Final Results

RNS Number : 5354V

RIT Capital Partners PLC

29 May 2008

 



29 May 2008

UNAUDITED FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2008

FINANCIAL HIGHLIGHTS

	31 March 2008	31 March 2007	Change
Total Net Assets (£ million)	1,690.0	1,635.6	+3.3%
Net Asset Value per Share	1,091.6p	1,047.3p	+4.2%
Share Price	1,147.0p	1,000.0p	+14.7%
Premium/(discount)	5.1%	(4.5%)

PERFORMANCE

	1 Year	5 Years	10 Years
RIT Capital Partners plc (Net Asset Value per Share)	4.2%	153.7%	184.2%
Morgan Stanley Capital International World Index (in £)	(6.3)%	52.7%	13.5%
FTSE All-Share Index	(10.8)%	68.6%	5.2%
Investment Trust Net Assets Index	(3.1)%	109.8%	61.6%

The following is derived from the Chairman's Statement which will appear in the Annual Report and Accounts.

CHAIRMAN'S STATEMENT

In last year's Annual Report, I commented on the paradox of investors' appetite for risk increasing at a time when the level of risk was clearly rising. The credit crunch, the housing debacle, the slow-down in economic growth and rising inflation were already threatening the world economy and, as the year has gone by, the outlook has worsened. As the recent World Economic Outlook from the IMF commented, 'the world economy has entered new and precarious territory'.

During the year under review we therefore significantly reduced our investment in listed equities from 84.0% of net assets to 56.7%, ending the year with exposure to listed equities (after adjusting for index futures) and unquoted investments of 66.8% compared with 103.5% at the outset.  

Over the year your Company's net asset value per share increased by 4.2% from 1,047.3p to 1,091.6p, and its net worth by some £54.4 million to £1,690.0 million. Over the same period, the Morgan Stanley Capital International World Index (in Sterling), the FTSE All-Share Index and the Investment Trust Net Assets Index decreased by 6.3%, 10.8% and 3.1% respectively.  

Currencies have been an important contributor to our results. During the earlier part of the year we hedged a large proportion of our exposure to the US Dollar, but reduced this hedge as the currency weakened. In the last quarter of the year we hedged the entirety of our Sterling exposure, concerned by the economic slow-down in the UK and by evidence of increasing inflation. We have diversified our currency exposure amongst a number of currencies worldwide, with particular emphasis on Asia and Scandinavia.  

In terms of geographical exposure, we have reduced our exposure to Europe and to China and increased our holdings in Middle Eastern securities. Our UK exposure has increased as a result of our holdings in UK government bonds.

We set out below our asset allocation within the investment portfolio at the year end:

ASSET ALLOCATION

	% of Portfolio at 31 March 2008	% of Portfolio at 31 March 2007
Quoted investments	34.4	57.6
Government securities and money market funds	23.4	2.1
Hedge funds	4.2	4.6
Long equity funds	11.5	11.8
Unquoted investments	15.8	14.9
Private equity partnerships	9.0	7.1
Property	1.7	1.9
	100.0	100.0

Although, at the time of writing this Statement, our asset allocation remains broadly similar, our exposure to listed equities is somewhat higher than at the year end. However, we continue to position ourselves defensively as, in our view, the downward adjustment in equity markets remains quite modest in the context of the problems that lie ahead.  Even if the worst of the immediate liquidity issues afflicting financial institutions are behind us, the availability and pricing of credit are likely to remain constrained for some time as banks rebuild their balance sheets. The capacity of financial institutions has been impaired and so therefore has their ability to provide credit on the scale necessary to facilitate economic expansion. Furthermore the authorities' determined response to the fear of a systemic collapse of the financial system may give rise to further difficulties and dislocation in the years ahead. Global inflationary pressures are of particular concern, especially when taken together with weakening economic conditions in the West.

Capital preservation and delivering long-term capital growth remain our highest priorities. We are likely to err on the side of caution in the months ahead, conscious that such positioning can lead to periods of underperformance during brief but often powerful market rallies. Indeed, in the period between our year end on 31 March 2008 and 22 May, the net asset value per share has increased to 1,113.5p (a 2.0% rise), compared with an increase in the MSCI World Index (in Sterling) of 7.1% over the same period.

