LEGAL ENTITY IDENTIFIER: 213800B9YWXL3X1VMZ69                                                   24 June 2022

 

THE BANKERS INVESTMENT TRUST PLC

('the Company')

 

Unaudited results for the half-year ended 30 April 2022

 

This announcement contains regulated information

 

INVESTMENT OBJECTIVE 

Over the long term, the Company aims to achieve capital growth in excess of the FTSE World Index and dividend growth greater than inflation, as measured by the UK Consumer Price Index ('CPI'), by investing in companies listed throughout the world.

 

INVESTMENT POLICY

The following investment ranges apply:

·     Equities: 80% to 100%

·     Debt securities and cash investments: 0% to 20%

·     Investment trusts, collective funds and derivatives: 0% to 15%

 

To achieve an appropriate spread of investment risk the portfolio is broadly diversified by geography, sector and company. The Manager ('Janus Henderson') has the flexibility to invest in any geographic region and any sector with no set limits on individual country or sector exposures and, therefore, the make-up and weighting of the portfolio may differ materially from the FTSE World Index.

 

The Manager primarily employs a bottom-up stock picking investment process, across six regional portfolios, to identify suitable opportunities. While each regional portfolio manager employs their own investment style, they all pay particular regard to cash generation and dividend growth over the medium term.

 

The Company can, but normally does not, invest up to 15% of its gross assets in any other investment companies (including listed investment trusts).

 

Derivatives

The Company may use financial instruments known as derivatives for the purpose of efficient portfolio management while maintaining a level of risk consistent with the risk profile of the Company.

 

Gearing

The Company can borrow to make additional investments with the aim of achieving a return that is greater than the cost of the borrowing. The Company can borrow up to 20% of net assets at the time of draw down.

 

PERFORMANCE HIGHLIGHTS

	30 April 2022	30 April 2021
Net asset value ('NAV') per share	113.0p	114.3p
Share price	105.9p	114.2p
Revenue return per share	1.08p	0.97p
Dividends paid or declared in respect of the period1	1.128p	1.076p

           

Total return performance to 30 April 2022 (including dividends reinvested and excluding transaction costs)

	6 months %	1 year %	3 years %	5 years %	10 years  %
NAV2	-5.6	0.8	29.6	58.2	205.4
Index3	-2.6	6.1	40.6	66.6	164.2
Share price4	-6.3	-5.6	24.2	53.9	226.2

 

1 The first interim dividend for 2022 was paid on 31 May 2022; the second interim dividend has been declared and will be paid on 31 August 2022

2 Net asset value total return per share with income reinvested and with debt at par

3 Composite of FTSE All-Share Index for the period to 31 October 2017 and FTSE World Index from 1 November 2017 to 30 April 2022

4 Share price total return using mid-market closing price

 

Sources: Janus Henderson, Morningstar Direct and Refinitiv Datastream

INTERIM MANAGEMENT REPORT

                                                                                                                                        

Review

In February I became Chair and I look forward to working with the Board and the Investment Manager, and to meeting many of our shareholders over the coming years. Founded in 1888, Bankers has a distinguished history. It has experienced a variety of financial and economic crises as well as, of course, its share of bull markets. Its strength has been its ability to adapt to changing circumstances and to grow. I have been involved in the investment trust sector for 30 years and Bankers struck me as interesting for a variety of reasons. First it is an old established and substantial trust. Second it has a sound record on both income and capital growth. Third it is unique in the way in which it manages separate portfolios under the same roof. As a result, it has the ability to appeal to a wide range of investors.

 

We have entered a more uncertain period for markets, with inflationary pressures everywhere and interest rates being raised to counter price demand for goods and services. Over the six months ended 30 April 2022, the NAV total return was -5.6% and the share price total return was -6.3%, both underperforming the FTSE World Index total return of -2.6%. The underperformance was due to mixed performance from stock selection in various regional sleeves combined with weakness in Asia, particularly China. The accompanying Fund Manager's Report contains more information together with a useful market commentary.

 

Dividends

The Company's income has continued to recover this year and our investment income for the six months ended 30 April 2022 was £17.8 million compared to £15.6 million for the same period last year, an increase of 14.1%.  This increase reflects continued dividend growth, the strengthening US dollar and a resumption in dividends from the few remaining companies who suspended dividends. Our net revenue for the six months was £14.2 million (2021: £12.6 million), equivalent to 1.08p per share (2021: 0.97p).

