TIDMLTI
RNS Number : 3481V
Lindsell Train Investment Trust PLC
02 December 2019
THE LINDSELL TRAIN INVESTMENT TRUST PLC
Half-year report for the six months ended 30 September 2019
Financial Highlights
Performance comparisons 1 April 2019 - 30 September Change
2019
Middle market share price per Ordinary Share* -4.7%
Net asset value per Ordinary Share* 23.4%
Benchmark 2.0%
MSCI World Index (Sterling) 10.6%
UK RPI Inflation (all items) 2.1%
The annual average running yield of the longest-dated UK
government fixed rate bond, currently UK Treasury 1(5) /(8) % 2071,
calculated using weekly data, plus a premium of 0.5%, subject to a
minimum yield of 4%.
Source: Bloomberg/Maitland Administration Services Limited
Investment Objective
The objective of the Company is to maximise long-term total
returns with a minimum objective to maintain the real purchasing
power of Sterling capital.
Investment Policy
The Investment Policy of the Company is to invest:
- in a wide range of financial assets including equities,
unquoted equities, bonds, funds, cash and other financial
investments globally with no limitations on the markets and sectors
in which investment may be made, although there may be a bias
towards Sterling assets consistent with a Sterling-dominated
investment objective. The Directors expect that the flexibility
implicit in these powers will assist in the achievement of the
absolute returns that the investment objective requires;
- in Lindsell Train managed fund products, subject to Board
approval, up to 25% of its gross assets; and
- in Lindsell Train Limited ("LTL") and to retain a holding,
currently 24.19%, in order to benefit from the growth of the
business of the Company's Investment Manager.
Diversification
The Company expects to invest in a concentrated portfolio of
securities with the number of equity investments averaging fifteen
companies. The Company will not make investments for the purpose of
exercising control or management and will not invest in securities
of or lend to any one company (or other members of its group) more
than 15% by value of its gross assets at the time of investment.
The Company will not invest more than 15% of gross assets in other
closed-ended investment funds.
Gearing
The Directors have discretion to permit borrowings up to 50% of
the Company's Net Asset Value. However, the Directors have decided
that it is in the Company's best interests not to use gearing. This
is in part a reflection of the increasing size and risk associated
with the Company's unquoted investment in LTL, but also in response
to the additional administrative burden required to adhere to the
full scope regime of the Alternative Investment Fund Managers
Directive ("AIFMD").
Dividends
The Directors' policy is to pay annual dividends consistent with
retaining the maximum permitted
earnings in accordance with investment trust regulations.
The composition of the portfolio as at 30 September 2019, which
may be changed at any time at the discretion of the Investment
Manager within the confines of the policy stated above, is shown
below.
Chairman's Statement
Over the six months to 30 September 2019 the Company's net asset
value ('NAV') performed well. Including the dividend paid in early
September, the NAV ended the six months up 23.4% which compared to
a rise in the benchmark of 2.0% and the good performance from world
stock markets (as measured by the MSCI World Index) of 10.6%. Set
against these positive changes the Company's share price declined
by 4.7%. This relatively modest decline masks a larger percentage
fall in the share price from its peak in late June. Having risen to
above GBP2,000 per share, a 100% premium to its then NAV, the share
price fell 35% in early July before settling at between GBP1,300
and GBP1,400 per share. The share price ended September at
GBP1,375, still a significant 28% premium to NAV.
The cause of the fall was not a sharp decline in markets nor
underperformance from Lindsell Train Limited's ('LTL') strategies,
which I had highlighted as key risks in previous reports. Instead
the trigger appeared to be the removal of LTL's two largest funds
from Hargreaves Lansdown's ('HL') Wealth 50 list of favoured funds.
It was made very clear by HL that this was not an investment-based
decision but that the action was taken to demonstrate HL's
independence as LTL, on behalf of its investors, owns 12% of HL's
equity. With HL's endorsement now removed it is possible that the
support for the two LTL funds by HL's customers will lessen in the
future, tempering fund inflows from that source. If nothing else it
was a ready reminder of the danger of buying shares in the Company
at an elevated premium to NAV, something that I continue to advise
against with the premium around 35%.
