Interim Results
British Assets Trust PLC
15 May 2006
BRITISH ASSETS TRUST PLC
To: RNS
From: British Assets Trust plc
Date: 15 May 2006
Interim Results for the six months ended 31 March 2006
Financial Highlights
• Net asset value total return of 13.3 per cent compared with a return
of 12.8 per cent from the benchmark index
• Share price total return of 13.4 per cent
• Interim dividend increased by 2.0 per cent to 1.33p per Ordinary Share
Chairman's Statement
Performance
The Company's net asset value total return, with net dividends reinvested, was
13.3 per cent for the six months ended 31 March 2006. This compares favourably
with a total return of 12.8 per cent from the composite benchmark index of 75
per cent FTSE All-Share Index and 25 per cent FTSE World (ex UK) Index.
Global stockmarkets delivered strong returns during the period. The best
performing market was Japan where the Company benefited from its overweight
position. Japanese economic data announcements were encouraging, particularly
with respect to stronger capital investment and increased household spending.
With the benefits of restructuring now coming through to corporate cash flows
and earnings, capital expenditure has been a major boost for the economy.
Accelerating employment growth, a modest increase in wage growth, stronger
industrial production and signs that the economy is emerging from an extended
period of deflation provided further good news for investors.
The Company also benefited from its underweight position in North America, which
lagged other major markets during the period, and from gearing which boosted
returns in rising markets. UK stock selection, however, had a negative impact
on performance mainly due to the sharp fall in the share price of Vodafone.
The rise in merger and acquisition activity and takeover rumours, particularly
in Europe, was a key feature of the period. In Europe, stockmarkets also
benefited from improving economic data from Germany. The US Federal Reserve
continued to raise interest rates to 4.75 per cent, the highest level since
April 2001. Commodity prices remained high, with the price of gold touching a 25
year high.
The Company's share price total return during the period was 13.4 per cent with
the debt adjusted discount unchanged at 8.6 per cent.
There were no significant asset allocation changes during the period. Share buy
backs were funded from existing cash resources.
The following table provides a breakdown of the estimated contributions to the
net asset value total return for the period.
Attribution of return:
Market/benchmark return 12.8
Stock selection
UK equities -1.1
Overseas equities 0.3
Regional asset allocation 0.4
Corporate bonds -0.5
Gearing 1.5
Share buy backs 0.2
Expenses -0.3
----------
British Assets Trust net asset value total
return 13.3
----------
Gearing
At the end of the period, the Company's gearing net of cash was 18.9 per cent,
which compared to 19.9 per cent as at 30 September 2005. The level of gearing is
represented by 12.2 per cent in equities and 6.7 per cent in corporate bonds.
Earnings and Dividends
The Company's revenue earnings during the period were 2.4p per Ordinary Share
(2005 - 2.3p).
The Company has continued to benefit from strong dividend growth from its
investee companies, particularly in the UK, and the receipt of some special
dividends. The revenue account has also benefited from the buy back of shares
for cancellation which reduces the number of shares on which the Company's own
dividend is payable.
In my statement to shareholders which accompanied the results for the year to 30
September 2005 I explained that, subject to there being no material reductions
in dividends paid by our investee companies, the Board expected to be in
position to grow the dividend in respect of the year ended 30 September 2007. As
explained above, the signs so far this year have been positive and we have
therefore decided that it is appropriate to grow the dividend in respect of the
current year.
A first interim dividend of 1.304p per Ordinary Share was paid on 7 April 2006
and the Board has declared a second interim dividend of 1.330p per Ordinary
Share which will be paid on 7 July 2006 to shareholders on the register on 9
June 2006. This represents an increase of 2.0 per cent in the rate of this
interim dividend. It is hoped to maintain at least this level of increase for
the subsequent dividends in respect of the current financial year and to achieve
the Board's stated aim of maintaining a progressive dividend policy in the years
ahead.
Share Buy Backs
The Company continued to buy back shares for cancellation during the period.
6,900,000 Ordinary Shares, equivalent to 2.1 per cent of the shares in issue as
at 30 September 2005, were bought back for a total consideration of £9.0
million. These buy backs enhanced the net asset value by 0.3p per share. As
stated above, in addition to enhancing the net asset value, these buy backs also
provided a benefit to the revenue account.
Board Composition
In my last statement to shareholders I explained that we intended to recruit an
additional independent non-executive Director. In this respect, I am very
pleased to report that Mr James Long joined the Board on 1 May 2006. Mr Long has
significant skills and experience which are particularly relevant to the
Company's circumstances.
Accounting Standards
Following recent changes to UK accounting standards, the Company's investments
are required to be valued at bid prices and not middle market prices as had
previously been the case. In addition, dividends paid by the Company are only
recognised in the accounts when paid to shareholders. The first two interim
dividends, which are payable after the end of the period are, therefore, not
provided for in these accounts.
