BRITISH ASSETS TRUST PLC
To: RNS
From: British Assets Trust plc
Date: 15 May 2009
Half Yearly Financial Report for the six months ended 31 March 2009
Chairman's Statement
In the six month period to 31 March 2009 stockmarkets around the world fell sharply on continued concerns about the health of the financial sector and of the global economy. As growth in the world's major economies slowed, governments and central banks announced significant fiscal stimulus packages in an attempt to halt the economic decline. However, it is not yet clear how effective these measures will be.
Against this backdrop, the Company's net asset value total return fell by 20.3 per cent during the period. This compares to a fall of 17.0 per cent in the composite benchmark index of 75 per cent FTSE All-Share Index and 25 per cent FTSE World (ex UK) Index. The Company's share price total return fell by 13.6 per cent, reflecting a narrowing of the debt-adjusted discount, which was 2.0 per cent as at 31 March 2009 compared to 8.0 per cent as at 30 September 2008 (source: Fundamental Data).
The table below provides a breakdown of the estimated contributions to the net asset value total return for the period.
Market/benchmark return -17.0%
Stock selection
UK equities -1.9
Overseas equities -0.4
Regional asset allocation 2.2
Corporate bonds 1.1
Gearing -4.9
Cash/other 1.0
Expenses -0.4
----------
British Assets Trust net asset value total return -20.3%
----------
As previously reported, during the period the Board agreed with the Managers that the overseas portfolios would be consolidated into two portfolios, a global developed markets portfolio, which is managed using quantitative stock selection techniques, and an actively managed global emerging markets portfolio. This change has meant moving away from regional portfolios based on geographic domicile. The reason for the change is to provide greater focus on the best individual investment opportunities overseas.
The emerging markets portfolio delivered positive performance during the period, in terms of both stock selection and asset allocation. This was, however, offset by negative stock selection elsewhere in the portfolio. The bulk of the underperformance in the UK was attributable to the Company's investment in Standard Life European Private Equity Trust plc which, along with the private equity funds of funds sector in general, fell heavily in value during the period. The corporate bond portfolio contributed positively to performance, outperforming its composite benchmark and is continuing to be an important contributor to the Revenue Account. The main reason for the overall underperformance during the period was the effect of gearing in a falling market.
Earnings and Dividends
The Company's revenue earnings for the period were 3.1p per share (2008: 2.8p).
A first interim dividend of 1.442p per share was paid on 9 April 2009 and the Board has declared a second interim dividend of 1.442p per share which will be paid on 10 July 2009 to shareholders on the register on 12 June 2009. These interim dividends represent increases of 3.0 per cent over the equivalent quarterly interim dividends paid in the previous year.
Although the Revenue Account has been affected by dividend cuts by the major banks and reduced interest rates on bank deposits, it has benefited from good dividend growth in certain sectors, in particular oils, pharmaceuticals and telecoms. It has also benefited from the recovery of VAT on management fees and associated interest, as explained in more detail below.
Gearing
At the end of the period the Company's level of gearing, net of cash, was 26.9 per cent, represented by equity gearing of 11.1 per cent and 15.8 per cent in corporate bonds.
The Company's borrowings are represented by £60 million 6.25 per cent Bonds which are due for redemption in 2031 and a £60 million bank revolving credit facility, £30 million of which was drawn down at the end of the period.
VAT on Management Fees
Following the European Court of Justice ruling in June 2007 that investment trusts should be regarded as special investment funds, investment management fees paid by the Company are no longer subject to VAT.
During the period, the Managers continued to liaise with HM Revenue & Customs to recover on the Company's behalf VAT paid previously on management fees. The accounts for the period include the recovery of VAT and associated interest of £2.2 million. Of this amount, £2.0 million was credited to the revenue account, providing an enhancement of 0.7p per share to the revenue earnings for the period. The balance was credited to capital. The total recovery provided an enhancement of 0.8p per share to the net asset value per share for the period.
Outlook
Much has been done by governments and companies globally in response to the deteriorating economic conditions. However, the continuing uncertainty about growth and dividends in the months ahead is likely to mean that stockmarkets will remain volatile during this period.
The Managers continue to focus on companies which they believe will provide a strong basis for both long term capital performance and dividend growth.
