Curtis, OBE has agreed to
take over Lord Macpherson's current role as Senior Independent
Director.
It has been my privilege to serve the Company and its
shareholders and I wish you all the very best for the future.
Outlook
In the world of investment, it is always important to
distinguish between the short-term prospects for economies and
share prices, and the long-term prospects for companies. This is
especially the case now, at a time when economic revival has been
helping to float almost all boats, but when we are also in an age
of change: an age where the world faces considerable challenges,
such as inflation and climate change, where supportive monetary
policy is likely to be withdrawn, where exchange rates may well
fluctuate and where the tectonic plates of geopolitics are
shifting, but an age where opportunities abound.
As a Board, we remain of the view that a long-term approach
based on investing globally for sustainable growth is the best
route to achieving SAINTS' aim of growing the dividend ahead of
inflation over time. We have great confidence in the managers'
approach, and this confidence has been further strengthened by the
experiences of the past year.
AGM
The AGM will be held at 12.30pm on Tuesday 5 April 2022 at
Baillie Gifford's offices at Calton Square, 1 Greenside Row,
Edinburgh. Our current expectation is that a physical meeting will
be possible: the meeting will be followed by a presentation from
the managers and all shareholders are invited to attend. Should
regulations relating to the Covid-19 pandemic change the intention
to hold a physical meeting will be reviewed and, if necessary, an
announcement will be made on the Company's website.
I would remind shareholders that they are able to submit proxy
voting forms before the applicable deadline and also to direct any
questions or comments for the Board in advance of the meeting
through the Company's Managers, either by emailing
trustenquiries@bailliegifford.com or calling 0800 917 2112 (Baillie
Gifford may record your call).
Finally, my fellow Directors and I send you all our very best
wishes for your health and happiness in the year ahead.
Peter Moon
Chairman
10 February 2022
For a definition of terms see Glossary of Terms and Alternative
Performance Measures at the end of this announcement.
Source: Refinitiv/Morningstar/Baillie Gifford and relevant
underlying index providers. See disclaimer at the end of this
announcement.
Past performance is not a guide to future performance.
Managers' Report
This year's review has two parts. The first part reviews the
Company's progress during the course of 2021, and some of the
changes to the portfolio over the course of the year. The second
looks forward, and outlines some of the questions that we are
debating as we head into 2022 - and to make them memorable we'll
call them Ambition, Borrowings, and Climate.
Progress during 2021
Last year in this review we discussed the importance of
adaptability in the companies that we invest in on SAINTS' behalf.
That adaptability has been on display again during this year:
overall the results were strong, but that hides a huge amount of
work by the management teams we invest alongside, navigating an
unpredictable and volatile operating environment.
Over the year the Company's NAV per share (borrowings at fair
value) rose by 21.5% on a total return basis, which was driven by
healthy returns from both the equity and property portfolios. The
income stream also saw strong growth, with earnings per share
growing by around 12%, to 12.79p. When we have been considering the
operational performance of our holdings this year, we have tended
to compare them to the pre-pandemic results, to get a better sense
of whether one year's success is showing us a rebound, or a
business that is emerging from the crisis in stronger shape than it
entered it. SAINTS' earnings per share in 2021 were around 8%
higher than the 11.87p earned in 2019.
Equity portfolio
The equity portfolio continues to dominate these results, given
that it represented on average 94.1% of the Company's net asset
value. Over the course of the year our equity portfolio delivered
21.0%, which was slightly ahead of global equity markets (20.0%).
The global economic recovery was in full swing throughout the year,
leading to growing bottle-necks in supply chains as companies
struggled to respond to a recovery in consumer demand. Stock
markets in the US and Europe performed more strongly than those in
Asia and Emerging Markets over the course of the year, which partly
reflects the recovery in economic confidence in the West, and
partly the struggles that some developing countries have had with
managing successive waves of the pandemic. However, our performance
continued to be driven by the idiosyncratic opportunities at our
companies, whether that is insulin maker Novo Nordisk's success in
developing novel treatments for obesity, or Silicon Motion's
success in taking share in the controllers for flash memory storage
in the semiconductor industry. In other words, it's been the
success of individual companies' management teams in executing on
their opportunities rather than clever top-down calls that have
delivered solid returns over the year - which tends to be how we
like it.
Dividend growth from the equity portfolio across the year was
robust, with dividend income growing by 6.5% per share. The
majority of our holdings posted healthy dividend growth, as they
gained confidence in the robustness of their businesses. In
addition, readers may remember that a handful of our holdings
reduced dividends in 2020, and most of these rebounded in 2021. On
top of these factors, holdings such as Rio Tinto, T. Rowe Price and
Admiral delivered not just strong dividend growth but paid large
special dividends. Set against that, the strength of sterling
against currencies like the US dollar and euro was a headwind to
income growth.
There is, though, another factor which affected our dividend
growth, which is less visible from the outside. Our strong belief
is that income investors will get the best results if they focus on
long-term income, not short-term yield. By this, we mean that we
would rather invest in a company where we have real confidence that
the dividend will be resilient and the growth strong over five or
ten years, than take a chance with a company with a high near-term
yield, but where we believe there are serious doubts over either
the growth or the sustainability of that income stream. Some people
call our approach 'quality', but we tend to think of it more as
another dimension of being 'long-term'.
In practical terms, that means we are constantly challenging our
investments, and asking ourselves whether the growth is good enough
to justify a place in the portfolio. Where there are names in the
portfolio where the attraction leans too much on 'income today',
and not enough on what that income might be over the next 5 or 10
years, we try to be disciplined about them. Selling a potential
income trap, and investing the proceeds in a great growing
franchise which pays dividends as it grows, may lead to a slight
reduction in this year's income. But in our experience it has
usually been the right thing to do in the long-term, both for the
capital growth it enables, and the future income performance of the
fund. And it is almost always better for your wealth than the
reverse of this process, selling good businesses in order to buy
some near-term income from a business whose long-term prospects are
poor. This is one reason why in the portfolio diagram on page 12 of
the Annual Report and Financial Statements, readers will see
comparatively few names on the right-hand side of the income
distribution today. Bringing this to life, towards the end of the
year we made an investment in Starbucks, the global coffee chain,
and sold British American Tobacco ('BAT'). It is clear to us that
the long-term volume growth prospects of Starbucks are likely to be
far stronger - the store base could easily grow at mid single
digits for a decade, and there is ample room to improve the
throughput of their stores (especially developing more 'drive-thru'
locations). The company has strong values, terrific brand equity,
and a record of robust pricing. It is run by people who are
thoughtful about its long-term success. It currently pays a
dividend yield slightly below 2%, but we are confident that this
will grow strongly over the coming decade. BAT's growth, meanwhile,
looks to us increasingly challenged, and we suspect that they will
struggle to grow an already high dividend.
