BIT - Half Year Report

LEGAL ENTITY IDENTIFIER: 213800B9YWXL3X1VMZ69 THE BANKERS INVESTMENT TRUST PLC (‘the Company’) Unaudited results for the half-year ended 30 April 2024 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 2024 Net asset value (‘NAV’) per share1 122.7p Share price 112.2p Revenue return per share 1.31p Dividends paid or declared in respect of the period2 1.344p 30 April 2023 Net asset value (‘NAV’) per share1 112.3p Share price 100.6p Revenue return per share 1.29p Dividends paid or declared in respect of the period2 1.24p Total return performance to 30 April 2024 (including dividends reinvested and excluding transaction costs) 6 months % 1 year % 3 years % 5 years % 10 years % NAV3 17.5 14.3 17.0 50.5 174.0 FTSE World Index4 16.6 19.1 30.4 72.8 149.4 Share price5 21.5 14.4 5.2 38.4 154.5 1 Net asset value per share with debt at par 2 The first interim dividend for 2024 was paid on 31 May 2024; the second interim dividend has been declared and will be paid on 30 August 2024 3 Net asset value total return per share with income reinvested and with debt at fair value 4 For 10 years, the benchmark is a composite of the FTSE World Index and the FTSE All-Share Index 5 Share price total return using mid-market closing price Sources: Janus Henderson, Morningstar Direct and LSEG Datastream INTERIM MANAGEMENT REPORT CHAIR’S STATEMENT Dear shareholder Performance Your Company has delivered a strong net asset value total return over the six months ended 30 April 2024 of 17.5% (2023: 8.1%) and a share price total return of 21.5% (2023: 5.4%), both returns outperforming the FTSE World Index total return of 16.6% (2023: 3.5%). Stock markets around the world rose in value principally due to solid corporate profit recovery exceeding forecasts by analysts. The anticipated tailwind of interest rate cuts from central banks never materialised as inflation remained higher than expected. The Fund Manager discusses the key drivers of performance in the period in more detail in his report. Following a strategic review, our Manager has started a process of concentrating the portfolio into four regional portfolios and reducing the number of holdings to approximately 100. This will direct a greater amount of the Company’s capital into the portfolio managers’ best investment ideas and bring greater focus to the regional portfolios. The reduction in portfolios from six to four will create a Pan European portfolio, incorporating the UK, and a Pan Asian (ex Japan) portfolio, including the Chinese A shares. This will reduce the overlap within these regions and remove potential conflicts. We continue to believe in the value of regional specialists with access to stock markets right across the globe. We are also pleased to announce that Jamie Ross, our European portfolio manager, will assume the role of Deputy Fund Manager, following the recent retirement of Mike Kerley. Jamie has over 17 years of financial industry experience and has been a member of the Company’s investment team since late 2018. We look forward to working more closely with Jamie alongside our Fund Manager, Alex Crooke. Revenue Our net revenue for the six months was £15.9 million (2023: £16.5 million), equivalent to 1.31p per share (2023: 1.29p). The reduction in revenue was a result of lower interest income, partially offset by a lower finance cost following the repayment of the 8% 2023 debenture on 31 October 2023. A reduced share count following share buybacks resulted in the earnings per share increasing by 1.6% over the period. A first interim dividend of 0.672p per share (2023: 0.62p) was paid on 31 May 2024. The Board has declared a second interim dividend of 0.672p (2023: 0.62p) per share, an increase of 8.4%, which will be payable on 30 August 2024 to shareholders on the register on 26 July 2024. The Board’s current expectation is that the dividend for the full year will be at least 5% above the total dividend paid in 2023. This continues the Company’s progressive dividend policy of successive annual dividend growth which it has achieved over the past 57 years. Share buy-backs The Company’s share price has continued to trade at a wide discount to its net asset value and we have taken advantage of this opportunity to buy back shares from the market. This activity is beneficial to ongoing shareholders, as shares are only purchased when the Company’s shares are trading at a discount to NAV, thereby enhancing shareholder value. A total of 49,748,991 shares were bought back at an average discount of 12.3% to the net asset value in the six months ended 30 April 2024 (2023: 24,080,927 shares bought back at an average discount of 9.0%) for a total consideration of £53.4 million (2023: £24.9 million). The discount at 30 April 2024 was 8.6% (2023: 10.4%). Board changes As mentioned at the year end, Julian Chillingworth retired from the Board at the Annual General Meeting in February 2024, having served as a Director for nine years, and as Senior Independent Director for the latter five years of his tenure. Richard West, who joined the Board on 1 April 2020, was appointed as the Company’s Senior Independent Director on 23 April 2024. Outlook Economic recovery is now under way in the European and Chinese markets while growth remains robust in the US and Japan. Corporate earnings should therefore