We suspect that the main reason for the elevated premium is the
belief on the part of some shareholders that the Board's valuation
of LTL is too conservative. The Board has considered the valuation
methodology of LTL and believes it to be appropriate and fair. This
is described in more detail in note 8. To remind you, the Board
believes it vitally important that the prospects for future growth
in funds under management and profitability should be balanced in
any valuation of LTL by the risks associated with reliance on key
individuals and with succession. LTL is not like some quoted fund
management companies with a long heritage and a history of managed
succession. LTL is still largely reliant on Nick and Michael but at
some juncture responsibility for managing LTL's core mandates and
the business will have to be handed to others. That process began
10 years ago with the recruitment of James Bullock, who is now a
portfolio manager. Madeline Wright, Alexander Windsor-Clive and
earlier this year Ben van Leeuwen have joined since, at two to
three year intervals. The Board has encouraged LTL to take measures
to build a successful and experienced team; in the meantime, while
uncertainty remains over how the future unfolds, the Board believes
it is appropriate to reflect that ongoing risk in LTL's current
valuation.
In the shadow of the fall in the share price the steady rise in
the NAV once again was largely attributable to the rise in the
valuation of LTL. This was up 39% (including the payment of the
interim dividend in June) from 31st March 2019 and captured the
strong increase in LTL funds under management from GBP18.4bn to
GBP22.0bn over the six months.
The Company's rising NAV also captured good performance from the
50% of the portfolio invested in quoted equities. The holding in
the London Stock Exchange ('LSE') in particular performed well, up
56%, helped by its proposed combination with Refinitiv and the
subsequent offer for the company from the Hong Kong Exchange, which
was then withdrawn with little detrimental effect on the share
price. The LSE has now risen from one of the Company's smallest
quoted holdings in 2006 to the largest at 8.5% of NAV thanks
entirely to its strong relative performance. The quoted portfolio
remained the same over the period, other than a small additional
investment in Laurent-Perrier.
Julian Cazalet
Chairman
2 December 2019
Investment Manager's Report
We are often asked why we rarely or never sell any of our
holdings. The questions get particularly pointed in relation to
investments that have done particularly well over the years.
Haven't such shares become expensive? Don't the big historic gains
make them more risky? Surely there must be better value
opportunities available elsewhere, especially in sectors that have
done poorly?
Our answer to such questions boils down to an appeal to one of
the oldest pieces of investment advice: RUN YOUR WINNERS.
As an investment principle running your winners is not
infallible, because nothing is infallible in investment. But
running winners brings some important benefits; benefits that, we
believe, tilt the odds of being successful slightly more in your
favour.
The thing about investing is that everything is so uncertain.
This is especially so, in our view, when it comes to valuation.
What makes an asset "cheap" or "expensive"? That's a problematic
question because the validation for whether something is dear or
good value depends on future developments that are by definition
more or less unknowable - because if they were known they would
already be in the price. What is abundantly clear is that not
everything that goes down in price has become "cheap" and not
everything that goes up becomes "expensive". And that acting on
signals of such opacity is not wise.
By contrast, running winners brings two advantages. First, by
resisting the temptation to trade in and out of holdings you
certainly avoid accruing transaction costs which are universally
acknowledged as a drag on investment performance. People are too
confident in their ability to predict the unknowable future and
this encourages them to trade more often than is good for their
financial health.
But second and far more important. If you have invested in a
winner - an asset that has appreciated meaningfully over a number
of years - you have not only been fortunate, you are also in
possession of a useful piece of information. This is that the
company you own part of has been able to generate positive
surprises over time, because it is only positive surprises that
make company shares go up. And although there is no certainty that
positive surprises will continue at least they have in the past -
and that is already something. Many industries and even more
individual companies most often just deliver serial
disappointments.
We have been lucky enough to have made a wonderful investment in
the London Stock Exchange for your company. We have held the stock
for 11 years and there is a current gain on book cost of 4.6-times.
Over the holding period there have been many times when LSE shares
have appeared "expensive" - or so has said the consensus. And there
have been many times when the shares have fallen or underperformed.
But holding on through these episodes has been rewarded, because
the LSE has been able to surprise its owners in a good way. These
surprises have resulted due to the persistence of the LSE's high
profitability, to the canny acquisitions it has made and to the
unique strategic position the company occupies in the world's
financial plumbing. That strategic position evidently more valuable
than ever, at least according to the price that the Hong Kong
Exchange was willing to place on it.
It is easy and disingenuous for investment managers to discuss
winners, like the LSE. But we don't table them to prove that what
we do works in any predictable way. We do so because they are an
illustration of the effects we are hoping to capture for
shareholders by approaching the investment challenge the way we do.
It has been a great example of running a winner. But we know not
everything we own has done or will do as well as the LSE.
