Half Yearly Report

RNS Number : 8208C

RIT Capital Partners PLC

20 November 2009

 



HALF-YEARLY RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2009

The following is derived from the Chairman's Statement which will appear in the Half -Yearly Financial Report.

Chairman's Statement

The extraordinary economic and market events over the past two years have elicited an extreme policy response to match the severity of the crisis. As I noted in last year's Annual Report, the Federal Reserve would do whatever it deemed necessary to combat deflationary forces: by printing money and reducing interest rates to negligible levels, the Fed would both encourage investors and prompt some economic recovery in the shorter term.

Although the rally in equity markets, credit markets and commodities from their recent lows has been significant, the longer-term consequences of these actions are still unknown. It is the balance between these shorter-term, positive influences and the sizeable, longer-term risks that will continue to make this such a challenging environment for investors. Earlier this year, I expressed the view that such risks were more tilted to an inflationary outcome. We continue to believe this to be the case but recognise that high unemployment and surplus manufacturing capacity may continue to create fears of deflation in the near future.

It is clear too that the pattern of the last decade, whereby consumption in the West has driven the emerging market economies, which have in turn financed western deficits, cannot last indefinitely. Emerging market economies are likely to rely less on exports and more on growth at home, led by domestic demand.  

Recognising the potential impact of the policy actions mentioned above, we increased our public market exposure (after adjusting for market hedges) from 35% of net assets at the start of your Company's financial year to 64% at 30 September. When unquoted investments are included, our investment exposure increased from 71% to 95% at 30 September. Given the longer-term concerns expressed above, we felt that total exposure should not exceed 100% and that the use of leverage was not warranted. 

This increase in market exposure, combined with a number of profitable positions, including long commodities and short treasury bonds, has resulted in a 21.7% rise in our net asset value per share to 1,064.1p in the period under review, participating to a significant extent in the global rally that has seen the Morgan Stanley Capital International World Index in Sterling appreciate by 25.4%. In US Dollar terms our net asset value per share would have risen by 35.8%. It is also worth noting that the net asset value at 30 September is only 7.9% below our all-time high, whereas the MSCI in Sterling is still 14.6% below its recent high point.

The FTSE All-Share Index and the Investment Trust Net Assets Index rose by 32.8% and 23.4% respectively over the period under review.

The net asset value per share at 13 November, the latest available date, was 1,035.9p.  

ASSET ALLOCATION

As an investment trust in the "global growth" sector, we are committed to a truly global approach both in terms of markets and currencies, which leads us generally to be less invested in the UK and Sterling than many of our peers. As a result, performance will lag in terms of Sterling when the UK market and Sterling rise disproportionately, as has been the case over the period under review. We remain of the view that our global approach will serve shareholders best over time.  

Shareholders should be aware that within the MSCI World Index, the widely accepted global index, the UK represents 10% of global market capitalisation, as does Sterling. Whilst we do not manage the portfolio with close reference to benchmark weightings, the portfolio's typical exposure to the UK and to Sterling will be more reflective of these weightings over time. We believe that, in this way, we offer our shareholders genuine global diversification. 

We set out below our asset allocation within the investment portfolio at the period end.

		% of Portfolio 30 September 2009	% of Portfolio  31 March  2009
Quoted investments		38.3	25.0
Hedge funds		2.0	0.7
Long equity funds		17.5	15.3
Unquoted investments:
	Direct	14.5	15.9
	Funds	12.0	12.6
Government securities and money market funds		14.2	28.8
Investment property		1.5	1.7
		100.0	100.0

A more detailed analysis of your Company's portfolio and currency exposure can be found on page 3 of the half-yearly report.

UNQUOTED INVESTMENTS

Developments in this part of the portfolio were dominated by the sale of our largest investment, Robin Hood Holdings, a generic pharmaceuticals business, to the US firm, Watson Pharmaceuticals. Our investment was valued at £93.4 million at 30 September, reflecting RIT's share of expected proceeds and representing a multiple of 5.1x our original investment, made between 2003 and 2005. We had increased the valuation of our holding to £81.3 million at 31 March 2009 to reflect the strong progress of the underlying business. The transaction is expected to complete before the end of 2009.

