Interim Results

Taverners Trust PLC 18 December 2003 THE TAVERNERS TRUST PLC UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2003 Chairman's Statement Over the half year to 31 October 2003 the undiluted Net Asset Value of Taverners Trust moved ahead by 33.9% while our benchmark FTSE Actuaries Leisure and Hotels index improved by 29.1%. Our share price improved by an even greater percentage from the severely depressed level of 53p at the beginning of the period to 77.5p. Since 1 July, when last I wrote to you, up to the present in December both share price and undiluted Net Asset Value have moved in line with the benchmark which is up by 17%. However almost all of this gain in Net Asset Value occurred before the end of our half year on 31 October. There has been little movement since. Coincidentally the Small Cap index has been underperforming the All-Share index and of course your Trust is predominantly invested in smaller companies. We are therefore less concerned about our recent underperformance since the end of the half year than we would be if the majority of companies in which we are invested were not producing excellent figures. The Trust still has around half of its portfolio in regional brewers; these are seen as defensive stocks and some fund managers have been moving out of these companies into more operationally geared stocks. However, the fine summer weather has guaranteed that pubs with outdoor areas have done well so that all the regional brewers and tenanted pub companies have produced first-rate figures in the recent results season. Where these companies are some of our largest holdings we shall continue to reduce our exposure slowly but we have no wish to make any major change to the balance of the portfolio in this area as we believe the reliable yields and consistent results from these companies should secure a sound rating over the long term. Our shareholders will recall that during the autumn of 2002 managed retailers concentrating on town centre units began to underperform seriously. We had hoped that, as the comparatives became less formidable during this autumn, like-for-like sales figures for these companies would turn positive. However this recovery has not materialised; the night-club company Luminar provided a sober assessment of the state of affairs with their interims in November. The company outlined a sensible and radical plan to ringfence and eventually sell 63 units and spend £100m on their Dancing Division; a provision of £60m will virtually wipe out their earnings for the year. Luminar will not have to tap their shareholders as they have strong cash flow but recovery will take some time. Regent Inns did not benefit as much as they had expected from the Rugby World Cup and the vodka bar group Inventive Leisure issued a profit warning. This part of the portfolio will require close monitoring in months to come and Christmas trading will be vitally important. We have taken a decision to rebuild slowly our portfolio of Alternative Investment Market (AIM) stocks, and 30% of the portfolio is now in AIM stocks. This seems to be working out well for us and we have acquired small holdings in Honeycombe Leisure, CI Traders which owns Ann Street Brewery in the Channel Islands and also in Majestic Wine; we have added to our holdings in Georgica and Ultimate Leisure, the Newcastle based night club company which is expanding in Belfast and the North of England. We have also reinvested in Urbium and in Ask Central. The latter's share price has risen as a reaction to discussions with City Centre Restaurants which look as if they will reach fruition; there is a good case for believing that a merger would benefit both companies. On OFEX our investment in Shepherd Neame has prospered and we have been building a shareholding in Brakspear; our small shareholding in Adnams of Southwold has also done well. As I write, the final version of the guidance to local authorities in connection with the new Licensing Act is still awaited. If this guidance is not laid before Parliament before the start of the Christmas recess it is likely that the date for implementation of the new licensing regime may slip a month or two towards May 2005. We covered the main points of how this new system will affect pubs in some detail in the Manager's Review in our last Report and Accounts, and there is no doubt that operating under the new rules will constitute a challenge to all concerned, in particular because local authorities will be in a much stronger position to impose conditions. It is thought likely that it will become more difficult to obtain new licences in residential areas, but if the new Act turns out to restrict proliferation it will be beneficial to those companies with licenses already in situ, so this should be positive for regional brewers and tenanted pub companies. The Chancellor has increased stamp duty on long leases, a step which may result in the longer leases often applied to the better tenancies becoming marginally less attractive. The expense of operating managed houses has been augmented by the 7% increase in the minimum wage effected in October and the increase in National Insurance Contributions; however it appears that some companies have been able to hold their margins through improvements in productivity. The Government's attitude to the issue of smoking in public places remains unclear. Having achieved