Interim Results
Standard Life Equity Income Tst PLC
17 May 2006
STANDARD LIFE EQUITY INCOME TRUST PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006
Chairman's Statement
After the formal selection process last autumn the Board appointed Standard Life
Investments to take over the management of the Company. The transition took
place on 24 November 2005, and the Company changed its name to Standard Life
Equity Income Trust PLC after the Annual General Meeting on 20 December 2005.
The Board is pleased to report that the reorganisation of about half the
portfolio by the new Manager was achieved at a cost of only 0.22%. It should be
noted that the reorganisation involved the sale of the Company's holdings in
bonds and preference shares, recommended by the Manager on valuation and style
criteria.
During the six months ended 31 March 2006, your Company produced a capital
return of 12.8% in terms of net asset value compared to a capital return of
11.0% for the FTSE All-Share Index, the Company's benchmark.
The Manager's Report provides further information on the UK economy and equity
market, a review of the portfolio together with additional detail as to the
initial changes made to the investments held. The Company's Ordinary shares
rose 16.8% from 256 pence per share to 299 pence per share on 31 March 2006,
representing a 7.4% discount to the net asset value of 323 pence per share; this
share price performance ranked the Company first among its peers in the AITC's
UK Growth & Income sector over the period under review.
Earnings and Dividend
Over the period to 31 March 2006, earnings per Ordinary share of 4.83 pence were
generated. The Board is pleased to declare an unchanged interim dividend of
2.60 pence per ordinary share, and will review the final dividend at its October
meeting, bearing in mind the Company's objectives to provide shareholders with
an above average income which grows in at least in line with the Retail Prices
Index.
New Accounting changes
The financial statements, and the net asset value per share figures quoted
above, have been prepared in accordance with UK Generally Accepted Accounting
Principles (UK GAAP). The new Financial Reporting Standards, issued as part of
the programme to converge UK GAAP with International Financial Reporting
Standards (IFRS), were applicable for the accounting period ended 31 March 2006
and the financial statements for the year ended 30 September 2005 and for the
six months ended 31 March 2005 have also been restated. The main change arising
from these revisions to UK GAAP, in relation to the Company's financial
statements, is that dividends to shareholders declared after the balance sheet
date are now shown in the period of payment rather than in the reporting period.
After review of the Company's investment objective, with its emphasis on
providing shareholders with an above average income and after considering the
likely long-term split between income and capital returns from the underlying
investment portfolio, the Board has decided to allocate 70% of finance costs to
capital as against the present ratio of 50% and this is reflected in the
financial statements for the period ended 31 March 2006.
Gearing
At the year end the Company had bank borrowings of £10.5 million and
consequently gearing of 8.0%. The Manager has authority from the Directors to
increase gearing up to 15%, to take advantage of market opportunities with the
aim of enhancing returns to shareholders.
Discount Control
The Board continues to review the level of the Company's share price, its net
asset value and the prevailing discount.
The Board
At the AGM on 20 December 2005 we saw the retirement of two long serving
directors, Tony Mitchard as Chairman and Simon McLean as Director. The Company
is grateful for all their work and support. Since then the Board has operated
with four non-executive directors. The Nomination Committee met during the
period and recommended to the Board, the recruitment of one further
non-executive director. The consequent formal selection process is nearly
complete.
Marketing
The Board is grateful to the Manager and to Dresdner Kleinwort Wasserstein
Securities, stockbroker to the Company, for undertaking over recent months
considerable marketing of the Company to a range of professional investment
firms.
At 31 March 2006, the Manager oversaw the transfer of plans managed by Standard
Life Investments of over 80% of the holdings of those Shareholders using the
savings scheme, and ISAs and PEPs products formerly run by DWS Investment
Managers. This transfer had been offered on terms of no cost. Your Board will
continue to promote the Company through these schemes which offer individuals a
cost-effective method of saving into Standard Life Equity Income Trust PLC.
Outlook
Standard Life Investments has made a good start as the new Manager of the
Company. Investment performance has improved under Karen Robertson and the
team, and the discount to net asset value at which the Company's shares are
trading has been reduced. The Board would hope to see both the benefits of this
new management team and their investment process result in continuing strong
performance which should further improve the rating of the Company's shares.
