Interim Results
British Assets Trust PLC
11 May 2004
BRITISH ASSETS TRUST PLC
To: RNS
From: British Assets Trust plc
Date: 11 May 2004
Interim Results for the six months ended 31 March 2004
Financial Highlights
• Dividend yield of 5.2 per cent
• Net asset value total return of 8.8 per cent compared with a return of 9.2
per cent from the benchmark index
• Discount of 8.6 per cent
Total Return
The Company's net asset value total return, with net dividends reinvested, was
8.8 per cent for the six month period ended 31 March 2004. This compares with a
total return of 9.2 per cent from the composite benchmark index of 75 per cent
FTSE All-Share Index and 25 per cent FTSE World (ex UK) Index.
Gearing boosted returns as stockmarkets moved ahead, buoyed by continued
positive economic and profit news, particularly out of the US. In the UK, large
companies with good dividends, of the type British Assets Trust favours
underperformed as investors favoured small and medium sized companies. Regional
asset allocation was positive reflecting the bias in favour of the Pacific
region and the underweight exposure to North America.
Activity
During the period the Company's exposure to Europe was reduced following a
period of strong outperformance and the exposure to Japan was increased by £10
million, funded by sales of UK equities. The increased exposure to Japan
reflects the Managers view that the country is at last emerging from a decade of
decline. The transformation of the Japanese economy is well underway. There are
less manufacturing jobs than in the past with new job creation concentrated in
the service sectors such as healthcare and outsourcing. New business formation
is picking up and there is now a more flexible workforce. Corporate
profitability is improving and valuations appear reasonable.
Gearing
The Company remained almost fully invested during the period and, as at 31 March
2004, the level of gearing, net of cash, was 29.1 per cent. 21.3 per cent is
invested in equities and 7.8 per cent is invested in corporate bonds. The Board
regularly reviews the Company's gearing level.
Earnings and Dividends
Earnings per share for the six months ended 31 March 2004 were 1.88p (2003 -
1.84p). A first interim dividend of 1.304p per Ordinary Share (2003 - 1.304p)
was paid on 9 April 2004 and the Board has declared a second interim dividend of
1.304p per Ordinary Share (2003 - 1.304p), which will be paid on 9 July 2004 to
shareholders on the register on 11 June 2004.
The Chairman's Statement within the Company's Annual Report for the year ended
30 September 2003 sets out the Board's approach in relation to the level of
dividends. The Board remains clear of the attraction to shareholders of the
Company's above average dividend yield but is also clear of the need to balance
this with the prime objective of maximising total return, that is capital growth
plus the dividend yield.
As stated in the Annual Report, the dividend income from companies in which the
Company is invested, and from the market in general, has been weak as a result
of considerable stockmarket turbulence and low economic growth. In addition, a
number of major UK companies now pay a dividend denominated in US dollars which,
with the recent weakness of the dollar has reduced the amount received in
Sterling.
However, many dividends declared by larger companies so far in 2004 have been
ahead of expectations, although the dollar remains weak. In addition, as stated
below, the Company bought back shares for cancellation during the period which,
as well as enhancing net asset value, reduces the number of shares on which
dividends are payable.
This reinforces the Board's belief that, short of a major downturn in world
economies, the Company can maintain the current level of dividend in the short
term and hopefully resume increasing it in the medium term.
The Board will continue to monitor the Company's revenue position and inform
shareholders accordingly.
Share Buy-Backs
During the period the Company bought back 5,450,000 Ordinary Shares for
cancellation for a total consideration of £5.7 million. These buy-backs enhanced
the net asset value by approximately 0.15 pence per share.
Marketing
The Board is encouraged by the level of demand created directly through the
Company's retail initiatives in the 2004 ISA season. During the period, the
demand created for the Company's shares through the ZeroChargeTM Isas and
Investment Plans was more than twice that of the previous year.
The Board will continue to place emphasis on marketing the Company's shares
through the ZeroChargeTM products, to private client stockbrokers and directly
to private investors and their intermediaries.