 

A first interim dividend of 0.55p per share (2021: 0.538p) was paid on 31 May 2022.  The Board has declared a second interim dividend of 0.578p (2021: 0.538p) per share, which will be payable on 31 August 2022 to shareholders on the register on 29 July 2022.

 

The Company aims over the long-term to grow dividends in excess of inflation, as measured by the UK Consumer Price Index ('CPI'). This year has seen the highest level of CPI inflation in a generation and while it will not be possible to grow our payments in line with inflation this year, Bankers' long-term record is healthy. Over the past 10 years, to 31 October 2021, dividends have grown by 71% compared to a 20% increase in CPI. The improving outlook for our investment income combined with the revenue reserve leads us to increase our forecast for dividend growth for the current financial year, from at least 3% to at least 5%.

 

Share buy-backs

The market uncertainty has led to the Company's shares trading at a discount which has offered an opportunity to buy back shares from the market. This activity is beneficial to ongoing shareholders, as shares are only purchased below net asset value. A total of 4,243,874 shares were bought back at an average discount of 6% to the net asset value in the six months ended 30 April 2022 (30 April 2021: nil), for a total consideration of £4.5 million. The discount at 30 April 2022 was 6.3% (2021: 0.1%). Since the period end, a further 4,256,126 shares have been bought back, for a total consideration of £4.3 million.  

 

There have been no share issues in the financial year to date.

 

The Board and Investment Manager 

 

Sue Inglis stepped down from the Board at the Annual General Meeting in February 2022, after nine years on the Board and three years as Chair. I should like to thank her on behalf of the Board for her outstanding contribution. The Board will miss her deep knowledge, experience and understanding of the investment trust world. The search for a new non-executive director has begun and will conclude before the end of the year.

 

A change in Chair allows the Board to reflect on the operation of the Company. The timing of this is prescient, given the market volatility. In the Board's view there is no requirement to alter our long-term objectives but rather there are opportunities to tighten up the way in which the Company operates, communicates and attracts new investors.

 

As part of this process the Company's Manager, Janus Henderson, has decided to appoint Mike Kerley as deputy to Alex Crooke. This appointment recognises the size and importance of the Company to Janus Henderson and the provision of this additional resource is welcomed by the Board. Mike has been in the investment management business for 37 years and he has been managing the Bankers' Pacific (ex Japan and China) portfolio since 2006. To support Mike with his portfolio role, Sat Duhra will co-manage the Pacific portfolio. Sat joined Janus Henderson in 2011 and has over 22 years of experience in financial markets. We are fortunate to have access to such experienced and knowledgeable investment professionals within Janus Henderson.

 

Outlook

 

Events this past year were impossible to predict. The rapid economic recovery from Covid restrictions created rising demand when there were still supply bottlenecks of goods. The  war in the Ukraine places further restrictions on the provision of energy and food supplies. There are some parallels to the economic conditions in the 1970's and 80's but, as is often the case, there are also key differences. Activity will slow this year but market share prices are adjusting to this outturn and, with the banking sector and corporates well capitalised, there should be a solid foundation to rebuild investors' confidence.

 

Simon Miller  

Chair

24 June 2022 

 

FUND MANAGER'S REPORT                                                                                                                   

 

Market review

The highest level of price inflation for over 30 years and potential central bank reactions have dominated markets throughout the past half year under review. The reasons for inflation touching 10% in the UK are manyfold but stem from disruption to both labour movement and supply chains throughout the Covid lockdowns. Goods price inflation has been compounded by rising service prices and, more recently, energy and food prices following the invasion of Ukraine. The equity markets have fallen in value since the end of December, with inflation proving far from transitory as central banks assured investors last year. Historically, such levels of inflation would provoke central banks to raise interest rates rapidly to curtail demand and bring prices back down but investors fear that the increase in rates has been too slow.

 

Longer term bond yields have also risen over the period, signalling unusual conditions where both bonds and equities have fallen in value. Essentially, market prices are signalling that central banks will not contain inflation quickly and that it is increasingly likely that a recession will follow. Growth equities, especially technology companies, have been especially hard hit, while energy and other defensive sectors such as utilities and healthcare have been relatively better performers. Ironically, corporate profits are proving resilient and are even rising, but the market valuation of those earnings by investors has been derated because of their cautious outlook. Typically, markets derate stocks well ahead of actual earnings falling.

