Final Results

THE TAVERNERS TRUST PLC PRELIMINARY ANNOUNCEMENT OF UNAUDITED ANNUAL RESULTS for the year ended 30 April 2004 Chairman's Statement The year on which we are reporting was a period of recovery for The Taverners Trust. On 30th April 2003 the share price was 53p and the Net Asset Value stood at 77.1p. On 30th April 2004 the share price had risen to 93.5p and the fully diluted Net Asset Value stood at 113.2p. These moves were in fairly close alignment with our benchmark FTSE Actuaries Leisure and Hotel index (the benchmark) which rose by 52.5% over the period. Thus while the Net Asset Value marginally underperformed the benchmark the share price outperformed as the discount to Net Asset Value narrowed to 19.2% from 31.2%. Since the end of our financial year on 30th April the Trust's Net Asset Value has moved ahead by 1.9% while the benchmark has moved up by 1.2% and the FTSE All-Share ex Investment Companies ("All Share") has fallen by 0.1%. I last wrote to you on 18th December when the Trust's share price stood at 77p and the fully diluted Net Asset Value was 104.7p. It will be obvious that a considerable proportion of the recovery in asset values had taken place by the date of publication of our Interim Report. However, your Trust's share price has continued to increase moving up by a further 18.8% to 92.3p at the time of writing during a period in which the benchmark has improved by 13.1% and the All Share has recorded an advance of 3.3%. It will be seen from the above statistics that the Leisure and Hotel sector in which the Trust invests has been a good place to be in the past year and that we have also been the beneficiaries of a most welcome narrowing of the discount to Net Asset Value inherent in our share price. For much of the period under reference Enterprise Inns was our largest holding and during September 2003 the Trust started to invest in Punch Taverns a Pubco which has some of the characteristics of Enterprise Inns. We regard Punch Taverns as a promising investment prospect because it has the capacity to expand and the share overhang is now dissipated. During the year to 30th April 2004 the share price of Enterprise Inns increased by 95% adding over £1.5m to the Trust's value or c.25% of the total value added during the year. The recent reduction in our Enterprise Inns investment means that the Trust had already lessened its exposure to the tenanted Pubco subsector prior to the announcement by the House of Commons Trade and Industry Select Committee that it proposed to investigate the relationship between the pubcos and their tenants. It is difficult to see what could transpire from this enquiry in view of the fact that the tie was given a clean bill of health by the competition authorities as lately as March 2003. However the advent of the enquiry has provided a number of disaffected tenants with an opportunity to criticise the pubcos. It is unlikely that the shares of Punch Taverns and Enterprise Inns will outperform until the enquiry is over; however it may be sensible to add to our holdings in these companies if it becomes clear that the outcome of the enquiry will be benign. The recovery that we had hoped would take place in the fortunes of the managed retailers with units concentrated in town centres did not occur. Comparatives should have been easier in the autumn, which was when the collapse in trade began to bite in 2002 but negative like-for-like sales persisted. On the other hand genuine late-night operators showed resilience in comparison with town centre circuit chameleon bars. More important, given that we had repositioned the Trust more towards regional brewers, business in traditional and community public houses was robust. Consequently there was no bad news from any of the regional brewers or pubcos; the share prices of Greene King, Wolverhampton and Dudley Breweries, Hardys and Hansons and Shepherd Neame all moved up steadily. A new Chief Executive at Young and Co's Brewery is taking action to churn the estate and his appointment has coincided with an announcement that the company is discussing the future of the valuable brewery site; these two events have prompted a 20% increase in the value of Young's voting shares. In my interim statement in December I mentioned two AIM companies in which we had reinvested, the restaurant company Ask Central managed by Adam and Sam Kaye, and the late night operator Urbium specialising in London and chaired by John Conlan the former Chief Executive of First Leisure. The share prices of these two companies did particularly well, together accounting for one third of the increase in our portfolio's value that has taken place since December. In the case of Ask the recommended merger with