So the question we ask ourselves is not so much why we continue
to hold companies that have performed well - AG Barr, Diageo,
Heineken, Mondelez, Paypal, RELX, Unilever. The answer is because
the companies enjoy structural advantages that mean they may be
able to surprise positively in the future. For instance, we think
about CEO Ivan Menezes' comment to us that Diageo speaks for only
4% of the world's beverage sales by value. Although Diageo appears
a "big" company to investors, because it is a top-ten FTSE 100
stock and "expensive", because it currently trades on over 20x
earnings - in fact Diageo is probably neither big nor expensive,
assuming it can grow its share of world beverage sales. Its brands,
its distribution and marketing skills and its cash flows mean that
the prospects for positive surprises remain good, we think.
No, we have to ask ourselves why we persevere with companies
that have proved persistently disappointing. Pearson is the obvious
example where we have allowed hope to triumph over experience. But
such disappointments are inevitable. All one can do is trust that a
lesson has been learned. And that the next decision taken in
respect of the company is the right one.
Nick Train
Lindsell Train Limited - Investment Manager
2 December 2019
Income Statement
Notes Revenue Six months ended Total
GBP'000 30 September GBP'000
2019
Unaudited
Gains on investments held Capital
at fair value GBP'000
through profit or loss - 39,463 39,463
Exchange gains on currency - (5) (5)
Income 2 6,275 - 6,275
Investment management fees 3 (645) (3,061) (3,706)
Other expenses 4 (247) (1) (248)
-------- ---------------- ---------
Net return before finance
costs and tax 5,383 36,396 41,779
Interest payable and similar - - -
charges
-------- ---------------- ---------
Return before tax 5,383 36,396 41,779
Tax 5 (42) - (42)
-------- ---------------- ---------
Return after tax for the
financial period 5,341 36,396 41,737
-------- ---------------- ---------
Return per Ordinary Share 6 GBP26.71 GBP181.98 GBP208.69
Six months ended
30 September 2018
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Gains on investments held
at fair value through profit
or loss - 20,820 20,820
Exchange gains on currency - 5 5
Income 4,411 - 4,411
Investment management fees (476) (1,227) (1,703)
Other expenses (261) - (261)
Net return before finance
costs and tax 3,674 19,598 23,272
Interest payable and similar - - -
charges
Return before tax 3,674 19,598 23,272
Tax (24) - (24)
Return after tax for the
financial period 3,650 19,598 23,248
Return per Ordinary Share GBP18.25 GBP97.99 GBP116.24
Year ended 31 March 2019
Audited
Revenue Revenue Revenue
GBP'000 GBP'000 GBP'000
Gains on investments held - - -
at fair value through profit
or loss
Exchange gains on currency - - -
Income 8,680 8,680 8,680
Investment management fees (995) (995) (995)
Other expenses (464) (464) (464)
Net return before finance
costs and tax 7,221 7,221 7,221
Interest payable and similar - - -
charges
Return before tax 7,221 7,221 7,221
Tax (49) (49) (49)
Return after tax for the
financial period 7,172 7,172 7,172
Return per Ordinary Share GBP35.86 GBP35.86 GBP35.86
All revenue and capital items in the above statement derive from
continuing operations.
The total columns of this statement represent the profit and
loss accounts of the Company. The revenue and capital columns are
supplementary to this and are prepared under the guidance published
by the Association of Investment Companies.
The Company does not have any other recognised gains or losses.
The net return for the period disclosed above represents the
Company's total comprehensive income.
No operations were acquired or discontinued during the
period.