W R E Thomson
Chairman
For further information please contact:
Julie Dent 0207 628 8000
F&C Investment Business Limited
Unaudited Income Statement
For the Six Months ended 31 March 2009
|
|
|
|
|
Revenue |
Capital |
Total |
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
Losses on investments |
- |
(70,092) |
(70,092) |
Exchange differences |
- |
(2,665) |
(2,665) |
Income (see note 4) |
9,133 |
- |
9,133 |
Investment management fee (see note 4) |
926 |
(253) |
673 |
Other expenses |
(347) |
- |
(347) |
|
|
|
|
|
|
|
|
Net return before finance costs & taxation |
9,712 |
(73,010) |
(63,298) |
|
|
|
|
Finance Costs: |
|
|
|
6.25% Bonds 2031 |
(474) |
(1,422) |
(1,896) |
Bank borrowings |
(139) |
(415) |
(554) |
|
|
|
|
Return on ordinary activities before tax |
9,099 |
(74,847) |
(65,748) |
|
|
|
|
Tax on ordinary activities |
(173) |
- |
(173) |
|
|
|
|
Return attributable to shareholders |
8,926 |
(74,847) |
(65,921) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return per Ordinary Share (p) |
3.1 |
(25.6) |
(22.5) |
|
|
|
|
The total column of this statement is the Profit and Loss Account of the Company. The
supplementary revenue and capital columns are both prepared under guidance published
by the Association of Investment Companies.
Unaudited Income Statement
For the Six Months ended 31 March 2008
|
|
|
|
|
Revenue |
Capital |
Total |
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
Losses on investments |
- |
(56,246) |
(56,246) |
Exchange differences |
- |
(562) |
(562) |
Income |
10,157 |
873 |
11,030 |
Investment management fee |
(222) |
(663) |
(885) |
Other expenses |
(369) |
- |
(369) |
|
|
|
|
Net return before finance costs & taxation |
9,566 |
(56,598) |
(47,032) |
|
|
|
|
Finance Costs: |
|
|
|
6.625% Bonds 2008 |
(505) |
(1,514) |
(2,019) |
6.25% Bonds 2031 |
(474) |
(1,422) |
(1,896) |
Bank borrowings |
(20) |
(45) |
(65) |
|
|
|
|
Return on ordinary activities before tax |
8,567 |
(59,579) |
(51,012) |
|
|
|
|
Tax on ordinary activities |
(68) |
- |
(68) |
|
|
|
|
Return attributable to shareholders |
8,499 |
(59,579) |
(51,080) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return per Ordinary Share (p) |
2.8 |
(19.9) |
(17.1) |
|
|
|
|
Audited Income Statement
For the Year ended 30 September 2008
|
|
|
|
|
|
|
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
|
|
|
|
|
|
|
|
|
Losses on investments |
|
- |
(137,257) |
(137,257) |
Exchange differences |
|
- |
(1,460) |
(1,460) |
Income |
|
21,414 |
873 |
22,287 |
Investment management fee |
|
(85) |
(39) |
(124) |
Other expenses |
|
(869) |
- |
(869) |
|
|
|
|
|
Net return before finance costs & taxation |
|
20,460 |
(137,883) |
(117,423) |
|
|
|
|
|
Finance Costs: |
|
|
|
|
6.625% Bonds 2008 |
|
(505) |
(1,514) |
(2,019) |
6.25% Bonds 2031 |
|
(944) |
(2,832) |
(3,776) |
Bank borrowings |
|
(231) |
(615) |
(846) |
|
|
|
|
|
Return on ordinary activities before tax |
|
18,780 |
(142,844) |
(124,064) |
|
|
|
|
|
Tax on ordinary activities |
|
(295) |
- |
(295) |
|
|
|
|
|
Return attributable to shareholders |
|
18,485 |
(142,844) |
(124,359) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return per Ordinary Share (p) |
|
6.2 |
(48.0) |
(41.8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Balance Sheet |
As At 31 March 2009 |
Audited As At 30 September 2008 |
As At 31 March 2008 |
|
£'000 |
£'000 |
£'000 |
Non-Current Assets |
|
|
|
Investments at fair value through profit or loss |
328,029 |
401,838 |
500,814 |
|
|
|
|
Current Assets |
|
|
|
Debtors |
7,092 |
4,263 |
53,028 |
Cash at bank and on deposit |
18,066 |
17,962 |
7,775 |
|
|
|
|
|
25,158 |
22,225 |
60,803 |
Creditors: |
|
|
|
Amounts falling due within one year |
(35,338) |
(31,152) |
(81,370) |
|
|
|
|
Net Current Liabilities |
