Half Yearly Report

RNS Number : 2623U
Artemis Alpha Trust PLC
19 December 2011
 

ARTEMIS ALPHA TRUST PLC (the "Company")

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

This announcement contains regulated information

Chairman's Statement

Performance

The six months to 31 October 2011 have been challenging for investors. With stock markets focused on macro issues, particularly the continuing sovereign debt problems in Europe, the reporting period has been characterised by highly volatile markets amid continuing uncertainty over how this situation will be addressed. Against this background your Company's performance has been disappointing, with the net asset value falling by 16.2 per cent, and the share price by 19.2 per cent over the period. The FTSE All-Share Index was down by 7.8 per cent over the same period.

Investments

As shareholders are aware, the Company has a sizeable exposure to unquoted companies, which at the end of October represented 29.9 per cent of the portfolio. Not surprisingly, the difficult market conditions have affected some of the companies in the unquoted portfolio, as a number of planned IPOs have had to be delayed. This has led to a number of investee companies having to raise additional funds for working capital purposes ahead of their IPOs, with these funding rounds being completed at lower prices than the previous values of these investments in the portfolio. As a result they have been written down in value, in line with your Board's valuation policy.

Despite the disappointing reduction in valuation, the investment manager remains optimistic about the unquoted portfolio overall, and believes that it will continue to be a source of positive returns for shareholders over the longer term.

Further information on the portfolio and investment approach over the last six months is set out in the investment manager's review which follows.

Dividends

Your Board has declared a first interim dividend for the year ending 30 April 2012 of 1.20p per share (2011: 1.20p). This dividend will be paid on 3 February 2012 to those shareholders on the register as at 30 December 2011.

Part of the Company's objective is to pay a growing dividend, but in view of the challenging conditions faced by investee companies currently, your Board believes that it is prudent to maintain the first interim dividend at last year's rate. The Board will review the second interim dividend following the year-end.

Share capital

The Company continues to buy back its shares as appropriate, to seek to ensure that the Company's shares trade at a consistently low discount to net asset value. During the period it bought back 150,000 ordinary shares at a discount of 3.7 per cent to the prevailing net asset value.

A total of 15,439 subscription shares were exercised at 30 June 2011 and converted into an equivalent number of ordinary shares.

Shareholder initiatives

I am pleased to advise you of several shareholder initiatives that have recently been completed.

Firstly, the Company is introducing a dividend reinvestment plan ("DRIP") and the registrar, Capita Registrars, wrote to shareholders on 12 December 2011 with full details of the DRIP. The DRIP is a straightforward and efficient way for shareholders to increase their holdings in the Company.

The second initiative is the introduction of an Artemis Alpha Trust ISA (the "ISA"). The ISA will enable investors to make an annual investment (up to £10,680 for the 2011/12 tax year) in the Company, with all capital gains and income from such an investment being free from tax. The ISA will complement the Company's existing Investment Plan.

 

 

Both products will be operated by the investment manager, Artemis Investment Management LLP ("Artemis"), and will enable investors to acquire shares in the Company either through regular monthly investments or lump sums. Investments from £50 per month for regular savers, or from £1,000 for lump sums can be made and there are no charges for acquiring shares through either of these products (only broker's commission and stamp duty). If you would like to invest in the Company through the ISA or the Investment Plan, please call Artemis on 0800 092 2051 or visit the website, artemisonline.co.uk.

Outlook

Stock markets continue to await a credible proposal from European leaders on how the debt issues will be resolved and thereby seek to avoid a default on sovereign debt. Until such a plan is put forward, fears of contagion from a default are likely to be uppermost in investors' minds. In the UK, the government continues to try to cut the budget deficit, but this is proving more difficult, with fears that without some form of fiscal stimulus the country will slip back into recession. Strong political leadership is needed to lift Europe and the UK out of the current situation and back to a path of sustainable economic growth.

While the macro picture remains quite gloomy, at the portfolio level our investment manager is still seeing many companies which are in good financial health, with growing businesses, and continues to believe that equities remain attractive as an asset class. Both your Board and investment manager believe that such companies' valuations will be recognised by stock markets in due course.

At the time of writing, the Company's net asset value stood at 262.55p per ordinary share and the share price was 246.50p per ordinary share, representing a discount of 6.1 per cent.

Finally, I look forward to updating you on the Company and its portfolio in the Annual Report in July 2012. More information is contained on dedicated pages on the investment manager's website, artemisonline.co.uk, which is updated monthly. Your Board is always interested to hear the views of shareholders and you can  contact me at simon.miller@artemisfunds.com.