satisfactory pronouncements from the Government on this topic and also on 'paid-for-policing' to curb town-centre nuisance, the industry was mildly disappointed that these subjects were once again raised in the Prime Minister's 'Conversation'. We think it unlikely that a ban on smoking in public houses would be enacted prior to a General Election and believe it might be an unpopular move in the Labour heartlands of Northern England. Meanwhile the pub industry pursues its sensible policy of improving ventilation and creating non-smoking areas - 'Ban the smoke, not the smoker' - which though costly is of course good for trade especially where food is being served. As we have remarked before, the regulatory clouds that surround the pub industry and tend to cause concern have a habit of dissipating. During the last twenty years many public houses have reinvented themselves; a great deal more food is being sold, much of it of high quality and good value. With the change in responsibility for licensing, regional companies may well be favoured by local authorities to whom their operations are well-known. Additionally local brewers continue to pick up free trade outlets from national brewers more skilled at marketing their products than in servicing individual accounts. Having for a short period lost its collective nerve over the pub sub-sector as a result of the difficulties of the town centre operators, the stock market is once again beginning to appreciate that the community pub is one of the less recession prone enterprises. This for the time being remains the centre of our investment focus without detracting from our efforts to search out good investment opportunities in other parts of the drinks and leisure industry, particularly in the smaller companies listed on AIM if they appear to offer the opportunity for growth. By its very nature the pub industry has always been subject to the threat of regulation. Over the years however these problems have been managed with skill and in general the industry has reached sound compromises with its regulators. We are confident it remains a good place to invest. Lionel Ross Chairman 18 December 2003 Statement of Total Return (unaudited) ------------------------- Six months ended Six months ended 31 October 2003 31 October 2002 ------- ------- Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 ------------------------- ------- ------ ------ ------- ------ ------ Gains/(losses) on - 4,302 4,302 - (5,064) (5,064) investments Income 307 - 307 273 - 273 Investment management (63) (63) (126) (70) (70) (140) fee Other expenses (102) - (102) (109) - (109) ------------------------- ------- ------ ------ ------- ------ ------ Net return before finance 142 4,239 4,381 94 (5,134) (5,040) costs and taxation Interest payable and (42) (42) (84) (52) (51) (103) similar charges ------------------------- ------- ------ ------ ------- ------ ------ Return on ordinary 100 4,197 4,297 42 (5,185) (5,143) activities before taxation Tax on ordinary (1) - (1) (2) 1 (1) activities ------------------------- ------- ------ ------ ------- ------ ------ Transfer to/(from) 99 4,197 4,296 40 (5,184) (5,144) reserves ------------------------- ------- ------ ------ ------- ------ ------ Return per Ordinary share (pence): Basic 0.62 26.34 26.96 0.25 (32.53) (32.28) ------------------------- ------- ------ ------ ------- ------ ------ The revenue column of this statement represents the revenue account of the Company. The Statement of Total Return is presented in accordance with the Statement of Recommended Practice for Financial Statements of Investment Trust Companies. All revenue and capital items are derived from continuing operations. Balance Sheet ----------------------------- ----------- ---------- --------- At At At 31 October 2003 31 October 2002 30 April 2003 (unaudited) (unaudited) (audited) ----------- ---------- --------- £'000 £'000 £'000 ----------------------------- ----------- ---------- --------- Fixed assets Investments 18,678 16,542 14,568 ----------------------------- ----------- ---------- --------- Current assets Debtors 65 96 45 Cash at bank 420 729 500 ----------------------------- ----------- ---------- --------- 485 825 545 Creditors: amounts falling (84) (100) (330) due within one year ----------------------------- ----------- ---------- --------- Net current assets 401 725 215 ----------------------------- ----------- ---------- --------- Total assets less current 19,079 17,267 14,783 liabilities Creditors: amounts falling (2,500) (3,000) (2,500) due after more than one year ----------------------------- ----------- ---------- --------- Net assets 16,579 14,267 12,283 ----------------------------- ----------- ---------- --------- Share capital and reserves Called-up share capital 3,984 3,984 3,984 Share premium account 10,536 10,536 10,536 Other reserves: Warrant reserve 981 981 981 Capital reserve - realised 654 1,518 750 Capital reserve - 193 (2,948) (4,100) unrealised Revenue reserve 231 196 132 ----------------------------- ----------- ---------- --------- Shareholders' funds 16,579 14,267 12,283 ----------------------------- ----------- ---------- --------- Net asset value per Ordinary share (pence): --- --- --- Basic 104.03 89.53 77.08 ----------------------------- ----------- ---------- --------- Fully-diluted 103.38 n/a n/a ----------------------------- ----------- ---------- --------- Cash