REG-The Lindsell Train Investment Trust plc: Half-year Report
03/12/2024 07:15
3 December 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
The Lindsell Train Investment Trust plc (the “Company”)
Unaudited Half-Year Results for the six months ended
30 September 2024
This Announcement is not the Company’s Half-year Report & Accounts. It is an
abridged version of the Company’s full Half-year Report & Accounts for the
six months ended 30 September 2024. The full Half-year Report & Accounts
together with a copy of this announcement, will shortly be available on the
Company’s website at www.ltit.co.uk where up to date information on the
Company, including NAV, share prices and monthly updates, can also be found.
The Company's Half-year Report & Accounts for the six months ended 30
September 2024 has been submitted to the UK Listing Authority, and will
shortly be available for inspection on the National Storage Mechanism (NSM) at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Financial Highlights
Six months to Year to
Performance comparisons 30 September 2024 31 March 2024
Net asset value total return per Ordinary Share* ^ -1.9% +2.1%
Share price total return per Ordinary Share* ^ +2.7% -19.8%
Discount of Share price to Net Asset Value 19.3% 22.0%
MSCI World Index total return (Sterling) +2.8% +22.5%
UK RPI Inflation (all items) +1.5% +4.3%
Source: Morningstar and Bloomberg.
* The net asset value and share price total returns at 30 September 2024 have
been adjusted to include the ordinary dividend of £51.50 per share paid on 13
September 2024, with the associated ex-dividend date of 8 August 2024.
^ Alternative Performance Measure (“APM”). See Glossary of Terms and
Alternative Performance Measures.
Investment Objective
The objective of the Company is to maximise long-term total returns with a
minimum objective to maintain the real purchasing power of Sterling capital.
Investment Policy
The Investment Policy of the Company is to invest:
(i) in a wide range of financial assets including equities, unlisted
equities, bonds, funds, cash and other financial investments globally with no
limitations on the markets and sectors in which investment may be made,
although there is likely to be a bias towards equities and Sterling assets,
consistent with a Sterling-dominated investment objective. The Directors
expect that the flexibility implicit in these powers will assist in the
achievement of the investment objective;
(ii) in LTL managed fund products, subject to Board approval, up to 25% of
its gross assets; and
(iii) in LTL and to retain a holding, currently 23.9%, in order to benefit
from the growth of the business of the Company’s Manager.
The Company does not envisage any changes to its objective, its investment
policy, or its management for the foreseeable future. The current composition
of the portfolio as at 30 September 2024, which may be changed at any time
(excluding investments in LTL and LTL managed funds) at the discretion of the
Manager within the confines of the policy stated above.
Diversification
The Company expects to invest in a concentrated portfolio of securities with
the number of equity investments averaging fifteen companies. The Company will
not make investments for the purpose of exercising control or management and
will not invest in the securities of, or lend to, any one company (or other
members of its group) more than 15% by value of its gross assets at the time
of investment.
The Company will not invest more than 15% of gross assets in other
closed-ended investment funds.
Gearing
The Directors have discretion to permit borrowings up to 50% of the Net Asset
Value. However, the Directors have decided that it is in the Company’s best
interests not to use gearing. This is in part a reflection of the increasing
size and risk associated with the Company’s unlisted investment in LTL, but
also in response to the additional administrative burden required to adhere to
the full scope regime of the AIFMD.
Dividends
The Directors’ policy is to pay annual dividends consistent with retaining
the maximum permitted earnings in accordance with investment trust
regulations, thereby building revenue reserves.
In a year when this policy would imply a reduction in the ordinary dividend,
the Directors may choose to maintain the dividend by increasing the percentage
of revenue paid out or by drawing down on revenue reserves. Revenue reserves
on 31 March 2024 were twice the annual 2024 ordinary dividend paid on 13
September 2024.
All dividends have been distributed from revenue or revenue reserves.
Chairman’s Statement
The Company’s net asset value (“NAV”) per share fell from £1,026.43 to
£955.83 over the six months to 30 September 2024, which resulted in a NAV
total return of minus 1.9% once the payment of the dividend of £51.50 was
added back. This compared with the 2.8% total return of the MSCI World index.
The share price total return over the same period was 2.7%. The share price
discount to the NAV narrowed marginally over the six months but remained near
its peak at 19% on 30 September 2024.
The six months were characterised by the steady fall in the valuation of LTL,
the Company’s unlisted investment in its Investment Manager. LTL’s total
return over the period was minus 8.4% and proved to be the biggest detrimental
contributor to the Company’s performance, resulting in the holding falling
from 34% of NAV six months earlier to 31% on 30 September 2024. The decline in
valuation reflected a contraction in LTL’s funds under management
(“FUM”). LTL’s strategies have suffered from disappointing relative
performance in recent years and some of its clients have understandably
responded by withdrawing funds, with LTL’s FUM falling from £15.2bn to
£13.4bn over the six months to 30 September 2024. A good proportion of
clients, including the Company, have experienced LTL’s successful
longer-term performance and remain loyal supporters of its differentiated
investment approach which, as the Investment Manager’s report implies,
remains consistent with its core principles.
The fall in FUM had a direct impact on LTL’s revenues, as is evident in
LTL’s half-year financial review shown in Appendix 1, but less so on its
operating profit margins, which remained above 60%. However, should FUM fall
below £11bn, caused either by client withdrawals or declining asset prices,
there is a risk that the margin protection provided by LTL’s salary and
bonus cap, which restricts salary and bonus payments to LTL employees to c.26%
of LTL revenues, may be compromised. The fall in LTL’s FUM was more directly
reflected in declining LTL dividend payments to the Company. The dividend from
LTL received in June fell 16% from last year and 7% from the December payment.
Declining LTL dividends will impact the Company’s ability to maintain its
dividend at the same level in 2025 without using revenue reserves to do so.