Charles Wood OBE
Chairman
16 May 2006
INCOME STATEMENT
FOR THE PERIOD ENDED 31 MARCH 2006
Six months ended 31 March 2006
(unaudited) (unaudited) (unaudited)
Revenue Capital Total
£'000 £'000 £'000
Realised gains on investments at fair value through - 8,991 8,991
profit and loss
Unrealised gains on investments at fair value - 6,328 6,328
through profit and loss
Currency losses - (29) (29)
Income 2,265 - 2,265
Investment management fee (50) (117) (167)
Administrative expenses (235) - (235)
________ ________ ________
Net return before finance costs and taxation 1,980 15,173 17,153
Interest payable (67) (138) (205)
________ ________ ________
Return on ordinary activities before taxation 1,913 15,035 16,948
Taxation on ordinary activities 8 - 8
________ ________ ________
Return on ordinary activities after taxation for the 1,921 15,035 16,956
period attributable to equity shareholders
________ ________ ________
Return per ordinary share 4.83p 37.84p 42.67p
________ ________ ________
_________________________________________________________________________________
Six months ended 31 March 2005
(unaudited) (unaudited) (unaudited)
(restated) (restated) (restated)
Revenue Capital Total
£'000 £'000 £'000
Realised gains on investments at fair value through - 3,041 3,041
profit and loss
Unrealised gains on investments at fair value - 5,224 5,224
through profit and loss
Currency losses - - -
Income 2,161 - 2,161
Investment management fee (223) (223) (446)
Administrative expenses (149) - (149)
________ ________ ________
Net return before finance costs and taxation 1,789 8,042 9,831
Interest payable (62) (62) (124)
________ ________ ________
Return on ordinary activities before taxation 1,727 7,980 9,707
Taxation on ordinary activities - - -
________ ________ ________
Return on ordinary activities after taxation for the 1,727 7,980 9,707
period attributable to equity shareholders
________ ________ ________
Return per ordinary share 4.34p 20.07p 24.41p
________ ________ ________
Year ended 30 September 2005
(audited) (audited) (audited)
(restated) (restated) (restated)
Revenue Capital Total
£'000 £'000 £'000
Realised gains on investments at fair value through - 4,993 4,993
profit and loss
Unrealised gains on investments at fair value - 13,040 13,040
through profit and loss
Currency losses - - -
Income 4,917 - 4,917
Investment management fee (459) (459) (918)
Administrative expenses (317) - (317)
________ ________ ________
Net return before finance costs and taxation 4,141 17,574 21,715
Interest payable (149) (149) (298)
________ ________ ________
Return on ordinary activities before taxation 3,992 17,425 21,417
Taxation on ordinary activities - - -
________ ________ ________
Return on ordinary activities after taxation for the 3,992 17,425 21,417
period attributable to equity shareholders
________ ________ ________
Return per ordinary share 10.04p 43.82p 53.86p
________ ________ ________
The total column of this statement represents the profit and loss account of the
Company.
The supplementary revenue and capital return columns are both prepared under
guidance issued by the Association of Investment Trust Companies.
No Statement of Recognised Gains and Losses has been prepared as all gains or
losses have been reflected in the Income Statement above.
The financial statements for the six months ended 31 March 2005 and year ended
30 September 2005 have been restated to reflect the change to accounting
practices as set out in the accompanying notes.
All revenue and capital items in the above statement derive from continuing
operations.
BALANCE SHEET
As at 31 March 2006
As at 31 March As at 31 March As at 30
2006 2005 September 2005
(unaudited) (unaudited) (audited)
(restated) (restated)
£'000 £'000 £'000
Fixed assets
Investments at fair value through profit or loss 137,408 104,947 119,716
Current assets
Debtors and prepayments 1,112 2,088 609
Cash at bank and in hand 619 1,276 472
________ ________ ________
1,731 3,364 1,081
Creditors: amounts falling due within one year
Bank loan (10,500) (4,500) (6,500)
Other creditors (349) (715) (579)
________ ________ ________
Net current liabilities (9,118) (1,851) (5,998)
________ ________ ________
Net assets 128,290 103,096 113,718
________ ________ ________
Capital and reserves
Called up share capital 9,935 9,941 9,935
Share premium account 20,373 20,373 20,373
Capital redemption reserve 12,615 12,609 12,615
Capital reserve - realised 62,586 52,305 53,879
Capital reserve - unrealised 20,019 5,875 13,691
Revenue reserve 2,762 1,993 3,225
________ ________ ________
Shareholders' funds 128,290 103,096 113,718
________ ________ ________
Net asset value per share 322.84p 259.28p 286.17p
________ ________ ________
Standard Life Equity Income Trust
Reconciliation of Movements in Shareholders' Funds