We took holdings in five new companies during the year,
including Starbucks. As in recent years, the opportunities were
eclectic, and spanned the globe. A common thread is that we are
investing in companies we think are likely to be the market leader,
and alongside management teams that we rate very highly, and where
we expect dividends in five or ten years time to be substantially
higher than today. In some cases this is because we expect the
markets they serve to grow quickly. For instance, Taiwanese company
TCI Bio is a leader in nutritional ingredients, that go into
nutritional drinks and skincare products. Unlike their peers, they
have invested heavily in research, and the ability to manufacture
at scale - and we hope they will replicate their strong position in
China in other large markets.
That ambition is echoed in Midea Group, the first
Shanghai-listed company SAINTS has invested in. They have grown
into one of the largest air conditioning and home appliance
manufacturers in China, with a distinctive direct distribution
model. Our Shanghai-based research team view them as one of China's
best-managed companies. Midea have plans to grow their operations
overseas, but also apply their skills to industries like robotics
and elevators - ambition in action. We expect to find other such
opportunities over the coming years. Closer to home, Línea Directa
is the leading direct motor insurer in Spain, and enjoys the same
large cost advantage over its traditional competitors that Admiral
has had in the UK. Like Admiral, we expect them to steadily take
share of its market, expand into different types of insurance such
as home and health. They have a tremendously cash generative
business model which should support dividend growth. Finally,
Valmet sells capital equipment and services to the pulp and paper
industry. Pulp and paper companies are rarely good businesses,
partly because they have to invest enormous amounts in equipment.
As Warren Buffett famously found with the textile industry, the
benefits of those investments have tended to accrue to their
customers, and their suppliers (like Valmet). We think that growth
for Valmet will be especially strong over the coming decade, as
mill owners are forced to invest to mitigate their impact on the
climate and environment more broadly.
We funded these through sales of China Mobile and Sumitomo
Mitsui Trust Holdings, as well as BAT. In each case, we had lower
conviction in their being a good fit with our aim of delivering a
resilient, growing income stream over the long-term - both because
of the capital intensity of the business, and the ambitions of the
management team. We also sold our small holding in the Aberforth
Split Level Income Trust, a fund which invests in smaller UK
dividend-paying companies.
Other income-generating assets
As explained in the Investment Approach on page 11 of the Annual
Report and Financial Statements, alongside the equity portfolio we
invest in other income-generating assets, with an aim of delivering
a spread above our long-term cost of borrowing. We also expect
these holdings to support the resilience of SAINTS' earnings,
because their distributions typically have a relatively low
correlation with our equity dividends. During the year we
established a small infrastructure equities portfolio as part of
this. Our aim here is to find companies which we believe will
deliver income and capital growth modestly ahead of inflation.
Besides our existing holding in Greencoat UK Wind, we took small
holdings in Italian grid operator Terna, Chinese toll-road operator
Jiangsu Expressway, medical practice owner Assura, and
infrastructure operator BBGI Infrastructure. This allocation
delivered GBP0.9m of income during the year. The average yield of
these holdings is over 4%, whereas SAINTS' average cost of
borrowing will this year fall just below 3%.
The property portfolio delivered a 25.7% total return over the
year. Credit for this terrific performance belongs to OLIM
Property, who have managed the portfolio since 1996. OLIM's
investment strategy remains focused on identifying long-term
inflation-linked leases, backed by good covenants, in less
well-trodden parts of the UK property market. The strong returns
delivered by SAINTS' portfolio in 2021 partly reflects a healthy
market for UK commercial property in 2020, where values rebounded
after a challenging experience in the pandemic: a total return of
16.5% was delivered by the MSCI UK Quarterly Property Index.
However, SAINTS' returns were significantly boosted by the sale of
the Data Centre in Milton Keynes that was leased to Talk Talk,
which was our largest single investment. The sale price of GBP23.9m
represents a 45.9% premium to its valuation in December 2020, which
shows how strong the appetite is for data centres today. This means
that this investment has delivered an excellent return of 17.3% per
annum since purchase in 2017. The sale of this property meant that
rental income for the year was around 10% lower, at GBP4.9m, but
the underlying income performance of our properties was robust,
with inflation-linked rental increases across most of our
properties. Despite strong capital growth, the sale also meant the
property portfolio ended the year at GBP74.9m, around GBP10m
smaller than at the end of 2020, or 8.1% of the Company's net
assets. In early January 2022, GBP7.75m of the Milton Keynes
proceeds were used to purchase a Premier Inn in Holyhead.
Our fixed income portfolio delivered a modest positive return of
0.8% over the year. Income of GBP2.6m was increased over the prior
year (GBP1.1m), partly offset by a 5% capital loss. That loss was
the result of growing concerns around inflation, which pushed
interest rate expectations higher over the course of the year, as
well as the strength of sterling compared to the US dollar and
other currencies. The only notable change in our holdings during
the year was the purchase of a small number of emerging market
sovereign bonds. At year end, fixed income represented 5.3% of net
assets, split between corporate bonds, and emerging market
sovereign debt.
Looking forwards
When we read letters from a company's management team, one thing
we are often trying to understand is: what are the trickiest
questions that a company is grappling with today? This is often
more useful than either vague or falsely precise predictions of the
future. With that in mind, here are three issues that we are
actively debating as we head into 2022, both with each other and
with the Board.
Ambition: delivering faster growth
Over the last year there have been many headlines about
inflation. Consumer demand has rapidly recovered after the
pandemic, and yet many supply chains have been struggling to
operate at full capacity. Some of our logistics holdings, such as
freight forwarder Kuehne + Nagel, have benefited from helping
customers navigate this disruption, with profits expected to double
year on year - but the knock-on impact has been costs going up, for
businesses and consumers. At the same time, a common refrain from
companies we've spoken to has been that finding skilled labour is
increasingly a challenge. Wage expectations in many parts of the
economy are rising, as are interest rate expectations.
One school of thought about how to respond to this says: now is
the time to go for stocks on low earnings multiples, because their
share prices will be less affected if stock markets discount
earnings more aggressively. At the end of 2021, such stocks were
definitely in vogue, and the textbooks say there's a mathematical
method to this.
We don't tend to believe in shuffling the portfolio to try
keeping time with the macro music. Our experience has been that the
best results come from finding companies that can adapt to
different rhythms, and trust them to do the dancing.
In any case, we aren't sure that pivoting to stocks just because
of low multiples will serve the long-term income investor well.
When we examined the impact of inflation across our companies last
Spring, it struck us that two things were very important for
protecting and growing earnings. Firstly, genuine pricing power.
Often people conflate pricing power with proxies like 'having a
known brand'. However, if you talk to any company about how you
pass through higher costs in the real world, then the answer is
more often "we find a way to give more value to the consumer, and
that enables us to charge a bit more for a better product". In
other words, they innovate. To our mind real pricing power comes
from those companies which are constantly innovating, and solving
new needs for customers. It's because of this that Microsoft did
not struggle to put through a 10% price increase this year, and
neither did chip-maker TSMC.
The second is the importance of having large volume growth
opportunities. It is much easier for a business to absorb 5% cost
inflation and still grow its earnings if its volumes are growing
healthily, and it is in the process of opening up big new markets.
