BIT – Half Year Report

PLEASE REFER TO THE PDF TO VIEW THE FULL ANNOUNCEMENT LEGAL ENTITY IDENTIFIER: - 213800B9YWXL3X1VMZ69 21 June 2021 THE BANKERS INVESTMENT TRUST PLC ("the Company") Unaudited results for the half-year ended 30 April 2021 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: o Equities: 80% to 100% o Debt securities and cash investments: 0% to 20% o 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 30 April 2021 30 April 2020 Net asset value ('NAV') per share* 114.3p 90.7p Share price* 114.2p 90.4p Revenue return per share* 0.97p 0.79p Net (cash) / gearing 2.4% 0.0% Dividends paid or declared in respect of the period1* 1.076p 1.070p Total return performance to 30 April 2021 (including dividends reinvested and excluding transaction costs) 6 months % 1 year % 3 years % 5 years % 10 years % NAV2 17.4 28.8 40.9 106.0 199.9 Index3 21.5 33.9 48.0 88.6 144.1 Share price4 17.7 28.9 41.8 117.8 248.8 1 First interim dividend for 2021 was paid on 28 May 2021, the second interim dividend has been declared and will be paid on 31 August 2021 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 2021 4 Share price total return using mid-market closing price * Current period and prior period figures have been restated due to the sub-division of each Ordinary share of 25p into ten Ordinary shares of 2.5p each on 1 March 2021 Sources: Morningstar and Refinitiv Datastream INTERIM MANAGEMENT REPORT CHAIR'S STATEMENT Review The announcement of successful Covid-19 vaccine trials in November and December 2020 provided a further boost to the global market recovery that had begun months earlier. This has continued into 2021, reflecting investor optimism that the pandemic-induced recession would be relatively short lived and that the aggressive fiscal and monetary stimuli would lead to a much faster global economic recovery. It also marked a shift away from lockdown beneficiaries (mainly tech and high growth stocks) to more cyclical sectors that should benefit as economies open up. In the UK, a further boost was received when an eleventh-hour trade deal was struck with the EU. The deal may be far from perfect but it is generally regarded as better than no deal. The outcome of the bitterly contested US presidential election also buoyed investor optimism. Having entered office in January, President Biden's immediate priorities were vaccinating America and also introducing a $2 trillion stimulus package to drive the economy forward. Both have more than achieved the President's aims. As the virus wanes and the US economy reopens and supply chain shortages have become apparent, investors' attention has turned to concerns about rising inflation and whether it would drive the Federal Reserve to tighten monetary policy sooner than expected and choke off the nascent recovery. The Federal Reserve members concerned about market volatility have gone to great lengths to defuse these worries, saying the Fed would look through any inflation spike and maintain its loose monetary policy until the economy was on a solid path to recovery. Performance Over the six months ended 30 April 2021, the NAV total return per share was 17.4% (2020: -3.2%) and the share price total return was 17.7% (2020: -1.4%), both underperforming the FTSE World Index total return of 21.5% (2020: -5.3%). Our underperformance largely resulted from the shift from lockdown beneficiaries to the reopening trade. Having been our worst performing portfolios over the previous financial year, our Pacific (ex Japan and China) and UK portfolios were best placed to benefit from this shift and delivered the strongest absolute performances over the period, both outperforming their benchmarks. The remaining four portfolios also delivered positive returns but underperformed their benchmarks. The Manager's report includes more detailed information on performance. Revenue returns Our dividend income for the six months ended 30 April 2021 was ?15.6 million compared to ?12.2 million for the same period last year, an increase of 28.0%. Our net revenue for the six months was ?12.6 million (2020: ?9.8 million), equivalent to 0.97p per share (2020: 0.79p as adjusted for the share split). Although the net revenue per share was higher than the previous corresponding period, we expect the revenue return per share for the current financial year to remain below the pre-Covid-19 level for the second year running. However, the outlook for our dividend income continues to improve, though will take time to recover fully. Dividends A first interim dividend of 0.538p per share (2020: 0.535p per share when adjusted for the share split) was paid on 28 May 2021. The Board has declared a second interim dividend of 0.538p (2020: 0.535p as adjusted) per share, which will be payable on 31 August 2021 to shareholders on the register on 30 July 2021. By virtue of the revenue reserves that the Company prudently built up in good times, I am pleased to be able to reiterate, on behalf of the Board, our current intention to deliver dividend growth of approximately 0.5% for the current financial year, resulting in aggregate dividends for the year of at least 2.164p per share (2020: 2.154p as adjusted for the share split). Based on aggregate dividends of 2.164p per share for the current financial year and the number of shares currently in issue, our revenue reserve at 30 April 2021, adjusted for the first and second interim dividends, represented 0.8 times the cost of the current year's dividends. Share split Following the price of the Company's shares of 25p each almost trebling over the previous 10 years, the Board proposed in January 2021 a share split to sub-divide each ordinary share of 25p into 10 ordinary shares of 2.5p each. Shareholders approved the resolution for the share split at the AGM on 24 February 2021 and the sub-division took effect on 1 March 2021 when the new shares were admitted to trading on the London Stock Exchange. Share issuance and buy-backs The Company's shares continued to trade close to, or at a small premium to, NAV during the six months ended 30 April 2021. Continued demand for the Company's shares led to the issue of a total of 18,825,000 new shares during the period (975,000 shares of 25p each prior to the share split and subsequently adjusted and a further 9,075,000 shares of 2.5p each following the share split), raising gross proceeds of ?21.1 million. As at 30 April 2021, the Company had 1,310,402,830 shares in issue. Since the period end, a further 3,950,000 new shares have been issued, raising gross proceeds of ?4.5 million. The new shares have all been issued at a premium sufficient to ensure that existing shareholders do not suffer any dilution of their NAV per share and the net proceeds were invested into markets. There have been no share buy-backs in the financial year to date. Gearing The Company began the current financial year with net cash of 1.1% and ended the period under review with net gearing of 2.4%. The Company renewed its ?20 million short-term borrowing facility