Our investment in Robin Hood is the second time that we have made a highly successful investment with Tony Tabatznik in a generic pharmaceuticals company founded by him.

BOARD

As I mentioned in the Annual Report, Charles Bailey retired as Chairman of the Audit Committee, with effect from 30 June 2009, and John Cornish took up this position. Both remain valued members of the Board and, on behalf of our shareholders, I would like to thank both of them for the detailed and expert attention they give to this onerous committee work.

Rothschild

20 November 2009

Enquiries: Mikael Breuer-Weil/David Haysey - 020 7647 8589

  RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLY FINANCIAL REPORT

In accordance with the Disclosure and Transparency Rules 4.2.7R and 4.2.8R, we confirm that to the best of our knowledge:

(a)	The condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union, as required by the Disclosure and Transparency Rule 4.2.4R;
(b)	The Chairman's Statement includes a fair review of the information required to be disclosed under the Disclosure and Transparency Rule 4.2.7R, interim management report.  This includes (i) an indication of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements presented in the half-yearly financial report and (ii) a description of the principal risks and uncertainties for the remaining six months of the financial year; and
(c)	There were no changes in the transactions or arrangements with related parties as described in the Group's annual report for the year ended 31 March 2009 that would have had a material effect on the financial position or performance of the Group in the first six months of the current financial year.

Duncan Budge

Director and Chief Operating Officer

20 November 2009

For and on behalf of the Board, the members of which 

are listed on page 20 of the Half-Yearly Financial Report.

  INDEPENDENT REVIEW REPORT TO RIT CAPITAL PARTNERS PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2009, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

The half-yearly financial report is published on the Company's website at www.ritcap.co.uk which is maintained by the Company's management.  The maintenance and integrity of the RIT Capital Partners plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.  This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose.  We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

  Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
20 November 2009
London

  CONSOLIDATED INCOME STATEMENT

	Six months ended 30 September 2009
	Notes	Revenue return  £m	Capital return  £m	Total £m
Income
Investment income		16.5	-	16.5
Other income		1.1	-	1.1
Gains on dealing investments held at fair value		68.2	-	68.2
		85.8	-	85.8
Gains on portfolio investments held at fair value		-	255.1	255.1
Other capital items		-	(3.5)	(3.5)
		85.8	251.6	337.4
Expenses
Administrative expenses		(7.8)	(2.2)	(10.0)
Investment management fees		(1.3)	(1.3)	(2.6)
Profit before finance costs and tax		76.7	248.1	324.8
Finance costs		(11.7)	-	(11.7)
Profit before tax		65.0	248.1	313.1
Taxation		(16.0)	1.2	(14.8)
Profit for the period		49.0	249.3	298.3
Earnings per ordinary share	2	31.7p	161.4p	193.1p

The total column of this statement represents the Group's Income Statement, prepared in accordance with International Financial Reporting Standards. 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, continued

		Six months ended 30 September 2008			Year ended 31 March 2009
Notes		Revenue return £m	Capital return £m	Total £m	Revenue  return £m	Capital return £m	Total £m
Income
Investment income		17.9	-	17.9	56.6	-	56.6
Other income		1.0	-	1.0	1.9	-	1.9
Losses on dealing investments held at fair value		(32.0)	-	(32.0)	(18.7)	-	(18.7)
		(13.1)	-	(13.1)	39.8	-	39.8
Losses on portfolio investments held at fair value		-	(134.8)	(134.8)	-	(381.2)	(381.2)
Other capital items		-	15.8	15.8	-	58.1	58.1
		(13.1)	(119.0)	(132.1)	39.8	(323.1)	(283.3)
Expenses
Administrative expenses		(7.8)	(0.9)	(8.7)	(15.1)	1.3	(13.8)
Investment management fees		(3.3)	0.7	(2.6)	(7.1)	(0.5)	(7.6)
Loss before finance costs and tax		(24.2)	(119.2)	(143.4)	17.6	(322.3)	(304.7)
Finance costs		(6.1)	-	(6.1)	(12.7)	-	(12.7)
Loss before tax		(30.3)	(119.2)	(149.5)	4.9	(322.3)	(317.4)
Taxation		(0.9)	(0.5)	(1.4)	(1.7)	1.4	(0.3)
Loss for the period		(31.2)	(119.7)	(150.9)	3.2	(320.9)	(317.7)
Earnings per ordinary share	2	(20.2)p	(77.3)p	(97.5)p	2.1p	(202.3)p	(205.2)p