It is much harder if it is mature, and struggling to find the next
customer. In such businesses, cost pressures are more likely to
fall through to the bottom line and, in time, this will fall
through to dividends too. We see this in our portfolio too - the
companies that have found inflation most challenging have typically
been those that have been struggling to deliver meaningful volume
growth even in better times (Kimberly-Clark de México being one
example).
So we think the better question to ask is not about just the PE
multiple, but about the extent to which the business is in control
of its destiny, and the scale of its growth opportunity - ie is it
large enough that we can be confident of it significantly outpacing
inflation, even if inflation is higher for longer? Indeed, these
factors may well become even more important and valuable if the
world in the next few years experiences a period of persistently
higher inflation.
Of course, the focus on execution and growth isn't just about
inflation. One reflection we've had when looking at our most
successful investments over recent years is that they've typically
been businesses which delivered very robust earnings and dividend
growth over a sustained period. In each case the scale of their
opportunity was very large, whether that was in providing access to
private investment markets for Partners Group, or the growing
Chinese sportswear market for Anta Sports.
The best way, then, to ensure that SAINTS delivers really
attractive dividend growth over the next five to ten years is more
likely to be by us, as managers, continuing to challenge ourselves
on whether we have enough real growth coming through from our
holdings. There's no short-cut for delivering this. It means
continuing to be demanding when deciding which companies we own;
reflecting on lessons we've learned about what makes company
cultures succeed and fail; thinking hard about the next
industry-wide changes that will open up opportunities for
companies; and, when it comes to new idea generation, looking at
many frogs in our search for the rare princes.
Borrowings: making the most of the new opportunity
2022 is a water-shed year for SAINTS. The GBP80m debenture that
was taken out in 1997, with a coupon of 8%, will mature; and we
will draw down on our new long-term borrowings, with a coupon of
3.12%. When combined with the GBP15m of additional borrowings we
drew down this year, the Company's effective interest cost will
more than halve, to a touch under 3.0%.
As we describe in the Investment Approach, the potential benefit
of SAINTS having some long-term borrowing is that there is an
opportunity for us to invest in assets that deliver additional
income for shareholders, with a spread above the cost of borrowing,
as well as the potential for capital growth. Unfortunately, over
recent years the actual benefit of this strategy has been modest,
certainly for income, given the high cost of the Company's
borrowing - and it has also required SAINTS to invest in some
higher yielding assets. The key one has been the property
portfolio, which has delivered terrific returns under OLIM's
stewardship over the last 25 years, and handsomely beaten that cost
of borrowing.
The good news is that with a lower cost of borrowing, the
benefit to shareholders of having this borrowing in the capital
structure should be greater than it has been in the past, and the
opportunity set of investible assets should be broader. The
question that we and the Board have discussed at length over the
last two years is: what are the best assets to hold against this
for the long-term?
Our initial conclusions are:
- We and the Board continue to believe that the property
portfolio remains a good fit for SAINTS' aim of delivering a
resilient income stream that out-paces inflation: 78% of income is
either RPI-linked or subject to fixed increases, and it has proven
to be impressively resilient through periods of stress.
- We think that some high quality infrastructure assets should share several of these attractive characteristics. Additionally, they should have rather less economic sensitivity than either our equity or property portfolios, which over time should be helpful in delivering a resilient income stream. This is why we have started to build a portfolio of these names with the help of Baillie Gifford's infrastructure analysts, as detailed above. This initiative is in its early days, and we would hope to uncover some additional interesting opportunities here over the coming years: we have much to learn about the space.
- Fixed income on the other hand doesn't offer inflation
protection, but what it does offer is contractual certainty, and a
significant degree of diversification from our other sources of
income. Both have value - and again, we benefit from in-house
stock-pickers who we think can help us find a small number of the
best credits for our aims.
The right balance between these three broad buckets is something
we debate, and will no doubt evolve over time, as will the income
streams of income on offer. But we think that careful individual
stock selection within these three very broad asset classes should
help us ensure that the income stream is meaningfully higher than
it would be from a pure equity portfolio - and that the
diversification they offer should also make it more resilient.
Climate - or SAINTS and Sustainability (with apologies to Jane
Austen)
We have said several times that we are investing for the best
long-term income, rather than just next year's dividend. Hopefully
it strikes most of our readers as common sense that this requires
us to think hard about the sustainability of the sources of both
income and growth in a broader sense. We think it's rarely the case
that companies that are behaving irresponsibly or harming society
at large will provide genuinely sustainable sources of income: they
tend to get found out. Conversely, we tend to find companies that
share our long-term time horizon are thoughtful about their impact
on society at large, and want that impact to be broadly beneficial.
Hopefully it also seems common sense that any long-term investor
would want to work hard to help their companies improve their
performance, as this would make it more likely that the growth
opportunities got realised.
Sharp-eyed shareholders will have spotted a number of
developments at SAINTS over recent years, that are in tune with
this. The Board formally adopted an ESG policy in 2020, setting out
their expectations of us as managers. We have talked in previous
letters about the framework we have developed for considering
companies' sustainability, which focuses on the impact of their
products and ambitions, their level of ambition to further or
address this, and how far we can trust them. Our team has a
dedicated analyst focusing solely on Environmental, Social and
Governance issues that might be relevant to our holdings. Last year
we published our second annual Stewardship Report, setting out how
we have been engaging with our holdings on your behalf, to improve
how they manage the sustainability of their operations. The
portfolio has also been steadily evolving. For example, today we
have no investments in fossil fuel producers, tobacco companies, or
armament companies - because we don't think these traditional yield
stocks offer sustainable sources of income and growth over the
long-term. As a result, our portfolio looks increasingly different,
in many cases quite dramatically different, from other UK and
global equity income trusts.
This has all been driven by investment considerations. However,
we think that there may be strong grounds for going further down
this path, and being more explicit about our expectations of our
holdings. To take one example that is front of mind at the moment:
climate change, and the need to decarbonise the economy. This has
recently been graphically highlighted by both extreme weather
events, and COP26 in Glasgow. We tend to avoid the most polluting
companies, which is why our portfolio's carbon footprint is 76%
lower than that of the market (compared to the MSCI All Countries
World (ACWI) Index as we discussed in the Stewardship Report which
was prepared for the year for March 2021). Looking forward, we
think it's increasingly unlikely that by the end of the decade a
company will be permitted to have a material impact on the climate,
without a clear plan to address this. And we very much doubt that
we would view such a business as a sustainable source of income and
growth. Similarly, we expect that the expectations of SAINTS'
shareholders will also increase, as will those of our regulators.
Our belief is that the best way to make a real difference is by
helping our companies to be more ambitious, and we are therefore
planning to engage with all our holdings which do have a material
impact on the climate over
the coming years to ensure that they are playing a responsible
part in the climate transition, with clear plans that align with a
scenario where global warming is kept to 1.5 degrees (often
referred to as 'Net Zero').
Conclusion
These three questions are ones that help define SAINTS'
strategy. As for the tactics: markets ended 2021 and started 2022
with a jolt, with sharp adjustments in share prices of some of the
high growth companies that have performed so strongly over recent
years. Your portfolio's focus on resilient companies that pay
dividends as they grow has seen it hold up reasonably well in this
environment. Indeed, we tend to view these periods of adjustment as
a chance to keep upgrading the portfolio's long-run growth
potential: any time the opportunity set gets shaken up is an
exciting one for a long-term stock picker.