In spite of our caution, we believe that attractive opportunities will become available as a result of difficult market conditions.  Given our relatively modest level of exposure, taken together with our borrowing facilities, we are particularly well placed to take advantage of these opportunities.

A more detailed analysis of your Company's portfolio and currency exposure is shown below.

LONG-TERM PERFORMANCE

Looking back twenty years since the inception of your Company in its current form in 1988, I am pleased to note that the net asset value per share has increased by over ten times. Over the last five years it has increased by more than 150%, representing an increase of over 20% per annum.

DIVIDEND

We are proposing to pay a dividend of 4.0p per share on 23 July 2008 to shareholders on the register at 13 June 2008. The focus of your Company remains one of achieving capital growth rather than increases in dividend income.

BOARD

We announced in December the appointment of John Cornish as an independent non-executive director, and I am delighted to welcome him to the Board. John headed the investment trust team at Deloitte for many years and is a director of four other investment trusts.

NILS TAUBE

We were saddened by the death of Nils Taube at the age of 79 in March. Nils played an important role in managing RITCP's portfolio for the ten years to 1998 and was acknowledged to be one of the great investors of his generation.  Both on behalf of shareholders and our Board, I would like to place on record our appreciation for his contribution to your Company throughout this period.

Rothschild

29 May 2008

The following tables will appear in the Company's Annual Report and Accounts.

MOVEMENT IN NET ASSET VALUE

The Group's net asset value as at 31 March 2008 was £1,690.0 million (31 March 2007: £1,635.6 million). This represents an increase of £54.4 million which is analysed below:

	£ million	£ million	Pence per share	Pence per share
Quoted investments	(2.2)		(1.4)
Hedge funds	1.6		1.0
Long equity funds	5.5		3.6
Unquoted investments	0.5		0.3
Property	(0.9)		(0.6)
Private equity partnerships	27.1		17.5
Government securities and money market funds	18.9		12.2
Investment Portfolio		50.5		32.6
Currency hedging gains and dealing profits	67.6		43.6
Index futures hedging	30.1		19.6
Hedging and Dealing		97.7		63.2
Foreign exchange adjustments on bank loans	(32.1)		(20.8)
Unallocated administrative expenses	(17.5)		(11.3)
Finance costs	(13.3)		(8.6)
Taxation	(8.8)		(5.7)
Other movements	2.1		1.4
Expenses, Interest, Taxation and Other		(69.6)		(45.0)
Profit for the Year		78.6		50.8
Interest rate swap (relating to term loans)	(5.3)		(3.4)
Dividend paid	(4.8)		(3.1)
Share buy-backs	(14.1)		-
Reserve Movements		(24.2)		(6.5)
Increase in net asset value		54.4		44.3

PORTFOLIO ANALYSIS BY COUNTRY/ AREA 

		31 March 2008 £ million	31 March 2007   £ million
US		642.3	721.4
UK		543.1	303.5
Europe		306.6	406.5
Far East		113.3	166.8
Japan		99.2	128.9
Canada		96.8	76.0
Other		109.9	51.0
Total		1,911.2	1,854.1

CURRENCY ANALYSIS OF NET ASSETS 

		31 March  2008  £ million	31 March  2007    £ million
Euro		333.4	276.0
Singapore Dollar		276.1	66.7
US Dollar		255.8	145.1
Swiss Franc		218.6	57.8
Norwegian Krone		168.7	4.2
Canadian Dollar		133.5	73.4
Swedish Krona		98.3	7.9
Japanese Yen		72.2	143.3
Sterling		(3.5)	800.3
Other		136.9	60.9
Total		1,690.0	1,635.6