The total column of this statement represents the Group's Income Statement, prepared in accordance with International Financial Reporting Standards. 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 STATEMENT OF COMPREHENSIVE INCOME

	Six months ended 30 September 2009
		Revenue return  £m	Capital return  £m	Total £m
Profit for the period		49.0	249.3	298.3
Other comprehensive income
Cash flow hedges		6.9	-	6.9
Exchange movements arising on consolidation		(0.5)	-	(0.5)
Total comprehensive income for the period		55.4	249.3	304.7

	Six months ended 30 September 2008			Year ended 31 March 2009
	Revenue return £m	Capital  return £m	Total £m	Revenue  return £m	Capital  return £m	Total £m
Loss for the period	(31.2)	(119.7)	(150.9)	3.2	(320.9)	(317.7)
Other comprehensive income
Cash flow hedges	3.0	-	3.0	(13.8)	-	(13.8)
Exchange movements arising on consolidation	0.2	-	0.2	0.8	-	0.8
Total comprehensive income for the period	(28.0)	(119.7)	(147.7)	(9.8)	(320.9)	(330.7)

  CONSOLIDATED BALANCE SHEET

	Notes	30 September  2009 £m	31 March  2009  £m	30 September  2008 £m
Non-current assets
Investments held at fair value	4	1,796.2	1,593.2	1,682.4
Investment property	4	28.0	28.5	29.2
Property, plant and equipment		0.3	0.4	0.3
Derivative financial instruments		-	-	5.8
Deferred tax asset		1.7	0.3	-
		1,826.2	1,622.4	1,717.7
Current assets
Dealing investments held at fair value		5.0	11.3	3.8
Sales for future settlement		107.2	14.7	56.8
Derivative financial instruments		29.0	6.0	3.8
Other receivables		11.9	13.5	14.1
Tax receivable		0.9	0.9	1.0
Cash at bank		72.4	98.5	115.7
		226.4	144.9	195.2
Total assets		2,052.6	1,767.3	1,912.9
Current liabilities
Bank loans and overdrafts		-	(0.1)	(0.5)
Purchases for future settlement		(69.2)	(19.5)	(53.4)
Derivative financial instruments		(8.0)	-	(5.9)
Tax payable		(17.3)	(1.8)	(1.9)
Other payables		(2.5)	(4.9)	(2.2)
		(97.0)	(26.3)	(63.9)
Net current assets		129.4	118.6	131.3
Total assets less current liabilities		1,955.6	1,741.0	1,849.0
Non-current liabilities
Derivative financial instruments		(11.6)	(13.7)	(2.7)
Bank loans		(288.8)	(369.3)	(296.3)
Provisions		(10.6)	(7.0)	(12.7)
Retirement benefit liability		(1.0)	(0.5)	-
Deferred tax liability		-	-	(1.2)
		(312.0)	(390.5)	(312.9)
Net assets		1,643.6	1,350.5	1,536.1
Equity attributable to equity holders
Called up share capital		154.5	154.5	154.8
Capital redemption reserve		35.7	35.7	35.4
Cash flow hedging reserve		(6.8)	(13.7)	3.1
Foreign currency translation reserve		0.1	0.6	-
Capital reserve		1,416.2	1,166.9	1,370.7
Revenue reserve		43.9	6.5	(27.9)
Total shareholders' equity		1,643.6	1,350.5	1,536.1
Net asset value per ordinary share		1,064.1p	874.3p	992.2p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended  30 September 2009	Share capital £m	Capital redemption reserve £m	Cash flow hedging reserve £m	Foreign currency translation reserve £m	Capital reserve £m	Revenue reserve £m	Total £m
Balance at 31 March 2009	154.5	35.7	(13.7)	0.6	1,166.9	6.5	1,350.5
Profit for the period	-	-	-	-	249.3	49.0	298.3
Cash flow hedges
Gains/(losses) taken to equity	-	-	(0.8)	-	-	-	(0.8)
Transferred to the income    statement for the period	-	-	7.7	-	-	-	7.7
Exchange movements arising on consolidation	-	-	-	(0.5)	-	-	(0.5)
Ordinary dividend paid	-	-	-	-	-	(11.6)	(11.6)
Balance at 30 September 2009	154.5	35.7	(6.8)	0.1	1,416.2	43.9	1,643.6