Whilst the decline in LTL’s FUM is disappointing, the Board takes some
comfort from LTL’s financial strength, which gives LTL the option to invest
behind its business if necessary. LTL’s half-year financial review shows
that LTL has cash resources of £105m at 30 September 2024.
The decline in LTL’s weighting within the Company’s portfolio brings
increased attention to the Company’s other investments. 56% of NAV is
invested in a concentrated selection of global quoted equities that in
aggregate contributed 1.4% of total return to the portfolio, with strong
individual total return contributions from Unilever up 23.7% and the London
Stock Exchange Group up 9.1%, offset by a 9.3% negative return from Diageo and
8.6% from Nintendo. The Investment Manager’s report that follows reviews the
performance and prospects of these companies in some more detail.
An important feature of the Company’s symbiotic relationship with LTL is its
desire to support LTL’s business by investing its capital into LTL managed
funds to help bolster a fund’s critical mass at an early stage of its
existence. Almost all of LTL’s funds have benefited from such investments
over time. Once sufficient critical mass is achieved the Company has sold the
investments to reallocate capital to either quoted investments or alternative
LTL funds. In the early 2000s the Company invested its maximum allocation of
25% in LTL funds, but since 2015 the allocation has averaged 9% of NAV, with
the allocation at 12.5% at 30 September 2024. All investments in LTL fund
products are the direct responsibility of the Board and any fees charged by
the funds are rebated to the Company to avoid double charging.
The investment in the Lindsell Train North American Equity Fund was made at
its inception in 2020. It accounted for 10.6% of NAV at 30 September 2024. The
Fund has compounded at 12.8% (in US dollars) since 30 April 2020, a
satisfactory return in the context of long-term US equity returns that have
averaged 10.5% over the last 50 years, yet not enough to keep up with the
17.5% U S dollar annualised return of its comparative benchmark over its life.
The Fund’s investments in Estée Lauder, PayPal, Brown Forman and Disney
have held back performance at a time when a narrow range of large technology
companies have driven the performance of the index. The Fund has benefited
from the exceptional performance of FICO, up more than 3 times since purchase,
and has recently sold part of the holding to add to the Fund’s
underperformers. Aside from the purchases of FICO, Madison Square Garden
Sports and the spinout of Kenvue from Johnson & Johnson, the constituents of
the Fund are unchanged from its inception, with the recent partial sale of
FICO representing the only turnover in its history. The Fund’s portfolio
valuation at 30 September 2024 is outlined in Appendix 3. Like all LTL funds,
the North American Equity portfolio stands out due to its concentration, its
focus on a narrow range of cash generative companies and its long-term
approach, all factors which should underpin its allure to other investors.
What is missing, of course, is outperformance relative to its benchmark, and
until that happens it will likely remain challenging for LTL to grow assets
meaningfully from its current size of £40m.
The Investment Manager’s report continues to paint a positive outlook for
the Company’s quoted investments, which they anticipate should result in
better relative performance for the Company and for LTL’s strategies. As
improved performance is only recognisable after the event, it is likely that
it will take some time before this is translated into rising FUM at LTL. In
the meantime we are realistic in recognising that LTL’s FUM will in all
probability continue to wane in the shorter term, which will impact LTL’s
valuation and by extension the Company’s NAV – a linkage that has been
well flagged as a risk in successive past statements by me and my
predecessors.
The Company’s elevated share price discount to its NAV is a source of
concern for the Board. It reflects, to varying degrees, LTL’s and the
Company’s disappointing investment performance, the continued and
prospective decline in the valuation of LTL, its largest investment, the
succession risk at LTL and the general level of discounts in the Investment
Trust industry. The Board thinks that resorting to share repurchases to reduce
the discount would prove ineffective and believes its buyback powers are
better deployed to take advantage of a discernible opportunity to add value
for remaining shareholders should one materialise. Any opportunity has to be
balanced with the need to fund a share repurchase with a sale of existing
quoted investments, the consequence of an increase in LTL’s percentage
weighting within the Company investment portfolio and the burden of an
increased expense ratio for remaining shareholders. The Board also believes
that the surest way to improve the Company’s rating is for LTL to generate
better relative and absolute performance for the Company and for broader LTL
funds. The Board has every confidence that this will happen and is doing
everything in its power to the provide the support necessary to LTL to ensure
that outcome.
Roger Lambert
Chairman
2 December 2024
Investment Manager’s Report
Excluding the holding in LTL, your portfolio comprises thirteen investments.
These are twelve direct equity holdings and one open-ended fund. Most of these
thirteen have been held for many years, in some cases for over 20 years.
Our investment approach is based on capturing the benefits of such long-term
holding periods. We avoid buying and selling as much as possible and instead
trust that time and the long-term business success of the companies we hold
will build value for shareholders. By definition, this requires patience. Of
late, even we have felt a degree of impatience about the disappointing recent
returns from some of our longstanding holdings. Nonetheless, as I will
demonstrate, there are many long-term winners in your portfolio that help
vindicate our approach. I also hope to demonstrate that most of our holdings
are currently pregnant with opportunity and we have high hopes for meaningful
capital gains across the whole portfolio in years to come.
To that end, I will update you on the current capital uplift on each holding,
relative to its average purchase price (the book cost). As a further indicator
of a growth in value over time, I will also note the dividend yield to book
cost of each holding. In other words, the percentage income return from the
most recent 12 month dividends based on historic book cost. I will also
comment on near-to-medium term prospects for each holding.
A.G. Barr
The capital value of your holding in this soft drinks business is up 9.5x on
the book cost. In addition, its long history of dividend increases means that
the value of 2024’s payment as a percent of book cost is c.24%. (Book cost
per share 0.65p. 2024 dividends 0.155p.) A.G. Barr has been a wonderful
investment for your Company. Speak to the company’s new CEO and you could
readily conclude it can carry on doing well; the shares are up 27% over the
last 12 months, for instance. A.G. Barr has strong brands in growing
categories and a very strong balance sheet. We expect that in five years’
time the dividend and the shares will be higher.
