This announcement contains regulated information
INVESTMENT OBJECTIVE
The Company’s investment objective is to provide shareholders with a growing total annual dividend, as well as capital appreciation.
HIGHLIGHTS
| • | We are pleased to announce an increase in dividends of 3.0% to 7.47p per share for the year, continuing the track record of having increased the dividend for each of the eleven years since launch. The dividend has grown at an average annualised rate of 5.8% compared to CPI growth of 2.9% during this time. |
| • | Most companies in the portfolio increased their dividends, supporting the robustness of the income stream. |
| • | NAV total return rose by 0.8% (debt at par) and 1.4% (debt at fair value) over the year. |
| • | We continue to maintain and follow the Company’s existing strategy of identifying companies that have the capacity to grow their earnings and dividends over the medium to long term while being attractively valued. |
PERFORMANCE TO/AT 31 AUGUST
| 2023 | 2022 | |
| Dividend in respect of the year | 7.47p1 | 7.25p |
| Dividend yield at the year end2 | 4.6% | 4.2% |
| Dividend growth year-on-year | 3.0% | 15.1% |
| 10-year compound dividend growth | 5.8% | 6.0% |
| Dividend growth since launch to 31 August 2023 | |||||||||||||
| 20113 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
| Total dividend (pence per share) | 1.40 | 4.00 | 4.05 | 4.25 | 4.50 | 4.65 | 4.90 | 5.30 | 5.70 | 6.00 | 6.30 | 7.25 | 7.47 |
| Dividend yields at 31 August | 2023% | 2022% |
| Company2 | 4.6 | 4.2 |
| Benchmark4 | 3.9 | 3.9 |
| AIC Global Equity Income sector5 | 3.6 | 3.4 |
| Total return performance for year to 31 August | 2023 % | 2022 % |
| NAV6 (debt at par) | 0.8 | 3.8 |
| NAV6 (debt at fair value) | 1.4 | 6.3 |
| Share price7 | (1.9) | 7.8 |
| Benchmark4 | 2.3 | 6.6 |
| AIC Global Equity Income sector (NAV)5 | 5.7 | 3.6 |
| Performance to/at 31 August | 2023 | 2022 |
| NAV per share at year end (debt at par) | 175.7p | 181.5p |
| Discount (debt at par)8 | (8.1)% | (5.3)% |
| NAV per share at year end (debt at fair value)8 | 178.6p | 183.4p |
| Discount (debt at fair value)8 | (9.6)% | (6.3)% |
| Share price at year end | 161.5p | 171.8p |
| NAV total return (debt at fair value)8 | 1.4% | 6.3% |
| Ongoing charge for year8,9 | 0.72% | 0.83% |
| Gearing at year end8 | 3.9% | 6.5% |
1 Includes the fourth interim dividend in respect of the year ended 31 August 2023 to be paid to shareholders on 30 November 2023
2 Calculated based on the closing share price at 31 August
3 Four-month period from launch on 28 April 2011 to 31 August 2011
4 MSCI ACWI (ex UK) High Dividend Yield Index (sterling adjusted)
5 Excludes British & American Investment Trust plc
6 Net asset value (“NAV”) total return (including dividends reinvested, net of fees)
7 The Company’s share price total return (assuming the reinvestment of all dividends excluding dealing expenses). Since inception share price return – launch price including discount (97.25p)
8 Alternative performance measure
9 Calculated using the methodology prescribed by the Association of Investment Companies (“AIC”)
Source: Morningstar Direct, Janus Henderson
CHAIRMAN’S STATEMENT
This is my first annual statement since taking over as chairman from Simon Jeffreys. I would like to thank Simon for his hard work as chairman during the past five years and especially during the testing period of the Covid pandemic. His attention to detail is remarkable and he did much to improve the quality of the Company’s annual report and accounts.
We are building on this legacy and aim to further simplify the narrative where possible and to highlight the primary objective of the Company, which is to provide a rising annual income to shareholders. To this end I am beginning my statement by talking about earnings and the dividend.
Earnings and dividends
We are pleased to announce a total dividend increase from 7.25p to 7.47p per ordinary share for the year to 31 August 2023, a rise of 3.0%. The total dividend for the year consists of a first, second and third interim dividend of 1.85p per ordinary share, and a fourth interim dividend of 1.92p which will be paid on 30 November 2023 to shareholders on the register at 10 November 2023.
After a significant increase of 23% in 2022, the revenue return of the Company this year is 1% lower than last. This slight decline is primarily the result of sterling’s appreciation against several currencies, particularly the US, Hong Kong and Australian dollars against which it has rallied 10%. Most companies held in the portfolio increased their dividends, supporting the robustness of the income stream during this period. A small portion of the dividend was not covered by earnings and so it was necessary to draw on our reserves to meet the shortfall.
We continue to recognise the importance of progressive dividend income to our shareholders. We will employ the flexibility of the investment trust structure to utilise both our strong revenue and capital reserves to support dividend growth when necessary. The distributable reserves of the Company increased by £15m to £107m at the year-end. If required, this provides a significant cushion to support the continued growth of the dividend.
We have increased the dividend for each of the eleven years since launch and this positive growth trend is demonstrated in the graphs in the annual report.
