Half Yearly Report

RNS Number : 3081W

RIT Capital Partners PLC

17 November 2010

 



HALF-YEARLY RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010

FINANCIAL HIGHLIGHTS

	30 September 2010	31 March 2010	Change
Total net assets (£ million)	1,784.5	1,815.7	(1.7)%
Net asset value per share	1,159.7p	1,180.1p	(1.7)%
Share price	1,110.0p	1,082.0p	2.6%
Discount	(4.3)%	(8.3)%

PERFORMANCE

	6 months	1 Year	5 Years	10 Years
RIT Capital Partners plc (NAV per share)	(1.7)%	9.0%	41.8%	122.2%
MSCI World Index (in £)	(5.1)%	6.6%	8.1%	(15.1)%
FTSE All-Share Index	(1.5)%	8.8%	4.4%	(5.3)%

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

CHAIRMAN'S STATEMENT

We are living through a period of unparalleled complexity and uncertainty. The balance of economic power is moving to the East, while the West struggles to adjust after a decade of excessive consumption financed by debt. Growth in the West is unlikely to match that of the past. It is hard to see how public debt can be repaid without resort to inflation. Our hope is for equilibrium but the objective remains precarious. We have therefore to accept a fragile, unbalanced world economy for some period of time.

Despite these uncertainties, stock markets have responded positively to Government intervention. Monetary policy leading to low interest rates, competitive devaluations, and liquidity have all encouraged investors into equities.

Whether this heralds a meaningful improvement in outlook is hard to say at this stage. We remain cautious but we will revise our stance if conditions improve; as I have noted previously, our priority remains capital preservation rather than profit maximisation. For the half year period ending 30 September 2010 your Company has seen its net asset value per share modestly lower, declining by 1.7% to 1,159.7p. The MSCI World Index in Sterling over this period fell by 5.1% and FTSE All-Share Index by 1.5%.

Given the rise in markets since the end of the period under review, I also want to update shareholders on recent performance. Our latest available NAV per share, as at 5 November is 1,190.4p, representing the highest value ever reported by your Company. This represents a gain of 2.6% since 30 September. The MSCI World Index (in £) over this period has risen by 4.1%. Over the calendar year, your Company's NAV has increased by 10.8%, somewhat ahead of the MSCI.

We have increased exposure to the developing and frontier markets to 21.6%, with a particular focus on companies which are beneficiaries of rising domestic demand. Also, we continue to believe in the merits of investing in dominant, "quality" companies with global franchises, mostly in developed markets.

We have added to our 'real asset' investments both through holdings of gold and gold shares, oil and energy-related investments and real estate-related equities. These areas provide some protection from inflation and have performed well for our shareholders over the half year.

We continue to find interesting specific opportunities, including direct unquoted investments. Recent unquoted investments in the oil and gas, telecommunications and insurance industries are showing early signs of promise. Agora, the North Sea oil exploration company in which we have invested, will benefit from its participation in one of the most significant North Sea discoveries in many years, the Catcher field. This will strengthen the management team's ability to exploit further opportunities. We are currently reviewing a number of attractive unquoted investments which are being offered to us, as long-term investors with permanent capital.

Over the past six months, we have focused on selling positions in which we had less confidence and, as a result, we now have 11.4% of available liquidity, after repaying all outstanding loans over the period. Our overall exposure to public markets has fallen somewhat, from 67.6% to 55.5%. While we may carry more exposure at any given time, we believe that this level of exposure is prudent during this period of uncertainty.

One particular challenge is currency exposure. We do not view RIT's portfolio in purely Sterling terms but rather consider it in a global context. We are therefore exposed to a spread of currencies. This has led us to manage our currency exposure actively. Our bias continues to be towards the currencies of countries with strong balance sheets and economic growth - largely in Asia, resource-rich countries and some emerging markets.

Rothschild

16 November 2010

Enquiries: 020 7514 1926

ATTRIBUTION ANALYSIS

The Company's net asset value as at 30 September 2010 was £1,784.5 million (31 March 2010: £1,815.7 million). This represents a decrease of £31.2 million which is analysed below:

