Smithson Investment Trust plc (LON: SSON) have today provided its interim financial report for the period from incorporation on 14 August 2018 to 30 June 2019
Financial Period End – 31 December 2019
Final Results Announced – February 2020
Annual General Meeting – 30 March 2020
|30 June 2019|
|NAV per share||1,202.5p|
|Period from||Company’s listing on|
|1 January 2019||19 October 2018|
|to 30 June 2019||to 30 June 2019|
|NAV per share (total return)||+27.6%||+20.3%|
|Share price (total return)||+23.4%||+23.4%|
|Small and Mid Cap Market Equities (total return)†||+17.2%||+7.5%|
† MSCI World SMID Index, measured on a net sterling adjusted basis
I am pleased to present this Interim Financial Report of Smithson Investment Trust plc for the period from incorporation to 30 June 2019. It is the second interim report of our extended first financial reporting period which commenced on the date of the Company’s incorporation on 14 August 2018 and will end on 31 December 2019. The Company commenced trading on the London Stock Exchange’s Main Market on 19 October 2018 and subsequently entered the FTSE 250 Index in December 2018.
As I reported to the shareholders in the first interim report for the period from incorporation to 31 December 2018, I am very pleased to note that the Company has again performed well in comparison with its peers. It has also produced extremely good results in absolute terms during this six month period to 30 June 2019. Although the Company has been trading for a relatively short period of time, the Board is very satisfied with its progress.
From 1 January 2019 to 30 June 2019, the net asset value (“NAV”) per share total return was 27.6% compared with the MSCI World SMID Index return of 17.2%. The share price total return for this six month period was 23.4%. From the date of the Company’s launch on 19 October 2018 to 30 June 2019, NAV per share total return was 20.3% compared with the MSCI World SMID Index return of 7.5%. The share price total return for the same period was 23.4%.
The Company held 29 investments as at 30 June 2019 and no new investments or divestments were made during the six months to 30 June 2019. This accords with the Investment Manager’s stated mantra of buying good companies, not overpaying and then doing nothing. Simon Barnard, the portfolio manager, has reported on the performance in detail in the Investment Manager’s Review.
Share issuance and premium to NAV
The Company has continued to trade at a premium to NAV and closed the Period at a 2.6% premium with an average premium over the Period of 4.1%.
During the Period, and in response to strong continuing demand for the Company’s shares (as evidenced by the share premium), the Company has used the placing programme (which has now been exhausted) and subsequently its issuance authorities (as explained in the IPO prospectus) to raise £247.3 million net of costs through the issue of 21.9 million new ordinary shares. Shares are only issued at a premium to net asset value which creates additional value for shareholders net of all issue costs. The average premium to the prevailing net asset value at which new shares were issued during the Period was 2.7%. The share issues have generated £6.0 million of premium to net asset value since the Company’s IPO.
As explained in greater detail in the Investment Manager’s Review, the new share proceeds have been invested in the same securities as held in the portfolio, with no significant changes in the portfolio weightings.
As shareholders may recall from the first interim report, the Company issued 82.25m shares on its Initial Public Offering (“IPO”), raising a sum of £822.5 million, the largest amount raised in the history of the London Stock Exchange for a new investment trust. As Fundsmith paid for the IPO costs, all of these proceeds were available for investment. Including all the shares issued up until the date of this report, the Company has issued a total of 107,065,958 ordinary shares and raised net proceeds of £1.1 billion. As at 9 August 2019 the market capitalisation was in excess of £1.3 billion.
Events since Period end
One new position was initiated in July, taking the total portfolio number to 30 companies. Since the Period end, a further 2.9 million shares have been issued, raising £36.2 million net of costs.
The Company’s principal objective is to provide shareholder returns through long-term capital appreciation rather than income. In accordance with the Company’s policy, an interim dividend has not been declared by the Board.
This position will be kept under review. It should not be expected that the Company will pay a significant annual dividend, but the Board intends to declare such annual dividends as are necessary to maintain the Company’s UK investment trust status.
The Board of Smithson Investment Trust plc remains positive on the outlook for global small and mid cap equities in the medium to long term but realises that politics and other macroeconomic factors might affect market movements in the short term.
The Board intends to continue to issue new shares so as to generate additional value for shareholders net of all issue costs and to enable the Investment Manager to continue to seek attractive investment opportunities for any further capital raised.
12 August 2019
The Company’s investment policy is to invest in shares issued by small and mid sized listed or traded companies globally with a market capitalisation (at the time of investment) of between £500 million to £15 billion (although the Company expects that the average market capitalisation of the companies in which it invests to be approximately £7 billion).
The Company’s approach is to be a long-term investor in its chosen stocks. It will not adopt short-term trading strategies. Accordingly, it will pursue its investment policy by investing in approximately 25 to 40 companies as follows:
(a) the Company can invest up to 10 per cent. in value of its Gross Assets (as at the time of investment) in shares issued by any single body;
(b) not more than 20 per cent. in value of its Gross Assets (as at the time of investment) can be in deposits held with a single body. In applying this limit all uninvested cash (except cash representing distributable income or credited to a distribution account that the Depositary holds) should be included;
(c) not more than 20 per cent. in value of its Gross Assets (as at the time of investment) can consist of shares issued by the same group. When applying the limit set out in (a), this provision would allow the Company to invest up to 10 per cent. in the shares of 2 companies which are members of the same group (as at the time of investment);
(d) the Company’s holdings in any combination of shares or deposits issued by a single body must not exceed 20 per cent. in value of its Gross Assets (as at the time of investment) overall;
(e) the Company must not acquire shares issued by a body corporate and carrying rights to vote at a general meeting of that body corporate if the Company has the power to influence significantly the conduct of business of that body corporate (or would be able to do so after the acquisition of the shares). The Company is to be taken to have power to influence significantly if it exercises or controls the exercise of 20 per cent. or more of the voting rights in that body corporate; and
(f) the Company must not acquire shares which do not carry a right to vote on any matter at a general meeting of the body corporate that issued them and represent more than 10 per cent. of the shares issued by that body corporate.
The Company may also invest cash held for working capital purposes and awaiting investment in cash deposits and money market funds.
For the purposes of the investment policy, certificates representing certain shares (for example, depositary interests) will be deemed to be shares.
The Company will not use portfolio management techniques such as interest rate hedging and credit default swaps.
The Company will not use derivatives for purposes of currency hedging or for any other purpose.
The Company has the power to borrow using short-term banking facilities to raise funds for short-term liquidity purposes or for discount management purposes including the purchase of its own shares, provided that the maximum gearing represented by such borrowings shall be limited to 15 per cent. of the Net Asset Value at the time of draw down of such borrowings. The Company may not otherwise employ leverage.