Interim Results

RNS Number : 8260W

British Portfolio Trust PLC

16 June 2008

 



For Immediate Release                                                                            16th June 2008

BRITISH PORTFOLIO TRUST plc

ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS

For the period from 1st November 2007 to 30th April 2008

Net Asset Value

A summary of the results for the period from 1st November 2007 to 30th April 2008 is set out below. The Net Asset Value (NAV) per Ordinary Share as at 30th April 2008 was 177.8p. This represents a decrease of 11.7% over the NAV as at 31st October 2007. Over the same period the Company's benchmark index, the FTSE All-Share Index, fell by 10.3%. However since 30th April the Company's NAV has outperformed its benchmark by 1.8%, albeit in a falling market (Source: Datastream to 13/06/08).

Interim Dividend 

The Board has declared an interim dividend of 1.80p per Ordinary Share (compared to 1.75p last year), which will absorb £729,419 and is payable on 3rd September 2008 to all holders of Ordinary Shares on the Register of Members at the close of business on 1st August 2008.

Market Review and Outlook

Equity markets were weak overall during the period under review as the credit crisis intensified and investors began to recognise the extent of its impact on economic growth and company profits. Markets recovered in March when the rescue of Bear Stearns by JP Morgan indicated the resolve of the US Federal Reserve to maintain confidence in the financial system.  Whilst it may be that the most dangerous period for the financial system has passed, it is nonetheless clear that many of the economic consequences of this extraordinary period lie ahead.

Recent economic data from the US has been weak, with many economists concluding that the US economy is likely to have entered the early stages of a recession.  Perhaps the most surprising theme of the recent months has been the ongoing strength of commodity markets, and most obviously oil, which traded over $120 a barrel for the first time. This has heightened concerns that inflation will remain stubbornly high, despite a weakening economy.

The UK economy, whilst substantially more resilient than the US in the last few quarters, is also facing a deteriorating outlook, and the consensus for 2008 GDP forecasts has fallen to 1.7%. Recent data from the housing market suggests prices are now falling, and whilst the extent of future price falls is hard to gauge, deteriorating conditions in the mortgage market are beginning to impact consumer confidence. The Monetary Policy Committee (MPC) cut interest rates by 0.25% in early February. However, for the most part this has not been passed on in terms of lower mortgage costs to consumers who remain highly leveraged by comparison with history. Inflationary pressures in the economy seem likely to prevent the MPC from cutting rates further and pressure continues to rise on household budgets from food and energy prices. The portfolio is underweight in UK consumer stocks.

In this environment of reduced risk appetite and lower economic growth, consumer cyclicals such as retailers, leisure and media companies were the worst performing areas of the UK market. The continued bad news from the banking sector culminated in the announcement of rights issues from Royal Bank of Scotland, HBOS and Bradford and Bingley to repair their damaged balance sheets. The portfolio remains underweight in banks, and although valuations are now becoming quite attractive, it will be some time before the impact of a slowing UK economy on bad debts can be fully assessed and negative newsflow is likely to continue for some time. The best performing area of the market was, again, the mining sector driven by rampant commodity prices and further merger and acquisition activity, this time centred on the ultimately aborted approach for Xstrata by Vale of Brazil and BHP Billiton's pursuit of Rio Tinto.

Portfolio Manager

As previously announced, we were pleased to welcome Jeremy Thomas as the Company's new portfolio manager on 18th April 2008. Since taking on the portfolio, Jeremy has reduced exposure to the UK smaller company sector in anticipation of a weaker domestic economy.

Portfolio Activity

During the period one of the additions to the portfolio was Reed Elsevier, the international publishing company with leading positions in scientific, legal and business information markets. We also started a new position in Tullett Prebon, the interdealer broker, which benefits from rising trade volumes driven by heightened volatility across a wide range of markets including commodities, currencies, bonds and equities. 

