Final Results
British Portfolio Trust PLC
18 December 2006
For Immediate Release
18th December 2006
BRITISH PORTFOLIO TRUST plc
ANNOUNCEMENT OF UNAUDITED PRELIMINARY RESULTS
For the year to 31st October 2006
CHAIRMAN'S STATEMENT
The Board announces the results for the year to 31st October 2006. A final
dividend has been declared of 2.85p per Ordinary Share, which will be payable on
2nd March 2007 to shareholders on the register at the close of business on 2nd
February 2007, making a total distribution for the year ended 31st October 2006
of 4.60p per Ordinary Share, compared to 4.00p in the previous financial year,
an increase of 15%.
The net asset value per Ordinary Share at 31st October 2006 was 184.3p compared
with 160.5p (as restated) at 31st October 2005, an increase of 14.8%. Over the
same period the benchmark index, the FTSE All-Share Index, increased by 17.9 %.
This year stock selection was less successful following the two good preceding
financial years when the returns were 18.5% versus 16.0% and 10.2% versus 8.1%.
Some of the reasons for this year's underperformance are discussed in the
Investment Manager's Review below.
On 13th October 2006 the Company issued 556,305 new Ordinary Shares relating to
the reconstruction of Allianz Dresdner Second Endowment Policy Trust plc and we
welcome these new shareholders.
During the year under review the Company bought back 2,241,333 Ordinary Shares
for cancellation and a further 155,700 Ordinary Shares since the year end. The
Company also bought back 2,946,000 Ordinary Shares to be held in treasury for
reissue into the market or cancellation at a future date. The Board intends to
seek renewed authority from shareholders to buy back up to 15% of the issued
share capital of the Company.
INVESTMENT MANAGER'S REVIEW
The period under review has seen another strong year from UK equities with the
FTSE All-Share Index showing an increase of 17.9%. The key driver for equity
markets has been the high levels of liquidity arising in part from the high
levels of mergers and acquisitions activity. With global interest rates
remaining at relatively low levels by historic standards private equity has
been able to obtain attractive funding. With strong underlying cash flow
companies have also been emboldened to return to the acquisition trail. Along
with high levels of share buybacks, a great deal of cash has been recycled back
into the equity market.
Performance in this period has been impacted by stock selection in the small
company part of the portfolio. Despite positive contributions from Aberdeen
Asset Management and Mulberry, one of our largest holdings, Energy XXI, which is
an acquisitive oil production company with cash generating assets based in the
Gulf of Mexico, has not performed as well as we would have hoped. Although its
share price has been lacklustre over the period, the company continues to show
good cash generation and a US listing in early 2007 is expected to highlight its
undervaluation relative to its UK peers. Prosperity Minerals and BDI Mining
also failed to live up to our expectations in the period under review but have
improved since the year end. We also had less exposure to the key takeovers
than in previous years.
In terms of sector selection, our overweight positions in Real Estate, Utilities
and Tobacco were positives, but Software and Computer Services and Travel and
Leisure were negative contributors.
The focus on companies undergoing significant structural change has been
maintained. Examples include Unite Group, the student accommodation provider,
which has formed an open ended property fund, and Collins Stewart Tullett, which
is soon to de-merge into an inter- dealer broker and a stockbroker.
Markets went up steadily in the early months of the year as investors drew
encouragement from the strength of global economies and inflation worries were
subdued. This changed in May as markets corrected on the inflationary impact of
higher energy prices and the slowing US housing market. Since then markets have
returned to their positive trend, comforted by lower oil prices and the fact
that interest rates in the United States have not risen since June. Looking
forward, the next move in US interest rates is more likely to be down than up.
The Bank of England's Monetary Policy Committee, however, surprised the market
by raising UK interest rates in August and then again in November principally
with the intention of containing house price inflation which has re-emerged this
year. The long term positive dynamics remain in place for the UK housing
market, but it remains to be seen if the recent moves will have a short term
impact. Currently the fund's exposure to the building sector is through
building materials companies such as Hanson. With UK interest rates now at
5-year highs, exposure to consumer related sectors is very selective with
current holdings including Whitbread and Marks & Spencer, where in both cases
management is clearly improving their companies' product offerings.
