Scottish Investment Trust warns of impact from US rate hike as profits fall

8th Dec 2014 07:44

Global investment trust group Scottish Investment Trust (SIT) on Monday reported a decline in annual profits and warned that an interest-rate hike in the States could rattle financial markets.Earnings per share fell to 11.51p in the 12 months to 31 October, down 14.2% on the year before. Total income dropped 10.9% to £19.85m.The company said the decline was due to the lower level of investment during the first part of the year, as well as a higher contribution from special dividends the year before.Net asset value with borrowings at market value was down 1% over the year at 661.6p.SIT's share price declined 0.8% to 598p during the period, compared with a 6.1% rise in the FTSE All-World Index.Nevertheless, the firm recommended a final dividend of 7.2p per share, leading to a full-year payout of 12p per share, up 3.4% on the year before.The company noted the "disparity in growth prospects" which shaped its financial year with anticipated policy tightening in the US strengthening the dollar, and weaker growth and stimulatory measures in the Eurozone, Japan and China leading to a weakening of their respective currencies.Chairman Douglas McDougall said that an increase in US interest rates - expected at some point next year - "has the potential to have a destabilising impact on global markets"."Investment markets are therefore likely to remain in thrall to the deliberations of the US Federal Reserve and other central banks," he said.However, he said that the recent plunge in oil prices will probably have a stimulatory impact on consumer spending and economic activity as a whole."The company has deployed a proportion of the long-term borrowings into higher-yielding equities and retains more than £60m in cash which could be utilised should attractive opportunities arise," McDougall said.