Holdings in the resources sector were the largest contributors to performance during the period, most notably BG, Dana Petroleum and Xstrata.   These positive contributors were offset by the weakness of a range of small cap holdings in the Trust, such as Galliford Try, Camco and Prosperity Minerals. 

So far analysts' expectations for corporate profits have not been cut sufficiently for 2008 or 2009 to reflect the weaker economic outlook.  Investors will have to experience  disappointing company announcements for some time and this will continue to challenge equity markets. However, on current forecasts the UK equity market trades on a price earnings ratio less than 12x and had a historic dividend yield of 4%. Even if profit forecasts are cut further, the UK equity market would remain cheap compared to other assets and its own history.  Sentiment is likely to remain volatile as earnings expectations are adjusted downwards but at some point, perhaps later this year, the equity market will start to anticipate economic recovery.

For the time being we continue to favour larger quality growth companies with strong balance sheets, but as 2008 unfolds we expect to be able to take advantage of some excellent stock opportunities that periods of weaker economic growth often present.  Our focus will be on high return businesses, which have attractive long term growth prospects, but which, because of the more difficult short term outlook for profits, trade at discounted valuations.

Share Buybacks and Treasury Share Transactions

During the period under review 1,179,310 Ordinary Shares were repurchased at a cost of £1,983,270, (including 1,173,500 Ordinary Shares purchased into treasury at a cost of £1,972,677), at an average discount of around 3.7%.  In the period from 1st May 2008 until 16th June 2008 a further 868,000 Ordinary Shares have been repurchased at a cost of £1,495,866, (including 763,000 Ordinary Shares purchased into treasury at a cost of £1,308,858).  

155 Bishopsgate                                 By Order of the Board

London EC2M 3AD                           P W I Ingram

16th June 2008                                    Secretary

  SUMMARY OF RESULTS

INCOME STATEMENT 

For the six months ended 30th April 2008
	Revenue	Capital	Total Return
	£'000s	£'000s	£'000s
			(Note 2)
Net losses on investments at fair value	-	(9,865)	(9,865)
Income	1,420	-	1,420
Investment management fee	(123)	(292)	(415)
Administration expenses	(101)	(2)	(103)
Net return before finance costs and taxation	1,196	(10,159)	(8,963)
Finance costs : interest payable and similar charges	(47)	(141)	(188)
Net return on ordinary activities before taxation	1,149	(10,300)	(9,151)
Taxation	(4)	-	(4)
Net return attributable to Ordinary Shareholders	1,145	(10,300)	(9,155)
Return per Ordinary Share (Note 1)	2.78p	(25.00)p	(22.22)p
(basic and diluted)

BALANCE SHEET

As at 30th April 2008

	£'000s
Investments at fair value through profit or loss	69,464
Fair value of interest rate swap	3
Net Current Assets	2,563
Total Assets less Current Liabilities	72,030
Creditors - Amounts falling due after one year	-
Total Net Assets	72,030
Called up Share Capital	436
Share Premium Account	14,819
Capital Redemption Reserve	113
Special Reserve	41,232
Capital Reserves - Realised	8,993
Unrealised	4,067
Hedging Reserve	(31)
Revenue Reserve	2,401
Shareholders' Funds	72,030

Net Asset Value per Ordinary Share	177.8p
The net asset value is based on 40,523,300 Ordinary Shares in issue.
An additional 3,065,664 Ordinary Shares were held in treasury.

  SUMMARY OF RESULTS

INCOME STATEMENT 

For the six months ended 30th April 2007
	Revenue	Capital	Total Return
	£'000s	£'000s	£'000s
			(Note 2)
Net gains on investments at fair value	-	4,564	4,564
Income	1,416	-	1,416
Investment management fee	(148)	(358)	(506)
Administration expenses	(111)	(2)	(113)
Net return before finance costs and taxation	1,157	4,204	5,361
Finance costs : interest payable and similar charges	(50)	(144)	(194)
Net return on ordinary activities before taxation	1,107	4,060	5,167
Taxation	(1)	-	(1)
Net return attributable to Ordinary Shareholders	1,106	4,060	5,166
Return per Ordinary Share (Note 1)	2.76p	10.14p	12.90p
(basic and diluted)

