Final Results
RIT Capital Partners PLC
15 May 2003
15 May 2003
PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED
31 MARCH 2003
The following is the Chairman's Statement which will appear in the annual
report.
During the year under review, world stock markets continued to suffer from the
fragility of the international economic and political situation. Although we
suffered a reduction in our asset value over this period, we draw some comfort
from the fact we continued to outperform the relevant indices by some margin. A
degree of protection against these hostile conditions was provided by our
liquidity, the highly diversified nature of the portfolio and our investments in
asset classes which are less directly correlated to stock markets.
During the year to 31 March 2003, your Company's net asset value per share
decreased by 10.4%, from 483.4p to 433.3p (before deducting the proposed
dividend).
In contrast, over the same period, the Morgan Stanley Capital International
Index (in Sterling), the FTSE All-Share Index and the Investment Trust Net
Assets Index declined by 32.8%, 32.1% and 28.9% respectively.
Since its inception in 1988, RITCP has significantly outperformed these indices.
The most recent net asset value per share at 13 May, after deducting the
proposed dividend, was 460.8p.
ASSET ALLOCATION
Set out below is our asset allocation at the year end.
% of % of
Portfolio at Portfolio at
31 March 31 March
2003 2002
Quoted investments 39.7 38.7
Hedge/other funds 15.2 17.1
Unquoted investments 17.4 18.2
Private equity partnerships 7.2 7.0
Government securities and liquidity 17.1 15.6
Property 3.4 3.4
Although the asset allocation within the portfolio has remained broadly
unchanged over the past year, the proportion of the portfolio invested in hedge/
other funds and our own directly held unquoted investments has slightly reduced.
At the year end, 41.8% of the portfolio was invested in the USA, 22.6% in the
UK, 11.8% in Germany, 5.5% in Japan and 4.5% in the Netherlands, with the
balance of 13.8% in other countries.
THE QUOTED PORTFOLIO
At the year end, £271.5 million, or 39.7% of the portfolio, was held directly in
quoted investments. A further £103.9 million, or 15.2% of the portfolio, was
held in hedge and other funds which mainly invest in quoted securities. Taking
these two categories together (but excluding our holdings of government
securities), some 54.9% of the portfolio was invested, either directly or
indirectly, in quoted or other marketable securities.
We aim to find outstanding investment managers who specialise in particular
asset classes or geographical areas. Some £170 million, or nearly two thirds of
RITCP's quoted portfolio of £271.5 million, is managed by twelve external
managers. Your Company has been an investor in selected hedge funds since its
incorporation in 1988. This approach allows our shareholders access to
specialist money managers whose funds are, in many cases, closed to new
investors.
THE UNQUOTED PORTFOLIO
Your Company's exposure to unquoted investments results either from investments
made directly by RITCP's own management, or through investments in externally
managed partnerships. In total, some £168.4 million, or 24.6% of the portfolio,
was invested in this sector at the year end: £119.3 million, or 17.4%, through
our own management and £49.1 million, or 7.2%, through our investments in
limited partnerships managed by third parties.
Our property investments, valued at £23.4 million, or 3.4% of the portfolio, are
concentrated in St James's Place, in central London and are valued every six
months by our professional advisers.
CURRENCY EXPOSURE
We aim to realign our currency exposure when we believe it is appropriate,
usually by way of hedging transactions. During the year, we reduced our US
Dollar exposure further by hedging almost entirely back into Sterling.
Consequently, although 41.8% of the portfolio at the year end was invested in US
Dollar denominated assets, our actual US Dollar exposure was reduced to 1.9%,
protecting us from the decline in the currency.
Similarly, we started the year with 18.9% of our portfolio denominated in Euros,
partly resulting from the investment of much of our liquidity in
Euro-denominated government bonds. In the second half of the year, anticipating
a possible weakening of Sterling, we diversified our currency exposure further
by increasing our Euro exposure (to 30% at the year end) and establishing a 7%
exposure to the Swiss Franc.
SHARE BUY-BACK
RITCP did not buy back any shares for cancellation during the year under review,
as the share price remained at a relatively low discount to the underlying value
for most of the relevant period. In future, we will be prepared to use this
facility in the light of market conditions and the level of the discount.
We shall therefore be seeking shareholders' approval at this year's AGM for the
renewal of our buy-back facility.
RESULTS AND DIVIDEND
During the year under review, the Company's net assets reduced by £79 million,
of which £85.5 million was attributable to capital, offset by a revenue profit
of £6.5 million. In the previous year, the net assets increased by £4.9 million,
of which £1.3 million related to capital and £3.6 million to revenue. These
figures exclude taxation and the proposed dividend.
We are proposing to pay a dividend of 3.1p per share on 3 July 2003 to
shareholders on the register at 6 June 2003, the same dividend as last year.
