Half Yearly Report

RNS Number : 1185D

British Assets Trust PLC

11 May 2012

 



BRITISH ASSETS TRUST PLC

To:                   RNS

From:              British Assets Trust plc

Date:               11 May 2012

Half-Yearly Financial Report for the six months ended 31 March 2012

Highlights

·     Net asset value total return of 15.9% compared with a total return of 15.5% from the benchmark index

·     Share price total return of 14.4%

·     Dividend yield of 4.8%

·     Premium of net asset value to share price of 0.5%* at period end

* Net asset value (non-UK GAAP) adjusted to reflect market value of debt

Chairman's Statement

The Company's net asset value total return for the six month period ended 31 March 2012 was 15.9 per cent. This compares with a total return of 15.5 per cent from the composite benchmark index of 80 per cent FTSE All-Share Index and 20 per cent FTSE World (ex UK) Index. The share price total return during the period was 14.4 per cent.

Global equity markets performed strongly during the period under review. The combination of the Long-Term Refinancing Operations implemented by the European Central Bank to tackle the debt crisis in the Eurozone, resilient economic data in the US, and evidence that the Chinese economy is not slowing any more than had been feared were all helpful.

In the UK, the Government remains committed to its austerity-led approach to reducing the structural deficit. There are signs of improving sentiment and confidence in certain parts of the economy, but the deteriorating position in Europe has placed further constraints on growth prospects in the shorter term.

The following table provides an estimate of the composition of the Company's performance during the period under review.

Market/benchmark return	15.5%
Stock selection	-1.1%
Asset allocation	0.0%
Corporate bonds	-0.7%
Gearing	2.4%
Expenses	-0.2%
British Assets Trust net asset value total return	15.9%

Sub-portfolio performance did not fully capture the sharp rise in markets over the period. Most of the portfolios outperformed their regional benchmark indices but the notable exception to this was the Global High Yield portfolio. Given its more absolute return focus and emphasis on higher yield generation, performance lagged the index during this rally which saw higher yielding companies in general underperform.

Earnings and Dividends

The Company's revenue earnings for the period were 3.0p per share (2011: 2.6p). A first quarterly interim dividend of 1.442p per share was paid on 5 April 2012 and the Board has declared a second quarterly interim dividend of 1.442p per share which will be paid on 6 July 2012 to shareholders on the register on 8 June 2012. These dividends are unchanged from the previous year.

Gearing

As at 31 March 2012, the Company's level of gearing, net of cash, was 16.4 per cent. This was represented by 3.3 per cent of equity gearing and 13.1 per cent in corporate bonds.

The Company's borrowings comprise £60 million 6.25 per cent Bonds which are due for redemption in 2031, and a £60 million bank facility which matures in March 2013. £23.0 million of the bank facility was drawn down at the end of the period.

Outlook

Although the Managers are expecting a modest economic recovery in the UK during the remainder of 2012, for so long as the Government stays committed to its austerity package the economy is unlikely to improve materially. In the near term, economic growth is likely to be stronger in the US than elsewhere in the developed world. In emerging markets, and in China in particular, signs of monetary easing as inflation fears subside should enable a "soft landing". The Managers therefore continue to favour overseas equity markets, where the portfolio remains overweight.

Dividend growth expectations in the UK for the remainder of 2012 remain for high single digit growth, and although earnings growth forecasts are somewhat lower than this, the strength of corporate balance sheets and low pay out ratios provide confidence that these expectations can be delivered.

Following strong stock market returns in the first six months of the financial year, we believe it is reasonable to expect a period of consolidation in the months ahead. Concerns over the implementation of austerity measures in Europe will restrain what would otherwise be reasonable prospects for equity markets. However, over the longer term we believe the outlook remains constructive and we would look for opportunities to increase equity gearing through any period of volatility.

Lynn Ruddick

Chairman

Unaudited Income Statement

For the Six Months ended 31 March 2012

	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments	-	45,786	45,786
Exchange differences	-	278	278
Income	9,928	-	9,928
Management expenses (see note 6)	(214)	(642)	(856)
Other expenses	(369)	-	(369)
Net return before finance costs & tax	9,345	45,422	54,767
Finance Costs:
6.25% Bonds 2031	(474)	(1,422)	(1,896)
Bank borrowings	(45)	(136)	(181)
Return on ordinary activities before tax	8,826	43,864	52,690
Tax on ordinary activities	(147)	-	(147)
Return attributable to shareholders	8,679	43,864	52,543
Return per share (p) (see note 4)	3.0	15.0	18.0

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 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

Audited Income Statement

For the Year ended 30 September 2011

		Revenue £'000	Capital £'000	Total £'000
Losses on investments		-	(29,080)	(29,080)
Exchange differences		-	(152)	(152)
Income		19,166	-	19,166
Management expenses (see note 6)		(362)	(1,085)	(1,447)
Other expenses		(862)	-	(862)
Net return before finance costs & tax		17,942	(30,317)	(12,375)
Finance Costs:
6.25% Bonds 2031		(944)	(2,832)	(3,776)
Bank borrowings		(87)	(260)	(347)
Return on ordinary activities before tax		16,911	(33,409)	(16,498)
Tax on ordinary activities		(235)	-	(235)
Return attributable to shareholders		16,676	(33,409)	(16,733)
Return per share (p) (see note 4)		5.7	(11.5)	(5.8)