Statement of Changes in Equity
Share Special Capital Revenue Total
For the six months ended capital reserve reserve reserve GBP'000
30 September 2019 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2019 150 19,850 148,035 11,150 179,185
Return after tax for the
financial period - - 36,396 5,341 41,737
Dividends paid - - - (5,900) (5,900)
----------------------------------- -------- -------- -------- -------- --------
At 30 September 2019 150 19,850 184,431 10,591 215,022
----------------------------------- -------- -------- -------- -------- --------
Share Special Capital Revenue Total
For the six months ended capital reserve reserve reserve GBP'000
30 September 2018 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2018 150 19,850 121,078 8,338 149,416
Return after tax for the
financial period - - 19,598 3,650 23,248
Dividends paid - - - (4,360) (4,360)
----------------------------------- -------- -------- -------- -------- --------
At 30 September 2018 150 19,850 140,676 7,628 168,304
----------------------------------- -------- -------- -------- -------- --------
Share Special Capital Revenue
capital reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended 31 March
2019 (audited)
At 31 March 2018 150 19,850 121,078 8,338 149,416
Return after tax for the
financial period - - 26,957 7,172 34,129
Dividends paid - - - (4,360) (4,360)
-------------------------------- -------- -------- -------- -------- --------
At 31 March 2019 150 19,850 148,035 11,150 179,185
-------------------------------- -------- -------- -------- -------- --------
Statement of Financial Position
Note 30 September 30 September 31 March
Fixed assets 2019 Unaudited 2018 2019 Audited
Investments held at fair value GBP'000 Unaudited GBP'000
through GBP'000
profit or loss 217,640 168,770 177,693
------------------ ------------ -------------------
Current assets
Other receivables 293 247 293
Cash at bank 335 651 3,782
------------------ ------------ -------------------
628 898 4,075
Creditors: amounts falling
due within one year
Other payables (3,246) (1,364) (2,583)
------------------ ------------ -------------------
(3,246) (1,364) (2,583)
Net current (liabilities)/assets (2,618) (466) 1,492
------------------ ------------ -------------------
Net assets 215,022 168,304 179,185
------------------ ------------ -------------------
Capital and reserves
Called up share capital 150 150 150
Special reserve 19,850 19,850 19,850
------------------ ------------ -------------------
20,000 20,000 20,000
Capital reserve 184,431 140,676 148,034
Revenue reserve 10,591 7,628 11,151
------------------ ------------ -------------------
Total shareholders' funds 215,022 168,304 179,185
------------------ ------------ -------------------
Net asset value per Ordinary 7 GBP1,075.11 GBP841.52 GBP895.93
Share
Cash Flow Statement
Six months Six months Year ended
ended 30 ended 30 September 31 March
September 2018 Unaudited 2019 Audited
2019 Unaudited GBP'000 GBP'000
Operating Activities GBP'000
Net return before finance costs
and tax 41,779 23,272 34,178
Gains on investments held at
fair value (39,463) (20,820) (29,414)
Gains on exchange movements 5 (5) 24
Decrease in other receivables 7 14 24
Decrease/(increase) in accrued
income (7) - (57)
(Decrease)/increase in other
payables 664 (1,596) (377)
Purchase of investments held
at fair value (527) - (4,414)
Sale of investments held at
fair value 43 1,003 5,088
--------------- -------------------- -----------------
Net cash inflow from operating
activities before interest and
taxation 2,501 1,868 5,052
Interest paid - - -
Taxation on investment income (43) (25) (49)
--------------- -------------------- -----------------
Net cash inflow from operating
activities 2,458 1,843 5,003
Financing activities
Equity dividends paid (5,900) (4,360) (4,360)
--------------- -------------------- -----------------
Net cash outflow from financing
activities (5,900) (4,360) (4,360)
(Decrease)/increase in cash
and cash equivalents (3,442) (2,517) 643
Cash and cash equivalents at
beginning of period 3,782 3,163 3,163
Gains on exchange movements (5) 5 (24)
--------------- -------------------- -----------------
Cash and cash equivalents at
end of period 335 651 3,782
--------------- -------------------- -----------------
Notes to the Financial Statements
1 Accounting policies
The financial statements of the Company have been prepared under
the historical cost convention modified to include the revaluation
of fixed assets in accordance with United Kingdom law and
Accounting Standards and with the Statement of Recommended Practice
("SORP") "Financial Statements of Investment Trust Companies and
Venture Capital Trusts", issued by the Association of Investment
Companies (issued November 2014 and updated in February 2018 with
consequential amendments) to comply with the revised reporting
standard.
The accounting policies and methods of computation followed in
this half-year report are consistent with the most recent annual
statements.
After considering a schedule of the Company's current financial
resources and liabilities for the next twelve months, and as the
majority of the net assets of the Company are securities which are
traded on recognised stock exchanges, the Directors have determined
that its resources are adequate for continuing in business for the
foreseeable future and that it is appropriate to prepare the
financial statements on a going concern basis. The Company does not
have a fixed life.
2 Income
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2019
2019 2018 Audited
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Income from investments
Overseas dividends 366 211 434
UK dividends
- Lindsell Train Limited 5,005 3,392 7,099
- Other UK dividends 904 808 1,147
-------------- -------------- -----------
6,275 4,411 6,505
-------------- -------------- -----------
3 Investment management fees
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2019
2019 2018 Audited
Unaudited Unaudited GBP'000
GBP'000 GBP'000
Investment Management
fee 665 518 1,066
Manager's performance
fee - charged to capital 3,061* 1,227* 2,433
Rebate of investment management
fee (20) (42) (71)
-------------- -------------- -----------
Total Management fee 3,706 1,703 3,428
*Accrued amount to 30
September 2019.