Outlook
The second half of the year could prove more challenging for global stockmarkets
as investors start to discount rising interest rates in the US and the economic
news is likely to be less robust. The Managers continue to increase the
Company's exposure to the Pacific region. Chinese growth remains buoyant, the
Hong Kong property market is recovering and, in Japan, after ten years of asset
deflation there is a growing confidence that the economy has at last turned the
corner.
For further information please contact:
Julie Dent 0131 465 1000
ISIS Asset Management plc
Unaudited Statement of Total Return (Incorporating the revenue account)
for the 6 Months ended 31 March 2004
2004 2004 2004
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 28,531 28,531
Exchange differences - 934 934
Income 8,505 - 8,505
Investment management fee:
Basic (222) (666) (888)
Performance - (455) (455)
Other expenses (571) - (571)
--------- --------- ---------
Net return before finance costs & taxation 7,712 28,344 36,056
Finance Costs:
6.625% Bonds 2008 (505) (1,514) (2,019)
6.25% Bonds 2031 (474) (1,422) (1,896)
--------- --------- ---------
Return on ordinary activities before tax 6,733 25,408 32,141
Tax on ordinary activities (103) - (103)
--------- --------- ---------
Return attributable to shareholders 6,630 25,408 32,038
Dividends in respect of ordinary shares (9,074) - (9,074)
--------- --------- ---------
Transfer (from) / to reserves (2,444) 25,408 22,964
--------- --------- ---------
Return per Ordinary Share (p) 1.88 7.22 9.10
Unaudited Statement of Total Return (Incorporating the revenue account)
for the 6 Months ended 31 March 2003
2003 2003 2003
Revenue Capital Total
£'000 £'000 £'000
Losses on investments - (11,697) (11,697)
Exchange differences - (470) (470)
Income 8,446 - 8,446
Investment management fee:
Basic (212) (636) (848)
Performance - - -
Other expenses (356) - (356)
--------- --------- ---------
Net return before finance costs & taxation 7,878 (12,803) (4,925)
Finance Costs:
6.625% Bonds 2008 (505) (1,514) (2,019)
6.25% Bonds 2031 (474) (1,422) (1,896)
Other (29) (86) (115)
--------- --------- ---------
Return on ordinary activities before tax 6,870 (15,825) (8,955)
Tax on ordinary activities (369) 256 (113)
--------- --------- ---------
Return attributable to shareholders 6,501 (15,569) (9,068)
Dividends in respect of ordinary shares (9,216) - (9,216)
--------- --------- ---------
Transfer from reserves (2,715) (15,569) (18,284)
--------- --------- ---------
Return per Ordinary Share (p) 1.84 (4.41) (2.57)
Statement of Total Return (Incorporating the revenue account)
for the Year ended 30 September 2003
2003 2003 2003
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 48,491 48,491
Exchange differences - (377) (377)
Income 17,943 - 17,943
Investment management fee:
Basic (413) (1,240) (1,653)
Performance - - -
Other expenses (870) - (870)
________ ________ ________
Net return before finance costs & taxation 16,660 46,874 63,534
Finance Costs:
6.625% Bonds 2008 (1,010) (3,028) (4,038)
6.25% Bonds 2031 (944) (2,832) (3,776)
Other (29) (86) (115)
________ ________ ________
Return on ordinary activities before tax 14,677 40,928 55,605
Tax on ordinary activities (270) - (270)
________ ________ ________
Return attributable to shareholders 14,407 40,928 55,335
Dividends in respect of ordinary shares (18,821) - (18,821)
________ ________ ________
Transfer from reserves (4,414) 40,928 36,514
________ ________ ________
Return per Ordinary Share (p) 4.08 11.58 15.66
Unaudited Balance Sheet As At As At As At
31.03.04 30.09.03 31.03.03
£'000 £'000 £'000
Fixed Assets
Investments 501,119 480,858 418,228
--------- --------- ---------
Current Assets
Debtors 6,724 5,660 9,134
Cash at bank and on deposit 10,663 15,388 21,026
--------- --------- ---------
17,387 21,048 30,160
Creditors:
Amounts falling due within one year (11,370) (12,104) (13,429)
----------- ---------- -----------
Net Current Assets 6,017 8,944 16,731
----------- --------- -----------