As at 31 March 2006
For the six months ended 31 March 2006 Share Capital Capital Capital
Share premium redemption reserve reserve Revenue
capital account reserve realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 September 2005 as 9,935 20,373 12,615 53,879 13,889 841 111,532
originally reported
Restatements - - - - (198) 2,384 2,186
_______ _______ _______ _______ _______ _______ _______
Balance at 30 September 2005 9,935 20,373 12,615 53,879 13,691 3,225 113,718
(restated)
Return on ordinary activities after - - - 8,707 6,328 1,921 16,956
taxation
Dividends paid (6.00p) - - - - - (2,384) (2,384)
_______ _______ _______ _______ _______ _______ _______
Balance at 31 March 2006 9,935 20,373 12,615 62,586 20,019 2,762 128,290
_______ _______ _______ _______ _______ _______ _______
For the year ended 30 September 2005 Share Capital Capital Capital
Share premium redemption reserve reserve Revenue
capital account reserve - realised - reserve Total
unrealised
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 September 2004 as 9,941 20,373 12,609 49,549 757 266 93,495
originally reported
Restatements - - - - (106) 2,267 2,161
_______ _______ _______ _______ _______ _______ _______
Balance at 30 September 2004 9,941 20,373 12,609 49,549 651 2,533 95,656
(restated)
Return on ordinary activities after - - - 4,385 13,040 3,992 21,417
taxation
Dividends paid (8.30p) - - - - - (3,300) (3,300)
Purchase of own shares for (6) - 6 (55) - - (55)
cancellation
_______ _______ _______ _______ _______ _______ _______
Balance at 30 September 2005 9,935 20,373 12,615 53,879 13,691 3,225 113,718
_______ _______ _______ _______ _______ _______ _______
For the six months ended 31 March 2005 Share Capital Capital Capital
Share premium redemption reserve reserve Revenue
capital account reserve - realised - reserve Total
unrealised
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 September 2004 as 9,941 20,373 12,609 49,549 757 266 93,495
originally reported
Restatements - - - - (106) 2,267 2,161
_______ _______ _______ _______ _______ _______ _______
Balance at 30 September 2004 9,941 20,373 12,609 49,549 651 2,533 95,656
(restated)
Return on ordinary activities after - - - 2,756 5,224 1,727 9,707
taxation
Dividends paid (5.70p) - - - - - (2,267) (2,267)
Purchase of own shares for - - - - - - -
cancellation
_______ _______ _______ _______ _______ _______ _______
Balance at 31 March 2005 9,941 20,373 12,609 52,305 5,875 1,993 103,096
_______ _______ _______ _______ _______ _______ _______
CASHFLOW STATEMENT
For the period ended 31 March 2006
Six months Six months ended Year ended 30
ended 31 March 31 March 2005 September 2005
2006 (Unaudited) (Audited)
(Restated)
(Unaudited) (Restated)
£'000 £'000 £'000
Reconciliation of operating revenue to net cash inflow from
operating activities
Net return before finance costs and taxation 1,980 1,789 4,141
Increase in accrued income (512) (326) (54)
(Increase) / decrease in other debtors (4) 1 94
(Decrease) / increase in other creditors (227) 75 20
Expenses charged to capital (255) (285) (459)
_________ _________ _________
Net cash inflow from operating activities 982 1,254 3,742
_________ _________ _________
Net cash inflow from operating activities as above 982 1,254 3,742
Net cash outflow from servicing of finance (287) (106) (99)
Net cash (outflow) / inflow from financial investment (2,135) 1,430 (2,781)
Equity dividends paid (2,384) (2,267) (3,300)
_________ _________ _________
Net cash (outflow) / inflow before financing (3,824) 311 (2,438)
Net cash inflow / (outflow) from financing 4,000 - 1,945
_________ _________ _________
Increase/ (decrease) in cash 176 311 (493)
_________ _________ _________
RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET DEBT
Increase in cash as above 176 311 (493)
Cash inflow from drawdown of loans (4,000) - (2,000)
Exchange movements (29) - -
_________ _________ _________
Movement in net debt in the period (3,853) 311 (2,493)
Opening net debt (6,028) (3,535) (3,535)
_________ _________ _________
Closing net debt (9,881) (3,224) (6,028)
_________ _________ _________
Represented by:
Cash and cash equivalents 619 1,276 472
Debt falling due within one year (10,500) (4,500) (6,500)
_________ _________ _________
(9,881) (3,224) (6,028)
_________ _________ _________
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
The accounts have been prepared under the historical cost convention, as
modified to include the revaluation of investments and in accordance with
applicable UK Accounting Standards and with the Statement of Recommended
Practice for 'Financial Statements of Investment Trust Companies' (issued in
January 2003 and revised in December 2005). They have also been prepared on the
assumption that the approval as an investment trust will continue to be granted.