Diageo
This has recently been a painful holding for us, with the shares down 35%
since their peak in 2021. Nonetheless, the value of your holding is still up
2.4x on book cost and the growing Diageo dividend means our shareholders are
earning a 7.4% dividend yield on the value of the original investment. Deeply
out of favour currently, we expect Diageo’s dividends to keep growing and
expect the shares to perform again; likely when consumer confidence recovers
and bars and clubs fill up. We also think it likely that Johnnie Walker,
Guinness, Tanqueray and other Diageo brands will still be being enjoyed many
decades hence: investors sometimes forget how unusual and valuable such
longevity is.
Finsbury Growth & Income Trust PLC (“FGIT”)
We have made a 4.8-fold gain for our shareholders in FGIT shares and today’s
dividends yield over 10% by value of the original book cost. Recent investment
performance has been disappointing, as for most of LTL’s mandates, but we
know FGIT’s investment portfolio comprises fine businesses, lowly valued in
our opinion, and expect NAV growth and share price gains to resume.
Heineken
We have made 2.2x on the investment in Heineken and receive a dividend on book
cost of 5.6%. Heineken has a huge opportunity in emerging economies and a big
opportunity to cut costs everywhere. That should add up to top-line growth and
profit margin expansion over time. On 16x earnings that combination could
drive share price gains.
Laurent Perrier
Another “immortal” beverage brand with a weak share price since Covid-19.
We are currently only up 25% on the investment, with a book cost dividend
yield of 2.5%. Valued on a P/E of 9x Laurent Perrier is, we think,
exceptionally undervalued.
Lindsell Train North American Fund
James Bullock and his team have generated a 56% gain on this fund, since its
launch in 2020. We hope there is much more to come. The calibre of its
portfolio holdings is exceptionally high.
London Stock Exchange Group (“LSEG”)
We are up nearly 7x on book cost for LSEG and the company’s strong dividend
growth means we earn an 8% yield on book cost. This is the biggest
public-market equity holding in your Trust, as well as being the biggest
equity holding across LTL’s client accounts. We believe the best is yet to
come for LSEG. After its integration of Refinitiv no rival can offer the same
range of services to global financial institutions – including must-have
data, access to deep liquidity pools and business-critical clearing services.
Putting all this functionality under one corporate roof presents an enormous
and unique opportunity for LSEG. And it is an opportunity that may well be
enhanced and accelerated by its joint venture with Microsoft.
Mondelez
Up 2.8x on our original purchase price, with a dividend yield to book cost of
6.8%, Mondelez has demonstrated an ability to grow steadily, based on growing
global consumption of chocolate, biscuits and snacks, where it owns leading
brands. Globally, Mondelez is #1 in Biscuits, #2 in Chocolate, #3 in Cakes and
Pastries and #4 in snack bars. Since 2014 the cash generated from those market
positions has allowed Mondelez to more than treble its dividend and to retire
nearly 20% of its outstanding shares, while its share price has more than
doubled. Why shouldn’t that continue?
Nintendo
We have increased shareholders’ capital in Nintendo 4.6x over our holding
period. Meanwhile, this year’s dividend offers a yield of nearly 13% on our
book cost, demonstrating Nintendo generates extraordinary amounts of cash when
its gaming hardware and software are popular. The share price has been
becalmed for 6 months, as investors await the reveal of Nintendo’s new
gaming console, due by the end of Q1 2025. We have high hopes this will be
well received and drive revenues to new highs, accompanied by the share price.
Mario, Pokémon and Zelda are more popular than ever and these wonderful
entertainment franchises offer proxy participation in the growth of digital
gaming.
PayPal
We have quintupled shareholders’ money in PayPal, despite its big sell-off
after 2021. The shares have rebounded over 30% over the last year. It does not
pay a dividend, but shares outstanding have reduced by nearly 18% since it
listed in 2015 as a result of share buybacks. 17x earnings does not seem a
high price to pay for this franchise.
RELX
This holding has also nearly quintupled on average purchase price and its
success as a business and investment is confirmed by the over 8% dividend
yield on book cost. RELX is a major holding in your company and across
Lindsell Train’s other client accounts. The company is recognized as one of
the outstanding data businesses in the world. It provides crucial services to
the global scientific, legal and insurance industries and has a credible
opportunity to become a preferred provider of Artificial Intelligence-powered
services to them too.
Unilever
We have more than doubled shareholders’ money in Unilever and receive a 6.8%
dividend yield on the book cost. The shares have performed better over the
last 12 months, up 19%, as investors have welcomed growth and efficiency
initiatives implemented by a new senior management team. We think it worth
noting that since the start of the century – January 2000 – Unilever has
delivered 10% p.a. total returns. Admittedly, these have come in a lumpy
fashion, but we submit they are the type of annualised return you might hope
for from a business like Unilever. By the way, that 10% p.a. return is
competitive. For instance, the S&P 500 has delivered just under 9% p.a. since
then in Sterling. Not many investors know that “boring” Unilever has
outstripped the US stock market so far this century, but it has. We recognise
the future does not have to look like the past, but Unilever’s proven
ability to develop brands that are relevant for consumers seems intact and
that has proven a reliable way to get rich slowly.
Universal Music Group (“UMG”)
On our most recent position, we are less than 12 months into what we expect
will be a multi-decade holding period. The shares are down 6.5% on our book
cost, with a 2% dividend yield. We have taken advantage of the weakness to
build the position.
Summary
In total, the current value of your portfolio, excluding the holding in LTL,
has nearly trebled on its book cost and we remain locked into the growing
dividend streams from the companies. Including the holding in LTL the
portfolio has quadrupled. Nonetheless, we know that investment is about future
returns and that the portfolio must be reviewed to ensure its continuing
relevance as we go deeper into the 21st century. In that regard, we highlight
the 28% of the portfolio invested in three exceptional data/technology
companies – LSEG, Nintendo and RELX – as likely drivers of future NAV.