Flow Statement (unaudited) ---------------------------------- ------------ ----------- Six months Six months ended ended 31 October 31 October 2003 2002 ------------ ----------- £'000 £'000 ---------------------------------- ------------ ----------- Net cash inflow/(outflow) from operating 35 (39) activities Net cash outflow from servicing of (85) (103) finance Net cash inflow from financial investment 50 974 Equity dividends paid (80) (80) ---------------------------------- ------------ ----------- (Decrease)/increase in cash (80) 752 ---------------------------------- ------------ ----------- Reconciliation of operating revenue to net cash inflow/(outflow) from operating activities Net revenue before interest payable and 142 94 taxation Increase in accrued income (11) (1) (Increase)/decrease in other debtors (9) 4 Decrease in other creditors (23) (65) Capitalised expenses taken to (63) (70) non-distributable reserves Overseas withholding tax suffered (1) (1) ---------------------------------- ------------ ----------- 35 (39) ---------------------------------- ------------ ----------- Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash as above (80) 752 Net debt at 1 May (2,000) (3,023) ---------------------------------- ------------ ----------- Net debt at 31 October (2,080) (2,271) ---------------------------------- ------------ ----------- Represented by: Cash at bank 420 729 Debt falling due after more than one year (2,500) (3,000) ---------------------------------- ------------ ----------- (2,080) (2,271) ---------------------------------- ------------ ----------- Notes: 1. The interim accounts have been prepared in accordance with applicable accounting standards under the historical cost convention, modified to include the revaluation of fixed asset investments. 2. In accordance with stated policy, no interim dividend has been declared (2002 - nil). 3. The breakdown of income for the periods to 31 October 2003 and 31 October 2002 was as follows: 31 October 31 October 2003 2002 £'000 £'000 Income from investments Franked investment income 298 262 Unfranked investment income 5 8 -------- -------- 303 270 -------- -------- Other income Deposit interest 4 2 Underwriting commission - 1 -------- -------- 4 3 -------- -------- Total income 307 273 -------- -------- 4. The basic revenue return per Ordinary share is based on net revenue on ordinary activities after taxation of £99,000 (2002 - £40,000) and on 15,936,000 (2002 - 15,936,000) Ordinary shares, being the weighted average number of Ordinary shares in issue for the period. The basic capital return per Ordinary share is based on net capital gains for the period of £4,197,000 (2002 - losses of £5,184,000) and on 15,936,000 (2002 - 15,936,000) Ordinary shares, being the weighted average number of Ordinary shares in issue for the period. The fully-diluted returns per Ordinary share have not been shown for the periods to 31 October 2003 and 2002 in accordance with FRS14 'Earnings per share' as there is no dilution in earnings resulting from Warrants in issue as the average share prices of the Warrants for the period are less than the exercise price of the Warrants. 5. The basic net asset value per Ordinary share is based on net Shareholders' funds at the period end, and on 15,936,000 (31 October 2002 - 15,936,000; 30 April 2003 - 15,936,000) Ordinary shares, being the number of Ordinary shares in issue at the period end. The fully-diluted net asset values per Ordinary share as at 31 October 2003 has been calculated by reference to the total number of Ordinary shares in issue at the period end and on the assumption that those Warrants which are not exercised at the period end, amounting to 3,081,600 Warrants as at 31 October 2003, were fully exercised on the first day of the financial period at 100p per share, giving a total of 19,017,600 Ordinary shares. No calculation has been shown as at 31 October 2002 and 30 April 2003 as the exercise price of the Warrants, being 100p, exceeded the value of the basic net asset value. 6. The financial information for the six months ended 31 October 2003 and 31 October 2002 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 extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified. The interim accounts have been prepared on the same basis as the annual accounts. 7. The Interim Report will be posted to shareholders in due course and further copies will be available from the registered office, One Bow Churchyard, Cheapside, London EC4M 9HH. Aberdeen Asset Management PLC Secretaries 18 December 2003 Independent Review Report by Ernst & Young LLP to The Taverners Trust PLC Introduction We have been instructed by the Company to review the financial information for the six months ended 31 October 2003 which comprises the Statement of Total Return, Balance Sheet, Cash Flow Statement and the related notes 1 to 6. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed. Directors' responsibilities The Interim Report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data, and based thereon, assessing whether the accounting policies and presentation have been consistently applied, unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 October 2003. Ernst & Young LLP London 18 December 2003 This information is provided by RNS The company news service from the London Stock Exchange

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