Total Assets less Current Liabilities 507,136 489,802 434,959
Creditors: amounts falling due after more than one
year:
6.625% Bonds 2008 (59,747) (59,716) (59,684)
6.25% Bonds 2031 (59,276) (59,263) (59,250)
----------- ---------- -----------
(119,023) (118,979) (118,934)
----------- --------- -----------
Net assets 388,113 370,823 316,025
---------- --------- ----------
Equity Shareholders' Funds 388,113 370,823 316,025
---------- --------- ----------
Net Asset Value per Share 111.6p 104.9p 89.4p
Summarised Unaudited Statement of Cash Flows
Six months to Six months to Year
to
31 March 31 March 30 September
2004 2003 2003
£'000 £'000 £'000
Net cash inflow from operating activities 5,471 6,405 15,607
Servicing of finance (3,863) (3,983) (7,845)
Taxation 144 11 58
Financial investments 7,868 27,960 26,276
Ordinary dividends paid (9,605) (9,590) ('18,821)
Net cash inflow before financing 15 20,803 15,275
Financing (5,674) (22,429) (22,429)
Decrease in cash (5,659) (1,626) (7,154)
Reconciliation of net cash flow to movement in net debt
Decrease in cash (5,659) (1,626) (7,154)
Currency gains/(losses) 934 (911) (1,021)
Yen loan repaid - 22,429 22,429
Increase in 6.625% Bonds 2008 Liability (31) (31) (63)
Increase in 6.25% Bonds 2031 Liability (13) (13) (26)
Movement in net debt (4,769) 19,848 14,165
Net debt at 1 October (103,591) (117,756) (117,756)
Net debt at 31 March/30 September (108,360) (97,908) (103,591)
Reconciliation of net revenue before
finance costs and taxation to net cash
inflow from operating activities
Net revenue before finance costs and taxation 7,712 7,878 16,660
Investment Management fee charged to capital (1,121) (636) (1,240)
Tax on investment income (92) (109) (296)
Changes in working capital and other non-cash items (1,028) (728) 483
Net cash inflow from operating activities 5,471 6,405 15,607
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 2003.
2. Earnings for the first six months should not be taken as a guide to the
results of the full year.
3. The second interim dividend of 1.304p per Ordinary Share will be paid on 9
July 2004 to shareholders on the register on 11 June 2004.
The last date for receipt of mandate instructions for those shareholders who
wish to join the Dividend Reinvestment Plan is 18 June 2004.
4. Return per Ordinary Share is based on a weighted average 351,860,916 Ordinary
Shares in issue during the period (31 March 2003 and 30 September 2003 -
353,362,282).
5. During the six months ended 31 March 2004 the Company bought in 5,450,000
Ordinary Shares for cancellation at a cost of £5,674,000 (31 March 2003 and
30 September 2003 - Nil).
6. There were 347,912,282 Ordinary Shares in issue at 31 March 2004 (31 March
2003 and 30 September 2003 - 353,362,292)
7. The following table provides a breakdown of the estimated contributions to
the total return for the period:
Attribution of Return Percentage Points
Market/benchmark return 9.2
Stock selection
UK equities -1.0
Overseas equities -0.4
Regional asset allocation 0.3
Corporate bonds -0.3
Gearing 1.1
Share buy-backs 0.2
Expenses -0.3
______
British Assets Trust total return 8.8
______
8. The Company's geographic exposure as a percentage of shareholders' funds at
31 March 2004 was as follows (comparative figures are for 30 September
2003).
31 March 2004 30 September 2003
UK 86.0 86.4
North America 15.6 16.4
Europe (ex UK) 7.6 8.7
Japan 6.2 3.2
Pacific (ex Japan) 5.9 5.9
Corporate Bonds 7.8 9.1
Liquidity 1.6 2.4
Borrowings (30.7) (32.1)
____ ____
100.0 100.0
9. These are not statutory accounts in terms of Section 240 of the Companies Act
1985 and are unaudited. Statutory accounts for the year ended 30 September
2003, which received an unqualified audit report, have been lodged with the
Registrar of Companies. No statutory accounts in respect of any period after
30 September 2003 have been reported on by the Company's auditors or
delivered to the Registrar of Companies. A full interim report will be sent
to shareholders in May 2004.
This information is provided by RNS
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