(10,180) |
(8,927) |
(20,567) |
|
|
|
|
Total Assets less Current Liabilities |
317,849 |
392,911 |
480,247 |
|
|
|
|
|
|
|
|
Creditors: amounts falling due after more than one year: |
|
|
|
6.25% Bonds 2031 |
(59,408) |
(59,395) |
(59,382) |
|
|
|
|
|
|
|
|
Net Assets |
258,441 |
333,516 |
420,865 |
|
|
|
|
|
|
|
|
Capital and Reserves |
|
|
|
Called-up share capital |
73,153 |
73,153 |
74,378 |
Capital redemption reserve |
15,188 |
15,188 |
13,963 |
Capital reserve |
134,473 |
209,320 |
298,353 |
Revenue reserve |
35,627 |
35,855 |
34,171 |
|
|
|
|
|
|
|
|
Shareholders' Funds |
258,441 |
333,516 |
420,865 |
|
|
|
|
|
|
|
|
Net Asset Value per Ordinary Share (p) |
83.3 |
114.0 |
141.5 |
Unaudited Reconciliation of Movements in Shareholders' Funds
|
Six months ended |
Six months ended |
Audited Year ended |
|
31 March |
31 March |
30 September |
|
2009 |
2008 |
2008 |
|
£'000 |
£'000 |
£'000 |
|
|
|
|
Opening shareholders' funds |
333,516 |
485,772 |
485,772 |
Share buy-backs |
- |
(4,839) |
(10,607) |
Dividends paid |
(9,154) |
(8,988) |
(17,290) |
Return attributable to shareholders |
(65,921) |
(51,080) |
(124,359) |
|
|
|
|
Closing shareholders' funds |
258,441 |
420,865 |
333,516 |
|
|
|
|
Summarised Unaudited Statement of Cash Flows
|
Six months ended |
Six months ended |
Audited Year ended |
|
|
31 March |
31 March |
30 September |
|
|
2009 |
2008 |
2008 |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
Net cash inflow from operating activities |
10,272 |
7,549 |
19,577 |
|
Servicing of finance |
(2,508) |
(3,927) |
(6,474) |
|
Taxation |
- |
- |
- |
|
Investments sold less investments purchased |
4,299 |
1,162 |
16,840 |
|
Dividends paid |
(9,154) |
(8,988) |
(17,290) |
|
|
|
|
|
|
Net cash inflow/(outflow) before financing |
2,909 |
(4,204) |
12,653 |
|
Financing: |
|
|
|
|
Ordinary shares purchased for cancellation |
- |
(4,839) |
(10,607) |
|
6.625% Bonds redeemed |
- |
(60,000) |
(60,000) |
|
Loan drawn down |
- |
30,000 |
30,000 |
|
Increase/(decrease) in cash |
2,909 |
(39,043) |
(27,954) |
|
|
|
|
|
|
|
|
|||
Reconciliation of net cash flow to movement in net debt |
|
|
|
|
Increase/(decrease) in cash |
2,909 |
(39,043) |
(27,954) |
|
Exchange differences |
(2,726) |
(531) |
(1,499) |
|
6.625% Bonds redeemed |
- |
60,000 |
60,000 |
|
Loan drawn down |
- |
(30,000) |
(30,000) |
|
Increase in 6.625% Bonds 2008 liability |
- |
(32) |
(32) |
|
Increase in 6.25% Bonds 2031 liability |
(13) |
(14) |
(27) |
|
Opening net debt |
(71,499) |
(71,987) |
(71,987) |
|
|
|
|
|
|
Closing net debt |
(71,329) |
(81,607) |
(71,499) |
|
|
|
|
|
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
|
|
|
|
|
|
|
|
Net return before finance costs and taxation
|
(63,298)
|
(47,032)
|
(117,423)
|
Losses on investments
|
70,092
|
56,246
|
137,257
|
Exchange differences
|
(393)
|
(531)
|
1,460
|
Tax on investment income
|
(153)
|
(81)
|
(295)
|
Changes in working capital and other non-cash items
|
4,024
|
(1,053)
|
(1,422)
|
|
|
|
|
Net cash inflow from operating activities
|
10,272
|
7,549
|
19,577
|
Statement of Principal Risks and Uncertainties
The Company's assets consist mainly of listed securities and its principal risks are therefore market related. The Company is also exposed to currency risk in respect of overseas markets in which it invests. Other risks faced by the Company include external, investment and strategic, regulatory, operational, and financial risks. These risks, and the way in which they are managed, are described in more detail under the heading Principal Risks and Risk Management within the Business Review in the Company's Annual Report for the year ended 30 September 2008. The Company's principal risks and uncertainties have not changed since the date of that report.