4 Other expenses
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2019
2019 2018 Audited
Unaudited Unaudited GBP'000
GBP'000 GBP'000
Directors' emoluments 62 49 112
Administration fee 40 40 80
Auditor's remuneration
for:
- audit of the financial
statements of the Company 13 13 25
Tax Compliance fee 2 2 3
Provision for VAT written
off 21 24 36
Other* 109 133 208
-------------- -------------- -----------
247 261 464
Capital charges 1 - -
-------------- -------------- -----------
248 261 464
-------------- -------------- -----------
* Includes registrar's fees, printing fees, AIFM fees, marketing
fees, safe custody fees, London Stock Exchange/FCA fees, Key Man
and Directors' and Officers' liability insurance, Employer's
National Insurance and legal fees.
5 Effective rate of tax
The effective rate of tax reported in the revenue column of the
income statement for the six months
ended 30 September 2019 is 0.78% (year ended 31 March 2019:
0.68% and six months ended
30 September 2018: 0.65%), based on revenue profit before tax of
GBP5,383,000 (year ended
31 March 2019: GBP7,221,000 and six months ended 30 September
2018: GBP3,674,000). This differs from the standard rate of tax,
19% (year ended 31 March 2019 and six months ended 30 September
2018: 19%) as a result of revenue not taxable for Corporation Tax
purposes.
6 Return per Ordinary Share
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
Return per Ordinary GBP41,737,000 GBP23,248,000 GBP34,129,000
Share
Weighted average number
of
Ordinary Shares in
issue during the period 200,000 200,000 200,000
---------------------- -------------- --------------
Return per Ordinary GBP208.69 GBP116.24 GBP170.65
Share
---------------------- -------------- --------------
The return per Ordinary Share detailed above can be further
analysed between revenue and capital, as below:
Revenue return per
Ordinary Share
Revenue return GBP5,341,000 GBP3,650,000 GBP7,172,000
Weighted average number
of Ordinary Shares
in issue during the
period 200,000 200,000 200,000
---------------------- -------------- --------------
Revenue return per
Ordinary Share GBP26.71 GBP18.25 GBP35.86
---------------------- -------------- --------------
Capital return per
Ordinary Share
Capital return GBP19,598,000 GBP19,598,000 GBP26,957,000
Weighted average number
of Ordinary Shares
in issue during the
period 200,000 200,000 200,000
---------------------- -------------- --------------
Capital return per
Ordinary Share GBP181.98 GBP97.99 GBP134.79
---------------------- -------------- --------------
7. Net asset value per Ordinary Share
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
Net assets attributable GBP215,022,000 GBP168,304,000 GBP179,185,000
Ordinary Shares in issue
at the period end 200,000 200,000 200,000
Net asset value per Ordinary GBP1,075.11 GBP841.52 GBP895.93
Share
--------------- --------------- ---------------
8 Valuation of financial instruments
The Company's investments and derivative financial instruments
as disclosed in the Statement of
Financial Position are valued at fair value.
FRS 102 requires an entity to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. Categorisation within the
hierarchy has been determined on the basis of the lowest level
input that is significant to the fair value measurement of the
relevant asset as follows:
- Level 1 - The unadjusted quoted price in an active market for
identical assets or liabilities that the entity can access at the
measurement date.
- Level 2 - Inputs other than quoted prices included within
Level 1 that are observable (ie developed using market data) for
the asset or liability, either directly or indirectly.
- Level 3 - Inputs are unobservable (ie for which market data is
unavailable) for the asset or liability.
The tables below set out fair value measurements of financial
instruments as at the year end by the
level in the fair value hierarchy into which the fair value
measurement is categorised.
Financial assets/liabilities at fair value through profit or
loss
Level 1 Level 2 Level 3 Total
At 30 September 2019 GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 108,248 - 109,392 217,640
------- ------- ------- -------
108,248 - 109,392 217,640
------- ------- ------- -------
Level 1 Level 2 Level 3 Total
At 30 September 2018 GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 87,395 4,453 76,922 168,770
------- ------- ------- -------
87,395 4,453 76,922 168,770
------- ------- ------- -------
Level 1 Level 2 Level 3 Total
At 31 March 2019 GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 95,333 - 82,360 177,693
------- ------- ------- -------
95,333 - 82,360 177,693
------- ------- ------- -------
Note: Within the above tables, the entirety of level 1 comprises
all the Company's ordinary investments, level 2 represents the
investment in Lindsell Train Global Equity LLC and level 3
represents the investment in LTL, including in 2018 the one share
in LTL against which an option was granted.