Six months ended  30 September 2008	Share capital £m	Capital redemption reserve £m	Cash flow hedging reserve £m	Foreign currency translation reserve £m	Capital reserve £m	Revenue reserve £m	Total £m
Balance at 31 March 2008	154.8	35.4	0.1	(0.2)	1,490.4	9.5	1,690.0
Loss for the period	-	-	-	-	(119.7)	(31.2)	(150.9)
Cash flow hedges
Gains taken to equity	-	-	3.1	-	-	-	3.1
Transferred to the income    statement for the period	-	-	(0.1)	-	-	-	(0.1)
Exchange movements arising on consolidation	-	-	-	0.2	-	-	0.2
Ordinary dividend paid	-	-	-	-	-	(6.2)	(6.2)
Balance at 30 September 2008	154.8	35.4	3.1	-	1,370.7	(27.9)	1,536.1

Year ended 31 March 2009	Share capital £m	Capital redemption  reserve £m	Cash flow hedging reserve £m	Foreign currency translation reserve £m	Capital reserve £m	Revenue reserve £m	Total £m
Balance at 31 March 2008	154.8	35.4	0.1	(0.2)	1,490.4	9.5	1,690.0
Loss for the year	-	-	-	-	(320.9)	3.2	(317.7)
Cash flow hedges
Losses taken to equity	-	-	(13.8)	-	-	-	(13.8)
Transferred to the income   statement for the period	-	-	-	-	-	-	-
Exchange movements arising on consolidation	-	-	-	0.8	-	-	0.8
Ordinary dividend paid	-	-	-	-	-	(6.2)	(6.2)
Purchase of own shares	(0.3)	0.3	-	-	(2.6)	-	(2.6)
Balance at 31 March 2009	154.5	35.7	(13.7)	0.6	1,166.9	6.5	1,350.5

CONSOLIDATED CASH FLOW STATEMENT

	Six months ended 30  September 2009 £m	Six months ended 30  September 2008 £m	Year ended  31 March 2009 £m
Cash inflow from Operating Activities	45.4	68.7	14.8
Investing Activities:
Purchase of property, plant and equipment	(0.1)	(0.2)	(0.3)
Sale of property, plant and equipment	-	0.1	-
Net cash outflow from Investing Activities	(0.1)	(0.1)	(0.3)
Financing Activities:
Purchase of own shares	-	-	(2.6)
Decrease in term loans	(61.5)	-	-
Equity dividend paid	(11.6)	(6.2)	(6.2)
Net cash outflow from Financing Activities	(73.1)	(6.2)	(8.8)
(Decrease)/increase in cash and cash equivalents in the period	(27.8)	62.4	5.7
Cash and cash equivalents at the start of the period	149.6	130.0	130.0
Effect of foreign exchange rate changes	(2.8)	3.2	13.9
Cash and cash equivalents at the period end	119.0	195.6	149.6
Reconciliation:
Cash at bank	72.4	115.7	98.5
Money market funds (included in portfolio investments)	46.6	80.4	51.2
Bank loans and overdrafts	-	(0.5)	(0.1)
Cash and cash equivalents at period end	119.0	195.6	149.6

  NOTES TO THE FINANCIAL STATEMENTS

1. BASIS OF ACCOUNTING

These financial statements are the half-yearly consolidated financial statements of RIT Capital Partners plc and its subsidiaries for the six months ended 30 September 2009. They are prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard IAS 34, Interim Financial Reporting, as adopted by the European Union, and were approved on 20 November 2009. These half-yearly financial statements should be read in conjunction with the Annual Report and Accounts for the year ended 31 March 2009 as they provide an update of previously reported information. The half-yearly consolidated financial statements have been prepared in accordance with the accounting policies set out in the notes to the consolidated financial statements for the year ended 31 March 2009.  The Group has adopted IAS 1 (Revised), 'Presentation of financial statements' for the first time in these financial statements.