BALANCE SHEET

As at 30th April 2007

	£'000s
Investments at fair value through profit or loss	78,803
Fair value of interest rate swap	(29)
Net Current Assets	3,862
Total Assets less Current Liabilities	82,636
Creditors - Amounts falling due after one year	(6,000)
Total Net Assets	76,636
Called up Share Capital	437
Share Premium Account	13,388
Capital Redemption Reserve	112
Special Reserve	39,903
Capital Reserves - Realised	6,269
Unrealised	14,553
Hedging Reserve	(82)
Revenue Reserve	2,056
Shareholders' Funds	76,636

Net Asset Value per Ordinary Share	194.7 p
The net asset value is based on 39,363,108 Ordinary Shares in issue.
An additional 4,361,666 Ordinary Shares were held in treasury.

SUMMARY OF RESULTS

INCOME STATEMENT

For the year to 31st October 2007

	Revenue	Capital		Total   Return
	£'000s	£'000s		£'000s
				(Note 2)
Net gains on investments at fair value	-	7,549		7,549
Income	2,914	-		2,914
Investment management fee	(284)	(689)		(973)
Administration expenses	(220)	(4)		(224)
Net return before finance costs and taxation	2,410	6,856		9,266
Finance costs: interest payable and similar charges	(88)	(260)		(348)
Net return on ordinary activities before taxation	2,322	6,596		8,918
Taxation	(9)	-		(9)
Net return attributable to Ordinary Shareholders	2,313	6,596		8,909
Return per Ordinary Share (Note 1)	5.66p	16.13p		21.79p
(basic and diluted)
BALANCE SHEET  As at 31st October 2007
			£'000s
Investments at fair value through profit or loss			88,152
Fair value of interest rate swap			40
Net Current Assets			1,777
Total Assets less Current Liabilities			89,969
Creditors- Amounts falling due after one year			(6,000)
Total Net Assets			83,969
Called up Share Capital			436
Share Premium Account			14,819
Capital Redemption Reserve			113
Special Reserve			43,216
Capital Reserves - Realised			7,092
Unrealised			16,268
Hedging Reserve			(57)
Revenue Reserve			2,082
Shareholders' Funds			83,969
Net Asset Value per Ordinary Share			201.4p
The net asset value is based on 41,702,610 Ordinary Shares in issue.
An additional 1,892,164 Ordinary Shares were held in treasury.

  SUMMARY OF RESULTS

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the six months ended 30th April 2008 and comparative periods

	Called up Share Capital £’000s	Share Premium Account £’000s	Capital Redemption Reserve £’000s	Special Reserve £’000s	Capital Reserve Realised £’000s	Capital Reserve Unrealised £’000s	Hedging Reserve £’000s	Revenue Reserve £’000s	Total £’000s
Six months ended 30th April 2008
Net Assets at 31st October 2007	436	14,819	113	43,216	7,092	16,268	(57)	2,082	83,969
Amortisation of Hedging Reserve	-	-	-	-	-	-	26	-	26
Revenue Return	-	-	-	-	-	-	-	1,145	1,145
Shares repurchased during the period	-	-	-	(1,984)	-	-	-	-	(1,984)
Dividends on Ordinary Shares	-	-	-	-	-	-	-	(826)	(826)
Capital Return	-	-	-	-	1,901	(12,201)	-	-	(10,300)
Net Assets at 30th April 2008	436	14,819	113	41,232	8,993	4,067	(31)	2,401	72,030
Six months ended 30th April 2007
Net Assets at 31st October 2006	443	13,388	106	42,576	3,181	13,581	(107)	2,082	75,250
Amortisation of Hedging Reserve	-	-	-	-	-	-	25	-	25
Revenue Return	-	-	-	-	-	-	-	1,106	1,106
Shares repurchased during the period	(6)	-	6	(2,673)	-	-	-	-	(2,673)
Dividends on Ordinary Shares	-	-	-	-	-	-	-	(1,132)	(1,132)
Capital Return	-	-	-	-	3,088	972	-	-	4,060
Net Assets at 30th April 2007	437	13,388	112	39,903	6,269	14,553	(82)	2,056	76,636