City Centre Restaurants (now re-named The Restaurant Group) at an equivalent of 180p was overtaken by a cash offer of 220p a share from the venture capitalists that had taken Pizza Express private; this take-over brought your Trust £1.1m of cash which is being re-invested. Since December Urbium shares have moved up more than 50% as a result of solid finals, a good AGM statement, a return to growth and a most successful opening in the City of London; the price/earnings ratio is still only 8.5 looking forward. The resurgence in the London economy is a feature at present although for some companies such as Fuller Smith & Turner this is still at an early stage. If this recovery continues it should help restaurants in the capital and the Home counties. In the Restaurant sub-sector the Trust has a considerable commitment to the Restaurant Group, where the Executive Chairman and Managing Director are well known to us, and small investments in Paramount which has acquired the Chez Gerard business and in Prezzo, another company managed by the Kaye family. Another holding that has served us well is Belhaven Group which has successfully accelerated its pub acquisition programme after raising more equity. Additionally sales of Belhaven Best have increased at the same time that the company's wholesaling operation is prospering. We find this company attractive at present as we believe there may be less regulatory risk in Scotland than South of the BORDER="0" and conditions in this niche market seem particularly favourable for this medium-sized company. Currently the trust holds three stocks that are quoted on OFEX, Shepherd Neame and Adnams, in which we hold gains of more than 75%, and WH Brakspear and Sons of Henley a holding to which we have recently been adding. Our OFEX holdings proved contrary performers in the 2002/2003 bear market in marked contrast to some of the holdings that caused us difficulty. At present the Trust has a self imposed rule that prevents us investing more than 10% of the portfolio in OFEX or unquoted stocks. In view of our belief that further opportunities exist to invest in some sound well-managed operations in this area we are seeking approval at the AGM to amend this restriction so that the Trust can invest up to 20% of its portfolio in OFEX and over-the-counter stocks. We do not forecast but have to be on our guard against another bear market developing. Even without the malign influence of geo-political disturbances the course of the domestic economy remains uncertain with consumer confidence less likely to be buoyed by rising house prices as interest rate increases start to bite. As explained above the regional and smaller brewery stocks in particular have shown remarkable resilience through the stock market difficulties of recent years. To claim additionally that they are recession-proof would be incautious but such stocks will remain at the core of your Trust's investment portfolio for the foreseeable future. A number of regulatory issues are rumbling around but, as we have often pointed out, this is not an unusual situation for the industry. It has a good record of managing its way through a decade and more of imposts and change. If there is radical change to the traditional tenancy arrangement it is likely to throw up new opportunities for investment, as there were in the aftermath of the 1989 Beer Orders. However we do not think this will occur and meanwhile we have just experienced a results season which produced excellent figures from the companies in which the Trust is mostly invested. We are proposing to maintain the level of our modest dividend of 0.5p per Ordinary share, which will still accommodate a small addition to our revenue reserves. If approved by Shareholders at the Annual General Meeting, the dividend will be payable on 17 September to 2004 to Ordinary shareholders on the register on 6 August 2004. Subsequent to the end of the Company's year, the Company announced on 21 June 2004 that it had repaid its remaining £2.5m term loan with Allied Irish Banks PLC ("AIB") and agreed a new three year £3m Bilateral Term Loan with AIB, of which £2.5m was drawn down immediately and fixed by way of an interest rate swap at an all-in rate of 6.41%. A further £0.5m remains available for drawing in the form of a committed revolving credit facility. Your Board is conscious of the pending imposition of a limit of one to the number of management representatives allowed to sit on investment trust boards and we have agreed with the Manager the following streamlining changes to take effect from the close of the Annual General Meeting: Martin Gilbert will step down as the Alternate Director for Billy Whitbread and Chris Fishwick is due for