James Dow
Toby Ross
Baillie Gifford & Co
10 February 2021
Income Statement
For the year ended For the year ended
31 December 2021 31 December 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================================== ======== ======== ======== ======== ======== ========
Gains on investments - securities - 127,973 127,973 - 73,114 73,114
Gains on investments - property - 13,679 13,679 - 42 42
Currency losses - (21) (21) - (291) (291)
Income (note 2) 27,980 - 27,980 23,568 - 23,568
Management fees (973) (2,920) (3,893) (1,097) (2,037) (3,134)
Other administrative expenses (1,252) - (1,252) (1,221) - (1,221)
================================================== ======== ======== ======== ======== ======== ========
Net return before finance costs and taxation 25,755 138,711 164,466 21,250 70,828 92,078
Finance costs of borrowings (1,426) (4,278) (5,704) (1,952) (3,626) (5,578)
================================================== ======== ======== ======== ======== ======== ========
Net return on ordinary activities before taxation 24,329 134,433 158,762 19,298 67,202 86,500
Tax on ordinary activities (2,509) 732 (1,777) (1,779) 424 (1,355)
================================================== ======== ======== ======== ======== ======== ========
Net return on ordinary activities after taxation 21,820 135,165 156,985 17,519 67,626 85,145
================================================== ======== ======== ======== ======== ======== ========
Net return per ordinary share (note 4) 12.79p 79.20p 91.99p 11.41p 44.04p 55.45p
================================================== ======== ======== ======== ======== ======== ========
The total column of the Income Statement is the profit and loss
account of the Company. The supplementary revenue and capital
columns are prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in this statement derive from
continuing operations.
A Statement of Comprehensive Income is not required as there is
no other comprehensive income.
The accompanying notes at the end of this document are an
integral part of the Financial Statements.
Balance Sheet
As at 31 December 2021 As at 31 December 2020
GBP'000 GBP'000 GBP'000 GBP'000
=============================================
Non-current assets
Investments - securities 938,357 718,644
Investments - property 74,900 84,900
Deferred expenses 207 207
============================================= ========== ============ ========= =============
1,013,464 803,751
============================================= ========== ============ ========= =============
Current assets
Debtors 3,710 2,531
Cash and cash equivalents 11,263 9,701
============================================= ========== ============ ========= =============
14,973 12,232
============================================= ========== ============ ========= =============
Creditors
Amounts falling due within one year (83,327) (3,713)
============================================= ========== ============ ========= =============
Net current (liabilities)/assets (68,354) 8,519
============================================= ========== ============ ========= =============
Total assets less current liabilities 945,110 812,270
============================================= ========== ============ ========= =============
Creditors
Amounts falling due after more than one year (14,925) (81,108)
========== ============ ========= =============
Net assets 930,185 731,162
============================================= ========== ============ ========= =============
Capital and reserves
Share capital 43,900 40,649
Share premium account 172,576 112,751
Capital redemption reserve 22,781 22,781
Capital reserve 673,740 538,575
Revenue reserve 17,188 16,406
============================================= ========== ============ ========= =============
Shareholders' funds 930,185 731,162
============================================= ========== ============ ========= =============
Net asset value per ordinary share* 529.7p 449.7p
============================================= ========== ============ ========= =============
Ordinary shares in issue (note 7) 175,600,943 162,595,943
============================================= ========== ============ ========= =============
* See Glossary of Terms and Alternative Performance Measures at the end of this announcement.
The accompanying notes at the end of this document are an
integral part of the Financial Statements.
Statement of Changes in Equity
For the year ended 31 December 2021
Share Share Capital redemption Shareholders'
capital premium account reserve Capital reserve* Revenue reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=================== ======== ================= ================== ================ =============== =============
Shareholders' funds
at 1 January 2021 40,649 112,751 22,781 538,575 16,406 731,162
Shares issued 3,251 59,825 - - - 63,076
Net return on
ordinary
activities after
taxation - - - 135,165 21,820 156,985
Dividends paid in
the year (note 5) - - - - (21,038) (21,038)
Shareholders' funds
at 31 December
2021 43,900 172,576 22,781 673,740 17,188 930,185
=================== ======== ================= ================== ================ =============== =============
For the year ended 31 December 2020
Share Share Capital redemption Shareholders'
capital premium account reserve Capital reserve* Revenue reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=================== ======== ================= ================== ================ =============== =============
Shareholders' funds
at 1 January 2020 36,880 52,535 22,781 470,949 17,343 600,488
Shares issued 3,769 60,216 - - - 63,985
Net return on
ordinary
activities after
taxation - - - 67,626 17,519 85,145
Dividends paid in
the year (note 5) - - - - (18,456) (18,456)
------------------- -------- ----------------- ------------------ ---------------- --------------- -------------
Shareholders' funds
at 31 December
2020 40,649 112,751 22,781 538,575 16,406 731,162
=================== ======== ================= ================== ================ =============== =============
* The capital reserve as at 31 December 2021 includes unrealised
investment holding gains of GBP380,179,000 (31 December 2020 -
GBP276,433,000).
The accompanying notes at the end of this document are an
integral part of the Financial Statements.
Cash Flow Statement
For the year ended For the year ended
31 December 2021 31 December 2020
GBP'000 GBP'000 GBP'000 GBP'000
================================================== ========== ======== ========== ========
Cash flows from operating activities
Net return on ordinary activities before taxation 158,762 86,500
Gains on investments - securities (127,973) (73,114)
Gains on investments - property (13,679) (42)
Currency losses 21 291
Finance costs of borrowings 5,704 5,578
Overseas withholding tax (1,764) (1,357)
Changes in debtors and creditors (1,890) (526)
Other non-cash changes 227 69
================================================== ========== ======== ========== ========
Cash from operations 19,408 17,399
Interest paid (6,498) (6,400)
================================================== ========== ======== ========== ========
Net cash inflow from operating activities 12,910 10,999
================================================== ========== ======== ========== ========
Cash flows from investing activities
Acquisitions of investments (168,238) (121,913)
Disposals of investments 99,950 67,920
Net cash outflow from investing activities (68,288) (53,993)
================================================== ========== ======== ========== ========
Cash flows from financing activities
Equity dividends paid (21,038) (18,456)
Shares issued 63,076 63,985
Loan notes drawn down 15,000 -
Costs of issuance of loan notes (77) -
================================================== ========== ======== ========== ========
Net cash inflow from financing activities 56,961 45,529
================================================== ========== ======== ========== ========
Increase in cash and cash equivalents 1,583 2,535
Exchange movements (21) (291)
Cash and cash equivalents at 1 January 9,701 7,457
================================================== ========== ======== ========== ========
Cash and cash equivalents at 31 December 11,263 9,701
================================================== ========== ======== ========== ========
The accompanying notes at the end of this document are an
integral part of the Financial Statements.