The valuation of the investment in LTL derives from a formula
created after taking advice from an expert in the sector and was
formally reviewed in March 2018 by professional advisors. The
formula uses a simple average of two different components:
- 1.5% of LTL's most recent funds under management; and
- LTL's net earnings (adjusted for a notional increase in staff
costs to 45% of revenues excluding performance fees) calculated on
a three month rolling basis, one month in arrears and annualised,
divided by the annual average running yield on the longest dated UK
government fixed rate bond, currently UK Treasury 1 (5) /(8) %
2071, calculated using weekly data, plus a premium of 0.5%, subject
to a minimum yield of 4% plus an equity risk premium of 4.5%.
The valuation of LT Global Equity LLC was based on the net asset
value of the Fund. The net asset value of LT Global Equity Fund LLC
was calculated on a monthly basis being the last New York (USA)
business day of each month. The NAV of the Fund was the mid-closing
price of its investment plus other assets held by the Fund less
operating expenses, accrued liabilities and the management fee.
The Board reserves the right to vary its valuation methodologies
at its discretion.
9. It is the intention of the Directors to conduct the affairs
of the Company so that the Company satisfies the conditions for
approval as an Investment Trust Company set out in Sections
1158/1159 of the Corporation Tax Act 2010.
Interim Management Report
The Directors are required to provide an Interim Management
Report in accordance with the UK Listing Authority's Disclosure and
Transparency Rules 4.2.3 to 4.2.11. They consider that the
Chairman's Statement and the Investment Manager's Report on pages 4
to 5 of this half-year report, the following statement on related
party transactions and the Directors' Responsibility Statement
below together constitute the Interim Management Report for the
Company for the six months ended 30 September 2019.
The Directors confirm that no related party transactions were
undertaken by the Company in the first six months of the current
financial year and that there have been no changes to the related
party disclosures set out in the Annual Report of the Company for
the year ended 31 March 2019.
The Directors do not expect the principal risks and
uncertainties as described in detail within the last Annual Report
and Accounts to change during the remaining six months of the
financial year.
The half-year report for the six months ended 30 September 2019
has not been reviewed by the Company's auditor,
PricewaterhouseCoopers LLP.
Directors' Responsibility Statement
The Directors listed at the back of this half-year report
confirm that to the best of their knowledge:
(a) the condensed set of Financial Statements, which has been
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, give a true and fair view of the assets,
liabilities, financial position and profit of the Company for the
period ended 30 September 2019;
(b) the Interim Management Report includes a fair review, as
required by Disclosure and Transparency Rule 4.2.7 R, of important
events that have occurred during the first six months of the
financial year, their impact on the condensed set of Financial
Statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
(c) the Interim Management Report includes a fair review of the
information concerning related party
transactions as required by Disclosure and Transparency Rule
4.2.8 R.
The half-year report was approved by the Board on 2 December
2019 and the above Responsibility Statement was signed on its
behalf by:
Julian Cazalet
Chairman
Portfolio Holdings at 30 September 2019
(All ordinary shares unless otherwise stated)
Look-through
Fair % of basis:
value total % of
total
Holding Security GBP'000 assets assets
645 Lindsell Train Limited 109,392 50.87 50.87
246,500 London Stock Exchange 18,014 8.38 8.57
420,500 Diageo 14,015 6.52 6.70
41,000 Nintendo 12,311 5.73 5.94
222,000 Unilever 10,855 5.05 5.23
101,000 PayPal 8,490 3.95 3.95
1,263,393 Barr (AG) 7,315 3.40 3.43
161,552 Mondelez International 7,252 3.37 3.53
89,000 Heineken 7,193 3.35 3.44
363,000 RELX 7,013 3.26 3.45
Lindsell Train Japanese Equity
3,288,767 Fund - B 5,116 2.38 2.17
420,000 Finsbury Growth & Income Trust 3,957 1.84 0.78
74,400 eBay 2,354 1.09 1.09
300,000 Pearson 2,212 1.03 1.06
27,376 Laurent-Perrier 2,151 1.00 1.00
------- ------ ------------------
Total investments 217,640 101.22 101.21
Net current assets (2,618) (1.22) (1.21)
------- ------ ------------------
Total assets 215,022 100% 100.00
------- ------ ------------------
Look-through basis: This adjusts the percentages held in each
security upwards by the amount held in LTL managed funds and
adjusts the fund's holdings downwards to account for the overlap.