re-election; providing this re-election duly takes place Billy Whitbread will resign and be appointed as his Alternate Director. At the same time I feel that it is appropriate that I should retire as Chairman, having served for over eight years since the launch of the Company in 1996. The Board has invited Hubert Reid to succeed me and has commenced a process to find a suitably qualified independent non executive Director whose appointment would then bring to four the total number of Directors of the Company following my retirement after the AGM. This is my last Chairman's Statement. I bow out commending to you my successor, Hubert Reid, wishing him, my other colleagues and all our shareholders good fortune. L J Ross Chairman 28 June 2004 Statement of Total Return ------- ------- -------------------------- Year ended Year ended ------- ------- 30 April 2004 30 April 2003 (unaudited) (audited) ------- ------- Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 -------------------------- ------- ------ ------ ------- ------ ------ Gains/(losses) on - 6,380 6,380 - (6,865) (6,865) investments Income 538 - 538 507 - 507 Investment management (135) (135) (270) (123) (123) (246) fee Other expenses (234) - (234) (228) - (228) Exchange losses - (1) (1) - (2) (2) -------------------------- ------- ------ ------ ------- ------ ------ Net return before finance 169 6,244 6,413 156 (6,990) (6,834) costs and taxation Interest payable and (84) (83) (167) (98) (114) (212) similar charges ------- ------ ------ ------- ------ ------ -------------------------- Net return on ordinary 85 6,161 6,246 58 (7,104) (7,046) activities before taxation Taxation on ordinary (1) - (1) (2) - (2) activities ------- ------ ------ ------- ------ ------ -------------------------- Net return on ordinary 84 6,161 6,245 56 (7,104) (7,048) activities after taxation Dividends in respect of (80) - (80) (80) - (80) equity shares ------- ------ ------ ------- ------ ------ -------------------------- Transfer to/(from) 4 6,161 6,165 (24) (7,104) (7,128) reserves ------- ------ ------ ------- ------ ------ -------------------------- Return per Ordinary share (pence): Basic 0.52 38.66 39.18 0.35 (44.58) (44.23) -------------------------- ------- ------ ------ ------- ------ ------ The revenue column of this statement represents the revenue account of the Company. All revenue and capital items in the above statement derive from continuing operations. Balance Sheet ----------------------------------- ----------- ----------- As at As at ----------- ----------- 30 April 2004 30 April 2003 (unaudited) (audited) ----------- ----------- £'000 £'000 ----------------------------------- ----------- ----------- Fixed assets Investments 20,828 14,568 ----------------------------------- ----------- ----------- Current assets Debtors 106 45 Cash at bank and in hand 281 500 ----------------------------------- ----------- ----------- 387 545 Creditors: amounts falling due within (2,767) (330) one year ----------- ----------- ----------------------------------- Net current (liabilities)/assets (2,380) 215 ----------------------------------- ----------- ----------- Total assets less current liabilities 18,448 14,783 Creditors: amounts falling due after - (2,500) more than one year ----------- ----------- ----------------------------------- Net assets 18,448 12,283 ----------------------------------- ----------- ----------- Capital and reserves Called-up share capital 3,984 3,984 Share premium account 10,536 10,536 Other reserves: Warrant reserve 981 981 Capital reserve - realised 717 750 Capital reserve - unrealised 2,094 (4,100) Revenue reserve 136 132 ----------------------------------- ----------- ----------- Equity Shareholders' funds 18,448 12,283 ----------------------------------- ----------- ----------- Net asset value per Ordinary share (pence): --- --- Basic 115.76 77.08 ----------------------------------- ----------- ----------- Fully-diluted 113.21 n/a ----------------------------------- ----------- ----------- Cash Flow Statement ------------------------------- -------- ------- Year ended Year ended 30 April 2004 30 April 2003 (unaudited) (audited) -------- ------- £'000 £'000 £'000 £'000 ------------------------------- -------- ------- ------- ------- Net cash inflow from operating 74 8 activities Servicing of finance Bank and loan interest paid (117) (216) Financial investment Purchases of investments (5,558) (6,087) Sales of investments 5,463 7,400 ------------------------------- -------- ------- ------- ------- Net cash (outflow)/inflow from (95) 1,313 financial investment Equity dividend paid (80) (80) ------------------------------- -------- ------- ------- ------- Net cash (outflow)/inflow before (218) 1,025 