Final Results
British & American Investment Trust PLC
Preliminary Announcement
for the year ended 31 December 2005
Registered number: 433137
Directors Registered office
J Anthony V Townsend (Chairman) Wessex House
Jonathan C Woolf (Managing Director) 1 Chesham Street
Dominic G Dreyfus (Non-executive) London SW1X 8ND
Ronald G Paterson (Non-executive) Telephone: 020 7201 3100
Registered in England
No.433137
28 April 2006
Financial Highlights
For the year ended 31 December 2005
2005 2004
(restated)
Revenue Capital Total Revenue Capital Total
return return return return
£000 £000 £000 £000 £000 £000
Return before tax - realised 1,759 479 2,238 1,487 457 1,944
Return before tax - unrealised - 4,665 4,665 - 3,459 3,459
__________ __________ __________ __________ __________ __________
Return before tax - total 1,759 5,144 6,903 1,487 3,916 5,403
__________ __________ __________ __________ __________ __________
Earnings per £1 ordinary share -
basic 5.41p 20.57p 25.98p 4.33p 15.66p 19.99p
__________ __________ __________ __________ __________ __________
Earnings per £1 ordinary share -
diluted 4.86p 14.70p 19.56p 4.09p 11.19p 15.28p
__________ _________ __________ __________ _________ __________
Net assets 42,765 37,869
__________ __________
Net assets per ordinary share
- deducting preference
shares at par 131p 111p
__________ __________
- diluted 122p 108p
__________ __________
134p
Diluted net asset value per
ordinary share at 21 April 2006
__________
Dividends declared or proposed
for the period
per ordinary share
- interim paid 2.3p 2.1p
- final proposed 3.25p 3.1p
- special paid 1.0p 0.0p
per preference share 3.5p 3.5p
Chairman's Statement
I am pleased to report our results for the year ended 31 December 2005.
As noted in our interim statement, we are now obliged to report our results under the new
International Financial Reporting Standards (IFRS). The Association of Investment Trust
Companies (AITC) has issued guidance to investment trusts on the presentation of their
accounts under IFRS and we are pleased to follow this guidance in our accounts to provide
shareholders with the most helpful format possible within the constraints of IFRS. The
main differences in the presentation of our accounts this year compared to previous years
relate to the profit and loss account and the recognition of dividends declared in the
year. Statutory profits or losses now include gains or losses on the capital account,
whether realised or unrealised, and dividends are only recognised in the accounts when
shareholders' right to receive the dividend has been established. Consequently, the final
dividend for the year 2005 proposed in these accounts is not in fact recognised in the
accounts, even on an accrued basis, until it is approved by shareholders at the AGM in
June of this year. This year's accounts also include a restatement of the prior year's
results to conform with IFRS.
In my statement, I will continue as before to highlight those results which we believe
present the most useful indicators of an investment trust's performance during the year,
including revenue returns and dividends paid relating to those returns in the year they
were earned. We also show in the accounts the split between realised and unrealised gains
and losses to give shareholders a better perspective of the return on investments over
time in comparison with movements in the market.
Revenue
The return on the revenue account before tax amounted to £1.8 million (2004 restated: £1.5
million). Gross income amounted to £2.0 million (2004 restated: £1.9 million), of which
£1.6 million (2004 restated: £1.5 million) represented income from investments and £0.4
million (2004 restated: £0.4 million) film, property and other income. The increase in
income was, as reported at the interim stage, primarily accounted for by the receipt of
special dividends from a number of our investee companies over the period.
Total profit before tax, which includes realised and unrealised capital appreciation,
amounted to £6.9 million (2004 restated: £5.4 million), reflecting the continued recovery
in equity valuations over the period as noted below. The capital element of this total was
represented by £0.6 million of realised gains and £4.7 million of unrealised gains.
The revenue return per ordinary share was 5.4p (2004 restated: 4.3p) on an undiluted basis
and 4.9p (2004 restated: 4.1p) on a diluted basis.