However, shareholders should be aware that this level of dividend might not be
sustainable in future years. As always, the focus of your Company is on
achieving capital preservation and growth over a period of time.
OUTLOOK
The last three years have been amongst the most difficult in living memory.
During the period, stock market indices have fallen sharply: the Morgan Stanley
Capital International Index (in Sterling) by 47.2%, the FTSE All-Share Index by
44.2% and the Investment Trust Net Assets Index by 43.7%. Over the same period,
your Company's net asset value per share has declined by 15.5%. In the context
of these difficult conditions, we are not unhappy with our relative
outperformance.
Looking to the future, we continue to be wary of markets generally, anticipating
volatility in the face of recessionary pressures and a poor outlook for
corporate earnings. Nevertheless, after such an extended bear market, we are
beginning to see opportunities to invest in companies at levels of valuation not
seen for some years. We have, in fact, increased the portfolio's equity exposure
by some 6% since the interim stage. We are well placed to take advantage of
these opportunities as they arise, by virtue of the liquidity which has been
maintained within your Company's portfolio.
For further information please contact:
Duncan Budge 020-7514 1928
CONSOLIDATED STATEMENT OF TOTAL RETURN
For the year ended 31 March 2003
Revenue Capital Total
£'000 £'000 £'000
Losses on investments - (114,750) (114,750)
Dealing profits 182 - 182
Investment income:
Dividends and interest 14,268 - 14,268
Income from investment properties 897 - 897
Other income 417 - 417
Administrative expenses (6,161) - (6,161)
Investment management fees (2,926) (192) (3,118)
Other capital items - 29,478 29,478
---------- ---------- ----------
Net return/(loss) before finance costs
and taxation 6,677 (85,464) (78,787)
Interest payable and similar charges (166) - (166)
---------- ---------- ----------
Return/(loss) on ordinary activities
before taxation 6,511 (85,464) (78,953)
Taxation on ordinary activities (1,837) 2,049 212
---------- ---------- ----------
Return/(loss) on ordinary activities
after taxation attributable to
equity shareholders 4,674 (83,415) (78,741)
Dividend (4,862) - (4,862)
---------- ---------- ----------
Transfer from reserves (188) (83,415) (83,603)
========== ========== ==========
Return/(loss) per ordinary share 3.0p (53.2p) (50.2p)
Net asset value per ordinary share 430.2p
The revenue column of this statement is the consolidated profit and loss account
of the Group.
The accompanying notes are an integral part of this statement.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the period.
CONSOLIDATED STATEMENT OF TOTAL RETURN
For the year ended 31 March 2002
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 1,909 1,909
Dealing losses (4,155) - (4,155)
Investment income:
Dividends and interest 15,987 - 15,987
Income from investment properties 910 - 910
Other income 485 - 485
Administrative expenses (6,341) - (6,341)
Investment management fees (3,009) (492) (3,501)
Other capital items - (144) (144)
--------- --------- ---------
Net return before finance costs
and taxation 3,877 1,273 5,150
Interest payable and similar charges (271) - (271)
--------- --------- ---------
Return on ordinary activities
before taxation 3,606 1,273 4,879
Taxation on ordinary activities (858) (657) (1,515)
--------- --------- ---------
Return on ordinary activities
after taxation attributable to
equity shareholders 2,748 616 3,364
Dividend (4,862) - (4,862)
---------- --------- ----------
Transfer (from)/to reserves (2,114) 616 (1,498)
========== ========= ==========
Return per ordinary share 1.8p 0.4p 2.2p
Net asset value per ordinary share 483.4p
The revenue column of this statement is the consolidated profit and loss account
of the Group.
The accompanying notes are an integral part of this statement.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the period.