Comparative figures in respect of these changes have been adjusted accordingly
in the accounts.
Outlook
With improving growth in Japan and Europe, US interest rates close to a peak,
and the expectation of further mergers and acquisitions, the prospects for
global equities are reasonable. The continuing emphasis on returning value to
shareholders by special dividends and share buy backs is also supportive.
However, at current levels markets are vulnerable to correction and volatility
is rising.
In 2005, equity market returns were largely driven by earnings growth, and we
expect that this will continue to be the key driver of returns in 2006. That
said, the pace of earnings growth is likely to be lower as economic growth
slows and companies find it difficult to pass on higher input costs.
W R E Thomson
Chairman
For further information please contact:
Julie Dent 0131 465 1000
Julie.dent@fandc.com
F&C Asset Management plc
Unaudited Income Statement
For the 6 Months ended 31 March 2006
2006 2006 2006
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 53,760 53,760
Exchange differences - (113) (113)
Income 9,335 - 9,335
Investment management fee:
Basic (253) (760) (1,013)
Performance - (583) (583)
Other expenses (308) - (308)
Net return before finance costs & taxation 8,774 52,304 61,078
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 7,795 49,368 57,163
Tax on ordinary activities (117) - (117)
Return attributable to shareholders 7,678 49,368 57,046
Return per Ordinary Share (p) 2.4 15.4 17.8
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 Trust Companies.
Unaudited Income Statement
For the 6 Months ended 31 March 2005
2005 2005 2005
(restated*) (restated*) (restated*)
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 31,553 31,553
Exchange differences - 239 239
Income 9,516 617 10,133
Investment management fee:
Basic (226) (677) (903)
Performance - - -
Other expenses (526) - (526)
Net return before finance costs & taxation 8,764 31,732 40,496
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 7,785 28,796 36,581
Tax on ordinary activities (115) - (115)
Return attributable to shareholders 7,670 28,796 36,466
Return per Ordinary Share (p) 2.3 8.6 10.9
* see notes 1 & 9
Audited Income Statement
For the Year ended 30 September 2005
2005 2005 2005
Revenue (restated*) Capital Total
(restated*) (restated*)
£'000 £'000 £'000
Gains on investments - 91,844 91,844
Exchange differences - 198 198
Income 19,479 1,167 20,646
Investment management fee:
Basic (460) (1,380) (1,840)
Performance - (1,588) (1,588)
Other expenses (1,090) - (1,090)
Net return before finance costs & taxation 17,929 90,241 108,170
Finance Costs:
6.625% Bonds 2008 (1,010) (3,028) (4,038)
6.25% Bonds 2031 (944) (2,832) (3,776)
Return on ordinary activities before tax 15,975 84,381 100,356
Tax on ordinary activities (270) - (270)
Return attributable to shareholders 15,705 84,381 100,086
Return per Ordinary Share (p) 4.8 25.5 30.3
* see notes 1 & 9
Unaudited Balance Sheet Audited
As At As At 31.03.05 As At
31.03.06 (restated*) 30.09.05
(restated*)
£'000 £'000 £'000
Fixed Assets
Investments 594,880 511,161 552,354
Current Assets
Debtors 7,503 8,017 6,321
Cash at bank and on deposit 19,764 18,756 28,303
27,267 26,773 34,624
Creditors:
Amounts falling due within one year (2,830) (4,422) (6,962)
Net Current Assets 24,437 22,351 27,662
Total Assets less Current Liabilities 619,317 533,512 580,016
Creditors: amounts falling due after more than one
year:
6.625% Bonds 2008 (59,873) (59,811) (59,842)
6.25% Bonds 2031 (59,329) (59,302) (59,316)
(119,202) (119,113) (119,158)
Net assets 500,115 414,399 460,858
Shareholders' Funds 500,115 414,399 460,858
Net Asset Value per Ordinary Share 158.1p 125.3p 142.5p
* see notes 1 & 9
Unaudited Reconciliation of Movements in Shareholders' Funds
Six months to Six months to Audited Year
to
31 March 31 March 30 September
2006 2005 2005
£'000 £'000 £'000
Opening shareholders' funds as previously reported 452,841 386,179 386,179
Adjustment mid to bid (771) (512) (512)
Dividends accrued 8,788 9,211 9,211
Opening shareholders' funds as restated 460,858 394,878 394,878
Share buy-backs (9,016) (7,763) (16,335)
Dividends paid (8,773) (9,182) (17,771)
Return attributable to shareholders 57,046 36,466 100,086
Closing shareholders' funds 500,115 414,399 460,858
Summarised Unaudited Statement of Cash Flows
Six months to Six months to Audited Year
to
31 March 31 March 30 September
2006 2005 2005
(restated) (restated)
£'000 £'000 £'000
Net cash inflow from operating activities 4,613 6,923 17,131
Servicing of finance (3,863) (3,863) (7,725)
Taxation 46 49 30
Financial investment 8,454 16,684 37,264
Dividends paid (8,773) (9,182) (17,784)
Net cash inflow before financing 477 10,611 28,916
Financing (9,016) (7,774) (16,346)
(Decrease)/increase in cash (8,539) 2,837 12,570
(Decrease)/increase in cash (8,539) 2,837 12,570
Currency gains/(losses) - 131 (55)
Increase in 6.625% Bonds 2008 Liability (31) (32) (63)
Increase in 6.25% Bonds 2031 Liability (13) (13) (27)
Movement in net debt (8,583) 2,923 12,425
Opening net debt (90,855) (103,280) (103,280)
Closing net debt (99,438) (100,357) (90,855)
Reconciliation of net return before finance costs and
taxation to net cash inflow from operating activities
Net revenue before finance costs and taxation 61,078 40,496 108,170
Gains on investment (53,760) (31,553) (91,844)
Tax on investment income (130) (137) (303)
Changes in working capital and other non-cash items (2,575) (1,883) 1,108
Net cash inflow from operating activities 4,613 6,923 17,131
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 2005 apart from the following in accordance with FRS 21
and FRS 26 which are effective from accounting periods commencing on or after 1
January 2005. Comparative figures have been restated accordingly.