Net assets
Group net assets were £42.8 million (2004 restated: £37.9 million), an increase of 12.9
percent. Total return for the period, after adding back dividends, was 18.2 percent. This
compares to an increase over the same period of 19.7 percent (dividends reinvested) in the
FTSE 100 share index and 21.6 percent (dividends reinvested) in the All Share index. The
net asset value per ordinary share increased to 122p (2004 restated: 108p) on a diluted
basis. Deducting prior charges at par, the net asset value per ordinary share increased
to 131p (2004 restated: 111p).
Dividends
We are pleased to recommend an increased final dividend of 3.25p per ordinary share, which
together with the interim dividend makes a total payment for the year of 5.55p (2004
restated: 5.2p) per ordinary share; this represents an increase of 6.7 percent over the
previous year's total dividend The final dividend will be payable on 22 June 2006 to
shareholders on the register at 26 May 2006. A dividend of 1.75p will be paid to
preference shareholders resulting in a total payment for the year of 3.5p per share.
In addition to these regular dividends, we paid an additional special dividend of 1p per
share during the year, in recognition of special dividends received during the year. By
separating out our special dividend we believe shareholders will find it easier to keep
track of our normal interim and final dividends and monitor their progress.
Discount and performance
I am pleased to note that the reduced discount to NAV at which our shares trade in the
market on which I reported last year has continued to be maintained, in line with the
general narrowing of discounts which has been seen in the investment trust sector as a
whole. In recent months, our shares have traded at discounts in the range of 5 to 8
percent. I can also report that the company has continued to out perform its benchmark in
the UK income and growth sector and is positioned in the top quartile of its AITC sector
by total return. These results reflect out-performance against benchmark in capital and
income over a number of years.
We look forward to continuing advances in the current year as equity and other financial
markets continue to recover and form a base for future growth.
As at 21 April 2006, group net assets had increased to £47.0 million, an increase of 10.0
percent since the beginning of the calendar year. This is equivalent to 148 pence per
share (prior charges deducted at par) and 134 pence per share on a diluted basis. Over the
same period the FTSE 100 increased 9.1 percent and the All Share Index increased 9.8
percent.
Anthony Townsend
28 April 2006
Managing Director's report
International Financial Reporting Standards
As noted in the Chairman's statement, we have adopted the accounting format suggested by
the AITC to allow investment trusts to present their results in the most helpful way
possible for shareholders within the constraints of the IFRS. Whilst this has allowed us
to present the accounts in a somewhat more accessible way than was the case at the interim
stage, there remain nevertheless a number of areas in which the requirements of the IFRS
do not sit well with the operations of an investment trust and the communication of its
performance to shareholders.
These deficiencies were referred to in my report at the interim stage and we have
attempted to address them by including where possible in the notes or other parts of the
report the information considered necessary to convey a proper understanding of the
operations of the company. As a result, however, the statutory accounts themselves - the
income statement and balance sheet - which constitute the document of record of the
operations of the company, regrettably remain subject to these deficiencies. Without the
fuller explanation, which can now only be shown in notes or ancillary parts of the
accounts, these statements which present the basic or 'headline' results, remain confusing
and in some respects misleading.
For example, using the AITC's model format we are able to add in the income statement the
split in profits (or losses) between income and capital; however, unrealised capital gains
(or losses) are now included as statutory profits (or losses) for the year despite the
fact that they have not actually been 'earned' ie realised and might at any time be
reversed. At the very least this will add a significant level of uncontrollable
volatility to the principal results of the company from year to year and will be of no
help to shareholders analysing either the past or possible future direction of the company
based on its profits. It is hard to imagine any other circumstance where shareholders
are presented with a 'profit' in the income statement on an unsold asset within the
company's main business activity which could, at any later stage, be totally reversed or
even converted into a loss, in respect of the very same unsold asset in which the earlier
'profit' was reported.
It is not surprising that the IFRS has encountered widespread criticism from companies,
both large and small, for the lack of clarity, common sense and continuity which accounts
produced under IFRS offer to shareholders. As noted above, this criticism can equally and
perhaps even more justifiably be levelled in the case of investment trusts.