  SUMMARY OF RESULTS

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

      For the six months ended 30th April 2008 and comparative periods 

      (continued)

	Called up  Share Capital £'000s	Share Premium Account £'000s	Capital Redemption Reserve £'000s	Special Reserve £'000s	Capital Reserve Realised £'000s	Capital Reserve Unrealised £'000s	Hedging Reserve £'000s	Revenue Reserve £'000s	Total £'000s
Year ended 31st October 2007
Net Assets at 31st October 2006	443	13,388	106	42,576	3,181	13,581	(107)	2,082	75,250
Amortisation of Hedging Reserve	-	-	-	-	-	-	50	-	50
Revenue Return	-	-	-	-	-	-	-	2,313	2,313
Shares repurchased during the year	(7)	-	7	(3,750)	-	-	-	-	(3,750)
Re-issue of Ordinary Shares held in treasury	-	1,431	-	4,390	2	-	-	-	5,823
Dividends on Ordinary Shares	-	-	-	-	-	-	-	(2,313)	(2,313)
Capital Return	-	-	-	-	3,909	2,687	-	-	6,596
Net Assets at 31st October 2007	436	14,819	113	43,216	7,092	16,268	(57)	2,082	83,969

  SUMMARY OF RESULTS

CASH FLOW STATEMENT

For the six months ended 30th April 2008 and comparative periods

	Six Months to 30th April  2008		Six Months to 30th April  2007		Year to 31st October 2007
	£'000s		£'000s		£'000s
Net cash inflow from operating activities	511		260		2,024
Return on investments and servicing of finance
Interest paid	(177)		(128)		(296)
Capital expenditure and financial investment
Purchases of fixed asset investments	(9,426)		(12,307)		(31,546)
Sales of fixed asset investments	19,015		18,280		37,520
Net cash inflow from capital expenditure and financial investment	9,589		5,973		5,974
Equity dividends paid	(826)		(1,132)		(2,313)
Net cash inflow before financing	9,097		4,973		5,389
Financing
Purchase of Ordinary Shares for cancellation and held in treasury	(1,979)		(2,673)		(3,750)
Repayment of medium term loan	(3,000)		-		-
Cash transferred from Greene King Acquisitions (No.3) Limited  in connection with the re-issue of Ordinary Shares held in treasury	-		-		236
Net cash outflow from financing	(4,979)		(2,673)		(3,514)
Increase in cash	4,118		2,300		1,875
Reconciliation of Return on Ordinary Activities before Taxation to Net Cash Flow from Operating Activities
Total Return before taxation	(9,151)		5,167		8,918
Add: Finance costs: interest payable and similar charges	188		194		348
Add: Special dividends credited to capital	-		-		222
Add: Net losses (gains) on investments at fair value	9,865		(4,564)		(7,549)
Less: Overseas tax suffered	(4)		(1)		(9)
	898		796		1,930
Increase in debtors	(327)		(519)		(140)
(Decrease) Increase in creditors	(60)		(17)		234
Net cash inflow from operating activities	511		260		2,024
Reconciliation of net cash flow to movement in net debt
Net cash inflow	4,118		2,300		1,875
Repayment of medium term loan	3,000		-		-
Movement in net funds	7,118		2,300		1,875
Net debt brought forward	(4,255)		(6,130)		(6,130)
Net funds (debt) carried forward	2,863		(3,830)		(4,255)