• Dividends proposed by the Directors are recognised in the periods in which
they are paid.
• Quoted investments, which were previously valued at mid prices, are now
valued at bid prices. Previously they were valued at mid-market price. This
has the effect of reducing the valuation of the investment portfolio by
£771,000 as at 30 September 2005 and £426,000 as at 31 March 2005.
2. Earnings for the first six months should not be taken as a guide to the
results of the full year.
3. Total income of £9,335,000 recognised through the revenue column of the
Income Statement includes special dividends of £231,000 (31 March 2005 -
£834,000 and 30 September 2005 - £1,082,000).
4. The second interim dividend of 1.330p per Ordinary Share will be paid on
7 July 2006 to shareholders on the register on 9 June 2006. In accordance with
FRS 21 this dividend, and the first interim dividend of 1.304p per Ordinary
Share paid on 7 April 2006, have not been accounted for in the results for the
six months ended 31 March 2006.
5. The last date for receipt of mandate instructions for those shareholders
who wish to join the Dividend Reinvestment Plan is 16 June 2006.
6. Return per share is based on a weighted average 320,093,326 Ordinary
Shares in issue during the period (31 March 2005 - 334,117,777 and 30 September
2005 -330, 374,885).
7. During the six months ended 31 March 2006 the Company bought 6,900,000
Ordinary Shares for cancellation at a cost of £9,016,000 (six months ended 31
March 2005 - 7,150,000 Ordinary Shares at a cost of £7,763,000 and year ended 30
September 2005 - 14,500,000 Ordinary Shares at a cost of £16,335,000).
8. There were 316,412,282 Ordinary Shares in issue at 31 March 2006 (31 March
2005 - 330,662,282 and 30 September 2005 - 323,312,282).
9. Reconciliation of net asset value per Ordinary Share
As At As At As At
31.03.06 31.03.05 30.09.05
Net asset value per Ordinary Share 158.1p 125.3p 142.5p
Less First and second interim dividends declared (FRS21) (2.6)p (2.6)p (2.6)p
Add Adjustment to valuation of investments from bid to 0.2p 0.1p 0.2p
mid basis (FRS26)
Comparable net asset value per Ordinary Share excluding 155.7p 122.8p 140.1p
adjustments required by FRS21 and FRS26
10. The following table provides a breakdown of the estimated contributions to
the net asset value total return for the period:
Attribution of Return Percentage Points
Market/benchmark return 12.8
Stock selection
UK equities -1.1
Overseas equities 0.3
Regional asset allocation 0.4
Corporate bonds -0.5
Gearing 1.5
Share buy-backs 0.2
Expenses -0.3
British Assets Trust net asset value total return 13.3
11. The Company's geographic exposure as a percentage of shareholders' funds
at 31 March 2006 was as follows (comparative figures are for 30 September
2005).
31 March 2006 30 September 2005
(restated)
UK 81.2 83.6
North America 13.2 13.1
Europe (ex UK) 6.7 5.8
Japan 7.0 6.0
Pacific (ex Japan) 4.1 4.0
Corporate Bonds 6.7 7.4
Liquidity 4.9 6.0
Borrowings (23.8) (25.9)
_____ ____
100.0 100.0
12. 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 2005, 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 2005 have been reported on by the Company's auditors or
delivered to the Registrar of Companies. The Interim Report will be sent to
shareholders in May 2006.
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