List of Investments at 31 December 2021
=======================================
Value % of
Name Business GBP'000 total assets
=================================== ======================================================== ======== =============
United Parcel Service Courier services 30,979 3.0
Microsoft Computer software 29,920 2.9
Novo Nordisk Pharmaceutical company 29,525 2.9
Taiwan Semiconductor Manufacturing Semiconductor manufacturer 29,245 2.9
Fastenal Distribution and sales of industrial supplies 29,042 2.8
Sonic Healthcare Laboratory testing 28,207 2.8
Procter & Gamble Household product manufacturer 26,486 2.6
Roche Pharmaceuticals and diagnostics 26,338 2.6
Partners Group Asset management 25,675 2.5
Nestlé Food producer 23,028 2.2
Pepsico Snack and beverage company 21,281 2.1
Schneider Electric Electrical power products 20,534 2.0
Apple Consumer technology 20,322 2.0
Albemarle Producer of speciality and fine chemicals 19,331 1.9
Distributes air conditioning, heating and refrigeration
Watsco equipment 18,907 1.8
Atlas Copco Engineering 18,442 1.8
Anta Sports Sportswear manufacturer and retailer 18,410 1.8
Admiral Car insurance 18,295 1.8
Carsales.com Online marketplace for classified car advertisements 17,231 1.7
Deutsche Boerse Securities exchange owner/operator 17,187 1.7
Silicon Motion Technology Semiconductor company 17,151 1.7
Analog Devices Integrated circuits 16,976 1.7
CH Robinson Delivery and logistics 16,302 1.6
Coca Cola Beverage company 15,762 1.5
Wolters Kluwer Information services and solutions provider 14,701 1.4
Experian Credit scoring and marketing services 14,403 1.4
McDonald's Fast food restaurants 13,980 1.4
Kuehne + Nagel Worldwide freight forwarder 12,670 1.2
National Instruments Electronic test and measurement systems 12,207 1.2
Hong Kong Exchanges and Clearing Securities exchange owner/operator 12,019 1.2
Cisco Systems Data networking equipment 11,599 1.1
Kering Luxury brand conglomerate 11,486 1.1
GlaxoSmithKline Pharmaceuticals, vaccines and consumer healthcare 11,177 1.1
Edenred Voucher programme outsourcer 11,034 1.1
T.Rowe Price Fund manager 10,851 1.1
NetEase Online gaming company 10,755 1.0
Man Wah Sofa designer and manufacturer 10,630 1.0
Midea Group Appliance manufacturer 10,357 1.0
Starbucks Coffee retailer 10,111 1.0
Arthur J Gallagher Insurance broker 10,111 1.0
United Overseas Bank Commercial banking 9,964 1.0
Valmet Manufacturer of pulp and paper machinery 9,634 0.9
Medtronic Medical devices company 8,786 0.9
B3 S.A. Securities exchange owner/operator 8,765 0.8
Greencoat UK Wind UK wind farms 8,661 0.8
Fevertree Drinks Producer of premium mixer drinks 8,334 0.8
Cullen/Frost Bankers Provides banking services throughout the state of Texas 8,332 0.8
Dolby Laboratories Multimedia software 8,257 0.8
Línea Directa Aseguradora Car and home insurance provider 8,131 0.8
Rio Tinto Mining 8,122 0.8
Want Want Snacks and milk-based products 7,890 0.8
Pernod Ricard Global spirits manufacturer 7,715 0.7
Hargreaves Lansdown UK retail savings and investment platform 7,619 0.7
TCI Producer of health-food products 7,139 0.7
AVI Staple foods manufacturer 6,315 0.6
Kimberly-Clark de México Paper-based household products 6,266 0.6
Hiscox Property and casualty insurance 5,946 0.6
USS Second-hand car auctioneer 5,836 0.6
Terna Electricity grid operator 5,485 0.5
SAP Business software developer 5,027 0.5
Amadeus IT Group Technology provider for the travel industry 4,768 0.5
Assura Primary healthcare property group 3,327 0.3
Jiangsu Expressway Tollroad operator 3,153 0.3
BBGI Global Infrastructure PFI/PPP fund 3,003 0.3
Terra Catalyst Fund* Fund of European property funds 265 -
Total Equities 889,407 86.7
============================================================================================= ======== =============
Direct Property
=================================== ======================================================== ======== =============
Direct Property See table below 74,900 7.3
=================================== ======================================================== ======== =============
Bonds
Sterling denominated Paymentsense 8% 2025 3,038 0.3
======== =============
Euro denominated Cogent Communications 4.375% 2024 4,010 0.4
Ivory Coast 6.625% 2048 1,718 0.2
======== =============
5,728 0.6
======== =============
US dollar denominated Netflix 5.375% 2029 6,234 0.6
Tesco 6.15% 2037 5,038 0.5
Catalent 5% 2027 3,153 0.3
First Quantum Minerals 7.25% 2023 2,603 0.2
Brazil 7.125% 20/01/2037 1,942 0.2
Dominican Republic 5.875% 30/01/2060 1,932 0.2
Mexico 5.75% 12/10/2110 1,930 0.2
First Quantum Minerals 7.5% 2025 1,815 0.2
======== =============
24,647 2.4
======== =============
Brazilian real denominated Brazil CPI Linked 15/05/2045 4,248 0.4
========= =====
Dominican peso denominated Dominican Republic 8.9% 15/02/2023 1,694 0.2
Dominican Republic 9.75% 05/06/2026 776 0.1
========= =====
2,470 0.3
========= =====
Indonesian rupiah denominated Indonesia 9% 15/03/2029 2,412 0.2
Indonesia 7.375% 15/05/2048 2,050 0.2
========= =====
4,462 0.4
========= =====
Mexican peso denominated Mexico IL 4% 15/11/2040 2,501 0.2
========= =====
Peruvian sol denominated Peru 6. 15% 12/08/2032 1,856 0.2
================================ ==================================== ========= =====
Total Bonds 48,950 4.8
====================================================================== ========= =====
Total Investments 1,013,257 98.8
Net liquid assets
(including deferred expenses) 12,089 1.2
====================================================================== ========= =====
Total Assets 1,025,346 100.0
(before deduction of debenture)
====================================================================== ========= =====
* Delisted.