 

The most resilient stock market has been the UK which has risen in value over the period under review. This has less to do with the strength of the UK economy but rather the high weighting of oil and mining companies and those with large overseas earnings within the market. The US dollar has appreciated by almost 9% over the period against sterling reflecting a flight to quality and the expectation that the Federal Reserve will raise interest rates quicker than the UK. The remaining major markets, the US, Japan and Europe have broadly fallen by the same amount in local currencies, approximately 10% but in sterling terms the US has delivered the better underlying return despite the sell-off in technology shares. China has been a notable laggard in terms of market performance as the policy of zero Covid cases in the community is having a detrimental impact on economic growth. It is proving challenging to understand when this policy will be overturned.

 

Performance

Overall, the portfolio has lagged the FTSE World Index by 3% which is largely attributable to a lower exposure to the US market and the poor performance of the China portfolio. There has also been underperformance in the US and European portfolios that has impacted the return, as both of these portfolios have a significantly higher weight to growth stocks which have derated in current market conditions. The UK and Asian portfolios have delivered performance ahead of their respective benchmarks attributable to good stock picking and the more value based, cash generative and dividend emphasis of the respective managers. Higher yielding stocks have been a noticeable outperformer in Asian markets this year. Unusually, quality as a factor in stock selection has performed poorly during this period which emphasises how macroeconomic events have driven stock market returns rather than fundamentals.

 

The portfolio's income has continued to recover with almost all companies reinstating dividends that were withheld through Covid restrictions. The banking and consumer services sectors were the last to return to normal patterns of dividend payments. The challenging economic outlook combined with many companies facing rising labour and input inflation is likely to limit further dividend growth this year. Similarly, the receipt of special dividends is trending lower than last year.

 

Outlook

While we desperately hope that there will be an end to the conflict in Ukraine, it is clear that energy and food prices are likely to be elevated for some time to come as supply shortages persist. While there is a real risk that economic activity contracts in Europe and elsewhere, purely through demand falling as consumers pay more for basic goods and services, shares are already pricing in a slowing growth outlook. The resilience of the UK stock market should continue despite the uncertainty stemming from UK politics. US interest rates are forecast to rise to over 2% by December, which will have a cooling effect on the US economy, but we still expect US growth to remain positive and therefore US corporate earnings to grow this year. Stock markets will remain volatile until there is a clear downward direction in inflationary pressures and investors can gain confidence in stock valuations.

 

Alex Crooke

Fund Manager 

24 June 2022

 

MANAGING OUR RISKS
The principal risks and uncertainties associated with the Company's business are divided into the following main areas:
·          Investment Activity and Performance Risks ·          Portfolio and Market Risks ·          Tax, Legal and Regulatory Risks ·          Financial Risks ·          Operational and Cyber Risks ·          Risks associated with Climate Change
Information on these risks and uncertainties and how they are managed are given in the Annual Report for the year ended 31 October 2021.  However, risks associated with the global Covid pandemic and other health emergencies are now considered within Portfolio and Market Risks, a grouping which has been extended to cover risks relating to heightened political and military tensions and inflationary pressures. Following a recent review, the Board believes that these principal risks and uncertainties are as applicable to the remaining six months of the financial year as they were to the six months under review.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors (listed in note 15) confirm that, to the best of their knowledge:
(a)	the unaudited condensed set of financial statements has been prepared in accordance with IAS 34 - Interim Financial Reporting ('IAS 34') and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by Disclosure Guidance and Transparency Rule 4.2.4R;
(b)	the interim management report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c)	the interim management report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or the performance of the Company during the period; and any changes in related party transactions described in the latest annual report that could have an impact in the first six months of the current financial year).

 On behalf of the Board

 Simon Miller

 Chair

 24 June 2022

 

For further information contact:                                             

Alex Crooke Fund Manager The Bankers Investment Trust PLC Telephone: 020 7818 4447	Simon Miller Chair The Bankers Investment Trust PLC Telephone: 020 7818 4233
Dan Howe Deputy Head of Investment Trusts Janus Henderson Investors Telephone: 020 7818 4458	Harriet Hall PR Manager, Investment Trusts Janus Henderson Investors Telephone: 020 7818 2636

 