 

Simon Miller

Chairman

19 December 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Manager's Review

Performance - Confident, despite disappointment...

Performance over the six months to 31 October 2011 saw the net asset value fall by 16.2 per cent. While always disappointing to report performance such as this, our long term record remains good and we remain confident that performance will get back to form in the coming months.

Review - The demands of debt...

The period under review has been all about the woes in the Eurozone, as the debt crisis in a number of peripheral countries has led to fears of default by them and the prospect of contagion across the entire European core. This led to extreme volatility in markets, with the FTSE All-Share Index firm in the first three months of the period under review, only to fall back sharply in the summer as the Greek crisis took centre stage.

As the summer wore on, it became clear that a radical overhaul of the entire European project was required, including much closer fiscal union alongside the existing monetary one. It was clear too that many countries' debts would be difficult to repay in full and that most European banks' balance sheets would have to be strengthened to counteract the prospect of write-downs in their loan books.

At the time of writing the fundamental, and as yet unanswered, question is: will Germany sanction the printing of money by the European Central Bank to prevent a debt deflationary spiral that would create a severe depression in the Eurozone - and the consequent collapse of many banks?

For the optimists there is always China. Inflation has started falling for the first time in a while, which should mean that consumption there can take up the slack of sluggish growth in the West. It is clear that much depends on Chinese demand being able to pull the rest of the world out of a long period of stagnation.

Portfolio - Sound stocks...

Whilst mindful of the above, and therefore being wary of buying stocks which are over reliant on continental European or domestic demand, the portfolio has continued to maintain an exposure to investee companies operating in other geographic regions, particularly the Far East, where we believe there are far greater prospects for growth. The Company still favours a stock-picking approach, investing in sound businesses with strong management teams.

The number of holdings in the portfolio has been reduced dramatically following the merger with Gartmore Growth Opportunities, with the total number of holdings now standing at 129 at 31 October 2011, down from 160 at the year-end. We have also reduced the level of gearing in the portfolio, reflecting the greater levels of uncertainty in the markets.

Our main investment themes remain oil & gas, palm oil and other financials - all areas in which we believe we have an edge in knowledge and understanding.

The star performer in the oil & gas sector was Lansdowne Oil & Gas, which began its highly promising drilling campaign. In palm oil, Asian Plantations performed well following a further acquisition of land in Malaysia. It was a tougher environment for other financials, but we continue to view favourably our investments in the emerging market asset managers, City of London Investment Group and Ashmore. We made a new investment in Polar Capital, a fast growing boutique fund management company with a range of top performing funds.

The best individual stock performer over the period was Cupid, an online dating company, which has experienced explosive growth as it expands its overseas network.

In terms of transactions, major purchases included Regus, the serviced office group, Mulberry, the luxury brand, whose sales are taking off in Asia, and Vitec, a leading manufacturer of camera equipment. On the sales side much effort was taken to sell some of the smaller holdings, as well as withdrawing cash from some of the more disappointing stocks such as Betfair and Supergroup.

In the unquoted portfolio, there were two notable revaluations. The first was The Hut Group, where we wrote down the value of our holding as a result of a provision having to be taken by the company against the value of stock in its 2010 financial statements. This led to a need for a small cash injection into the company at a lower price than our carrying value. We remain optimistic about the prospects for this business as it enters its key trading months.

The second was Vostok Energy. The company had hoped to complete an IPO in 2011, but market conditions prevented it from doing so. The postponement of an IPO meant that it had to raise some additional money to provide it with working capital to cover operational commitments. The fund raising was supported by existing shareholders, with the company's directors also investing. It was, however, completed at a lower price than our previous carrying value. As a business it continues to progress, with increasing revenues from the sale of gas to Gazprom at prices which will move upwards as the Russian gas price is moved up towards the global price. This should provide the company with sufficient cash flows for it to remain operational until it can raise funds at IPO to provide it with capital to fund a number of larger capital expenditure projects it has planned.

We are mindful of the difficulties all private businesses have had in raising fresh capital to execute their business plans this year. It has been a matter of disappointment that two or three of our unquoted companies have not been able to float. But this has more to do with the state of financial markets than the prospects for the businesses themselves.

Set out below is the attribution analysis showing the stocks which have had the greatest effect, positive and negative, on the performance of the Company.