Property Portfolio
==================
2021
2021 % 2020
Location Type Tenant Value GBP'000 of total assets Value GBP'000
================== ================== ================== =============== ================= ==============
Sherwin-Williams
Basingstoke Warehouse UK Limited 3,000 0.3 3,000
Sherwin-Williams
Diversified
Brands
Biggleswade Warehouse Limited 7,650 0.7 5,800
Stonegate Pub
Cleethorpes Public House Company Limited 750 0.1 700
Petrol Station and
Convenience Co-operative Group
Crawley Store Food Limited 3,800 0.4 3,750
Aldi Stores
Denbigh Supermarket Limited 5,750 0.6 5,350
Spirit Pub Company
(Managed)
Earley Public House Limited 2,800 0.3 2,700
Care UK Community
Partnerships
Kenilworth Nursing Home Limited 6,200 0.6 6,750
Stonegate Pub
Luton Public House Company Limited 2,700 0.3 2,700
TalkTalk
Communications
Milton Keynes (*) Data Centre Limited - - 16,400
Park Resorts
New Romney Holiday Village Limited 19,000 1.8 17,150
Newport Pagnell Car Showroom Pendragon Plc 3,300 0.3 3,000
Spirit Pub Company
(Managed)
Otford Public House Limited 1,850 0.2 1,800
Co-operative Group
Pagham Convenience Store Food Limited 1,350 0.1 1,250
Stonegate Pub
Prestatyn Public House Company Limited 1,100 0.1 1,100
Southend-on-Sea Warehouse Booker Limited 11,200 1.1 9,000
Mitchells &
Butlers Retail
(No.2)
Taunton Bowling Alley Limited 4,450 0.4 4,450
74,900 7.3 84,900
======================================================== =============== ================= ==============
* Sold during the year
Notes
1. The Financial Statements for the year to 31 December 2021 have been prepared in accordance
with FRS 102, 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'
and on the basis of the accounting policies set out in the Annual Report and Financial Statements
for the year ended 31 December 2021.
2. Income 2021 2020
GBP'000 GBP'000
================================================================================== ======== =========
Income from investments
UK dividends 4,499 3,616
UK interest 381 121
Overseas dividends 16,004 13,355
Overseas interest 2,175 985
======================================================================================= ======== =========
23,059 18,077
======================================================================================= ======== =========
Other income
Deposit interest 2 5
Rental income 4,905 5,456
Other income 14 30
======================================================================================= ======== =========
4,921 5,491
======================================================================================= ======== =========
Total income 27,980 23,568
--------------------------------------------------------------------------------------- -------- ---------
Total income comprises
Dividends from financial assets designated at fair value through profit or loss 20,503 16,971
Interest from financial assets designated at fair value through profit or loss 2,556 1,106
Interest from financial assets not at fair value through profit or loss 2 5
Other income not from financial assets 4,919 5,486
======================================================================================= ======== =========
27,980 23,568
======================================================================================= ======== =========
3. Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been
appointed as the Company's Alternative Investment Fund Manager ('AIFM') and Company Secretary.
Baillie Gifford & Co Limited has delegated investment management services to Baillie Gifford
& Co. Dealing activity and transaction reporting have been further sub-delegated to Baillie
Gifford Overseas Limited and Baillie Gifford Asia (Hong Kong) Limited. The management of the
property portfolio has been delegated to OLIM Property Limited.
The Investment Management Agreement between the AIFM and the Company sets out the matters
over which the Managers have authority in accordance with the policies and directions of,
and subject to restrictions imposed by, the Board. The Investment Management Agreement is
terminable on not less than six months' notice. Compensation fees would only be payable in
respect of the notice period if termination were to occur within a shorter notice period.
The annual management fee is 0.45% of the first GBP500 million of total assets and 0.35% of
the remaining total assets, total assets being the value of all assets held (excluding the
property portfolio) less all liabilities, other than any liability in the form of debt intended
for investment purposes, calculated on a quarterly basis. The Board is of the view that
calculating the fee with reference to performance would be unlikely to exert a positive influence
on performance.
The Property Management Agreement sets out the matters over which OLIM Property Limited has
discretion and those matters which require Board approval. The Property Management Agreement
is terminable on three months' notice. The annual fee is 0.5% of the value of the property
portfolio, subject to a minimum quarterly fee of GBP6,250.
Notes (Ctd)
4. Net return per ordinary share 2021 2020
Revenue Capital Total Revenue Capital Total
========================================== ============ =========== ======= ======= ======== =========
Net return per ordinary share 12.79p 79.20p 91.99p 11.41p 44.04p 55.45p
Revenue return per ordinary share is based on the net revenue on ordinary activities after
taxation of GBP21,820,000 (2020 - GBP17,519,000) and on 170,652,354 (2020 - 153,553,731) ordinary
shares of 25p, being the weighted average number of ordinary shares in issue during the year.
Capital return per ordinary share is based on the net capital gain for the financial year
of GBP135,165,000 (2020 - net capital gain of GBP67,626,000), and on 170,652,354 (2020 - 153,553,731)
ordinary shares, being the weighted average number of ordinary shares in issue during the
year.
There are no dilutive or potentially dilutive shares in issue.
5. Ordinary Dividends 2021 2020
2021 2020 GBP'000 GBP'000
===================================================================== ======= ======= ======== =========
Amounts recognised as distributions in the year:
Previous year's final (paid 9 April 2021) 3.00p 3.00p 4,965 4,447
First interim (paid 23 June 2021) 3.05p 3.00p 5,204 4,538
Second interim (paid 20 September 2021) 3.075p 3.00p 5,308 4,666
Third interim (paid 17 December 2021) 3.175p 3.00p 5,561 4,805
12.30p 12.00p 21,038 18,456
========================================================================== ======= ======= ======== =========
We also set out below the total dividends paid and proposed in respect of the financial year,
which is the basis on which the requirements of section 1159 of the Corporation Tax Act 2010
are considered. The revenue available for distribution out of current year profits by way
of dividend for the year is GBP21,820,000 (2020 - GBP17,519,000).
============================================================================================================
2021 2020
2021 2021 GBP'000 GBP'000
===================================================================== ======= ======= ======== =========
Dividends paid and payable in respect of the year:
First interim (paid 23 June 2021) 3.05p 3.00p 5,204 4,538
Second interim (paid 20 September 2021) 3.075p 3.00p 5,308 4,666
Third interim (paid 17 December 2021) 3.175p 3.00p 5,561 4,805
Current year's proposed final dividend (payable 8 April 2022) 3.375p 3.00p 5,927 4,965
12.675p 12.00p 22,000 18,974
========================================================================== ======= ======= ======== =========
If approved, the recommended final dividend of 3.375p will be paid on 8 April 2022 to all
shareholders on the register at the close of business on 4 March 2022. The ex-dividend date
is 3 March 2022. The Company's Registrar offers a Dividend Reinvestment Plan and the final
date for the receipt of elections for reinvestment of this dividend is 18 March 2022.
6. The book value of the 8% Debenture Stock 2022 (`Debenture Stock') at 31 December 2021 was
GBP80,236,000 (31 December 2020 - GBP81,108,000). The market value of the Debenture Stock
at 31 December 2021 was GBP82,500,000 (31 December 2020 - GBP86,928,000). The redemption date
for the Debenture Stock is 10 April 2022.
On 25 June 2021 the Company issued GBP15 million of long-term secured privately placed notes
('loan notes') with a fixed coupon of 2.23% and a repayment date of 25 June 2036. At 31 December
2021 the book value of the loan notes amounted to GBP14,925,000. The fair value of the loan
notes at 31 December 2021 was GBP14,922,000.
Notes (Ctd)
7. During the year, 13,005,000 (2020 - 15,075,000) shares were issued at a premium to net asset
value raising proceeds of GBP63,076,000 (2020 - GBP63,985,000). At 31 December 2021 the Company
had authority to buy back 24,594,234 ordinary shares and to allot 6,054,189 ordinary shares
without application of pre-emption rights in accordance with the authorities granted at the
AGM in April 2021. No shares were bought back during the year.
