Company Announcements

 LEGAL ENTITY IDENTIFIER: - 213800B9YWXL3X1VMZ69                                                                     1 July 2019

THE BANKERS INVESTMENT TRUST PLC

Unaudited results for the half-year ended 30 April 2019

This announcement contains regulated information

INVESTMENT OBJECTIVES 

The Company aims over the long term to achieve capital growth in excess of the FTSE World Index and annual dividend growth greater than inflation, as defined by the UK Retail Prices Index ('RPI'), 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, value-based investment process to identify suitable opportunities and pays particular regard to cash generation and dividends. The Board regularly monitors the Company's investments and the Manager's investment activity. 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

Total Return Performance to 30 April 2019 (including dividends reinvested and excluding transaction costs)

1 Net asset value total return per share with income reinvested

2 Composite of FTSE All-Share index for the period 31 October 2017 and FTSE World Index from 1 November 2017 to 30 April 2019

3 Share price total return using mid-market closing price

Sources: Morningstar for the AIC and Datastream

INTERIM MANAGEMENT REPORT

CHAIRMAN'S STATEMENT

Review

Our Net Asset Value ('NAV') total return for the six month period to 30 April 2019 was 8.7%, outperforming the FTSE World Index total return of 6.9%.  Our share price total return was higher, at almost 10%, due to the narrowing of the discount to NAV at which our shares traded. 

The positive returns disguise that the period was quite eventful.  After the sharp fall in global equity markets in the final month of our last financial year, markets largely stabilised in November before falling again in December.  Negative investor sentiment at the end of 2018 reflected a number of possible outcomes in the coming year. There was pessimism regarding the resolution of the ongoing US-China trade dispute, as well as concerns that there would be further US interest rate rises in 2019 and fears that the next recession may be closer than many had previously anticipated. The new year brought renewed optimism, driven by the belief that trade tensions were easing and by more dovish central bank policy, in particular from the US Federal Reserve, as inflationary pressures appeared to be subsiding.  This led, in the first four months of 2019, to a strong recovery in global equity markets, which broadly rose to the highs achieved in 2018.  As, in our Fund Manager's opinion, investors were pricing in an over optimistic outlook, we used this rally to realise some profits.

All of our regional portfolios made positive contributions to our overall portfolio performance; their respective local benchmarks also delivered positive returns, with the exception of Japan. On a relative performance basis, only the Asia Pacific (ex-Japan and China) and Emerging Market portfolios underperformed their local benchmarks. The US portfolio was marginally reduced during the period following strong performance, with the proceeds retained as cash to reduce the Company's net gearing.

Our allocation to direct investments in emerging markets, other than Asia, has been, typically, around 2-3% of our overall portfolio. However, we have significant exposure to the African and South American regions through companies listed in Europe and New York.  Having regard to its relatively small size and the volatility of its performance over recent years, we concluded that our direct Emerging Markets portfolio has not contributed meaningfully to the Company's returns.  Accordingly, we will start to sell down our investments in that portfolio, initially raising cash before ultimately reallocating to other regions.

Revenue Returns and Dividend

The Company's net revenue for the six months was £11.3 million, equivalent to 9.25p per share (2018: 8.52p).

The Board paid a first interim dividend on 31 May 2019 of 5.10p (2018: 4.86p) and has declared a second interim dividend of 5.10p (2018: 4.86p) per share payable on 30 August 2019 to shareholders on the register on 26 July 2019.

I am pleased to be able to reiterate, on behalf of the Board, a forecast of dividend growth of approximately 6% for the current financial year, resulting in aggregate dividends for the year of 20.9p (2018: 19.72p). 

Borrowings

The Company has refinanced its short term borrowings by agreeing a new two year £20 million borrowing facility with Sumitomo Mitsui Banking Corporation Europe Limited in February 2019. Currently, the Company is not geared as it is considered that markets are running ahead of fundamentals.

Board Changes

My predecessor, Richard Killingbeck, who joined the Board in 2003 and became Chairman in 2013, retired from the Board at the conclusion of the AGM in February. I would like to take this opportunity to thank Richard for his outstanding contribution and commitment to Bankers and his wise counsel to me and other members of the Board during his long association with the Company. Over the years we have aimed to achieve a level of continuity in regard to the Board and thus we believe the efficient management and oversight of your Company will continue in the same vein as it did under Richard's tenure. 

We are looking to replace Richard's investment knowledge with the appointment of a new non-executive director to the Board later in the year. 

Outlook

Since the end of the period under review, global equity markets have continued to ebb and flow as investors react to the latest news.  Of particular note were the more dovish statements from the European Central Bank ('ECB') and US Federal Reserve in June. The ECB indicated that, if the inflation outlook fails to improve, it could launch a further expansion of its €2.6tn quantitative easing programme and the US Federal Reserve hinted at possible interest rate cuts, citing increased uncertainties about the economic outlook.

Whilst some recent economic data has been weaker than anticipated, there are factors that should be positive for global equity markets. In particular, inflationary pressures remain muted, global monetary policy appears to continue to be supportive and corporate earnings growth is still positive.  However, the ongoing US-China trade dispute is likely to continue to hold back both the global economy and global equity markets. Even if they resolve their trade dispute, tension between the two countries may endure and adversely impact business conditions, which could continue to constrain global economic growth.

In the UK, the unresolved Brexit saga continues to weigh on business prospects and investor sentiment towards UK stocks. We will not know who the next Prime Minister will be until after 21 July and, even then, when and how the Brexit saga will be resolved.

Overall, I remain cautious on the outlook for global equity markets.  Global economic growth in the current calendar year is expected to be lower than in 2018, particularly in the US where corporate earnings received a significant boost from one-off tax cuts in 2018.  As our Fund Manager believes that markets have run ahead of fundamentals, we feel it is prudent to raise cash within the portfolio and would expect to deploy this at more attractive prices later in the year. With the macro uncertainties, the recent higher levels of equity market volatility are likely to persist but volatility does provide more opportunities for long-term managers, such as our Fund Manager, to buy at attractive prices. 

Sue Inglis

Chairman

1 July 2019

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties associated with the Company's business are divided into the following main areas:

·          Investment Activity and Performance 

·          Portfolio and Market (including Brexit)

·          Tax, Legal and Regulatory

·          Financial

·          Operational and Cyber

Information on these risks and uncertainties and how they are managed are given in the Annual Report for the year ended 31 October 2018.  In the view of the Board 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

For and on behalf of the Board

Sue Inglis  

Chairman

1 July 2019

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CONDENSED STATEMENT OF COMPREHENSIVE INCOME

The total columns of this statement represent the Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union.  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

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