Performance
In 2005 UK equity markets experienced a further year of broadly based gains resulting in a
cumulative recovery of 65 percent since the lows reached in 2001. As at 31 December, the
market had returned to its 2002 levels and, as noted below, by April of this year the FTSE
100 finally broke through the 6000 level last achieved in 2001.
As reported at the interim stage, the advances during 2005 were boosted by the out-
performance of the oil and natural resources sectors on the back of continuing record
prices in these commodities due to supply worries and heavy demand from newly
industrialised countries such as China and India. The UK market was also buoyed by
substantial levels of corporate activity including buyouts, demergers and takeovers in a
number of the leading stocks across a variety of sectors. The trend of private capital
funds bidding for listed company assets has been growing during the recent period of
downturn in stock prices while companies have been repairing their balance sheets and
cashflows but price multiples have remained subdued. The acceleration in this private
capital activity and the larger volumes involved has contributed to the strength of the
market and the growth in multiples to more normal levels.
Our portfolio underperformed the main indices during the year primarily due to some
underweighting in the oil and natural gas sectors which out-performed significantly during
the period and now form a substantial part of the FTSE 100 at approximately 25 percent.
Our slightly higher holdings of cash also contributed to this effect. In the first
quarter, however, the portfolio has outperformed the indices, as reported above, by a
modest amount.
In the US, the leading indices recovered from the fall at mid-year to finish the year in
positive territory with a gain of 2 percent. The dull performance of stocks in the USA
reflected the continuing programme of monetary tightening by the Federal Reserve towards a
level of perceived equilibrium in US dollar rates and general tensions within the economy
arising out of the structural imbalances in the fiscal and trade accounts.
In the first quarter, equity prices in the UK have continued to advance strongly, rising
by over six percent with the FTSE 100 exceeding 6000 for the first time since the multi-
year downturn commenced in 2001. This performance marks a continuation of the trends seen
in 2005 as described above. While this rate of advance can not be expected to be
maintained indefinitely in the current year without price levels out-running improvements
in fundamentals, equity markets are generally expected to remain firm over the coming
period in the absence of external shocks as corporate profitability continues to grow.
Against this background, we will continue to pursue our generalist investment approach,
remaining invested in leading stocks with good yield.
Jonathan Woolf
Consolidated income statement
For the year ended 31 December 2005
2005 2004
(restated)
Revenue Capital Total Revenue Capital Total
return return return return
£000 £000 £000 £000 £000 £000
Income 2,032 - 2,032 1,864 - 1,864
Gains on fair value through profit or loss
assets - unrealised - 4,665 4,665 - 3,459 3,459
Realised gains on sales - 618 618 - 457 457
Expenses (273) (139) (412) (377) - (377)
________ ________ ________ ________ ________ ________
Profit before finance costs and tax 1,759 5,144 6,903 1,487 3,916 5,403
________ ________ ________ ________ ________ ________
Profit before tax 1,759 5,144 6,903 1,487 3,916 5,403
Tax (57) - (57) (55) - (55)
________ ________ ________ ________ ________ ________
Profit for the period 1,702 5,144 6,846 1,432 3,916 5,348
________ ________ ________ ________ ________ ________
Earnings per share
Basic - ordinary shares 5.41p 20.57p 25.98p 4.33p 15.66p 19.99p
________ ________ ________ ________ ________ ________
Diluted - ordinary shares 4.86p 14.70p 19.56p 4.09p 11.19p 15.28p
________ ________ ________ ________ ________ ________
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 Trust Companies. All
items in the above statement derive from continuing operations.
All income is attributable to the equity holders of the parent company. There are no minority
interests.