financing Financing Part repayment of bank loan - (500) ------------------------------- -------- ------- ------- ------- (Decrease)/increase in cash (218) 525 ------------------------------- -------- ------- ------- ------- Reconciliation of net cash flow to movements in net debt (Decrease)/increase in cash as (218) 525 above Cash outflow from decrease in - 500 loans -------- ------- ------- ------- ------------------------------- Change in net debt resulting from (218) 1,025 cash flows Exchange movements (1) (2) ------------------------------- -------- ------- ------- ------- Movement in net debt for the year (219) 1,023 Opening net debt (2,000) (3,023) ------------------------------- -------- ------- ------- ------- Closing net debt (2,219) (2,000) ------------------------------- -------- ------- ------- ------- Notes: 1. Dividend The Directors have today declared a first and final dividend of 0.50p per Ordinary share for the year ended 30 April 2004 (2003 - 0.50p) which, if approved by Shareholders at the Annual General Meeting, will be payable on 17 September 2004 to Shareholders on the register on 6 August 2004. 2. Income 2004 2003 £'000 £'000 Income from investments UK dividend income 525 487 Overseas dividends 6 11 ------ ------ 531 498 ------ ------ Other income Deposit interest 7 8 Underwriting commission - 1 ------ ------ 7 9 ------ ------ Total income 538 507 ------ ------ 3. Return per share 2004 2003 Revenue Capital Total Revenue Capital Total p p p p p p Basic 0.52 38.66 39.18 0.35 (44.58) (44.23) ------- ------ ----- ------- ------ ------ The basic revenue return per Ordinary share is calculated on the net revenue on ordinary activities after taxation of £84,000 (2003 - £56,000) and on 15,936,000 (2003 - 15,936,000) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year. The basic capital return per Ordinary share is calculated on net capital returns for the year of £6,161,000 (2003 - losses of £7,104,000) and on 15,936,000 (2003 - 15,936,000) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year. Fully diluted returns calculated on the basis set out in Financial Reporting Standard 14 'Earning per share' ('FRS 14') indicate that the exercise of Warrants in issue would have no dilutive effect on returns. 4. Net asset value per share The net asset value per share and the net asset values attributable to equity Shareholders at the year end calculated in accordance with the Articles of Association and FRS 4 were as follows: Net asset value Net asset values per share attributable attributable 2004 2003 2004 2003 p p £'000 £'000 Ordinary shares: Basic 115.76 77.08 18,448 12,283 -------- -------- -------- -------- Fully diluted 113.21 n/a -------- -------- The movements during the year of the assets attributable to the Ordinary shares were as follows: 2004 2003 £'000 £'000 Net assets attributable at 1 May 2003 12,283 19,411 Capital return/(loss) for the year 6,161 (7,104) Revenue on ordinary activities after taxation 84 56 Dividends appropriated in the year (80) (80) -------- -------- Net assets attributable at 30 April 2004 18,448 12,283 -------- -------- The basic net asset value per Ordinary share is based on net assets and on 15,936,000 (2003 - 15,936,000) Ordinary shares, being the number of Ordinary shares in issue at the year end. The fully-diluted net asset values per Ordinary share as at 30 April 2004 have been calculated by reference to the total number of Ordinary shares in issue at the year end and on the assumption that those Warrants which are not exercised at the period end, amounting to 3,081,600 Warrants as at 30 April 2004, were fully exercised on the first day of the financial year at 100p per share, giving a total of 19,017,600 Ordinary shares. No calculation has been shown as at 30 April 2003 as the exercise price of the Warrants, being 100p, exceeded the value of the basic net asset value. 5. The financial information for the year ended 30 April 2004 comprises non-statutory accounts within the meaning of section 240 of the Companies Act 1985. The financial information for the year ended 30 April 2003 has been abridged from the published accounts that have been delivered to the Register of Companies and on which the report of the auditors is unqualified and does not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The statutory accounts for 2004 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Register of Companies in due course. 6. Copies of the Annual Report will be posted to all Shareholders in due course and further copies may be obtained from the Registered Office, One Bow Churchyard, Cheapside, London EC4M 9HH. Aberdeen Asset Management PLC Secretaries 28 June 2004

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