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

	(Unaudited) Half-year ended 30 April 2022			(Unaudited) Half-year ended 30 April 2021			(Audited) Year ended 31 October 2021
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
(Losses)/gains on investments held at fair value through profit or loss	-	(100,441)	(100,441)	-	220,218	220,218	-	308,991	308,991
Investment income	17,822	-	17,822	15,610	-	15,610	34,939	-	34,939
Other operating income	62	-	62	53	-	53	88	-	88
	---------	-----------	---------	---------	---------	---------	---------	---------	---------
Gross revenue and capital (losses)/gains	17,884	(100,441)	(82,557)	15,663	220,218	235,881	35,027	308,991	344,018
	----------	------------	---------	----------	-----------	---------	---------	---------	---------
Expenses
Management fees (note 2)	(992)	(2,314)	(3,306)	(880)	(2,055)	(2,935)	(1,843)	(4,300)	(6,143)
Other expenses	(687)	-	(687)	(535)	-	(535)	(1,074)	-	(1,074)
	---------	-----------	---------	---------	---------	---------	---------	---------	---------
Profit/(loss) before finance costs and taxation	16,205	(102,755)	(86,550)	14,248	218,163	232,411	32,110	304,691	336,801
Finance costs	(695)	(1,550)	(2,245)	(454)	(1,058)	(1,512)	(1,037)	(2,423)	(3,460)
	---------	------------	---------	---------	----------	---------	---------	---------	---------
Profit/(loss) before taxation	15,510	(104,305)	(88,795)	13,794	217,105	230,899	31,073	302,268	333,341
Taxation	(1,337)	-	(1,337)	(1,232)	-	(1,232)	(2,705)	-	(2,705)
	---------	------------	---------	---------	-----------	---------	---------	---------	---------
Profit/(loss) for the period	14,173	(104,305)	(90,132)	12,562	217,105	229,667	28,368	302,268	330,636
	=====	=======	=====	=====	=======	=====	=====	=====	=====
Earnings/(loss) per ordinary share (note 3)	1.08p	(7.95)p	(6.87)p	0.97p	16.70p	17.67p	2.17p	23.13p	25.30p
	=====	======	======	=====	=======	=====	=====	=====	=====

 

 

The total columns of this statement represent the Statement of Comprehensive Income, prepared in accordance with UK adopted international accounting standards. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. 

 

All income is attributable to the equity shareholders of The Bankers Investment Trust PLC.

 

The accompanying condensed notes are an integral part of the financial statements.

 

CONDENSED STATEMENT OF CHANGES IN EQUITY

                                                                                                                                                                                                                                              

Half-year ended 30 April 2022 (Unaudited)	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 November 2021	32,827	159,797	12,540	1,343,631	38,589	1,587,384
Buy-back of shares into treasury 2021 (note 5)	51	-	(51)	-	-	-
	----------	----------	----------	-------------	----------	--------------
Total equity at 1 November 2021	32,878	159,797	12,489	1,343,631	38,589	1,587,384
Total comprehensive income:
(Loss)/profit for the period	-	-	-	(104,305)	14,173	(90,132)
Transactions with owners, recorded directly to equity:
Buy-back of shares to treasury	-	-	-	(4,533)	-	(4,533)
Ordinary dividends paid	-	-	-	-	(14,289)	(14,289)
	----------	----------	----------	-------------	----------	--------------
Total equity at 30 April 2022	32,878	159,797	12,489	1,234,793	38,473	1,478,430
	======	======	======	========	======	========
Half-year ended 30 April 2021 (Unaudited)	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 November 2020	32,289	134,125	12,489	1,043,682	38,386	1,260,971
Total comprehensive income:
Profit for the period	-	-	-	217,105	12,562	229,667
Transactions with owners, recorded directly to equity:
Issue of new shares	471	20,580	-	-	-	21,051
Share issue costs	-	(190)	-	-	-	(190)
Costs relating to sub-division of shares	-	-	-	(45)	-	(45)
Ordinary dividends paid	-	-	-	-	(14,043)	(14,043)
	----------	----------	----------	-------------	----------	--------------
Total equity at 30 April 2021	32,760	154,515	12,489	1,260,742	36,905	1,497,411
	======	======	======	========	======	========
Year ended 31 October 2021 (Audited)	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 November 2020	32,289	134,125	12,489	1,043,682	38,386	1,260,971
Total comprehensive income:
Profit for the year	-	-	-	302,268	28,368	330,636
Transactions with owners, recorded directly to equity:
Buy-back of shares to treasury	(51)	-	51	(2,274)	-	(2,274)
Issue of new shares	589	25,862	-	-	-	26,451
Share issue costs	-	(190)	-	-	-	(190)
Costs relating to sub-division of shares	-	-	-	(45)	-	(45)
Ordinary dividends paid	-	-	-	-	(28,165)	(28,165)
	----------	----------	-----------	-------------	----------	-------------
Total equity at 31 October 2021	32,827	159,797	12,540	1,343,631	38,589	1,587,384
	======	======	======	========	======	========

 

The accompanying condensed notes are an integral part of the financial statements.