with SMBC Bank International plc (formerly called Sumitomo Mitsui Banking Corporation Europe Limited), which expired in February, for a further year. The facility can be drawn and repaid as required and is in addition to the Company's existing fixed debt. The Board is currently reviewing the Company's debt structure and will provide an update on the outcome of this review in due course. The Board In our recent Annual Report it was noted that at 31 October 2021 I will have served nine years as a Director of the Company. To allow for smooth succession in due course, the Nominations Committee has started the process of recruiting a new Director. An independent consultancy firm that specialises in investment trust board recruitments has been appointed to lead the search for a suitable candidate. Outlook The pandemic is far from over, but the development of effective vaccines has been a major turning point. The accelerating vaccine rollout, leading to economies gradually reopening and the return to some form of economic, financial and social normality, gives reason for optimism for a strong economic recovery this year for those countries fortunate enough to secure abundant vaccine supplies. High levels of corporate cash deposits and household savings may lead to a significant uptick in spending, providing a further boost to economic recovery, albeit with attendant inflationary risk. Government stimulus packages and ongoing central bank asset purchases should provide additional support, with central bank tapering unlikely to commence this year. However, mass vaccination on a global scale will take time. The pace of recovery will differ materially across regions and countries as well as business sectors and companies. In addition, concerns over infection rates in certain parts of the world, new variants emerging and further waves, the return of inflation (whether transitory or not) and geo-political tensions remain. Overall, the broad picture is positive, but market volatility is likely to persist as the world endeavours to navigate its way out of the pandemic. Sue Inglis Chair 21 June 2021 FUND MANAGER'S REPORT Market review The period under review saw a significant stock market recovery, largely driven by optimism that the rollout of vaccines would bring about a lifting of lockdowns and subsequent economic recovery. Upward revisions to global growth forecasts have fed through to profit upgrades for many companies. There has been, however, a change in leadership within markets whereby those companies hardest hit by lockdown (in sectors such as travel, hospitality and retail) have seen the sharpest recovery in share prices, while growth stocks have not materially participated in the rally. Nevertheless, many companies that investors believe will be beneficiaries of reopening remain challenged, as it is unclear how quickly global travel, for example, will recover given the threat of further Covid-19 variants. The UK market has seen the largest bounce in share prices, as the country has benefitted from an early rollout of vaccines but more importantly a conclusion to the tortuous process of leaving the European Union. The Brexit deal concluded over Christmas was celebrated by politicians but is not the panacea for unfettered trade with the EU. It will take most of the year to determine the winners and losers on trade. However, the simple process of concluding an exit has clearly lifted uncertainty for international investors and renewed confidence in sterling has also assisted the UK stock market. Inflation has been rising through 2021, reflecting bottlenecks in supply chains and disruption to factories last year from Covid-19 restrictions. In recent months, prices of basic goods such as food, timber and building materials have risen rapidly. Currently, central banks view these increases as transitory and have not reacted by raising interest rates. However, longer-term bond yields have risen reflecting investors' views that rates will ultimately move upwards. The increase in the gap between short and long-term rates has benefitted financial stocks, and banks in particular, leading to the sector being one of the stand-out performers over the reported half year. Performance The portfolio returns in the six-month period to 30 April 2021 have been strong but have lagged the benchmark index, the FTSE World Index. There has been outperformance in the UK and Asia Pacific (ex Japan and China) portfolios, both of which are positioned more towards value and cyclical sectors that have benefitted from optimism of economic recovery. However, the US, European and Japanese portfolios are positioned towards higher growth companies which, whilst delivering impressive returns, have lagged the overall index gains in their respective markets. We continue to retain confidence in the high-quality companies within these portfolios and expect steady growth in profitability over the coming years. The income generated by the portfolio has steadily recovered from its low point last year, as more companies have found confidence in their future outlook and returned to paying investors a dividend. We expect the sharp recovery in economic activity over the coming twelve months to feed through to increasing dividends and a steady recovery towards pre-pandemic levels of income for the Company. The banking and retail sectors remain the two areas yet to reinstate dividends, but we remain hopeful about prospects for resumption of pay-outs into 2022. Outlook Given the imbalance in supply and demand for Covid-19 vaccinations globally, it seems likely that there will be periods of stop/start as we navigate the remainder of the year. We have been increasing investment into European and Japanese markets based on lower valuations and a perception by investors that their recovery will be delayed by slow vaccination programmes. We are more optimistic as these markets have historically been beneficiaries of rising inflation and economic growth. These stock markets have higher representation of larger, cyclical companies such as those in the auto and engineering sectors which still offer good value. There will likely be periods of fluctuating share prices, as normally happens when markets have risen sharply, but we remain optimistic about the global recovery and intend to use market setbacks to increase investment towards our favoured companies. Alex Crooke Fund Manager 21 June 2021 PLEASE REFER TO THE PDF TO VIEW THE FULL ANNOUNCEMENT For further information contact: Alex Crooke Fund Manager The Bankers Investment Trust PLC Telephone: 020 7818 4447 Sue Inglis Chair The Bankers Investment Trust PLC Telephone: 020 7818 4233 James de Sausmarez Director and Head of Investment Trusts Janus Henderson Investors Telephone: 020 7818 3349 Laura Thomas PR Manager Janus Henderson Investors Telephone: 020 7818 2636 Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) are incorporated into, or forms part of, this announcement. End CA:00374294 For:BIT Type:INTERIM Time:2021-06-22 08:30:36