It provides Shareholders with a measure of stock specific risk by
amalgamating the direct holdings of the Company with the indirect
holdings held within the LTL funds.
Leverage
We detail below the balance sheet positions of the Funds managed
by LTL as at 30 September 2019:
Fund Net equity
exposure
Lindsell Train Japanese Equity Fund 94.84%
Finsbury Growth & Income Trust 100.53%
Analysis of Investment Portfolio at 30 September 2019
Breakdown by location of listing
(look-through basis)^
30 September 31 March
2019 2019
Japan 8% 8%
Europe 4% 5%
UK* 80% 77%
USA 9% 9%
Cash and equivalents (1%) 1%
------------ --------
100% 100%
------------ --------
Breakdown by location of underlying
company revenues (look-through basis)^
Japan 4% 4%
Europe 28% 27%
UK** 38% 36%
USA** 20% 20%
Emerging 11% 12%
Cash and equivalents (1%) 1%
------------ --------
100% 100%
------------ --------
Breakdown by sector
(look-through basis)^
Consumer staples 24% 29%
Communication services 7% 7%
Industrials 4% 4%
Financials* 60% 53%
Information Technology 4% 5%
Consumer Discretionary 1% 1%
Healthcare 1% -%
Cash and equivalents (1%) 1%
------------ --------
100% 100%
------------ --------
* LTL accounts for 51% and is not listed.
** LTL accounts for 28 percentage points of the UK figure, 18
percentage points of the Europe figure and 5 percentage points of
the USA figure.
^ Look-through basis: This adjusts the percentages held in each
asset class, country or currency by the amount held by LTL
managed funds. It provides Shareholders with a more accurate
measure of country and currency exposure by aggregating the direct
holdings of the Company with the indirect holdings held by the LTL
funds.
Appendix 1
Half year review of Lindsell Train Limited ('LTL')
The Manager of The Lindsell Train Investment Trust
Funds under Management Jul 2019 Jan 2019 Jul 2018
FUM by Strategy: GBPm GBPm GBPm
UK 10,691 8,311 8,368
Global 11,208 7,465 6,502
Japan 664 484 434
-------- -------- --------
Total 22,563 16,260 15,304
-------- -------- --------
Largest Client Accounts
Jul 2019 Jan 2019 Jul 2018
% of FUM % of FUM % of FUM
Largest Pooled Fund Account 39% 35% 37%
Largest Segregated Account 8% 9% 9%
Financials
Jul 2019 Jul 2018 %
Profit & Loss GBP GBP Change
Fee Revenue
Investment Management fee 50,506 35,251 43%
Performance Fee 2,436 2,827 (14%)
Bank Interest 220 76
-------- --------
53,162 38,154
Staff Remuneration * (17,583) (13,619) 29%
Fixed Overheads (1,623) (1,141) 42%
FX Currency Translation Gain 720 221
-------- --------
Operating profit 34,676 23,615 47%
Taxation (6,589) (4,487)
-------- --------
Net Profit 28,087 19,128 47%
Dividends (20,688) (13,996)
-------- --------
Retained profit 7,399 5,132
-------- --------
Capital & Reserves
Called up Share Capital 266 266
Profit & Loss Account 57,384 39,415
-------- --------
Shareholders' Funds 57,650 39,681
Balance Sheet
Fixed Assets 37 50
Current Assets (inc cash
at bank) 70,251 48,238
Liabilities (12,638) (8,607)
-------- --------
Net Assets 57,650 39,681
-------- --------
* No more than 25% of fees (other than LTIT fees) can be paid as
staff remuneration. Employer national insurance costs are excluded
from this limit.