Consolidated statement of changes in equity
For the year ended 31 December 2005
Share Capital Capital Retained Total
capital reserve reserve earnings
realised unrealised
£000 £000 £000 £000 £000
Balance at 31 December 2003 - restated 35,000 14,824 (18,419) 2,741 34,146
(note 5(d))
Changes in equity for 2004 - restated
Profit for the period (note 5(b)) - (1,710) 5,626 1,432 5,348
Ordinary dividend paid (note 3) - - - (1,275) (1,275)
Preference dividend paid (note 3) - - - (350) (350)
________ ________ ________ ________ ________
Balance at 31 December 2004 carried forward 35,000 13,114 (12,793) 2,548 37,869
- restated (note 5(a))
Changes in equity for 2005
Profit for the period - 2,027 3,117 1,702 6,846
Ordinary dividend paid (note 3) - - - (1,600) (1,600)
Preference dividend paid (note 3) - - - (350) (350)
________ ________ ________ ________ ________
Balance at 31 December 2005 carried forward
35,000 15,141 (9,676) 2,300 42,765
________ ________ ________ ________ ________
restated - see note 5
Consolidated Balance Sheet
For the year ended 31 December 2005
Group
2005 2004
(restated)
£000 £000
Non-current assets
Investments - fair value through profit or loss 42,369 35,610
Current assets
Receivables 3,379 187
Cash and cash equivalents 3,263 2,227
__________ __________
6,642 2,414
__________ __________
Total assets 49,011 38,024
__________ __________
Current liabilities (6,246) (155)
__________ __________
Total assets less current liabilities 42,765 37,869
__________ __________
Net assets 42,765 37,869
__________ __________
Equity attributable to equity holders
Ordinary share capital 25,000 25,000
Convertible preference share capital 10,000 10,000
Capital reserve -realised 15,141 13,114
Capital reserve -unrealised (9,676) (12,793)
Retained earnings 2,300 2,548
__________ __________
Total equity 42,765 37,869
__________ __________
restated - see note 5
Approved: 28 April 2006
Consolidated cash flow statement
For the year ended 31 December 2005
Year ended Year ended
2005 2004
(restated)
£000 £000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 6,903 5,403
Adjustments for:
Gains on investments (5,283) (3,916)
Scrip dividends (4) (4)
Film income tax deducted at source (4) (4)
Proceeds on disposal of fair value through profit 6,406 6,765
and loss investments
Purchases of fair value through profit and loss (7,552) (5,952)
investments
__________ __________
Operating cash flows before movements in working 466 2,292
capital
Increase in receivables (52) (40)
Increase in payables 2,576 19
__________ __________
Net cash from operating activities before income 2,990 2,271
taxes
Income taxes paid (4) -
__________ __________
NET CASH FROM OPERATING ACTIVITIES 2,986 2,271
__________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid on ordinary shares (1,600) (1,275)
Dividends paid on preference shares (350) (350)
__________ __________
NET CASH USED IN FINANCING ACTIVITIES (1,950) (1,625)
__________ __________
NET INCREASE IN CASH AND CASH EQUIVALENTS
1,036 646
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
2,227 1,581
__________ __________
CASH AND CASH EQUIVALENTS AT END OF YEAR
3,263 2,227
__________ __________
Purchases and sales of investments are considered to be operating activities of the
company, given its purpose, rather than investing activities.
1 Basis of preparation
The financial information set out above contains the financial information of the company and its
subsidiaries (together referred to as the "Group") for the year ended 31 December 2005. The financial
information is prepared on the historical cost basis, modified to include the revaluation of
investments.
The financial information set out above does not constitute the company's statutory accounts for the
years ended 31 December 2005 or 2004. Statutory accounts for 2004, which were prepared under UK
Generally Accepted Accounting Practices ("UK GAAP"), have been delivered to the registrar of companies
and those for 2005, prepared under IFRS as adopted by the EU, will be delivered in due course.
The auditors have reported on the 31 December 2004 year end accounts and their reports were
unqualified and did not include references to any matters to which the auditors drew attention by way
of emphasis without qualifying their reports and did not contain statements under section 237(2) or
(3) of the Companies Act 1985.
EU law (IAS Regulation EC 1606/2002) requires that the annual financial statements of the Group for
the year ended 31 December 2005 be prepared in accordance with International Financial Reporting
Standards (IFRS) and its interpretations as adopted by the European Union ("adopted IFRS").