8. Transaction costs incurred on the purchase and sale of investments are added to the purchase
cost or deducted from the sale proceeds, as appropriate. During the year, transaction costs
on purchases amounted to GBP113,000 (2020 - GBP105,000) and GBP290,000 (2020 - GBP40,000)
respectively. Of the gains on sales during the year of GBP37,906,000 (2020 - losses of GBP9,451,000)
a net gain of GBP14,491,000 (2020 - net gain of GBP3,456,000) was included in investment holding
gains at the previous year end.
=============================================================================================================
9.
Analysis of 1 January Cash Exchange Other 31 December
Change in Net 2021 Flows Movement Cost of issuance non-cash changes 2021
Debt GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================= ========= ========= ================ ================ ================ =============
Cash and cash
equivalents 9,701 1,583 (21) - - 11,263
Debenture Stock
due in less than
one year - - - - (80,236) (80,236)
Debenture Stock
due in more than
one year (81,108) - - - 81,108 -
Loan notes due in
more than one
year - (15,000) - 77 (2) (14,925)
================= ========= ========= ================ ================ ================ =============
Total (71,407) (13,417) (21) 77 870 (83,898)
================= ========= ========= ================ ================ ================ =============
10. The financial information set out above does not constitute the company's statutory accounts
for the years ended 31 December 2021 or 2020 but is derived from those accounts. Statutory
accounts for 2020 have been delivered to the registrar of companies, and those for 2021 will
be delivered in due course. The auditor has reported on those accounts; their reports were
(i) unqualified, (ii) did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
11. The Report and Accounts will be available on the SAINTS page of the Managers' website saints-it.com
(++) on or around 3 March 2022.
Glossary of Terms and Alternative Performance Measures (APM)
Total Assets
Total assets less current liabilities, before deduction of all
borrowings.
Net Asset Value
Net Asset Value (NAV) is the value of total assets less
liabilities (including borrowings). The NAV per share is calculated
by dividing this amount by the number of ordinary shares in
issue.
Net Asset Value (Borrowings at Book Value)
Borrowings are valued at adjusted net issue proceeds. Book value
approximates amortised cost.
31 December 31 December
2021 2020
==================================== ================ ================
Shareholders' funds (borrowings GBP930,185,000 GBP731,162,000
at book value)
Add: book value of borrowings GBP95,161,000 GBP81,108,000
Less: fair value of borrowings (GBP97,422,000) (GBP86,928,000)
==================================== ================ ================
Shareholders' funds (borrowings GBP927,924,000 GBP725,342,000
at fair value)
==================================== ================ ================
Shares in issue at year end 175,600,943 162,595,943
==================================== ================ ================
Net Asset Value per ordinary share
(borrowings at fair value) 528.4p 446.1p
==================================== ================ ================
Net Asset Value (Borrowings at Fair Value) (APM)
Borrowings are valued at an estimate of their market worth. This
indicates the cost to the Company of repaying its borrowings under
current market conditions. It is a widely reported measure across
the investment trust industry.
Discount/Premium (APM)
As stockmarkets and share prices vary, an investment trust's
share price is rarely the same as its NAV. When the share price is
lower than the NAV per share it is said to be trading at a
discount. The size of the discount is calculated by subtracting the
share price from the NAV per share and is usually expressed as a
percentage of the NAV per share. If the share price is higher than
the NAV per share, this situation is called a premium.
2021 2021 2020 2020
NAV NAV NAV NAV
(book) (fair) (book) (fair)
======================= ======== ======== ======== ========
Closing NAV per share 529.7p 528.4p 449.7p 446.1p
Closing share price 541.0p 541.0p 464.0p 464.0p
======================= ======== ======== ======== ========
Premium 2.1% 2.4% 3.2% 4.0%
======================= ======== ======== ======== ========
Glossary of Terms and Alternative Performance Measures (APM)
(ctd)
Ongoing Charges (APM)
The total expenses (excluding borrowing costs) incurred by the
Company as a percentage of the average net asset value (with
borrowings at fair value). The ongoing charges have been calculated
on the basis prescribed by the Association of Investment
Companies.
A reconciliation from the expenses detailed in the Income
Statement above is provided below.
31 December 31 December
2021 2020
======================================== =============== ===============
Investment management fee GBP3,893,000 GBP3,134,000
Other administrative expenses GBP1,252,000 GBP1,221,000
======================================== =============== ===============
Total expenses (a) GBP5,145,000 GBP4,355,000
======================================== =============== ===============
Average daily cum-income net asset GBP826,357,000 GBP621,179,000
value (with borrowings at fair value)
(b)
======================================== =============== ===============
Ongoing charges (a) ÷ (b)
(expressed as a percentage) 0.62% 0.70%
======================================== =============== ===============
Total Return (APM)
The total return is the return to shareholders after reinvesting
the net dividend on the date that the share price goes
ex-dividend.
2021 2021 2021 2020 2020 2020
NAV (book) NAV (fair) Share NAV (book) NAV (fair) Share
price price
=========================== =========== ============ ============ ========= ============ ============ =========
Opening NAV per
share/share
price (a) 449.7p 446.1p 464.0p 407.1p 400.9p 426.0p
Closing NAV per
share/share
price (b) 529.7p 528.4p 541.0p 449.7p 446.1p 464.0p
Dividend adjustment
factor* (c) 1.025486 1.025738 1.024954 1.029353 1.028917 1.028233
Adjusted closing NAV
per share/share (d=b
price x c) 543.2p 542.0p 554.5p 462.9p 459.0p 477.1p
=========================== =========== ============ ============ ========= ============ ============ =========
(d ÷
Total Return a)-1 20.8% 21.5% 19.5% 13.7% 14.5% 12.0%
=========================== =========== ============ ============ ========= ============ ============ =========
* The dividend adjustment factor is calculated on the assumption
that the dividends paid out by the Company are reinvested into the
shares of the Company at the cum income NAV at the ex-dividend
date.
Glossary of Terms and Alternative Performance Measures (APM)
(ctd)
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other
public company, an investment trust can borrow money to invest in
additional investments for its portfolio. The effect of the
borrowing on the shareholders' assets is called 'gearing'. If the
Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the
value of the Company's assets falls, the situation is reversed.
Gearing can therefore enhance performance in rising markets but can
adversely impact performance in falling markets.
Potential gearing is the Company's borrowings expressed as a
percentage of shareholders' funds.
31 December 2021 31 December 2020
========================== ================= =================
Borrowings at book value GBP95,161,000 GBP81,108,000
Shareholders' funds GBP930,185,000 GBP731,162,000
========================== ================= =================
Potential gearing 10% 11%
========================== ================= =================
Equity gearing is the Company's borrowings adjusted for cash,
bonds and property expressed as a percentage of shareholders'
funds.