Capital performance and markets
Our secondary objective is to provide long-term capital appreciation. Over the year, the net asset value (“NAV”) total return per ordinary share rose by 0.8% (debt at par) and by 1.4% (debt at fair value). The total return on the ordinary share price was -1.9%, this figure includes total dividends of 7.47p per ordinary share, an increase of 3.0% on the previous year. The Company’s performance comparator, the MSCI ACWI (ex UK) High Dividend Yield Index (sterling adjusted), generated a 2.3% total return over the same period.
A more detailed analysis of performance, portfolio and positioning is provided in the Fund Manager’s Report below.
Gearing
Well-judged gearing can enhance returns to shareholders. The board’s current policy is to permit the fund manager to gear up to 25% of net assets at the time of drawdown. Borrowing limits for this purpose include implied gearing using derivatives. The Company’s senior unsecured notes (€30m at 2.43% due 2044) provide low-cost debt financing and have helped to insulate shareholders from rising interest rates over the period. Total gearing at the year end was 3.9% (31 August 2022: 6.5%).
Liquidity and discount management
The Company’s share price has traded at a discount to NAV of between 1% to 10% over the period and was 8.1% (with debt at par) at 31 August 2023. The board continues to monitor the Company’s premium/discount to NAV and will consider appropriate action if this moves and remains out of line with the Company’s peer group. The board’s ability to influence the premium or discount over anything but the short term is limited and accordingly we believe it is not in shareholders’ interests to have a specific share issuance or buy-back policy. It is sensible to retain flexibility however, and we shall therefore consider share issuance and/or buy-backs where appropriate and subject to market conditions.
Ongoing charge
The ongoing charge for the year to 31 August 2023, as calculated in accordance with the Association of Investment Companies (“AIC”) methodology, was 0.72% (2022: 0.83%). It is pleasing that costs have fallen year on year primarily because of the management fee reduction which took effect from 1 September 2022. This reduction has improved the Company’s overall cost position making it a more attractive proposition.
Environmental, Social and Governance
The board pays close attention to the importance of Environmental, Social and Governance (“ESG”) matters and, together with the investment team, is conscious that investors’ interest in ESG matters will continue to grow. The fund manager carefully considers ESG related risks and opportunities when investing. This year we have enhanced disclosures about the manager’s and investment team’s approach to ESG and these are contained in the annual report.
Continuation vote
The Company’s articles of association give shareholders the opportunity every three years to vote on whether they wish to continue the life of the Company, or to wind it up. Such a resolution will be put to shareholders at this year’s annual general meeting.
Given that the Company has achieved its primary objective of producing a rising annual income for its shareholders, the board recommends that all shareholders vote in favour of continuing the Company. All directors intend to do so in respect of their own beneficial holdings and recent contact with larger shareholders suggests to the board that they will do likewise.
Board composition
I am delighted to welcome Mai Fenton to the board. Mai was appointed on 1 June 2023. She has a wealth of marketing expertise, having spent over 25 years in this area, focused on high-growth companies. Most recently, Mai was Chief Marketing Officer at Superscript, an SME insurance provider, where she was responsible for all aspects of their brand, digital and partnerships marketing activity. She brings to the board an understanding of, and focus on, the consumer; the key target when creating retail demand for the Company’s shares.
The board is fully compliant with the FCA listing rules in relation to targets for board composition and diversity and the directors will endeavour to ensure that it remains so.
Annual general meeting
The twelfth annual general meeting (“AGM”) of the Company will be held at 2.30pm on Tuesday, 12 December 2023 at the offices of Janus Henderson Investors, 201 Bishopsgate, London EC2M 3AE. The notice of meeting and details of the resolutions to be proposed are set out in a separate document which accompanies this annual report. Ben Lofthouse, our fund manager, will give a presentation at the meeting.
As an alternative, I invite shareholders to join by Zoom webinar and details of how to register are set out in the notice of meeting. As is our normal practice, there will be live voting for those physically present at the AGM. However, due to technical restrictions, we cannot offer live voting by Zoom. We therefore request all shareholders, particularly those who cannot attend physically, to submit their votes by proxy to ensure that their votes are included.
Outlook
The interest rate environment across the world has changed markedly during the past year in response to higher inflation. By having raised interest rates vigorously over the past 20 months, central banks hope to dampen down economic growth and thus contain inflation without precipitating a major recession. For inflation to fall back to previous levels, interest rates must either be raised further, which may lead to a recession, or be kept at or around current levels for longer. It is therefore unlikely that the very low and, in some cases, negative interest rates of recent years will return in the foreseeable future. A more likely consequence of this interest rate scenario is that stock markets will mark time until the valuations of their underlying companies decline to more attractive levels. This will occur as company earnings continue to grow, albeit slowly, but their share prices do not rise. Eventually, valuations will reach fair value, fully reflecting the inflation background. At this point stock markets can begin to rise again.
Meanwhile, investors will have to rely more on the dividend income from their investments, than they have in recent years, to generate a higher proportion of their total return. Here the relationship between the Company’s investment trust status and its dividend is particularly important. This status allows the Company to draw on its reserves to sustain and even grow dividend payments in the most difficult period of an interest rate/inflationary cycle.
We cannot control the macroeconomic background but we can maintain and follow the Company’s existing strategy of identifying companies that have the capacity to grow their earnings and dividends over the medium to long term while being attractively valued.
Richard Hills
Chairman
1 November 2023