 

Five largest stock contributors


Contribution %

Cupid

0.6

Lansdowne Oil & Gas

0.5

Asian Plantations

0.2

Continental Farmers Group

0.2

Leed Petroleum

0.2

Five largest stock detractors


Contribution %

The Hut Group

(3.2)

Vostok Energy

(2.8)

Salamander Energy

(1.1)

Providence Resources

(0.8)

Oxford Catalysts

(0.6)

 

Outlook - Equities relatively attractive...

In spite of the obvious issues in the world economy and particularly Europe, we continue to find excellent value at the stock level. Company balance sheets are far more robust than they were in 2008. With interest rates at record low levels and governments printing money, equities look as attractive an asset class as any other - especially when compared with bonds.

 

John Dodd and Adrian Paterson

Fund managers

Artemis Investment Management LLP

19 December 2011

 

 

 

 

 

Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report

 

We confirm that to the best of our knowledge, in respect of the Half-Yearly Financial Report for the six months ended 31 October 2011:

-        the condensed set of financial statements has been prepared in accordance with IAS 34, 'Interim Financial Reporting' issued by the International Accounting Standards Board as adopted by the EU;

-        the interim management report includes a fair review of the information required by:

(a)  Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months; and a description of the principal risks and uncertainties for the remaining six months of the year); and

(b)  Disclosure and Transparency Rule 4.2.8R (related party transactions).

 

For and on behalf of the Board

Simon Miller

Chairman

19 December 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Condensed Income Statement

For the six months ended 31 October 2011



Six months ended

31 October 2011

(unaudited)

Six months ended
31 October 2010

(unaudited)

Year ended
30 April 2011

(audited)



Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Investment income



1,200


--

1,200

454


--

454

1,426


--

1,426

Other income


65

--

65

118

--

118

352

--

352












Total revenue


1,265

--

1,265

572

--

572

1,778

--

1,778












(Losses)/gains on investments


 

--

(25,400)

(25,400)


--

10,999

10,999


--

24,044

24,044

(Losses)/gains on current asset investments


(601)

--

(601)

--

--

--

72

--

72

Currency (losses)/gains


--

(50)

(50)

--

13

13

--

31

31












Total income


664

(25,450)

(24,786)

572

11,012

11,584

1,850

24,075

25,925












Expenses











Investment management fee


(56)

(502)

(558)

(28)

(250)

(278)

(80)

(722)

(802)

Performance fee


40

363

403

--

--

--

(40)

(363)

(403)

Other expenses


(210)

(10)

(220)

(127)

--

(127)

(284)

(25)

(309)












Profit/(loss) before finance costs and tax


438

(25,599)

(25,161)

417

10,762

11,179

1,446

22,965

24,411












Finance costs


(41)

(370)

(411)

(19)

(170)

(189)

(53)

(474)

(527)












Profit/(loss) before tax


397

(25,969)

(25,572)

398

10,592

10,990

1,393

22,491

23,884












Tax


(29)

15

(14)

(8)

--

(8)

(39)

30

(9)












Profit/(loss) for the period


368

(25,954)

(25,586)

390

10,592

10,982

1,354

22,521

23,875












Earnings per ordinary share (basic)

2

0.75p

(53.29)p

(52.54)p

1.30p

35.29p

36.59p

3.64p

60.56p

64.20p

Earnings per ordinary share (diluted)

2

0.75p

(53.29)p

(52.54)p

1.17p

31.80p

32.97p

3.64p

60.56p

64.20p












 



 

Condensed Balance Sheet

As at 31 October 2011

 


Notes

31 October 2011

(unaudited)
£'000

31 October 2010

(unaudited)
£'000

30 April 2011

(audited)
£'000

Non-current assets





Investments


141,650

110,123

181,549






Current assets





Investments held by subsidiary


2,256

1,669

2,903

Other receivables


615

2,941

4,593

Cash and cash equivalents


2,986

189

--








5,857

4,799

7,496






Total assets


147,507

114,922

189,045






Current liabilities





Other payables


(783)

(2,662)

(2,002)

Bank overdraft


--

(716)

(1,519)

Bank loan


(14,500)

(11,500)

(26,500)








(15,283)

(14,878)

(30,021)






Net assets


132,224

100,044

159,024






Equity attributable to equity holders





Share capital


557

305

557

Share premium


594

24,157

69,136

Special reserve


70,938

1,592

2,807

Warrant reserve


--

1,270

--

Capital redemption reserve


33

32

33

Retained earnings -- revenue


2,050

1,881

2,485

Retained earnings -- capital

5

58,052

70,807

84,006






Total equity


132,224

100,044

159,024






Net asset value per ordinary share (basic)