CONSOLIDATED BALANCE SHEET
31 March 31 March
2003 2002
£'000 £'000
Fixed assets
Investments 684,472 769,467
Tangible fixed assets 151 206
--------- ----------
684,623 769,673
---------- ----------
Current assets 29,217 44,434
Creditors: Amounts falling due
within one year (32,859) (24,921)
---------- ----------
Net current (liabilities)/assets (3,642) 19,513
---------- ----------
Total assets less current
liabilities 680,981 789,186
Creditors: Amounts falling due
after more than one year
Bank loans - (21,167)
Provisions for liabilities and
charges (6,276) (9,744)
---------- ----------
674,705 758,275
========== ==========
Capital and reserves
Called up share capital 156,848 156,848
Capital redemption reserve 33,308 33,308
Capital reserve - realised 554,625 536,654
Capital reserve - unrealised (94,845) 6,541
Revenue reserve 24,769 24,924
---------- ----------
Equity shareholders' funds 674,705 758,275
========== ==========
CONSOLIDATED CASH FLOW STATEMENT
Year Ended Year Ended
31 March 31 March
2003 2002
£'000 £'000
Cash inflow from
operating activities 30,152 6,327
---------- ----------
Servicing of finance
Bank and loan interest paid (171) (274)
---------- ----------
Net cash outflow from
servicing of finance (171) (274)
---------- ----------
Taxation
UK tax paid (75) (436)
Overseas tax paid (458) (565)
---------- ----------
Net cash outflow from taxation (533) (1,001)
---------- ----------
Financial investment
Purchase of investments (355,406) (449,127)
Sale of investments 308,243 398,695
---------- ----------
Net cash outflow
from financial investment (47,163) (50,432)
---------- ----------
Capital expenditure
Purchase of fixed assets (49) (59)
Sale of fixed assets 6 10
---------- ----------
Net cash outflow from
capital expenditure (43) (49)
---------- ----------
Equity dividend paid (4,862) (4,862)
---------- ----------
Net cash outflow
before management of liquid
resources and financing (22,620) (50,291)
---------- ----------
Management of liquid resources
Purchase of government
securities (216,978) (363,451)
Sale of government securities 228,812 391,271
---------- ----------
Net cash inflow from
management of liquid resources 11,834 27,820
---------- ----------
Financing
Increase in term loans - 21,167
---------- ----------
Net cash inflow from financing - 21,167
---------- ----------
Decrease in cash
in the year (10,786) (1,304)
========== ==========
NOTES
1 RETURN/(LOSS) PER ORDINARY SHARE
The return per share for the year ended 31 March 2003 is based on the revenue
return after tax of £4.7 million (31 March 2002: £2.7 million) and the capital
loss after tax of £83.4 million (31 March 2002: capital return of £0.6 million)
and the weighted average number of ordinary shares in issue during the year of
156.8 million (31 March 2002: 156.8 million).
2 NET ASSET VALUE PER ORDINARY SHARE
The net asset value per share at 31 March 2003 is based on the net assets
attributable to ordinary shareholders of £674.7 million (31 March 2002: £758.3
million) and the number of ordinary shares in issue at 31 March 2003 of 156.8
million (31 March 2002: 156.8 million).
3 MOVEMENTS IN FIXED ASSET INVESTMENTS
Unquoted
and Funds and Other
Quoted Property Partnerships Securities Total
£'000 £'000 £'000 £'000 £'000
At 31 March 2002 298,028 166,146 185,547 119,746 769,467
Reclassifications (929) (375) - 1,304 -
Additions 285,512 33,688 24,221 217,484 560,905
Disposals (270,254) (21,896) (27,510) (225,006) (544,667)
Revaluation (40,824) (34,924) (29,288) 3,802 (101,233)
------- ------- ------- ------- -------
At 31 March 2003 271,533 142,639 152,970 117,330 684,472
======= ======= ======= ======= =======
Funds and partnerships comprise hedge funds, other funds and private equity
partnerships. Other securities comprise government securities and investments in
money market funds.
4 MOVEMENTS IN RESERVES
Capital
Redemption Capital Revenue
Reserve Reserve Reserve
£'000 £'000 £'000
At 31 March 2002 33,308 543,195 24,924
Loss for the year - - (188)
Capital loss for the year - (83,415) -
Other movements - - 33
--------- ---------- ---------
At 31 March 2003 33,308 459,780 24,769
========= ========== =========
5 OTHER CAPITAL ITEMS
Other capital items include profits arising on forward currency contracts and
movements on provisions.
6 LITIGATION
In November 1997 proceedings were issued in the New York Courts against a total
of ten defendants, including the Company, by Richbell Information Services Inc.
('RIS') and certain connected entities. The proceedings relate to the Company's
investment in H-G Holdings Inc. and a loan made to RIS by the Company's
wholly-owned subsidiary, Atlantic and General Investment Trust Limited. The
claim against all of the defendants was for approximately US$240 million. On 15
March 2002 the New York Court dismissed the proceedings in their entirety. On 1
April 2002 the plaintiffs filed an appeal against that dismissal. No decision on
that appeal has been issued as of 15 May 2003.
Based upon legal advice received, the Directors believe that neither the appeal
nor the underlying proceedings, should they be reinstated, will have a material
effect on the financial position of the Company.
7 UNAUDITED STATEMENTS
The results for the year ended 31 March 2003 are unaudited and do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
Statutory accounts for the year ended 31 March 2002 have been delivered to the
Registrar of Companies. The auditors have made a report under Section 235 of the
Companies Act 1985 on those statutory accounts which was unqualified and did not
contain a statement under Section 237 (2) or (3) of the Companies Act 1985.
8 ANNUAL REPORT
The Company's Annual Report and Accounts for the year ended 31 March 2003 will
be posted to shareholders on Tuesday, 27 May 2003. Copies of this announcement
and the annual Report will be available to the public at the Company's
registered office at 27 St James's Place, London SW1A 1NR.
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