Today, we believe your portfolio offers an attractive mix of steady,
predictable growth companies and look forward to it trebling again over time.
Nick Train
Lindsell Train Limited
Investment Manager
2 December 2024
Portfolio Holdings at 30 September 2024
(All ordinary shares unless otherwise stated)
Look-
through
Fair % of basis:
value net % of total
Holding Security £’000 assets assets†
6,378 Lindsell Train Limited 59,116 30.9% 30.9%
232,900 London Stock Exchange 23,802 12.4% 12.7%
12,500,000 WS Lindsell Train North American Equity Fund Acc* 20,287 10.6% 0.0%
410,000 Nintendo 16,277 8.5% 8.5%
363,000 RELX 12,738 6.7% 6.9%
425,000 Diageo 11,063 5.8% 6.0%
219,890 Unilever 10,638 5.6% 5.8%
148,165 Mondelez International 8,137 4.3% 4.6%
1,230,800 A.G. Barr 7,668 4.0% 4.1%
94,720 PayPal 5,508 2.9% 3.2%
87,270 Heineken 4,912 2.6% 2.6%
420,000 Finsbury Growth & Income Trust PLC* 3,608 1.9% 0.0%
39,099 Laurent-Perrier 3,481 1.8% 1.8%
160,691 Universal Music Group 3,141 1.6% 1.6%
Indirect Holdings – 0.0% 10.8%
Total Investments 190,376 99.6% 99.5%
Net Current Assets 789 0.4% 0.5%
Net Assets 191,165 100.0% 100.0%
† Look-through basis: Percentages held in each security is adjusted upwards
by the amount of securities held by Lindsell Train managed funds. A downward
adjustment is applied to the fund‘s holdings to take into account the
underlying holdings of these funds. It provides shareholders with a measure of
stock specific risk by aggregating the direct holdings of the Company with the
indirect holdings held within Lindsell Train funds.
* LTL managed funds.
Leverage
We detail below the equity exposure of the Funds managed by LTL as at 30
September 2024:
Net equity
exposure
WS Lindsell Train North American Equity Fund Acc 98.8%
Finsbury Growth & Income Trust PLC 100.7%
Analysis of Investment Portfolio at 30 September 2024
Breakdown by Location of Listing
(look-through basis)^
UK* 67.2%
USA 17.7%
Japan 8.5%
Europe Excluding UK 6.1%
Cash and Equivalents 0.5%
100.0%
Breakdown by Location of Underlying Company Revenues
(look-through basis)^
USA^^ 33.2%
Europe Excluding UK^^ 24.6%
UK^^ 24.6%
Rest of World 13.6%
Japan 3.5%
Cash and Equivalents 0.5%
100.0%
Breakdown by Sector
(look-through basis)^
Financials 49.6%
Consumer Staples 26.8%
Communication Services 12.0%
Industrials 8.2%
Information Technology 2.4%
Consumer Discretionary 0.4%
Health Care 0.1%
Cash & Equivalent 0.5%
100.0%
^ Look-through basis: this adjusts the percentages held in each asset class,
country or currency by the amount held by LTL managed funds. It provides
shareholders with a more accurate measure of country and currency exposure by
aggregating the direct holdings of the Company with the indirect holdings held
by the LTL funds.
* LTL accounts for 30.9% and is not listed.
^^ LTL accounts for 13 percentage points of the Europe figure, 14 percentage
points of the UK figure, 4 percentage points of the USA figure and 0
percentage point of the RoW figure.
Income Statement
Six months ended Six months ended
30 September 2024 30 September 2023
Notes Revenue £’000 Unaudited Capital £’000 Total £’000 Revenue £’000 Unaudited Capital £’000 Total £’000
Losses on investments held at fair value through profit or loss – (8,788) (8,788) – (13,047) (13,047)
Exchange losses on currency – (1) (1) – (4) (4)
Income 2 5,790 – 5,790 6,687 – 6,687
Investment management fees 3 (418) – (418) (530) – (530)
Other expenses 4 (350) – (350) (385) – (385)
Return/(loss) before taxation 5,022 (8,789) (3,767) 5,772 (13,051) (7,279)
Taxation 5 (53) – (53) (61) – (61)
Return/(loss) after taxation for the financial period 4,969 (8,789) (3,820) 5,711 (13,051) (7,340)
Return/(loss) per Ordinary Share 6 £24.84 £(43.94) £(19.10) £28.56 £(65.26) £(36.70)
All revenue and capital items in the above statement derive from continuing
operations.
The total columns of this statement represent the profit and loss accounts of
the Company. The revenue and capital columns are supplementary to this and are
prepared under the guidance published by the Association of Investment
Companies.
The Company does not have any other recognised gains or losses. The net loss
for the period disclosed above represents the Company’s total comprehensive
income.
No operations were acquired or discontinued during the period.
