Half Yearly Report

RNS Number : 2855G

British Assets Trust PLC

10 May 2011

 



BRITISH ASSETS TRUST PLC

To:                RNS

From:            British Assets Trust plc

Date:             10 May 2011

Half-Yearly Financial Report for the six months ended 31 March 2011

Highlights

·     Net asset value total return of 10.2 per cent compared with a total return of 9.5 per cent from the benchmark index

·     Share price total return of 9.2 per cent

·     Dividend yield of 4.6 per cent

Chairman's Statement

Stock markets made good progress during the six month period ended 31 March 2011. The Company's net asset value total return was 10.2 per cent which compares favourably against a total return of 9.5 per cent from the composite benchmark index of 75 per cent FTSE All-Share Index and 25 per cent FTSE World (ex UK) Index. The share price total return for the period was 9.2 per cent and the debt-adjusted discount of share price to net asset value per share ended the period at 2.5 per cent.

Despite concerns over the impact of the Government's austerity measures, economic newsflow in the UK was generally positive during the period. Corporate newsflow has also been encouraging. However, the economic recovery remains fragile and this has caused a degree of uncertainty in stock markets, as have the continuing concerns over the economic health of some of the peripheral European countries and the implications this might have for other parts of the region. Markets have also been affected by the uncertainties surrounding the unrest in the Middle East and North Africa and the earthquake and tsunami in Japan.

Stock market returns from emerging markets, whilst reasonable, lagged those from developed markets during the period, reflecting moves by emerging nations, in particular China, to cool their economies as large flows of liquidity and rising commodity prices have contributed significantly to inflationary pressures and currency appreciation. The Company was overweight in emerging markets versus developed markets during the period and, as shown in the table below, this had an adverse effect on the contribution of asset allocation to performance. The Managers reduced the Company's exposure to emerging markets slightly during the period, however it remains overweight as the strong growth prospects still suggest good performance on a longer term view.

Bonds underperformed against equities during the period but the Company's corporate bond portfolio continues to be an important part of the overall portfolio, providing a good level of income which helps support the rate of dividend.

The table below provides a breakdown of the estimated contributions to the net asset value total return for the period.

Attribution of Return
Market/benchmark return	9.5%
Stock Selection
UK equities	0.1
Overseas equities	0.9
Asset allocation	-0.3
Corporate bonds	-1.0
Gearing	1.8
Expenses	-0.8
	---------
British Assets Trust net asset value total return	10.2%
	---------

 

Stock selection was positive within both the UK and overseas portfolios. The impact of gearing was positive in a rising market.

Earnings and Dividends

The Company's revenue earnings for the period were 2.6p per share (2010: 2.4p). A first quarterly interim dividend of 1.442p per share was paid on 8 April 2011 and the Board has declared a second quarterly interim dividend of 1.442p per share which will be paid on 8 July 2011 to shareholders on the register on 10 June 2011. These dividends are unchanged from the previous year.

BP has now returned to paying dividends, albeit at only half the level paid prior to the suspension in 2010. This, combined with a continuing trend of increasing dividends in the UK, where the Company earns most of its income, has been beneficial to the revenue account. However, dividends are still below the level they were prior to the credit crisis. The Board expects the Company to benefit from continued dividend growth in the UK and overseas but, having reviewed the Company's longer term revenue forecasts in detail, the Board still considers it likely that the level of dividend will be maintained rather than increased in respect of the current financial year.

Gearing

At the end of the period, the Company's level of gearing net of cash was 17.7 per cent, represented by equity gearing of 3.5 per cent and 14.2 per cent in corporate bonds.

The Company's borrowings are represented by £60 million 6.25 per cent Bonds which are due for redemption in 2031 and a £60 million bank revolving credit facility which matures in March 2013, £27.7 million of which was drawn down at the end of the period.

Outlook

Stock markets are likely to remain sensitive to any negative economic data, the oil price and events in the Middle East. However, the prospects for corporate earnings and dividend growth are reasonable and this should be positive for stock markets.