CONSOLIDATED INCOME STATEMENT 

For the year ended 31 March 2008

		Revenue  return  £ million		Capital  return  £ million	Total  £ million
Income
Investment income		45.6		-	45.6
Other income		3.2		-	3.2
Profits on dealing investments held at fair value		57.4		-	57.4
Total income		106.2		-	106.2
Gains on portfolio investments held at fair value		-		42.6	42.6
Other capital items		-		(22.1)	(22.1)
		106.2		20.5	126.7
Expenses
Administrative expenses		(14.6)		(3.5)	(18.1)
Investment management fees		(5.6)		(2.3)	(7.9)
Profit before finance costs and tax		86.0		14.7	100.7
Finance costs		(13.3)		-	(13.3)
Profit before tax		72.7		14.7	87.4
Taxation		(4.1)		(4.7)	(8.8)
Profit for the year		68.6		10.0	78.6
Earnings per ordinary share		44.2p	6.4p		50.6p

		£ million
Note:	Proposed final dividend	6.2
	Proposed final dividend per ordinary share	4.0p

The total column of this statement represents the Group's Income Statement, prepared in accordance with International Financial Reporting Standards (IFRS). The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.

CONSOLIDATED INCOME STATEMENT 

For the year ended 31 March 2007

		Revenue  return  £ million	Capital  return  £ million	Total  £ million
Income
Investment income		32.6	-	32.6
Other income		1.1	-	1.1
Losses on dealing investments held at fair value		(43.2)	-	(43.2)
Total income		(9.5)	-	(9.5)
Gains on portfolio investments held at fair value		-	116.0	116.0
Other capital items		-	28.4	28.4
		(9.5)	144.4	134.9
Expenses
Administrative expenses		(11.1)	(1.4)	(12.5)
Investment management fees		(5.9)	(1.4)	(7.3)
Profit before finance costs and tax		(26.5)	141.6	115.1
Finance costs		(9.0)	-	(9.0)
Profit before tax		(35.5)	141.6	106.1
Taxation		(1.4)	(0.1)	(1.5)
Profit for the year		(36.9)	141.5	104.6
Earnings per ordinary share		(23.6)p	90.6p		67.0p

		£ million
Note:	Final dividend	4.8
	Final dividend per ordinary share	3.1p

The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS.  The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing obligations.

CONSOLIDATED BALANCE SHEET 

		31 March  2008  £ million	31 March  2007    £ million
Non-current assets
Investments held at fair value		1,878.6	1,819.3
Investment property		32.6	34.8
Property, plant and equipment		0.4	0.3
Derivative financial instruments		4.8	5.4
Retirement benefit asset		1.4	1.7
Deferred tax asset		-	2.3
		1,917.8	1,863.8
Current assets
Dealing investments held at fair value		1.9	0.3
Sales for future settlement		49.8	8.0
Other receivables		19.2	6.7
Tax receivable		0.6	0.5
Cash at bank		152.1	131.6
		223.6	147.1
Total assets		2,141.4	2,010.9
Current liabilities
Bank loans and overdrafts		(98.9)	(151.1)
Securities sold short		-	(2.2)
Purchases for future settlement		(37.8)	(21.3)
Tax payable		(3.2)	(0.4)
Other payables		(7.1)	(11.6)
		(147.0)	(186.6)
Net current assets/(liabilities)		76.6	(39.5)
Total assets less current liabilities		1,994.4	1,824.3
Non-current liabilities
Derivative financial instruments		(4.7)	-
Bank loans		(284.9)	(178.2)
Provisions		(13.1)	(10.5)
Deferred tax liability		(1.7)	-
		(304.4)	(188.7)
Net assets		1,690.0	1,635.6
Equity attributable to equity holders
Called up share capital		154.8	156.2
Capital redemption reserve		35.4	34.0
Cash flow hedging reserve		0.1	5.4
Foreign currency translation reserve		(0.2)	(0.2)
Capital reserve - realised		1,344.1	1,193.3
Capital reserve - unrealised		146.3	301.2
Revenue reserve		9.5	(54.3)
Total shareholders' equity		1,690.0	1,635.6
Net asset value per ordinary share		1,091.6p	1,047.3p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2008	Share Capital £ million	Capital redemption reserve £ million	Cash flow hedging reserve £ million	Foreign currency translation reserve £ million	Capital reserve £ million	Revenue reserve £ million	Total £ million
Balance at 31 March 2007	156.2	34.0	5.4	(0.2)	1,494.5	(54.3)	1,635.6
Profit for the year	-	-	-	-	10.0	68.6	78.6
Cash flow hedges
Losses taken to equity	-	-	(4.1)	-	-	-	(4.1)
Transferred to the income
statement for the year	-	-	(1.2)	-	-	-	(1.2)
Exchange movements arising
on consolidation	-	-	-	-	-	-	-
Ordinary dividend paid	-	-	-	-	-	(4.8)	(4.8)
Purchase of own shares	(1.4)	1.4	-	-	(14.1)	-	(14.1)
Balance at 31 March 2008	154.8	35.4	0.1	(0.2)	1,490.4	9.5	1,690.0