Statement of Changes in Equity
Share Special Capital Revenue
capital reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000
For the six months ended 30 September 2024 (unaudited)
At 31 March 2024 150 19,850 161,981 23,304 205,285
(Loss)/return after tax for the financial period – – (8,789) 4,969 (3,820)
Dividend paid – – – (10,300) (10,300)
At 30 September 2024 150 19,850 153,192 17,973 191,165
Share Special Capital Revenue
capital reserve reserve reserve Total
£’000 £’000 £’000 £’000 £’000
For the six months ended 30 September 2023 (unaudited)
At 31 March 2023 150 19,850 168,000 23,390 211,390
(Loss)/return after tax for the financial period – – (13,051) 5,711 (7,340)
Dividends paid – – – (10,300) (10,300)
At 30 September 2023 150 19,850 154,949 18,801 193,750
Statement of Financial Position
30 September 31 March
2024 2024
Unaudited Audited
Note £’000 £’000
Fixed assets
Investments held at fair value through profit or loss 190,376 199,082
Current assets
Other receivables 402 478
Cash at bank 715 6,028
1,117 6,506
Creditors: amounts falling due within one year
Other payables (328) (303)
Net current assets 789 6,203
Net assets 191,165 205,285
Capital and reserves
Called up share capital 150 150
Special reserve 19,850 19,850
20,000 20,000
Capital reserve 153,192 161,981
Revenue reserve 17,973 23,304
Equity shareholders’ funds 191,165 205,285
Net asset value per Ordinary Share 7 £955.83 £1,026.43
Statement of Cash Flows
Six months ended Six months ended
30 September 30 September
2024 2023
Unaudited Unaudited
£’000 £’000
Net loss before finance costs and tax (3,767) (7,279)
Losses on investments held at fair value 8,788 13,047
Losses on exchange movements 1 4
Decrease in other receivables 13 67
Decrease/(increase) in accrued income 61 (25)
Increase in other payables 26 36
Taxation on investment income (53) (73)
Net cash inflow from operating activities 5,069 5,777
Purchase of investments held at fair value (886) (86)
Sale of investments held at fair value 805 353
Net cash (outflow)/inflow from investing activities (81) 267
Equity dividends paid (10,300) (10,300)
Net cash outflow from financing activities (10,300) (10,300)
Decrease in cash and cash equivalents (5,312) (4,256)
Cash and cash equivalents at beginning of period 6,028 8,010
Losses on exchange movements (1) (4)
Cash and cash equivalents at end of period 715 3,750
Notes to the Financial Statements
1 Accounting policies
The Financial Statements of the Company have been prepared under the
historical cost convention modified to include the revaluation of fixed assets
investments and in accordance with United Kingdom Company law, FRS 104
“Interim Financial Reporting” applicable in the UK and Ireland, the
Statement of Recommended Practice (“SORP”) “Financial Statements of
Investment Trust Companies and Venture Capital Trusts”, issued by the
Association of Investment Companies updated in July 2022 and the Companies Act
2006.
The accounting policies followed in this Half-year Report are consistent with
the policies adopted in the audited financial statements for the year ended 31
March 2024.
2 Income
Six months ended Six months ended
30 September 2024 30 September 2023
Unaudited Unaudited
£’000 £’000
Income from investments
Overseas dividends 512 530
UK dividends
– Lindsell Train Limited 4,108 4,954
– Other UK dividends 1,059 1,082
– Deposit interest 111 121
5,790 6,687
3 Management fees
Six months ended Six months ended
30 September 30 September
2024 2023
Unaudited Unaudited
£’000 £’000
Investment management fee 484 591
Rebate of investment management fee (66) (61)
Net management fees 418 530
4 Other expenses
Six months ended Six months ended
30 September 30 September
2024 2023
Unaudited Unaudited
£’000 £’000
Directors’ emoluments 83 91
Company Secretarial & Administration fee 94 96
Auditor’s remuneration†* 29 24
Tax compliance fee 3 3
Other** 141 171
350 385
† Remuneration for the audit of the Financial Statements of the Company.
* Excluding VAT.
** Includes registrar’s fees, printing fees, marketing fees, safe custody
fees, London Stock Exchange/FCA fees, Key Man and Directors’ and Officers’
liability insurance, Employer’s National Insurance and legal fees.
5 Effective rate of tax
The effective rate of tax reported in the revenue column of the income
statement for the six months ended 30 September 2024 is 1.05% (six months
ended 30 September 2023: 1.06%), based on revenue profit before tax of
£5,022,000 (six months ended 30 September 2023: £5,772,000). This differs
from the standard rate of tax, 25% (six months ended 30 September 2023: 25%)
as a result of revenue not taxable for Corporation Tax purposes.
6 Total loss per Ordinary Share
Six months ended Six months ended
30 September 30 September
2024 2023
Unaudited Unaudited
Total loss £(3,820,000) £(7,340,000)
Weighted average number of Ordinary Shares in issue during the period 200,000 200,000
Total loss per Ordinary Share £(19.10) £(36.70)
The total loss per Ordinary Share detailed above can be further analysed
between revenue and capital, as below:
Revenue return per Ordinary Share
Revenue return £4,969,000 £5,711,000
Weighted average number of Ordinary Shares in issue during the period 200,000 200,000
Revenue return per Ordinary Share £24.84 £28.56
Capital loss per Ordinary Share
Capital loss £(8,789,000) £(13,051,000)
Weighted average number of Ordinary Shares in issue during the period 200,000 200,000
Capital loss per Ordinary Share £(43.94) £(65.26)
7 Net asset value per Ordinary Share
Six months ended Year ended
30 September 31 March
2024 2024
Unaudited Audited
Net assets attributable £191,164,753 £205,285,000
Ordinary Shares in issue at the period/year end 200,000 200,000
Net asset value per Ordinary Share £955.83 £1,026.43
8 Valuation of financial instruments
The Company’s investments and derivative financial instruments as disclosed
in the Statement of Financial Position are valued at fair value.
FRS 102 requires an entity to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making
the measurements. Categorisation within the hierarchy has been determined on
the basis of the lowest level input that is significant to the fair value
measurement of the relevant asset as follows:
* Level 1 – The unadjusted quoted price in an active market for identical
assets or liabilities that the entity can access at the measurement date.
* Level 2 – Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or liability,
either directly or indirectly.
* Level 3 – Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
The tables below set out fair value measurements of financial instruments as
at the year end by the level in the fair value hierarchy into which the fair
value measurement is categorised.
Financial assets/liabilities at fair value through profit or loss
Level 1 Level 2 Level 3 Total
At 30 September 2024 £’000 £’000 £’000 £’000
Investments 110,973 20,287 59,116 190,376
Level 1 Level 2 Level 3 Total
At 31 March 2024 £’000 £’000 £’000 £’000
Investments 110,456 19,624 69,002 199,082
Note: Within the above tables, level 1 comprises all the Company’s ordinary
investments, level 2 represents the investment in WS Lindsell Train North
American Equity Fund and level 3 represents the investment in LTL.