Lynn Ruddick

Chairman

Unaudited Income Statement

For the Six Months ended 31 March 2011

	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments	-	32,488	32,488
Exchange differences	-	(142)	(142)
Income	8,853	-	8,853
Management expenses (see note 6)	(178)	(1,259)	(1,437)
Other expenses	(403)	-	(403)
Net return before finance costs & tax	8,272	31,087	39,359
Finance Costs:
6.25% Bonds 2031	(474)	(1,422)	(1,896)
Bank borrowings	(44)	(132)	(176)
Return on ordinary activities before tax	7,754	29,533	37,287
Tax on ordinary activities	(96)	-	(96)
Return attributable to shareholders	7,658	29,533	37,191
Return per share (p) (see note 4)	2.6	10.2	12.8

The total column of this statement is the Profit and Loss Account of the Company.  The

supplementary revenue and capital columns are both prepared under guidance published

by the Association of Investment Companies.

Unaudited Income Statement

For the Six Months ended 31 March 2010

	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments	-	39,406	39,406
Exchange differences	-	22	22
Income	8,035	-	8,035
Management expenses (see note 6)	(166)	(808)	(974)
Other expenses	(286)	-	(286)
Net return before finance costs & tax	7,583	38,620	46,203
Finance Costs:
6.25% Bonds 2031	(474)	(1,422)	(1,896)
Bank borrowings	(42)	(126)	(168)
Return on ordinary activities before tax	7,067	37,072	44,139
Tax on ordinary activities	(129)	-	(129)
Return attributable to shareholders	6,938	37,072	44,010
Return per share (p) (see note 4)	2.4	12.7	15.1

Audited Income Statement

For the Year ended 30 September 2010

		Revenue £'000	Capital £'000	Total £'000
Gains on investments		-	30,471	30,471
Exchange differences		-	323	323
Income		17,156	-	17,156
Management expenses (see note 6)		(334)	(1,452)	(1,786)
Other expenses		(845)	-	(845)
Net return before finance costs & tax		15,977	29,342	45,319
Finance Costs:
6.25% Bonds 2031		(944)	(2,833)	(3,777)
Bank borrowings		(86)	(257)	(343)
Return on ordinary activities before tax		14,947	26,252	41,199
Tax on ordinary activities		(353)	-	(353)
Return attributable to shareholders		14,594	26,252	40,846
Return per share (p) (see note 4)		5.0	9.0	14.0

Unaudited Balance Sheet	As At 31 March 2011	Audited As At 30 September 2010	As At 31 March 2010
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	477,182	457,280	464,509
Current assets
Debtors	6,669	4,364	3,345
Cash at bank and on deposit	14,918	7,002	11,355
	21,587	11,366	14,700
Creditors:
Amounts falling due within one year	(33,721)	(31,405)	(30,433)
Net current liabilities	(12,134)	(20,039)	(15,733)
Total assets less current liabilities	465,048	437,241	448,776
Creditors:  amounts falling due after more than one year:
6.25% Bonds 2031	(59,461)	(59,448)	(59,434)
Net assets	405,587	377,793	389,342
Capital and reserves
Called-up share capital	72,778	72,778	72,778
Capital redemption reserve	15,563	15,563	15,563
Capital reserve	286,777	257,244	268,064
Revenue reserve	30,469	32,208	32,937
Shareholders' funds	405,587	377,793	389,342
Net asset value per share (p) (see note 5)	139.3	129.8	133.7

Unaudited Reconciliation of Movements in Shareholders' Funds

	Six months ended	Six months ended	Audited Year ended
	31 March	31 March	30 September
	2011	2010	2010
	£'000	£'000	£'000
Opening shareholders' funds	377,793	354,742	354,742
Dividends paid	(9,397)	(9,410)	(17,795)
Return attributable to ordinary shareholders	37,191	44,010	40,846
Closing shareholders' funds	405,587	389,342	377,793

Summarised Unaudited Statement of Cash Flows

	Six months ended	Six months ended	Audited Year ended
	31 March	31 March	30 September
	2011	2010	2010
	£'000	£'000	£'000
Net cash inflow from operating activities	6,600	4,937	13,628
Servicing of finance	(2,050)	(2,048)	(4,096)
Investments sold less investments purchased	12,517	4,625	1,669
Dividends paid	(9,397)	(9,410)	(17,795)
Net cash inflow/(outflow) before financing	7,670	(1,896)	(6,594)
Financing:
Revolving advance facility drawndown/(repaid)	352	-	(304)
Increase/(decrease) in cash	8,022	(1,896)	(6,898)

Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash	8,022	(1,896)	(6,898)
Revolving advance facility (drawdown)/repaid	(352)	-	304
Exchange differences	(2)	(91)	209
Increase in 6.25% Bonds 2031 liability	(13)	(13)	(27)
Opening net debt	(79,871)	(73,459)	(73,459)
Closing net debt	(72,216)	(75,459)	(79,871)

Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	39,359	46,203	45,319
Gains on investments	(32,488)	(39,406)	(30,471)
Exchange differences	142	(22)	(323)
Tax on investment income	(96)	(129)	(353)
Changes in working capital and other non-cash items	(317)	(1,709)	(544)
Net cash inflow from operating activities	6,600	4,937	13,628

Statement of Principal Risks and Uncertainties

The Company's assets consist mainly of listed securities and its principal risks are therefore market related. The Company is also exposed to currency risk in respect of overseas markets in which it invests. Other risks faced by the Company include external, investment and strategic, regulatory, operational, and financial risks. These risks, and the way in which they are managed, are described in more detail under the heading Principal Risks and Risk Management within the Business Review in the Company's Annual Report for the year ended 30 September 2010. The Company's principal risks and uncertainties have not changed since the date of that report.

Statement of Directors' Responsibilities in Respect of the Half-Yearly Financial Report

We confirm that to the best of our knowledge:

·     the financial statements have been prepared in accordance with the Statement 'Half-Yearly Financial Reports' issued by the UK Accounting Standards Board and give a true and fair view of the assets, liabilities, financial position and return of the Company;

·     the Chairman's Statement (constituting the Interim Management Report) together with the Statement of Principal Risks and Uncertainties above include a fair review of the information required by the Disclosure and Transparency Rules ("DTR") 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·     the financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so. The only such transactions that have taken place during the period have been the payment of the investment management fee as disclosed in note 3.

On behalf of the Board

Lynn Ruddick

Director

Notes:

1.   The unaudited interim results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 30 September 2010.

2.   The results for the first six months should not be taken as a guide to the results for the full year.

3.   The second interim dividend of 1.442p per Ordinary Share will be paid on 8 July 2011 to shareholders on the register on 10 June 2011.  In accordance with accounting standards this dividend and the first interim dividend of 1.442p per Ordinary Share, paid on 8 April 2011, have not been accounted for in the results for the six months ended 31 March 2011.

The last date for receipt of mandate instructions for those shareholders who wish to join the Dividend Reinvestment Plan is 17 June 2011.

4.   Return per share is based on a weighted average 291,112,282 Ordinary Shares in issue during the period (31 March 2010 and 30 September 2010 - same).

5.   There were 291,112,282 Ordinary Shares in issue at 31 March 2011 (31 March 2010 and 30 September 2010 - same). 

6.   Management Expenses

	Six months ended 31 March 2011			Six months ended 31 March 2010			Year ended 30 September 2010
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment Management Fee:
- basic fee	178	534	712	166	499	665	334	1,002	1,336
- performance fee	-	725	725	-	309	309	-	450	450
	178	1,259	1,437	166	808	974	334	1,452	1,786

7.   The Company's geographic exposure as a percentage of shareholders' funds at 31 March 2011 was as follows:

	31 March 2011	30 September 2010
UK	74.7	76.2
Global Developed (ex UK)	18.0	17.3
Emerging Markets	10.8	12.7
Corporate Bonds	14.2	14.8
Cash	3.8	2.0
Borrowings	(21.5)	(23.0)
	_____	____
	100.0	100.0

8.   The results for the half-year ended 31 March 2011 and 31 March 2010, which have not been audited or reviewed by auditors, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 30 September 2010, which received an unqualified audit report, have been lodged with the Registrar of Companies.  The Half-Yearly Financial Report is available at the Company's website address, www.british-assets.co.uk.

For further information please contact:

Julie Dent

F&C Investment Business Limited

0207 628 8000

[e-mail]

 

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