Statement of Directors' Responsibilities in Respect of the Interim Report
We confirm that to the best of our knowledge:
the financial statements have been prepared in accordance with the Statement 'Half-Yearly Financial Reports' issued by the UK Accounting Standards Board and give a true and fair view of the assets, liabilities, financial position and return of the Company;
the Chairman's Statement (constituting the Interim Management Report) includes a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;
the Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and
the financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so. The only such transactions that have taken place during the period have been the payment of the investment management fee as disclosed in note 4.
On behalf of the Board
W R E Thomson
Director
15 May 2009
Notes:
1. The unaudited interim results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 30 September 2008.
2. The results for the first six months should not be taken as a guide to the results for the full year.
3. There were no special dividends in the six months to 31 March 2009 (31 March 2008 - £873,000 all recognised through capital and 30 September 2008 - £873,000 all recognised through capital).
4. Investment Management Fee
As a result of the European Court of Justice decision that investment management fees payable by investment trusts are not, and never should have been, liable to value added tax ('VAT'), the Company recovered VAT and associated interest of £2,207,000 during the period (31 March 2008 - nil and 30 September 2008 £1,490,000).
The amount of £2,207,000 includes interest of £936,000, which is recognised within income for the period, and a VAT recovery of £1,271,000, as shown in the table below, which has been allocated between revenue and capital in the same ratio as the VAT originally suffered.
|
Six months to
31 March 2009
|
Six months to 31 March 2008
|
Year to
30 September 2008
|
||||||
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
|
|
|
|
|
|
|
|
|
- basic fee
|
149
|
449
|
598
|
222
|
663
|
885
|
403
|
1,211
|
1,614
|
-VAT recoverable
|
(1,075)
|
(196)
|
(1,271)
|
-
|
-
|
-
|
(318)
|
(1,172)
|
(1,490)
|
|
(926)
|
253
|
(673)
|
222
|
663
|
885
|
85
|
39
|
124
|
5. The second interim dividend of 1.442p per Ordinary Share will be paid on 10 July 2009 to shareholders on the register on 12 June 2009. In accordance with accounting standards this dividend and the first interim dividend of 1.442p per Ordinary Share, paid on 9 April 2009, have not been accounted for in the results for the six months ended 31 March 2009.
6. The last date for receipt of mandate instructions for those shareholders who wish to join the Dividend Reinvestment Plan is 19 June 2009.
7. Return per share is based on a weighted average 292,612,282 Ordinary Shares in issue during the period (31 March 2008 - 298,575,124 and 30 September 2008 - 297,162,555).
8. There were 292,612,282 Ordinary Shares in issue at 31 March 2009 (31 March 2008 - 297,512,282 and 30 September 2008 - 292,612,282).
9. These accounts have not been audited or reviewed by the Company's auditors.
10. The Company's geographic exposure as a percentage of shareholders' funds at 31 March 2009 was as follows:
|
31 March 2009 |
30 September 2008 |
|
|
|
UK |
74.5 |
74.8 |
Overseas Regional Portfolios |
- |
36.8 |
Overseas Developed |
19.9 |
n/a |
Overseas Emerging Markets |
16.7 |
n/a |
Corporate Bonds |
15.8 |
8.9 |
Cash |
7.6 |
6.3 |
Borrowings |
(34.5) |
(26.8) |
|
_____ |
____ |
|
100.0 |
100.0 |
11. These are not statutory accounts in terms of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2008, which received an unqualified audit report, have been lodged with the Registrar of Companies. No statutory accounts in respect of any period after 30 September 2008 have been reported on by the Company's auditors or delivered to the Registrar of Companies. The Half Yearly Financial Report will be available at the Company's website address, www.british-assets.co.uk.