This financial information has been prepared in accordance with adopted IFRS at 31 December 2005, the
Group's first annual reporting date at which it is required to use adopted IFRS. The impact of the
transition to adopted IFRS and the significant accounting policies of the Group, which have altered as
result of the adoption of IFRS, were included in the interim financial information for the six month
period ended 30 June 2005 which was published on 28 September 2005.
2 Earnings per ordinary share
The calculation of the basic and diluted earnings per share is based on the following data:
2005 2004
(restated)
Revenue Capital Total Revenue Capital Total
return return return return
£000 £000 £000 £000 £000 £000
Earnings:
Basic 1,352 5,144 6,496 1,082 3,916 4,998
Preference
dividend 350 - 350 350 - 350
__________ __________ __________ __________ __________ __________
Diluted 1,702 5,144 6,846 1,432 3,916 5,348
__________ __________ __________ __________ __________ __________
Basic revenue, capital and total return per ordinary share is based on the net revenue, capital and
total return for the period and after deduction of dividends in respect of preference shares and on 25
million (2004: 25 million) ordinary shares in issue.
The diluted revenue, capital and total return is based on the net revenue, capital and total return
for the period and on 35 million (2004 - 35 million) ordinary and preference shares in issue.
3 Dividends
2005 2004
£000 £000
Amounts recognised as distributions to equity holders in the period:
Dividends on ordinary shares:
Final dividend for the year ended 31 December 2004 of 3.1p (2003:3.0p)
per share 775 750
Interim dividend for the year ended 31 December 2005 of 2.3p
(2004:2.1p) per share 575 525
Special dividend for the year ended 31 December 2005 of 1.0p (2004:nil)
per share 250 -
__________ __________
1,600 1,275
__________ __________
Proposed final dividend for the year ended 31 December 2005 of 3.25p
(2004:3.1p) per share 813 775
__________ __________
Dividends on 3.5% cumulative convertible preference shares:
Preference dividend for the year ended 31 December 2004 of 1.75p
(2003:1.75p) per share 175 175
Preference dividend for the year ended 31 December 2005 of 1.75p
(2004:1.75p) per share 175 175
__________ __________
350 350
__________ __________
Preference dividend payable for the year ended 31 December 2005
of 1.75p (2004:1.75p) per share 175 175
__________ __________
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and
has not been included as a liability in these financial statements in accordance with IFRS.
We also set out below the total dividend payable in respect of the financial year, which is the basis
on which the retention requirements of Section 842 Income and Corporation Taxes Act 1988 are
considered.
2005 2004
£000 £000
Dividends on ordinary shares:
Interim dividend for the year ended 31 December 2005 of 2.3p
(2004:2.1p) per share 575 525
Special dividend for the year ended 31 December 2005 of 1.0p (2004:nil)
per share 250 -
Proposed final dividend for the year ended 31 December 2005 of 3.25p
(2004:3.1p) per share 813 775
__________ __________
1,638 1,300
__________ __________
Dividends on 3.5% cumulative convertible preference shares:
Preference dividend for the year ended 31 December 2005 of 1.75p
(2004:1.75p) per share 175 175
Preference dividend payable for the year ended 31 December 2005 of
1.75p (2004:1.75p) per share 175 175
__________ __________
350 350
__________ __________
4 Net asset values
Net asset Net assets
value per attributable
share
2005 2004 2005 2004
£ £ £000 £000
Ordinary shares
Undiluted 1.31 1.11 32,765 27,869
Diluted 1.22 1.08 42,765 37,869
The undiluted and diluted net asset values per £1 ordinary share are based on net assets at the year
end and 25 million (undiluted) ordinary and 35 million (diluted) ordinary and preference shares in
issue.
5 Transition to IFRS
This is the first year that the company has presented its financial statements under IFRS. The last
set of annual financial statements was for the year ended 31 December 2004, and the date of transition
to IFRS was therefore 1 January 2004. Accordingly, a full reconciliation of the changes is shown
below.