The unquoted portfolio has been re-valued as at 30 September 2009 by the Valuation Committee as part of its detailed, six-monthly review of the fair value of these investments.

2. EARNINGS PER ORDINARY SHARE

The earnings per ordinary share for the six months ended 30 September 2009 is based on the net profit of £298.3 million (six months ended 30 September 2008: net loss of £150.9 million; year ended 31 March 2009: net loss of £317.7 million) and the weighted average number of ordinary shares in issue during the period of 154.5 million (six months ended 30 September 2008: 154.8 million; year ended 31 March 2009: 154.8 million).

The earnings per ordinary share figure detailed above can be further analysed between revenue and capital as set out below:

	Six months ended  30 September  2009 £m	Six months ended  30 September  2008 £m	Year ended  31 March 2009 £m
Net revenue profit/(loss)	49.0	(31.2)	3.2
Net capital profit/(loss)	249.3	(119.7)	(320.9)
	298.3	(150.9)	(317.7)
	Pence per share	Pence per share	Pence per share
Revenue earnings/(loss) per ordinary share	31.7	(20.2)	2.1
Capital earnings/(loss) per ordinary share	161.4	(77.3)	(207.3)
	193.1	(97.5)	(205.2)

3. NET ASSET VALUE PER ORDINARY SHARE

The net asset value per ordinary share as at 30 September 2009 is based on the net assets attributable to equity shareholders of £1,643.6 million (30 September 2008: £1,536.1 million; 31 March 2009: £1,350.5 million) and the number of ordinary shares in issue at 30 September 2009 of 154.5 million (30 September 2008: 154.8 million; 31 March 2009: 154.5 million).

4. MOVEMENTS IN INVESTMENTS

	Quoted £m	Hedge Funds £m	Long Equity Funds £m	Unquoted Investments: Direct £m	Unquoted Investments: Funds £m	Other Securities £m	Investment  Property £m	Total £m
Cost at 31 March 2009	488.7	13.3	305.2	258.0	191.0	459.5	25.2	1,740.9
Appreciation/(depreciation)
at 31 March 2009	(82.6)	(2.3)	(57.1)	(0.4)	12.9	7.0	3.3	(119.2)
Valuation at 31 March 2009	406.1	11.0	248.1	257.6	203.9	466.5	28.5	1,621.7
Additions	770.3	28.0	52.8	1.8	20.3	209.1	-	1,082.3
Disposals	(591.7)	(7.1)	(36.8)	(25.1)	(9.2)	(415.2)	-	(1,085.1)
Revaluation	113.4	4.4	54.7	30.1	4.0	(0.8)	(0.5)	205.3
Valuation at 30 September 2009	698.1	36.3	318.8	264.4	219.0	259.6	28.0	1,824.2
Cost at 30 September 2009	639.3	33.3	319.6	242.7	207.9	257.0	25.2	1,725.0
Appreciation/(depreciation)
At 30 September 2009	58.8	3.0	(0.8)	21.7	11.1	2.6	2.8	99.2

Other securities comprise government securities and investments in money market funds.

5. DIVIDENDS PAID

	Six months ended 30 September 2009 £m	Six months ended 30 September 2008 £m	Year ended  31 March 2009 £m
Dividends paid	11.6	6.2	6.2
Pence per share	7.5p	4.0p	4.0p

6. COMPARATIVE INFORMATION

The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  The financial information for the half years ended 30 September 2009 and 30 September 2008 has not been audited.

The information for the year ended 31 March 2009 has been extracted from the latest published audited financial statements.  The audited financial statements for the year ended 31 March 2009 have been filed with the Registrar of Companies and the report of the auditors on those accounts contained no qualification or statement under section 498(2) or (3) of the Companies Act 2006.

 

END

 

 

IR VKLFFKFBZFBQ