3

271.56p

333.58p

325.70p

Net asset value per ordinary share (diluted)

3

271.56p

295.64p

325.70p






 



Condensed Statement of Changes in Equity

For the six months ended 31 October 2011

 


Six months ended 31 October 2011 (unaudited)






Capital





Share

Share

Special

Warrant

redemption

Retained earnings



capital

premium

reserve

reserve

reserve

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 1 May 2011

557

69,136

2,807

--

33

2,485

84,006

159,024

Total comprehensive income:









Profit/(loss) for the period

--

--

--

--

--

368

(25,954)

(25,586)

Transactions with owners recorded directly to equity:









Cancellation of share premium

--

(68,595)

68,595

--

--

--

--

--

Repurchase of ordinary shares into treasury

--

--

(464)

--

--

--

--

(464)

Conversion of subscription shares

--

53

--

--

--

--

--

53

Dividends paid

--

--

--

--

--

(803)

--

(803)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 October 2011

557

594

70,938

--

33

2,050

58,052

132,224


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Six months ended 31 October 2010 (unaudited)






Capital





Share

Share

Special

Warrant

redemption

Retained earnings



capital

premium

reserve

reserve

reserve

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 1 May 2010

305

24,116

1,910

1,278

32

1,970

60,207

89,818

Total comprehensive income:









Profit for the period

--

--

--

--

--

390

10,592

10,982

Transactions with owners recorded directly to equity:









Repurchase of ordinary shares into treasury

--

--

(318)

--

--

--

--

(318)

Exercise of manager warrants

--

41

--

(8)

--

--

8

41

Dividends paid

--

--

--

--

--

(479)

--

(479)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 October 2010

305

24,157

1,592

1,270

32

1,881

70,807

100,044


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Year ended 30 April 2011 (audited)






Capital





Share

Share

Special

Warrant

redemption

Retained earnings



capital

premium

reserve

reserve

reserve

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 1 May 2010

305

24,116

1,910

1,278

32

1,970

60,207

89,818

Total comprehensive income:









Profit for the year

--

--

--

--

--

1,354

22,521

23,875

Transactions with owners recorded directly to equity:









Issue of ordinary shares

117

37,323

--

--

--

--

--

37,440

Costs of merger

--

(772)

--

--

--

--

--

(772)

Repurchase of ordinary shares into treasury

--

--

(319)

--

--

--

--

(319)

Re-issue of ordinary shares from treasury

--

527

1,286

--

--

--

--

1,813

Exercise of manager warrants

66

7,914

--

(1,278)

--

--

1,278

7,980

Bonus issue of subscription shares

70

--

(70)

--

--

--

--

--

Cancellation of subscription shares

(1)

--

--

--

1

--

--

--

Conversion of subscription shares

--

28

--

--

--

--

--

28

Dividends paid

--

--

--

--

--

(839)

--

(839)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 April 2011

557

69,136

2,807

--

33

2,485

84,006

159,024


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Condensed Cash Flow Statement

For the six months ended 31 October 2011


Six months ended
31 October 2011
(unaudited)
£'000

Six months ended
31 October 2010
(unaudited)
£'000

Year ended
30 April 2011
(audited)
£'000

Operating activities




(Loss)/profit before tax

(25,572)

10,990

23,884

Interest payable

411

189

527

Losses/(gains) on investments

25,400

(10,999)

(24,044)

Currency losses/(gains)

50

(13)

(31)

Losses/(gains) on current asset investments

601

--

(72)

Increase in other receivables

(68)

(12)

(231)

(Decrease)/increase in other payables

(462)

(147)

488





Net cash inflow from operating activities before interest and tax

360

8

521





Interest paid

(411)

(189)

(527)

Irrecoverable overseas tax suffered

(14)

--

(9)





Net cash outflow from operating activities

(65)

(181)

(15)





Investing activities




Purchases of investments

(28,175)

(27,238)

(100,348)

Sales of investments

46,009

27,032

75,319





Net cash inflow/(outflow) from investing activities

17,834

(206)

(25,029)





Financing activities




Repurchase of ordinary shares into treasury

(464)

(318)

(319)

Exercise of manager warrants

--

41

7,980

Re-issue of ordinary shares from treasury

--

--

1,813

Costs of merger

--

--

(772)

Conversion of subscription shares

53

--

28

Dividends paid

(803)

(479)

(839)





Net cash (outflow)/inflow from financing activities

(1,214)

(756)