LTL Valuation Methodology
The current methodology was approved and has been applied to the monthly
valuations of the Company from 31 March 2022. J.P. Morgan Cazenove undertook
an independent review of the methodology in January 2024, which confirmed that
the methodology adopted in 2022 remained valid.
The methodology seeks to capture the changing economics and prospects for
LTL’s business. It is designed to be as transparent as possible so that
shareholders can themselves calculate how any change to the inputs would
affect the resultant valuation.
This methodology has a single component based on a percentage of LTL’s funds
under management (“FUM”), with the percentage applied being reviewed
monthly and adjusted to reflect the ongoing profitability of LTL. At the end
of each month the ratio of LTL’s notional annualised net profits* to LTL’s
FUM is calculated and, depending on the result, the percentage of FUM is
adjusted according to the table shown within this Report.
The Board reserves the right to vary its valuation methodology at its
discretion.
* LTL’s notional net profits are calculated by applying a fee rate
(averaged over the last six months) to the most recent end-month FUM to
produce annualised fee revenues excluding performance fees. Notional staff
costs of 45% of revenues, annualised fixed costs and tax are deducted from
revenues to produce notional annualised net profits.
9 Sections 1158/1159 of the Corporation Tax Act 2010
It is the intention of the Directors to conduct the affairs of the Company so
that the Company satisfies the conditions for approval as an Investment Trust
Company set out in Sections 1158/1159 of the Corporation Tax Act 2010.
10 Going Concern
The Directors believe, having considered the Company’s investment objective,
risk management policies, capital management policies and procedures, and the
nature of the portfolio and the expenditure projections, that the Company has
adequate resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the foreseeable
future, and, more specifically, that there are no material uncertainties
relating to the Company that would prevent its ability to continue in such
operational existence for at least twelve months from the date of the approval
of this Half-year Report. For these reasons, they consider there is reasonable
evidence to continue to adopt the going concern basis in preparing the
financial statements. In reviewing the position as at the date of this Report,
the Board has considered the guidance on this matter issued by the Financial
Reporting Council.
As part of their assessment, the Directors have given careful consideration to
the consequences for the Company of continuing uncertainty in the global
economy. As previously reported, stress testing was also carried out in April
2024 to establish the impact of a significant and prolonged decline in the
Company’s performance and prospects. This included a range of plausible
downside scenarios such as reviewing the effects of substantial falls in
investment values and the impact of the Company’s ongoing charges ratio.
11 2024 Accounts
The figures and financial information for the year to 31 March 2024 are
extracted from the latest published accounts of the Company and do not
constitute statutory accounts for the year.
Those accounts have been delivered to the Registrar of Companies and included
the Report of the Company’s auditor which was unqualified and did not
contain a reference to any matters to which the Company’s auditor drew
attention by way of emphasis without qualifying the report, and did not
contain a statement under section 498 of the Companies Act 2006.
Interim Management Report
The Directors are required to provide an Interim Management Report in
accordance with the UK Listing Authority’s Disclosure and Transparency
Rules. They consider that the Chairman’s Statement and the Investment
Manager’s Report, the following statements and the Directors’
Responsibility Statement below together constitute the Interim Management
Report for the Company for the six months ended 30 September 2024.
Principal Risks and Uncertainties
A review of the half year, including reference to the risks and uncertainties
that existed during the period and the outlook for the Company can be found in
the Chairman’s Statement and in the Investment Manager’s Review. The
principal risks faced by the Company fall into the following broad categories:
market risk; portfolio performance; share price performance; cyber risk; key
person risk; valuation risk; climate change; geopolitical or natural event
risk; and operational disruption. Information on each of these areas is given
in the Strategic Report/Business Review within the Annual Report for the year
ended 31 March 2024.
The Company’s principal risks and uncertainties have not changed materially
since the date of that report and are not expected to change materially for
the remaining six months of the Company’s financial year.
The Board, the Company Secretary and the Investment Manager discuss and
identify emerging risks as part of the risk identification process and have
considered the impact of technological breakthroughs, such as AI, may have on
the operations of the portfolio companies.
Related Party Transactions
During the first six months of the current financial year, no transactions
with related parties have taken place which have materially affected the
financial position or the performance of the Company.
Directors’ Responsibilities
The Board of Directors confirms that, to the best of its knowledge:
(i) the condensed set of financial statements contained within the Half-year
Report have been prepared in accordance with applicable UK Accounting
Standards; and
(ii) the interim management report includes a true and fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
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 performance of the entity during that period; and any changes in
the related party transactions described in the last Annual Report that could
do so.
The Half-year Report has not been audited by the Company’s auditors.
This Half-year Report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the information
available to them up to the date of this Report and such statements should be
treated with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such forward-looking
information.
For and on behalf of the Board
Roger Lambert
Chairman
2 December 2024
Appendix 1
Half-year review of Lindsell Train Limited (“LTL”) the Investment Manager
of The Lindsell Train Investment Trust plc (“LTIT”), as at 31 July 2024
Funds under Management
Jul 2024 Jan 2024 Jul 2023
FUM by Strategy £m £m £m
UK 5,818 6,729 7,456
Global 7,894 8,956 9,798
Japan 71 154 216
North America 39 37 35
Total 13,822 15,876 17,505
Largest Client Accounts
Jul 2024 Jan 2024 Jul 2023
% of FUM % of FUM % of FUM
Largest Pooled Fund Asset 30% 29% 29%
Largest Segregated Account 12% 11% 11%
Financials
Unaudited
Jul 2024 Jul 2023 %
Profit & Loss £’000 £’000 Change
Fee Revenue
Investment Management Fees 36,451 45,240 -19%
Performance Fees – –
Interest 498 433
36,949 45,673
Staff Remuneration* (10,912) (13,542) -19%
Fixed Overheads (2,618) (2,352) 11%
Operating Profit 23,419 29,779 -21%
FX Currency Translation Loss (39) (853)
Investment Unrealised Gain 299 217
Gilts/Bonds Gain 1,509 840
Profit before taxation 25,188 29,983
Taxation (6,319) (6,857)
Net Profit 18,869 23,126 -18%
Dividends (17,169) (20,465)
Retained profit 1,700 2,661
Balance Sheet
Fixed Assets 33 75
Investments 80,945 62,113
Current Assets (Inc cash at bank) 31,992 50,675
Liabilities (7,752) (12,311)
Net Assets 105,219 100,551
Capital & Reserves
Called up Share Capital 266 266
Treasury Shares (437) (437)
Profit & Loss Account 105,390 100,722
Shareholders' Funds 105,219 100,551
* Staff costs include permanent staff remuneration, social security,
temporary apprentice levy, introduction fees and other staff related costs. No
more than 25% of fees (other than LTIT) can be paid as permanent staff
remuneration.