Balance Sheet	Unaudited As At 31 March 2012	Audited As At 30 September 2011	Unaudited As At 31 March 2011
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	449,686	413,563	477,182
Current assets
Debtors	12,930	2,945	6,669
Cash at bank and on deposit	11,635	10,671	14,918
	24,565	13,616	21,587
Creditors:
Amounts falling due within one year	(28,325)	(24,412)	(33,721)
Net current liabilities	(3,760)	(10,796)	(12,134)
Total assets less current liabilities	445,926	402,767	465,048
Creditors:  amounts falling due after more than one year:
6.25% Bonds 2031	(59,487)	(59,474)	(59,461)
Net assets	386,439	343,293	405,587
Capital and reserves
Called-up share capital	72,778	72,778	72,778
Capital redemption reserve	15,563	15,563	15,563
Capital reserve	267,699	223,835	286,777
Revenue reserve	30,399	31,117	30,469
Shareholders' funds	386,439	343,293	405,587
Net asset value per share (p) (see note 5)	132.7	117.9	139.3

Reconciliation of Movements in Shareholders' Funds

	Unaudited Six months ended	Unaudited Six months ended	Audited Year ended
	31 March	31 March	30 September
	2012	2011	2011
	£'000	£'000	£'000
Opening shareholders' funds	343,293	377,793	377,793
Dividends paid	(9,397)	(9,397)	(17,767)
Return attributable to ordinary shareholders	52,543	37,191	(16,733)
Closing shareholders' funds	386,439	405,587	343,293

Summarised Statement of Cash Flows

	Unaudited Six months ended	Unaudited Six months ended	Audited Year ended
	31 March	31 March	30 September
	2012	2011	2011
	£'000	£'000	£'000
Net cash inflow from operating activities	7,814	6,600	16,108
Servicing of finance	(2,054)	(2,050)	(4,192)
Investments sold less investments purchased	4,582	12,517	14,104
Dividends paid	(9,397)	(9,397)	(17,767)
Net cash inflow/(outflow) before financing	945	7,670	(8,253)
Financing:
Revolving advance facility drawndown/(repaid)	19	352	(4,312)
Increase in cash	964	8,022	3,941

Reconciliation of net cash flow to movement in net debt
Increase in cash	964	8,022	3,941
Revolving advance facility (drawdown)/repaid	(19)	(352)	4,312
Exchange differences	220	(2)	(310)
Increase in 6.25% Bonds 2031 liability	(13)	(13)	(26)
Opening net debt	(71,954)	(79,871)	(79,871)
Closing net debt	(70,802)	(72,216)	(71,954)

Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	54,767	39,359	(12,375)
(Gains)/losses on investments	(45,786)	(32,488)	29,080
Exchange differences	(278)	142	152
Tax on investment income	(115)	(96)	(235)
Changes in working capital and other non-cash items	(774)	(317)	(514)
Net cash inflow from operating activities	7,814	6,600	16,108

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 2011. 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.

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; and

·     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 transaction which took place during the period was the payment of the investment management fee as disclosed in note 6.

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 2011.

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 6 July 2012 to shareholders on the register on 8 June 2012. 

The last date for receipt of mandate instructions for those shareholders who wish to join the Dividend Reinvestment Plan is 15 June 2012.

4.   Return per share is based on a weighted average 291,112,282 Ordinary Shares in issue during the period (31 March 2011 and 30 September 2011 - same).

5.   There were 291,112,282 Ordinary Shares in issue at 31 March 2012 (31 March 2011 and 30 September 2011 - same). 

6.   Management Expenses

	Six months ended 31 March 2012			Six months ended 31 March 2011			Year ended 30 September 2011
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment Management Fee:
- basic fee	214	642	856	178	534	712	362	1,085	1,447
- performance fee				-	725	725	-	-	-
	214	642	856	178	1,259	1,437	362	1,085	1,447

       With effect form 1 October 2011, the basic management fee was increased from 0.3 per cent per annum of the Company's total assets less current liabilities to 0.4 per cent of the Company's total assets less current liabilities. The performance fee arrangements were discontinued on the same date.

7.   The Company's geographic exposure as a percentage of shareholders' funds at 31 March 2012 was as follows:

	31 March 2012	30 September 2011
UK	76.8	79.3
Global High Yield	19.4	17.8
Global Emerging	7.1	7.8
Corporate Bonds	13.1	15.6
Cash	4.9	3.6
Borrowings	(21.3)	(24.1)
	_____	____
	100.0	100.0

8.   The results for the half-year ended 31 March 2012, 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 2011, 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:

Phil Doel

F&C Investment Business Limited

0207 628 8000

[e-mail]

 

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