7,891





Net increase/(decrease) in cash and cash equivalents

16,555

(1,143)

(17,153)





Cash and cash equivalents at the start of the period

(28,019)

(10,897)

(10,897)

Effect of foreign exchange rate changes

(50)

13

31





Cash and cash equivalents at the end of the period

(11,514)

(12,027)

(28,019)





Bank loan

(14,500)

(11,500)

(26,500)

Bank overdraft

--

(716)

(1,519)

Cash

2,986

189

--






(11,514)

(12,027)

(28,019)





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the Half-Yearly Financial Report

1.  Accounting policies

The Group's Half-Yearly Financial Report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', the provisions of the Companies Act 2006 and with the guidance set out in the Statement of Recommended Practice for Investment Trust
Companies and Venture Capital Trusts issued by the Association of Investment Companies in
January 2009.

The Half-Yearly Financial Report has been prepared under the same accounting policies as the Annual Financial Statements for the year ended 30 April 2011.

 

2.  Earnings per ordinary share


Six months ended

 31 October 2011

Six months ended

31 October 2010

Year ended

30 April 2011

Earnings per ordinary share is based on:




Revenue earnings (£'000)

368

390

1,354

Capital earnings (£'000)

(25,954)

10,592

22,521





Total earnings (£'000)

(25,586)

10,982

23,875





Weighted average number of ordinary shares in issue during the period (basic)

48,704,648

30,011,861

37,189,744

Weighted average number of ordinary shares in issue during the period (diluted)

48,704,648

33,304,491

37,189,744





 

3.  Net asset value per ordinary share


As at

31 October 2011

As at

31 October 2010

As at

30 April 2011

Net asset value per ordinary share is based on:




Net assets (£'000)

132,224

100,044

159,024





Number of ordinary shares in issue at the end of the period (basic)

48,690,588

29,991,203

48,825,239

Assumed exercise of manager warrants/ subscription shares at the end of the period

--

6,533,982

--

Number of ordinary shares in issue at the end of the period (diluted)

48,690,588

36,525,185

48,825,239





 

 

 

 

 

 

 

 

 

 

 

4.  Dividends


Six months ended

31 October 2011

£'000

Six months ended

31 October 2010

£'000

Year ended

30 April 2011

£'000

Second interim dividend for the year ended 30 April 2010 - 1.60p

--

479

479

First interim dividend for the year ended 30 April 2011 - 1.20p

--

--

360

Second interim dividend for the year ended 30 April 2011 - 1.65p

803

--

--






803

479

839





 

A first interim dividend for the year ending 30 April 2012 of £584,287 (1.20p per ordinary share) has been declared. This will be paid on 3 February 2012 to those shareholders on the register at the close of business on 30 December 2011.

 

5.  Analysis of retained earnings - capital


31 October 2011

£'000

31 October 2010

£'000

30 April 2011

£'000





Retained earnings - capital (realised)

63,649

51,223

73,364

Retained earnings - capital (unrealised)

(5,597)

19,584

10,642






58,052

70,807

84,006





 

6.  Comparative information

The financial information for the six months ended 31 October 2011 and 31 October 2010 has not been audited and does not constitute statutory financial statements as defined in Section 234 of the Companies Act 2006.

The information for the year ended 30 April 2011 has been extracted from the Audited Financial Statements for the year ended 30 April 2011. These financial statements contained an unqualified auditor's report and have been lodged with the Registrar of Companies and did not contain a statement required under Section 498 of the Companies Act 2006.

 

7.  Principal risks and uncertainties

Pursuant to DTR 4.2.7R of the Disclosure and Transparency Rules, the principal risks faced by the Company include general market price risk, liquidity risk, regulatory, and financial risks.

These risks, which have not materially changed since the Annual Report for the year ended 30 April 2011, and the way in which they are managed, are described in more detail in the Annual Report for the year ended 30 April 2011 which is available on the investment manager's website
at artemisonline.co.uk.

8.  Related party transactions

There were no related party transactions during the period.

 

 

Copies of the Half-Yearly Financial Report for the six months ended 31 October 2011 will be sent to shareholders shortly and will be available from the registered office at Cassini House, 57 St James's Street, London SW1A 1LD as well as on the investment manager's website at artemisonline.co.uk.

 

 

 

Artemis Investment Management LLP

Company Secretary

 

For further information, please contact:

Billy Aitken at Artemis Investment Management LLP

Telephone: 0131 225 7300

19 December 2011

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR EKLFFFLFFFBL
UK 100

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