Five Year History
Unaudited
Jul 2024 Jul 2023 Jul 2022 Jul 2021 Jul 2020
Operating Profit Margin 63% 65% 65% 64% 66%
Earnings per share (£) 708 867 1,083 1,237 1,084
Dividends per share (£) 644 768 975 1,004 949
Total Staff Cost as % of Revenue 30% 30% 31% 33% 29%
Opening FUM (£m) 17,505 19,562 24,298 21,151 22,563
Changes in FUM (£m) -3,683 -2,057 -4,736 3,147 -1,412
– of market movement 603 1,054 -1,271 3,040 -1,385
– of net fund inflows/(outflows) -4,286 -3,111 -3,465 106 -27
Closing FUM (£m) 13,822 17,505 19,562 24,298 21,151
LTL Open-ended funds as % of total 60% 64% 66% 73% 72%
Client Relationships
– Pooled funds 5 5 5 5 5
– Segregated accounts 13 15 18 17 17
Ownership
Jul 2024 Jan 2024 Jul 2023 Jan 2023 Jul 2022
Michael Lindsell and spouse 9,578 9,578 9,630 9,650 9,650
Nick Train and spouse 9,578 9,578 9,630 9,650 9,650
The Lindsell Train Investment Trust plc 6,378 6,378 6,421 6,450 6,450
Other Directors/employees 1,126 1,126 979 893 805
26,660 26,660 26,660 26,643 26,555
Treasury Shares 0 0 0 17 105
Total Shares 26,660 26,660 26,660 26,660 26,660
Board of Directors
Nick Train Chairman and Portfolio Manager
Michael Lindsell Chief Executive and Portfolio Manager
Michael Lim IT Director and Secretarial
Joss Saunders Chief Operating Officer
James Bullock Portfolio Manager
Jessica Cameron Head of Marketing & Client Services
Jane Orr Non-Executive Director
Julian Bartlett Non-Executive Director
Rory Landman Non-Executive Director
Employees
Jul 2024 Jan 2024 Jul 2023 Jan 2023 Jul 2022
Investment Team 6 6 7 7 7
(including Portfolio Managers)
Client Servicing & Marketing 8 7 8 9 7
Operations & Administration 13 13 12 12 12
Non-Executive Directors 3 3 3 2 2
30 29 30 30 28
Appendix 2
WS Lindsell Train North American Equity Fund Portfolio Holdings at 30
September 2024
(All ordinary shares unless otherwise stated)
Fair % of
value net
Holding Security £’000 assets
1,877 FICO 2,720 6.9%
19,200 Oracle 2,439 6.2%
11,600 American Express 2,345 5.9%
11,200 Visa 2,294 5.8%
5,900 S&P Global 2,272 5.8%
10,300 Equifax 2,255 5.7%
17,750 Alphabet 2,195 5.6%
24,910 Walt Disney 1,786 4.5%
3,800 Intuit 1,759 4.5%
18,100 TKO Group 1,670 4.2%
20,100 Colgate - Palmolive 1,555 3.9%
7,300 Verisk Analytics 1,458 3.7%
8,600 CME Group 1,415 3.6%
3,560 Adobe 1,374 3.5%
10,800 PepsiCo 1,369 3.5%
20,400 Nike 1,344 3.4%
20,440 PayPal 1,189 3.0%
21,350 Mondelez 1,173 3.0%
21,100 Coca-Cola 1,130 2.9%
14,425 Estee Lauder 1,072 2.7%
12,000 T Rowe Price 974 2.5%
26,601 Brown-Forman 953 2.4%
6,065 Johnson & Johnson 733 1.9%
5,100 Hershey 729 1.8%
3,300 Madison Square Garden Sports 512 1.3%
14,739 Kenvue 254 0.6%
Total Investments 38,970 98.8%
Net Current Assets 472 1.2%
Net Assets 39,442 100.0%
Appendix 3
LTIT Director’s valuation of LTL (unaudited)
30 Sept 2024 30 Sept 2023
Notional annualised net profits (A)* (£’000) 24,680 31,411
Funds under Management less LTIT holdings (B) (£’000) 13,357,008 16,339,590
Normalised notional net profits as % of FUM A/B = (C) 0.185% 0.192%
% of FUM (D) (see table below to view % corresponding to C) 1.85% 1.90%
Valuation (E) i.e. B x D (£’000) 247,105 310,452
Number of shares in issue (F) 26,660 26,660
Valuation per share in LTL i.e. E / F £9,269 £11,645
* Notional annualised net profits are made up of:
– annualised fee revenue, based on 6-mth average fee rate applied to most
recent month-end AUM
– annualised fee revenue excludes performance fees
– annualised interest income, based on 3-mth average
– notional staff costs of 45% of annualised fee revenue
– annualised operating costs (excluding staff costs), based on 3-mth
normalised average
– notional tax at Sep '24 - 25%.