 

Year ended 31 March 2007	Share capital £ million	Capital redemption reserve £ million	Cash flow hedging reserve £ million	Foreign currency translation reserve £ million	Capital reserve £ million	Revenue reserve £ million	Total £ million
Balance at 31 March 2006	156.2	34.0	4.1	0.1	1,352.9	(12.6)	1,534.7
Profit for the year	-	-	-	-	141.6	(36.9)	104.7
Cash flow hedges
Gains taken to equity	-	-	1.5	-	-	-	1.5
Transferred to the income statement for the year
	-	-	(0.2)	-	-	-	(0.2)
Exchange movements arising on consolidation
	-	-	-	(0.3)	-	-	(0.3)
Ordinary dividend paid	-	-	-	-	-	(4.8)	(4.8)
Balance at 31 March 2007	156.2	34.0	5.4	(0.2)	1,494.5	(54.3)	1,635.6

CONSOLIDATED CASH FLOW STATEMENT

	Year ended  31 March 2008  £ million	Year ended  31 March 2007  £ million
Cash inflow/(outflow) from Operating Activities	60.0	(9.0)
Investing Activities:
Purchase of property, plant and equipment	(0.2)	(0.2)
Sale of property, plant and equipment	-	-
Net cash outflow from Investing Activities	(0.2)	(0.2)
Financing Activities:
Buy-back of ordinary shares	(14.1)	-
Increase in term loans	74.5	-
Equity dividend paid	(4.8)	(4.8)
Net cash inflow /(outflow) from Financing Activities	55.6	(4.8)
Increase/(decrease) in cash and cash equivalents in the year	115.4	(14.0)
Cash and cash equivalents at the start of the year	10.8	27.0
Effect of foreign exchange rate changes	3.8	(2.2)
Cash and cash equivalents at the year end	130.0	10.8
Reconciliation:
Cash at bank	152.1	131.6
Money market funds (included in portfolio investments)	76.8	30.3
Bank loans and overdrafts	(98.9)	(151.1)
Cash and cash equivalents at the year end	130.0	10.8

NOTES

1. ACCOUNTING POLICIES

The Group's consolidated financial statements for the year ended 31 March 2008 have been drawn up in accordance with IFRS as adopted by the European Union.  The accounting policies are unchanged from those disclosed within the Annual Report and Accounts for the year ended 31 March 2007.

The Group has adopted the following standards and interpretations:

IFRS 7 Financial Instruments: Disclosures

IAS 1 (Amended) Presentation of Financial Statements: Capital Disclosures

IFRIC 9 Reassessment of Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

The first-time application of these did not result in any changes to the Group's financial statements. The new disclosures are set out in the Annual Report and Accounts.

2. EARNINGS PER ORDINARY SHARE

The earnings per ordinary share for the year ended 31 March 2008 is based on the net profit of £78.6 million (year ended 31 March 2007: £104.6 million) and the weighted average number of ordinary shares in issue during the year of 155.2 million (year ended 31 March 2007: 156.2 million).

3. NET ASSET VALUE PER ORDINARY SHARE

The net asset value per ordinary share as at 31 March 2008 is based on the net assets attributable to the equity shareholders of £1,690.0 million (31 March 2007: £1,635.6 million) and the number of ordinary shares in issue at 31 March 2008 of 154.8 million (31 March 2007: 156.2 million).