For the accounting period beginning on 1 October 2005, the Company had the
option to prepare its financial statements in accordance with International
Financial Reporting Standards ('IFRS'), as adopted by the International
Accounting Standards Board ('IASB'). The Board has elected to continue to adopt
UK Generally Accepted Accounting Principles ('UK GAAP') and therefore with the
new Financial Reporting Standards issued as part of the programme to align UK
GAAP with IFRS. Figures for the six months ended 31 March 2005 and year ended 30
September 2005 have been restated accordingly.
The same accounting policies used for the year ended 30 September 2005 have been
applied with the following exceptions:
(a) Investments - Listed investments have been designated upon
initial recognition as fair value through profit and loss. Investments are
recognised and derecognised on the trade date where a purchase or sale is under
a contract whose terms require delivery within the timeframe established by the
market concerned and are initially measured at fair value. Subsequent to initial
recognition investments are valued at fair value. Fair value is assumed to be
the bid price of investments, or trade price in the absence of such information,
less incidental costs upon acquisition. Gains and losses arising from changes in
fair value are included in net profit or loss for the period as a capital item
in the Income Statement and are ultimately recognised in the unrealised reserve.
(b) Dividends - Under FRS 21 'Events after the Balance Sheet Date
', dividends should only be accrued in the accounts if they are a liability at
the Balance Sheet date. No provision has been made in the financial statements
for the interim dividend for the period ended 31 March 2006. The financial
statements for the years ended 30 September 2005 and 2004 have been restated to
remove the final dividends that were accrued at those dates.
(c) Realised capital reserve - Gains or losses on investments
realised in the period that have been recognised in the Income Statement are
transferred to the realised capital reserve. In addition, any prior unrealised
gains or losses on such investments are transferred from the unrealised capital
reserve to realised capital reserve on disposal of the investment.
(d) Unrealised capital reserve - Increases and decreases in the
fair value of investments are recognised in the Income Statement and are then
transferred to the unrealised capital reserve.
(e) Investment management fees and finance costs - After a review
by the Board the allocation to capital has changed to 70% (previously 50%) from
1 October 2005. This treatment is in line with the Board's expectation of future
returns from the Company's investments over the long term in the form of revenue
and capital.
2. The Board has declared an unchanged interim dividend in
respect of the year ending 30 September 2006 of 2.60p per share (2005 - interim
dividend of 2.60p per share). The dividend will have a record date of 26 May
2006 and will be paid on 23 June 2006 to Ordinary Shareholders on the register
at the record date. The ex-dividend date will be 24 May 2006.
3. The revenue return per Ordinary share is based on net
revenue on ordinary activities after taxation of £1,921,000 (30 September 2005 -
£3,992,000; 31 March 2005 - £1,727,000) and on 39,737,907 (30 September 2005 -
39,753,523; 31 March 2005 - 39,762,907) Ordinary Shares, being the weighted
average number of Ordinary shares in issue for the period.
4. The capital return per Ordinary share is based on net
capital gains for the period of £15,035,000
(30 September 2005 - £17,425,000; 31 March 2005 - £7,980,000) and on 39,737,907
(30 September 2005 - 39,753,523; 31 March 2005 - 39,762,907) Ordinary Shares,
being the weighted average number of Ordinary Shares in issue for the period.
5. The net asset value per Ordinary share is based on total
Shareholders' funds of £128,290,000 (30 September 2005 - £113,718,000; 31 March
2005 - £103,096,000) and on 39,737,907 (30 September 2005 - 39,737,907; 31 March
2005 - 39,762,907) Ordinary Shares, being the number of Ordinary shares in issue
at the period end.
6. There was no Ordinary share cancellation for the six months
ended 31 March 2006.
7. The financial information for the year ended 30 September
2005 has been extracted from the Annual report and accounts of the company which
have been filed with the Registrar of Companies. The auditor's report on those
accounts was unqualified.
8. The financial statements for the six months ended 31 March
2006 and 31 March 2005 comprise non-statutory financial statements within the
meaning of Section 240 of the Companies Act 1985. The interim financial
statements have been prepared on the same basis as the annual financial
statements with the exception of the disclosures in Note 1.
9. The interim report will be posted to shareholders and will
be available from the Secretaries and the Managers, Standard Life Investments.
For Aberdeen Asset Management PLC
SECRETARIES
16 May 2006
Please note that past performance is not necessarily a guide to the future and
that the value of investments and the income from them may fall as well as rise.
Investors may not get back the amount they originally invested.
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