Looking forward, although concerns about the US economy will in the short term
remain, growth in Japan and Europe is likely to improve. The positive
environment for mergers and acquisitions is expected to continue and this, in
combination with further strong dividend growth, should provide support for the
UK equity market.
STATUS
The Company operates as an approved investment trust within the meaning of
Section 842 of the Income and Corporation Taxes Act 1988. Approval was granted
for the year ended 31st October 2005, and is expected to be granted for the year
under review. The Company is not a close company.
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 12.30pm on 9th
February 2007.
155 Bishopsgate By Order of the Board
London EC2M 3AD P W I Ingram
18th December 2006 Company Secretary
UNAUDITED INCOME STATEMENT
For the year to 31st October 2006
Revenue Capital Total
£'000s £'000s £'000s
(Note 2)
Net gains on investments at fair value - 10,410 10,410
Income 2,768 - 2,768
Investment management fee (298) (718) (1,016)
Expenses of administration (179) (3) (182)
Net return before finance costs and taxation 2,291 9,689 11,980
Finance costs: interest payable and similar charges (73) (215) (288)
Return on ordinary activities before taxation 2,218 9,474 11,692
Taxation
Overseas taxation (1) - (1)
Return attributable to Ordinary Shareholders 2,217 9,474 11,691
Return per Ordinary Share (Note 1) 5.21p 22.25p 27.46p
UNAUDITED BALANCE SHEET
as at 31st October 2006
£'000s
Investments held at fair value through profit or loss 81,281
Fair value of interest rate swaps (30)
Net current liabilities (1)
Total assets less current liabilities 81,250
Creditors: Amounts falling due after more than one year (6,000)
Total Net Assets 75,250
Called up Share Capital 443
Share Premium Account 13,388
Capital Redemption Reserve 106
Special Reserve 42,576
Capital Reserves:
Realised 3,181
Unrealised 13,581
Hedging Reserve (106)
Revenue Reserve 2,081
Equity Shareholders' Funds (all equity interests) 75,250
Net asset value per Ordinary Share 184.3p
The Net Asset Value is based on 40,827,974 Ordinary Shares in issue.
UNAUDITED INCOME STATEMENT
For the year to 31st October 2005
Revenue Capital Total
£'000s £'000s £'000s
(Note 2)
Net gains on investments at fair value - 11,987 11,987
Income 2,642 - 2,642
Investment management fee (281) (666) (947)
Expenses of administration (171) (4) (175)
Net return before finance costs and taxation 2,190 11,317 13,507
Finance costs: interest payable and similar charges (93) (278) (371)
Return on ordinary activities before taxation 2,097 11,039 13,136
Taxation
Overseas taxation (2) - (2)
Return attributable to Ordinary Shareholders 2,095 11,039 13,134
Return per Ordinary Share (Note 1) 4.53p 23.88p 28.41p
UNAUDITED BALANCE SHEET
as at 31st October 2005
£'000s
(restated)
Investments held at fair value through profit or loss 72,302
Net current assets 6,654
Total assets less current liabilities 78,956
Creditors: Amounts falling due after more than one year (6,000)
Total Net Assets 72,956
Called up Share Capital 460
Share Premium Account 12,378
Capital Redemption Reserve 84
Special Reserve 51,068
Capital Reserves:
Realised (1,055)
Unrealised 8,395
Revenue Reserve 1,626
Equity Shareholders' Funds 72,956
Net asset value per Ordinary Share 160.5p
The Net Asset Value is based on 45,459,002 Ordinary Shares in issue.
UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31st October 2006
Called up Share Capital Special Capital Capital Hedging Revenue Total
Share Premium Redemption Reserve Reserve Reserve Reserve Reserve
Capital Account Reserve Realised Unrealised
(£000s) (£000s) (£000s (£000s) (£000s) (£000s) (£000s) (£000s) (£000s)
Net Assets at 31st
October 2004 as
previously stated 472 12,378 72 53,456 (6,487) 2,788 252 62,931
-
Dividends on
Ordinary Shares not
recognised as a
current liability - - - - - - - 943 943
Net Assets at 31st
October 2004
(restated) 472 12,378 72 53,456 (6,487) 2,788 - 1,195 63,874
Revenue Return - - - - - - 2,095 2,095
Shares repurchased
during the year (12) - 12 (2,388) - - - - (2,388)
Dividends on
Ordinary Shares - - - - - - - (1,664) (1,664)
Capital Return - - - - 5,432 5,607 - 11,039
Net Assets at 31st
October 2005
(restated) 460 12,378 84 51,068 (1,055) 8,395 - 1,626 72,956
Called up Share Capital Special Capital Capital Hedging Revenue Total
Share Premium Redemption Reserve Reserve Reserve Reserve Reserve
Capital Account Reserve Realised Unrealised
(£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s)
Net Assets at 31st
October 2005 as
previously stated 460 12,378 84 51,068 (1,055) 8,395 - 535 71,865
Dividends on
Ordinary Shares not
recognised as a
current liability - - - - - - - 1,091 1,091
Net Assets at 31st
October 2005
(restated) 460 12,378 84 51,068 (1,055) 8,395 - 1,626 72,956
Adjustment to
record investments
at bid value - - - - - (52) - - (52)
Recognition of
Interest Rate Swaps - - - - - - (106) - (106)
Revenue Return - - - - - - 2,217 2,217
Shares repurchased
during the year (22) - 22 (8,492) - - - - (8,492)
Shares issued
during the year 5 1,010 - - - - - - 1,015
Dividends on
Ordinary Shares - - - - - - - (1,762) (1,762)
Capital Return - - - - 4,236 5,238 - - 9,474
Net Assets at 31st
October 2006 443 13,388 106 42,576 3,181 13,581 (106) 2,081 75,250
UNAUDITED CASH FLOW STATEMENT
For the year to 31st October 2006 and comparative period.
2006 2005
£'000s £'000s
Net cash inflow from operating activities 2,363 1,992
Servicing of Finance
Interest paid (393) (366)
Investing Activities
Purchase of fixed asset investments (28,056) (24,223)
Sale of fixed asset investments 29,007 28,687
Net cash inflow from investing activities 951 4,464
Equity dividends paid (1,762) (1,664)
Net cash inflow before financing 1,159 4,426
Financing
Purchase of Ordinary Shares for cancellation / treasury (8,491) (2,389)
Capital distribution payment received from Jos Holdings plc - 1
Cash transferred from Allianz Dresdner Second Endowment Policy
Trust plc
68 -
Net cash outflow from financing (8,423) (2,388)
(Decrease) Increase in cash (7,264) 2,038
BRITISH PORTFOLIO TRUST PLC
TOP 20 EQUITY HOLDINGS AS AT 31st October 2006
Valuation % of
31.10.06 Total
£'000s Assets Principal Activities
BP 5,151 6.84 Oil and Gas Producers
GlaxoSmithKline 4,187 5.56 Pharmaceuticals and Biotechnology
Royal Dutch Shell 'B' Shares 3,936 5.23 Oil and Gas Producers
Energy XXI 3,575 4.75 Oil and Gas Producers
HSBC Holdings 3,330 4.42 Banks
Vodafone Group 2,921 3.88 Mobile Telecommunications
Royal Bank of Scotland 2,787 3.70 Banks
AstraZeneca 2,352 3.12 Pharmaceuticals and Biotechnology
Barclays 1,989 2.64 Banks
Anglo American 1,954 2.59 Mining
HBOS 1,946 2.58 Banks
BT Group 1,739 2.31 Fixed Line Telecommunications
Prudential 1,383 1.84 Life Assurance
British American Tobacco 1,368 1.82 Tobacco
Lloyds TSB Group 1,299 1.72 Banks
Collins Stewart Tullett 1,253 1.66 General Financial
Xstrata 1,164 1.55 Mining
Whitbread 1,151 1.53 Travel & Leisure
Imperial Tobacco 1,151 1.53 Tobacco
Land Securities 1,132 1.50 Real Estate
45,768 60.77
Note 1
The return per Ordinary Share is based on a weighted average number of shares in
issue during the period of 42,580,602 (2005: 46,234,631).
Note 2
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items derive from continuing operations. No operations
were acquired or discontinued in the period.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the Income Statement.
Included in the cost of investments are transaction costs on purchases amounting
to £147,346 (2005: £138,556) and transaction costs on sales amounting to £48,271
(2005: £50,207).
Note 3
Investments are designated as held at fair value through profit or loss in
accordance with FRS 26 'Financial Instruments: Measurement'. Listed investments
are valued at bid market prices. This represents a change in accounting policy.