be expected to continue to grow, supported at some point by interest rate cuts later this year or next. While share price returns to date have discounted some of this positive outlook, valuations do not look stretched which will ensure that your Company is well placed to continue to grow. Simon Miller Chair 25 June 2024 FUND MANAGER’S REPORT Market Review The six month period to the end of April 2024 has been a good time to be invested in equity markets, as a strong recovery in share prices led to most markets reaching new all-time highs. Investors were optimistic that fading price inflation would lead to the tight monetary policy being eased by rate cuts. However, as it turned out, rates were not cut during the period in any major market and instead it was the delivery of stronger-than-expected corporate profits that underpinned higher share prices. In most sectors, companies experienced improving margins as higher prices stuck and energy costs fell. The US market was marginally the better performer during the period, closely followed by Europe, Japan and the UK. The best performing stocks continued to be those focused on delivering artificial intelligence (‘AI’) solutions, particularly in the US market. However, recovery was fairly broad based in most markets as financials, industrials and retail exposed companies performed best, while energy, utilities and telecoms were laggards. Performance As indicated in the Annual Report, a number of new holdings were purchased in zero yielding US technology companies, including Alphabet, Amazon and Meta. Results from these companies were well received during the period, as margins grew strongly on the back of reducing costs by closing loss-making divisions and growing revenues. The technology exposure in the overall portfolio was increased from 16.3% to 22.3%. Despite these new additions, performance in the US portfolio continued to lag the benchmark, driven principally by lack of exposure to Nvidia. There is exposure to semiconductor manufacture across a wide spectrum of technologies in each of the Japanese, US, Asian and European portfolios. However, Nvidia is garnering all the exposure, and investors chasing returns. Undoubtedly they are the leader in developing AI chips, but we do have concerns that new orders will start to plateau leading to pricing pressure, ultimately impacting their share price. Performance in the Japanese portfolio was considerably better than the benchmark, delivering a return nearly 5% ahead. This was driven by recovery in financials as the Bank of Japan raised interest rates for the first time since 2007, ending the period of negative interest rates. The Yen weakened over the period but the stock market recovery more than made up for this, delivering a total return of 20.2% over the period. The European, Asian and Chinese portfolios also delivered returns in excess of their benchmarks. Portfolio The portfolio has grown in both the number of regions and stocks over the past decade, delivering diversification and access to new markets such as China and India. However this has thrown up conflicts as companies can be dual listed and choices within sectors have narrowed due to consolidation by merger or acquisition. We have therefore decided to consolidate the number of regions to four: North America, Pan Europe (to include the UK), Pan Asia (ex Japan) and Japan. We will continue to invest directly in the UK and Chinese markets but with a single investment team overseeing these regions with greater scope to invest more capital in the best companies across wider regions. Jamie Ross, supported by myself, will manage the Pan European portfolio and Sat Duhra will manage the Pan Asian portfolio. Additionally, we have conducted a careful review of stock selection and portfolio construction. The conclusion of this work was that smaller holdings were not improving performance and by concentrating the portfolios, we would have a higher active stance, an indicator of greater divergence from the index. We therefore intend to increase the amount of capital in our best ideas by reducing the number of holdings towards 100. We will target regional portfolios of 20 investments with slightly more in the US, as it is a market with significantly more listed companies and therefore investment opportunities. We expect the tighter concentrated portfolio to be substantially implemented by the end of October 2024. Outlook We are excited by the prospect of a focused portfolio, investing more in our best ideas. In meetings with our investee companies, we are hearing positive messages about orders improving, restocking from customers and margins holding up. Inflation has fallen close to central bank targets and the first interest rate cuts have started in major economic regions. The overall outlook is more positive than six months ago and should support the increase in share prices we have seen this year. Alex Crooke Fund Manager 25 June 2024 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 Head of Investment Trusts Janus Henderson Investors Telephone: 020 7818 4458 Harriet Hall PR Director, Investment Trusts Janus Henderson Investors Telephone: 020 7818 2636 PLEASE REFER TO THE PDF TO VIEW THE FULL ANNOUNCEMENT 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. *********************************