TWENTY LARGEST EQUITY HOLDINGS

As at 30th April 2008

		Valuation £'000s	% of Total Assets*	Principal Activities
BP		4,911	6.82	Oil & Gas Producers
Royal Dutch Shell 'B' Shares		4,689	6.51	Oil & Gas Producers
Vodafone Group		3,699	5.14	Mobile Telecommunications
Energy XXI		3,252	4.51	Oil & Gas Producers
HSBC Holdings		2,946	4.09	Banks
GlaxoSmithKline		2,646	3.67	Pharmaceuticals & Biotechnology
Xstrata		2,486	3.45	Mining
Anglo American		2,461	3.42	Mining
BG Group		2,260	3.14	Oil & Gas Producers
National Grid		1,785	2.48	Gas, Water & Multiutilities
BT Group		1,705	2.37	Fixed Line Telecommunications
British American Tobacco		1,493	2.07	Tobacco
Barclays		1,456	2.02	Banks
AstraZeneca		1,382	1.92	Pharmaceuticals & Biotechnology
Royal Bank of Scotland		1,358	1.89	Banks
Compass Group		1,313	1.82	Travel & Leisure
Prudential		1,278	1.77	Life Insurance
BAE Systems		1,101	1.53	Aerospace & Defence
Standard Chartered		1,093	1.52	Banks
Tesco		1,081	1.50	Food & Drug Retailers
		44,395	61.64

PORTFOLIO ANALYSIS

As at 30th April 2008

Sector		Valuation £'000s	% of Total Assets*
Oil & Gas		16,812	23.34
Financials		12,742	17.69
Industrials		9,094	12.63
Basic Materials		7,566	10.50
Utilities		5,918	8.22
Consumer Services		5,407	7.51
Telecommunications		5,404	7.50
Healthcare		4,028	5.59
Consumer Goods		2,493	3.46
Interest Rate Swap		3	0.00
Net Current Assets		2,563	3.56
		72,030	100.00

* Total Assets are stated net of current liabilities.

  Note 1 

The return per Ordinary Share is based on a weighted average number of shares in issue of 41,206,577  (30th April 2007: 40,057,775; 31st October 2007: 40,881,996).

Note 2

The total return 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 which amounted to £56,884 (30th April 2007: £72,186; 31st October 2007: £171,602) and transaction costs on sales which amounted to £23,239 (30th April 2007: £27,507; 31st October 2007: £41,789).

Note 3

Investments are designated as held at fair value through profit or loss in accordance with FRS 26 'Financial Instruments: Recognition and Measurement'. Listed investments are valued at bid market prices. 

Interest rate swaps are held at fair value through profit or loss. 

Note 4

Dividends paid on Ordinary Shares in respect of earnings for each period are as follows:

	Six months to	Six months to	Year to
	30th April 2008	30th April 2007	31st October 2007
	£'000s	£'000s	£'000s
Final dividend 2.00p paid 3rd March 2008 (2007-2.85p)	826	1,132	1,132
Interim dividend 1.75p paid 14th June 2007	-	-	689
Special dividend 1.25p paid 14th June 2007	-	-	492
	826	1,132	2,313

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.

	Six months to	Six months to	Year to
	30th April 2008	30th April 2007	31st October 2007
	£'000s	£'000s	£'000s
Interim dividend 1.80p payable 3rd September 2008 (2007-1.75p)	729	689	-
Special dividend Nil (2007 - 1.25p)	-	492	-
Final dividend 2.00p	-	-	834
	729	1,181	834

The interim and special dividends above are based on the number of shares in issue at the period end. However, the dividends 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 period end.  Note 5

The interim statement has neither been audited nor reviewed by the Company's auditors. The financial information for the year ended 31st October 2007 has been extracted from the statutory financial statements of the Company for that year which have been delivered to the Registrar of Companies. The Auditors' Report on those financial statements was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985.

The Interim Report will be sent to Shareholders shortly and made available to the public at the Registered Office of the Company, 155 Bishopsgate, London EC2M 3AD.

For further information, please contact:-

Simon White

RCM (UK) Limited

Tel: [phone]

 

END

 

 

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