However, in accordance with the exemption conferred by paragraph 108D of FRS
26, comparatives have not been restated. In prior periods listed investments
were valued at mid-market prices. As a consequence the adoption of bid prices
on 1st November 2005 decreased the value of listed investments by £52,256 to
£72,249,871.
Interest rate swaps are now also held at fair value through profit or loss.
Previously, they were stated at nil.
Note 4
In accordance with FRS 21 'Events after the Balance Sheet Date', the final
dividend payable on Ordinary Shares is recognised as a liability when approved
by shareholders. Interim dividends are recognised only when paid. This is a
change of accounting policy and results in a restatement of the prior year
creditors and a consequential increase in the prior year net asset value.
Dividends paid on Ordinary Shares in respect of earnings for each period are as
follows:
Year to Year to
31st October 2006 31st October 2005
£'000s £'000s
Interim dividend 1.75p paid 6th September 2006 (2005
-1.60p) 736 731
Final dividend 2.40p paid 3rd March 2006 (2005 -2.00p) 1,091 943
Prior year over accrual (65) (10)
1,762 1,664
Dividends payable at the period end are not recognised as a liability under FRS
21 'Events after the Balance Sheet Date'. Details of these dividends are set
out below.
Year to Year to
31st October 2006 31st October 2005
£'000s £'000s
Final dividend 2.85p payable 2nd March 2007 (2005 -2.40p) 1,164 1,091
The proposed final dividend above is based on the number of shares in issue at
the period end. However, the dividend payable will be based on the number of
shares in issue on the record date and will reflect any purchases and
cancellations of shares by the Company settled subsequent to the year end.
Note 5
Restatement of opening balances
As previously stated Restated
31st October 2004 Adjustment 31st October 2004
£'000s £'000s £'000s
Fixed Assets Investments 64,973 - 64,973
Net Current Assets 3,958 943 1 4,901
Total Assets less Current Liabilities 68,931 943 63,874
Less: Creditors-amounts falling due after more
than one year (6,000) - (6,000)
Total Net Assets 62,931 943 63,874
Capital and Reserves
Called up Share Capital 472 - 472
Share Premium Account 12,378 - 12,378
Capital Redemption Reserve 72 - 72
Special Reserve 53,456 - 53,456
Capital Reserves: Realised (6,487) - (6,487)
: Unrealised 2,788 - 2,788
Revenue Reserve 252 943 1 1,195
Shareholders' Funds 62,931 943 63,874
Net asset value per Ordinary Share 133.4p 2.4p 135.8p
As previously stated Restated
31st October 2005 Adjustment 31st October 2005
£'000s £'000s £'000s
Fixed Assets Investments 72,302 - 72,302
Net Current Assets 5,563 1,091 1 6,654
Total Assets less Current Liabilities 77,865 1,091 78,956
Less: Creditors-amounts falling due after more
than one year (6,000) - (6,000)
Total Net Assets 71,865 1,091 72,956
Capital and Reserves
Called up Share Capital 460 - 460
Share Premium Account 12,378 - 12,378
Capital Redemption Reserve 84 - 84
Special Reserve 51,068 - 51,068
Capital Reserves: Realised (1,055) - (1,055)
: Unrealised 8,395 - 8,395
Revenue Reserve 535 1,091 1 1,626
Shareholders' Funds 71,865 1,091 72,956
Net asset value per Ordinary Share 158.1p 2.4p 160.5p
1 Represents the effect of not recognising the final dividend (FRS 21)
Note 6
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 31st October 2006 or 31st
October 2005. The financial information for the year ended 31st October 2005 has
been extracted from the statutory accounts for that year, which were filed with
the Registrar of Companies on 16th February 2006, and this information has now
been restated to reflect changes in certain accounting policies (see Note 5).
The auditors report on those accounts; was unqualified before this restatement
and did not contain a statement under either section 237(2) or (3) of the
Companies Act 1985. The statutory accounts for the year ended 31st October 2006
will be finalised on the basis of the financial information presented by the
directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
Note 7
The annual report will be sent to shareholders in mid January 2007 and will be
available to members of the public from the Company's registered office at 155
Bishopsgate, London EC2M 3AD.
For further information, please contact:
Simon White, Head of Investment Trusts
RCM (UK) Limited
Tel: 020 7065 1539
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