5(a) Restatement of balances for the year ended 31 December 2004
Previously
reported Effect of Restated
(UK GAAP) transition to (IFRS)
31 December IFRS 31 December
2004 2004
£000 £000 £000
Investments - fair value through profit or loss 35,663 (53)) 35,610
Current assets 2,414 - 2,414
Current liabilities (1,105)) 950 (155))
__________ __________
Total assets less current liabilities 36,972 37,869
__________ __________
Net assets 36,972 37,869
__________ __________
Equity attributable to equity holders
Share capital
- ordinary shares 25,000 - 25,000
- preference shares 10,000 - 10,000
Capital reserves - realised 13,114 - 13,114
Capital reserves - unrealised (note 1) (12,740)) (53)) (12,793))
Retained earnings (note 2) 1,598 950 2,548
__________ __________
Total equity 36,972 37,869
__________ __________
Notes
1. Investments are designated as held at fair value under IFRS and are carried at bid prices.
Previously, under UK GAAP approximately 77 percent by value were already carried at bid equivalent
with the balance being carried at mid prices or cost. This results in a downward revaluation of
£53,000 in investments and a decrease in capital reserves.
2. No provision has been made for the final dividend on the ordinary and preference shares for the
year ended 31 December 2004 of £950,000. Under IFRS the final dividend is not recognised until
approved by shareholders.
5(b) Reconciliation of the Statement of Total Return to the Income Statement for the year ended
31 December 2004
Group
2004
£000
Reported revenue gain under UK GAAP 1,432
Reported capital gain under UK GAAP 3,946
__________
Total return under UK GAAP 5,378
Movement in mid to bid December 2003 23
Movement in mid to bid December 2004 (53))
__________
Reported income under IFRS 5,348
__________
5(c) Reconciliation of the Cash Flow Statement for the year ended 31 December 2004
Previously
reported Effect of Restated
(UK GAAP) transition to (IFRS)
31 December IFRS 31 December
2004 2004
£000 £000 £000
Net cash flow from operating activities
before and after tax 1,458 813 2,271
Net cash flow on investing activities (note 1) 813 (813)) -
Equity dividends paid (note 2) (1,275)) 1,275 -
__________ __________
996 2,271
Net cash used in financing activities (350)) (1,275)) (1,625))
__________ __________
Net change in cash and cash equivalents 646 646
__________ __________
Notes
1. Under IFRS cash flow on purchases and sales of investments which are designated as fair value
through profit or loss are considered to be operating activities of the company. Therefore, these cash
flows have been reclassified to reflect this.
2. Under IFRS dividends are treated as a finance cost and these have been reclassified to reflect
this.
5(d) Restatement of balances for the year ended 31 December 2003
Previously
reported Effect of Restated
(UK GAAP) transition to (IFRS)
31 December IFRS 31 December
2003 2003
£000 £000 £000
Investments - fair value through profit or loss 32,482 (23)) 32,459
Current assets 1,743 - 1,743
Current liabilities (981)) 925 (56))
__________ __________
Total assets less current liabilities 33,244 34,146
__________ __________
Net assets 33,244 34,146
__________ __________
Equity attributable to equity holders
Share capital
- ordinary shares 25,000 - 25,000
- preference shares 10,000 - 10,000
Capital reserves - realised 14,824 - 14,824
Capital reserves - unrealised (note 1) (18,396)) (23)) (18,419))
Retained earnings (note 2) 1,816 925 2,741
__________ __________
Total equity 33,244 34,146
__________ __________
Notes
1. Investments are designated as held at fair value under IFRS and are carried at bid prices.
Previously, under UK GAAP approximately 76 percent by value were already carried at bid equivalent
with the balance being carried at mid prices or cost. This results in a downward revaluation of
£23,000 in investments and a decrease in capital reserves.
2. No provision has been made for the final dividend on the ordinary and preference shares for the
year ended 31 December 2003 of £925,000. Under IFRS the final dividend is not recognised until
approved by shareholders.
British & American Investment Trust Plc
Latest directors dealings
- 1 day ago IntegraFin Holding
- 1 day ago Spirent Communications
- 1 day ago CRH (CDI)
- 1 day ago Bezant Resources
- 1 day ago EJF Investments Ltd NPV