31 December 2021 31 December 2020
=================================== ================= =================
Borrowings at book value GBP95,161,000 GBP81,108,000
Less: cash and cash equivalents (GBP11,263,000) (GBP9,701,000)
Less: bond investments (GBP48,950,000) (GBP40,775,000)
Less: direct property investments (GBP74,900,000) (GBP84,900,000)
=================================== ================= =================
Adjusted borrowings (GBP39,952,000) (GBP54,268,000)
Shareholders' funds GBP930,185,000 GBP731,162,000
=================================== ================= =================
Equity gearing (4%) (7%)
=================================== ================= =================
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers
(AIFM) Regulations, leverage is any method which increases the
Company's exposure, including the borrowing of cash and the use of
derivatives. It is expressed as a ratio between the Company's
exposure and its net asset value and can be calculated on a gross
and a commitment method. Under the gross method, exposure
represents the sum of the Company's positions after the deduction
of sterling cash balances, without taking into account any hedging
and netting arrangements. Under the commitment method, exposure is
calculated without the deduction of sterling cash balances and
after certain hedging and netting positions are offset against each
other.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed,
is the percentage of the listed equity portfolio that differs from
its comparative index. It is calculated by deducting from 100 the
percentage of the portfolio that overlaps with the comparative
index. An active share of 100 indicates no overlap with the index
and an active share of zero indicates a portfolio that tracks the
index.
Sustainable Finance Disclosures Regulation ('SFDR')
The AIFM has adopted Baillie Gifford & Co's Governance and
Sustainable Principles and Guidelines as its policy on integration
of sustainability risks in investment decisions.
Baillie Gifford & Co believes that a company cannot be
financially sustainable in the long run if its approach to business
is fundamentally out of line with changing societal expectations.
It defines 'sustainability' as a deliberately broad concept which
encapsulates a company's purpose, values, business model, culture,
and operating practices.
Baillie Gifford & Co's approach to investment is based on
identifying and holding high quality growth businesses that enjoy
sustainable competitive advantages in their marketplace. To do this
it looks beyond current financial performance, undertaking
proprietary research to build up an in-depth knowledge of an
individual company and a view on its long-term prospects. This
includes the consideration of sustainability factors
(environmental, social and/or governance matters) which it believes
will positively or negatively influence the financial returns of an
investment. The likely impact on the return of the portfolio from a
potential or actual material decline in the value of investment due
to the occurrence of an environmental, social or governance event
or condition will vary and will depend on several factors including
but not limited to the type, extent, complexity and duration of an
event or condition, prevailing market conditions and existence of
any mitigating factors.
Whilst consideration is given to sustainability matters, there
are no restrictions on the investment universe of the Company,
unless otherwise stated within in its Objective and Policy. Baillie
Gifford & Co can invest in any companies it believes could
create beneficial long-term returns for investors. However, this
might result in investments being made in companies that ultimately
cause a negative outcome for the environment or society.
More detail on the Investment Manager's approach to
sustainability can be found in the Governance and Sustainability
Principles and Guidelines document, available publicly on the
Baillie Gifford website (
bailliegifford.com/en/uk/about-us/literature-library/corporate-governance/governance-sustainability-principles-and-guidelines/
).
Taxonomy Regulation
The Taxonomy Regulation establishes an EU-wide framework or
criteria for environmentally sustainable economic activities in
respect of six environmental objectives. It builds on the
disclosure requirements under the EU Sustainable Finance Disclosure
Regulation ('SFDR') by introducing additional disclosure
obligations in respect of AIFs that invest in an economic activity
that contributes to an environmental objective. These AIFs are
required to disclose (a) information on the environmental objective
to which the investments underlying the AIF contribute (b) a
description of how and to what extent the underlying investments of
the AIF are in economic activities that qualify as environmentally
sustainable and are aligned with the Taxonomy Regulation (c) the
proportion, as a percentage of the AIF's portfolio, of investments
in environmentally sustainable economic activities which are
aligned with the Taxonomy Regulation (including the proportion, as
a percentage of the AIF's portfolio, of enabling and transitional
activities, as described in the Taxonomy Regulation). These
disclosure obligations are being phased-in - from 1 January 2022 in
respect to the first two environmental objectives (climate change
mitigation and climate change adaptation) and from 1 January 2023
in respect of the remaining four environmental objectives.
The Company does not commit to make sustainable investments as
defined under SFDR. As such, the underlying investments do not take
into account the EU criteria for environmentally sustainable
economic activities.
Third Party Data Provider Disclaimer
No third party data provider ('Provider') makes any warranty,
express or implied, as to the accuracy, completeness or timeliness
of the data contained herewith nor as to the results to be obtained
by recipients of the data. No Provider shall in any way be liable
to any recipient of the data for any inaccuracies, errors or
omissions in the index data included in this document, regardless
of cause, or for any damages (whether direct or indirect) resulting
therefrom.
No Provider has any obligation to update, modify or amend the
data or to otherwise notify a recipient thereof in the event that
any matter stated herein changes or subsequently becomes
inaccurate.
Without limiting the foregoing, no Provider shall have any
liability whatsoever to you, whether in contract (including under
an indemnity), in tort (including negligence), under a warranty,
under statute or otherwise, in respect of any loss or damage
suffered by you as a result of or in connection with any opinions,
recommendations, forecasts, judgements, or any other conclusions,
or any course of action determined, by you or any third party,
whether or not based on the content, information or materials
contained herein.
FTSE Index Data
Source: FTSE International Limited ('FTSE') (c) FTSE 2022.
'FTSE(R)' is a trade mark of the London Stock Exchange Group
companies and is used by FTSE International Limited under licence.
All rights in the FTSE indices and/or FTSE ratings vest in FTSE
and/or its licensors. Neither FTSE nor its licensors accept any
liability for any errors or omissions in the FTSE indices and/or
FTSE ratings or underlying data and no party may rely on any FTSE
indices, ratings and/or underlying data contained in this
communication. No further distribution of FTSE Data is permitted
without FTSE's express written consent. FTSE does not promote,
sponsor or endorse the content of this communication.
Automatic Exchange of Information
In order to fulfil its legal obligations under UK tax legislation relating to the automatic
exchange of information, The Scottish American Investment Company P.L.C. is required to collect
and report certain information about certain shareholders.
The legislation requires investment trust companies to provide personal information to HMRC
on certain investors who purchase shares in investment trusts. Accordingly, The Scottish American
Investment Company P.L.C. will have to provide information annually to the local tax authority
on the tax residencies of a number of non-UK based certificated shareholders and corporate
entities.
Shareholders, excluding those whose shares are held in CREST, who come on to the share register
will be sent a certification form for the purposes of collecting this information.
For further information, please see HMRC's Quick Guide:
Automatic Exchange of Information - information for account holders
gov.uk/government/publications/exchange-of-information-account-holders
Regulated Information Classification: Additional regulated
information required to be disclosed under applicable laws.
++ Neither the contents of the Managers' website nor the
contents of any website accessible from hyperlinks on the Managers'
website (or any other website) is incorporated into, or forms part
of, this announcement.
None of the views expressed in this document should be construed
as advice to buy or sell a particular investment.
- ends -
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END
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February 11, 2022 02:39 ET (07:39 GMT)
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