4. MOVEMENTS IN INVESTMENTS

	Quoted £ million	Hedge Funds £ million	Long Equity Funds £million	Unquoted £ million	Private Equity Partnerships £ million	Other  securities £ million	Investment Property £ million	Total £ million
Cost at 31 March 2007	882.0	68.6	172.7	223.8	108.9	39.2	25.2	1,520.4
Appreciation/(depreciation)
at 31 March 2007	187.0	16.8	46.0	52.4	22.3	(0.4)	9.6	333.7
Valuation at 31 March 2007	1,069.0	85.4	218.7	276.2	131.2	38.8	34.8	1,854.1
Reclassifications	2.3	(1.0)	(2.3)	-	1.0	-	-	-
Additions	1,067.4	-	127.1	80.1	61.3	905.0	-	2,240.9
Disposals	(1,407.7)	(5.9)	(118.2)	(48.1)	(42.0)	(502.2)	-	(2,124.1)
Revaluation	(72.6)	1.2	(5.6)	(6.7)	19.8	6.4	(2.2)	(59.7)
Valuation at 31 March 2008	658.4	79.7	219.7	301.5	171.3	448.0	32.6	1,911.2
Cost at 31 March 2008	635.5	67.0	193.0	233.5	139.1	441.6	25.2	1,734.9
Appreciation /(depreciation)
at 31 March 2008	22.9	12.7	26.7	68.0	32.2	6.4	7.4	176.3

Portfolio investments	1,878.6
Investment property	32.6
Fair value of investments	1,911.2

Investment properties were valued at 31 March 2008 by Jones Lang LaSalle in accordance with the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors on the basis of open market value.

5. OTHER CAPITAL ITEMS

Other capital items include profits arising on forward currency contracts, exchange movements, index futures and movements on provisions.

6. TAXATION

Year ended 31 March 2008	Revenue £ million	Capital £ million	Total £ million
UK corporation tax charge	0.3	2.4	2.7
Adjustment in respect of prior years	-	-	-
Overseas taxation	1.8	0.4	2.2
Double taxation relief	-	(0.1)	(0.1)
Current tax charge	2.1	2.7	4.8
Deferred tax charge	2.0	2.0	4.0
Adjustment in respect of prior years	-	-	-
Taxation charge	4.1	4.7	8.8

Year ended 31 March 2007	Revenue £ million	Capital £ million	Total £ million
UK corporation tax charge	-	0.2	0.2
Adjustment in respect of prior years	-	(0.1)	(0.1)
Overseas taxation	1.3	0.2	1.5
Double taxation relief	-	(0.2)	(0.2)
Current tax charge	1.3	0.1	1.4
Deferred tax charge	0.1	0.3	0.4
Adjustment in respect of prior years	-	(0.3)	(0.3)
Taxation charge	1.4	0.1	1.5

The deferred tax charge in both the current and prior year relates to the origination and reversal of timing differences.

7. UNAUDITED STATEMENTS

This unaudited consolidated financial information has been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority and IFRS, as endorsed by the EU. The accounting policies applied are consistent with those described in the Annual Report and Accounts for the year ended 31 March 2007 and the auditors have confirmed that they are not aware of any matter that may give rise to a modification to their audit report. 

This consolidated financial information does not constitute statutory financial statements for the years ended 31 March 2008 or 31 March 2007 as defined in section 240 of the Companies Act 1985.  The Annual Report and Accounts for the year ended 31 March 2007 have been filed with the Registrar of Companies.  The report of the auditors on those accounts was unqualified.  The Annual Report and Accounts for 2008 will be filed with the Registrar of Companies in due course. 

8. ANNUAL REPORT

It is intended that the Company's Annual Report and Accounts for the year ended 31 March 2008 will be posted to shareholders on or around Friday 6 June 2008. Copies of this announcement and the Annual Report and Accounts will be available to the public at the Company's registered office at 27 St James's Place, London SW1A 1NR.

Contact: David Haysey, Chief Investment Officer, tel: [phone]

 

END

 

 

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