Notional annualised net profits*/FUM (%) Valuation of LTL - Percentage of FUM
0.15 – 0.16 1.70%
0.16 – 0.17 1.75%
0.17 – 0.18 1.80%
0.18 – 0.19 1.85%
0.19 – 0.20 1.90%
0.20 – 0.21 1.95%
0.21 – 0.22 2.00%
Glossary of Terms and Alternative Performance Measures (“APM”) (unaudited)
Alternative Investment Fund Managers Directive (“AIFMD”)
The Alternative Investment Fund Managers Directive (the “Directive”) is a
European Union Directive that entered into force on 22 July 2013. The
Directive regulates EU fund managers that manage alternative investment funds
(this includes investment trusts).
Alternative Performance Measure (“APM”)
An alternative performance measure is a financial measure of historical or
future financial performance, financial position or cash flow that is not
prescribed by the relevant accounting standards. The APMs are the discount and
premium, dividend yield, share price and NAV total returns and ongoing
charges. The Directors believe that these measures enhance the comparability
of information between reporting periods and aid investors in understanding
the Company’s performance.
Benchmark
With effect from 1 April 2021 the Company’s comparator benchmark is the MSCI
World Index total return in Sterling. Prior to 1 April 2021 the benchmark was
the annual average redemption yield on the longest-dated UK government fixed
rate (1.625% 2071) calculated using weekly data, plus a premium of 0.5%,
subject to a minimum yield of 4.0%.
Discount and premium (APM)
If the share price of an investment trust is higher than the Net Asset Value
(NAV) per share, the shares are trading at a premium to NAV. In this
circumstance the price that an investor pays or receives for a share would be
more than the value attributable to it by reference to the underlying assets.
The premium is the difference between the Share Price and the NAV, expressed
as a percentage of the NAV.
A discount occurs when the share price is below the NAV. Investors would
therefore be paying less than the value attributable to the shares by
reference to the underlying assets.
A premium or discount is generally the consequence of the balance of supply
and demand for the shares on the stock market.
The discount or premium is calculated by dividing the difference between the
Share Price and the NAV by the NAV.
As at As at
30 September 31 March
2024 2024
£ £
Share Price 771.00 801.00
Net Asset Value per Share 955.83 1,026.43
Discount to Net Asset Value per Share 19.3% 22.0%
MSCI World Index total return in Sterling (the Company’s comparator
Benchmark)
The MSCI requires the Company to include the following statement in the
Half-year Report.
“The MSCI information (relating to the Benchmark) may only be used for your
internal use, may not be reproduced or redisseminated in any form and may not
be used as a basis for or a component of any financial instruments or products
or indices. None of the MSCI information is intended to constitute investment
advice or a recommendation to make (or refrain from making) any kind of
investment decision and may not be relied on as such. Historical data and
analysis should not be taken as an indication or guarantee of any future
performance analysis, forecast or prediction. The MSCI information is provided
on an “as is” basis and the user of this information assumes the entire
risk of any use made of this information. MSCI, each of its affiliates and
each other person involved in or related to compiling, computing or creating
any MSCI information (collectively, the “MSCI Parties”) expressly
disclaims all warranties (including, without limitation, any warranties of
originality, accuracy, completeness, timeliness, non-infringement,
merchantability and fitness for a particular purpose) with respect to this
information. Without limiting any of the foregoing, in no event shall any MSCI
Party have any liability for any direct, indirect, special, incidental,
punitive, consequential (including, without limitation lost profits) or any
other damages. (www.msci.com).”
Net asset value (“NAV”) per Ordinary Share
The NAV is shareholders’ funds expressed as an amount per individual share.
Equity shareholders’ funds are the total value of all the Company’s
assets, at current market value, having deducted all current and long-term
liabilities and any provision for liabilities and charges.
The NAV of the Company is published weekly and at each month end.
The figures disclosed in the Financial Highlights have been calculated as
shown below:
Six months
ended Year ended
30 September 31 March
2024 2024
‘000 ‘000
Net Asset Value (a) £191,165 £205,285
Ordinary Shares in issue (b) 200 200
Net asset value per Ordinary Share (a) ÷ (b) £955.83 £1,206.43
Revenue return per share
The revenue return per share is the revenue return profit for the period
divided by the weighted average number of ordinary shares in issue during the
period.
Share price and NAV total return (APM)
This is the return on the share price and NAV taking into account both the
rise and fall of share prices and valuations and the dividends paid to
shareholders.
Any dividends received by a shareholder are assumed to have been reinvested in
either additional shares (for share price total return) or the Company’s
assets (for NAV total return).
The share price and NAV total returns are calculated as the return to
shareholders after reinvesting the net dividend in additional shares on the
date that the share price goes ex-dividend.
Six months ended
30 September 2024
LTIT NAV LTIT Share Price
NAV/Share Price at 30 September 2024 a £955.83 £771.00
Dividend Adjustment Factor* b 1.23820 1.06696
Adjusted closing NAV/Share Price c = a x b £1,183.51 £822.63
NAV/Share Price 31 March 2024 d £1,206.43 £801.00
Total return (c/d)-1 x 100 -1.9% +2.7%
* The dividend adjustment factor is calculated on the assumption that the
dividend of £51.50 paid by the Company during the year was reinvested into
shares or assets of the Company at the cum income NAV per share/share price,
as appropriate, at the ex-dividend date.
LTL total return performance
The total return performance for LTL is calculated as the return after
receiving but not reinvesting dividends received over the period.
Six months ended
30 September 2024
LTL valuation
Valuation at 31 March 2024 a £10,819
Valuation at 30 September 2024 b £9,269
Dividend per share paid during the period c £644
Total return (b-a)+c /a x 100 -8.4%
Treasury Shares
Shares previously issued by a company that have been bought back from
Shareholders to be held by the Company for potential sale or cancellation at a
later date. Such shares are not capable of being voted and carry no rights to
dividends.
-ENDS-
For further information please contact
Victoria Hale
Company Secretary
Frostrow Capital LLP
020 3100 8732
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