Five Year History Jul 2019 Jul 2018 Jul 2017 Jul 2016 Jul 2015
Operating Profit Margin 65% 62% 58% 65% 57%
Earnings per share (GBP) 1,054 717 493 335 245
Dividends per share (GBP) 776 525 390 285 157
Total Staff Cost as %
of Revenue 33% 36% 38% 30% 38%
Opening FUM (GBPm) 15,304 11,326 8,045 5,758 3,897
Changes in FUM (GBPm) 7,259 3,978 3,281 2,287 1,861
- of market movement 4,568 2,044 1,530 979 1,053
- of net new fund inflows 2,691 1,934 1,751 1,308 808
Closing FUM (GBPm) 22,563 15,304 11,326 8,045 5,758
Open ended funds as %
of total 75% 72% 64% 57% 48%
Client Relationships
- Pooled funds 4 4 4 4 4
- Separate accounts 17 17 15 16 16
Ownership
Jul 2019* Jan 2019 Jul 2018
Michael Lindsell & spouse 9,650 967 967
Nick Train & spouse 9,650 967 967
Lindsell Train Investment
Trust plc 6,450 646 646
Other Directors/employee 910 86 86
--------- -------- -------- --------
26,660 2,666 2,666
* On February 1 2019, LTL undertook a share split, and each
share was subdivided into 10 shares of GBP10 each.
Board of Directors
Nick Train Chairman and Portfolio Manager
Michael Lindsell Chief Executive & Portfolio Manager
Michael Lim Chief Operating Officer
Jane Orr Head of Client Servicing & Marketing
James Alexandroff Non-Executive
Employees
July 2019 Jan 2019 July 2018
Investment Team ( inc. 3 Portfolio
Managers) 6 5 5
Client Servicing & Marketing 5 5 4
Operations & Administration 8 7 8
Non-Executive director 1 1 1
Total number of employees 20 18 18
======================================= ====== ============ =============
Appendix 2
LTIT Directors' Valuation of LTL (unaudited) Sept 2019 Sept 2018
GBP'000 GBP'000
Funds under Management excluding LTIT
holdings 21,643,251 15,344,509
---------- ----------
Value of LTL based on 1.5% of FUM
(A) 324,649 230,168
---------- ----------
Annualised revenue ex performance
fee * 115,232 81,555
Notional staff costs (45%) (51,854) (36,700)
Annualised interest income 431 183
Annual operating costs (3,280) (2,271)
Notional tax (11,501) (8,126)
---------- ----------
Notional post tax earnings 49,028 34,641
---------- ----------
Benchmark + 4.0% 4.0%
Equity risk premium 4.5% 4.5%
Total yield + premium (discount rate) 8.5% 8.5%
---------- ----------
Value of LTL based on earnings (B) 576,803 407,545
---------- ----------
Valuation of LTL (A+B)/2) (C) 450,726 318,856
---------- ----------
Shares in issue (D)(#) 26,660 2,666
---------- ----------
Valuation per share of LTL (C/D) GBP16,906 GBP11,960^
---------- ----------
* Annualised figures are previous three months' data.
+ The annual average running yield of the longest-dated UK
government fixed rate bond, currently UK treasury 1(5) /(8) % 2071,
calculated using weekly data, plus a premium of 0.5%, subject to a
minimum yield of 4%.
# On 1 February 2019, LTL undertook a share split, and each
share was subdivided into 10 shares of GBP10 each.
^ The valuation per share figure for September 2018 is
retrospectively changed based on 26,660 shares for ease of
comparison.
Company Information
Directors
Julian Cazalet (Chairman)
Nicholas Allan
Vivien Gould
Richard Hughes
Rory Landman
Michael Lindsell
Company Secretary and Registered Office
Maitland Administration Services Limited
Hamilton Centre
Rodney Way
Chelmsford
Essex
CM1 3BY
Tel: 01245 398950
www.maitlandgroup.com
email: cosec@maitlandgroup.co.uk
Solicitor
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
Broker
JP Morgan Cazenove Ltd
25 Bank Street
Canary Wharf
London
E14 5JP
Investment Manager
Lindsell Train Limited
5th Floor
66 Buckingham Gate
London
SW1E 6AU
Tel: 020 7808 1210
(Authorised and Regulated by the
Financial Conduct Authority)
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0871 664 0300
Calls cost 10p per minute plus network extras
(from outside the UK: +44 208 639 3399)
Independent Auditors
PricewaterhouseCoopers LLP
Atria One, 144 Morrison Street
Edinburgh
EH3 8EX
Custodian
Northern Trust Company
50 Bank Street
Canary Wharf
London
E14 5NT
Shareholder relations
The Company's Ordinary share price is listed daily in the
Financial Times.
For further information visit: www.lindselltrain.com and follow
the links.
Individual Savings Account ("ISA")
The Company's shares are eligible to be held in an ISA account
subject to HM Revenue & Customs' limits.
Website
The Company's internet website is located at:
www.lindselltrain.com
Registered in England, No: 4119429
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLLFBKLFLFBX
(END) Dow Jones Newswires
December 02, 2019 07:25 ET (12:25 GMT)
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