Period ended 30 September 2010	£m	£m	Pence per share	Pence per share
Quoted equities	(20.9)		(13.6)
Long equity funds	5.9		3.8
Hedge funds	(15.6)		(10.1)
Unquoted direct	14.5		9.4
Unquoted funds	1.8		1.2
Real assets	15.8		10.3
Absolute return, fixed income and currency (1)	5.0		3.3
	------		------
		6.5		4.3
Government bonds and money market funds	(14.3)		(9.3)
Other income	1.2		0.8
Exchange differences on cash and borrowings	(2.5)		(1.6)
	------		------
		(15.6)		(10.1)
Administrative expenses	(7.9)		(5.2)
Investment management fees	(2.4)		(1.6)
	------		------
		(10.3)		(6.8)
Finance costs (2)	(12.0)		(7.8)
Taxation	4.1		2.7
	------		------
		(7.9)		(5.1)
Loss for the period		(27.3)		(17.7)
Interest rate swap (2)	3.4		2.1
Dividends	(6.2)		(4.0)
Other reserve movements	(1.1)		(0.8)
	------		------
		(3.9)		(2.7)
Decrease in net asset value		(31.2)		(20.4)

(1) The gain is split between absolute return (loss of £1.2 million), fixed income (loss of £17.7 million) and currency (gain of £23.9 million).

(2) During the period the Company's outstanding loans were repaid. The corresponding interest rate swaps were also closed, resulting in a finance cost of £8.9 million, offset by a movement in the cashflow hedging reserve of £3.4 million.

NET ASSET VALUE BY ASSET CATEGORY (%)

	31 March 2010 % of net assets	30 September 2010   % of  net assets
Quoted equities	19.5	9.8
Long equity funds	40.9	35.7
Hedge funds	7.8	6.6
Unquoted direct investments	10.2	11.0
Unquoted fund investments	10.5	12.4
Real assets	11.6	13.3
Absolute return, fixed income and currency	2.3	2.4
Liquidity	14.6	11.4
Borrowings	(16.8)	-
Other assets/(liabilities)	(0.6)	(2.6)
Total net assets	100.0	100.0

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 2010 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

16 November 2010

For and on behalf of the Board, the members of which are listed on page 21 of the Half-Yearly Financial Report.

CONSOLIDATED INCOME STATEMENT

	Six months ended 30 September 2010
	Notes	Revenue return £m	Capital return £m	Total £m
Income
Investment income		20.3	-	20.3
Other income		1.2	-	1.2
Losses on derivative financial instruments		(4.8)	-	(4.8)
		16.7	-	16.7
Losses on portfolio investments held at fair value		-	(23.3)	(23.3)
Exchange loss on monetary items and borrowings		-	(2.5)	(2.5)
		16.7	(25.8)	(9.1)
Expenses
Administrative expenses		(7.1)	(0.8)	(7.9)
Investment management fees		(2.2)	(0.2)	(2.4)
Loss  before finance costs and tax		7.4	(26.8)	(19.4)
Finance costs		(12.0)	-	(12.0)
Loss before tax		(4.6)	(26.8)	(31.4)
Taxation		4.1	-	4.1
Loss for the period		(0.5)	(26.8)	(27.3)
Earnings per ordinary share	2	(0.3p)	(17.4p)	(17.7p)

		Six months ended 30 September 2009			Year ended 31 March 2010
Notes		Revenue return £m	Capital return £m	Total £m	Revenue return £m	Capital return £m	Total £m
Income
Investment income		16.5	-	16.5	33.5	-	33.5
Other income		1.1	-	1.1	1.4	-	1.4
Gains on derivative financial instruments		68.2	-	68.2	92.6	-	92.6
		85.8	-	85.8	127.5	-	127.5
Gains on portfolio investments held at fair value		-	255.1	255.1	-	398.1	398.1
Exchange gain/(loss) on monetary items and
borrowing		-	(5.8)	(5.8)	-	13.4	13.4
		85.8	249.3	335.1	127.5	411.5	539.0
Expenses
Administrative expenses		(7.8)	0.1	(7.7)	(18.1)	(3.6)	(21.7)
Investment management fees		(1.3)	(1.3)	(2.6)	(5.3)	(2.4)	(7.7)
Profit before finance costs and tax		76.7	248.1	324.8	104.1	405.5	509.6
Finance costs		(11.7)	-	(11.7)	(23.6)	-	(23.6)
Profit before tax		65.0	248.1	313.1	80.5	405.5	486.0
Taxation		(16.0)	1.2	(14.8)	(13.7)	0.3	(13.4)
Profit for the period		49.0	249.3	298.3	66.8	405.8	472.6
Earnings per ordinary share	2	31.7p	161.4p	193.1p	43.3p	263.0p	306.3p

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 2010
		Revenue return £m	Capital return £m	Total £m
Loss for the period		(0.5)	(26.8)	(27.3)
Other comprehensive income
Cash flow hedges		-	-	-
Exchange movements arising on consolidation		(0.1)	-	(0.1)
Actuarial loss in defined benefit pension plan		(1.0)	-	(1.0)
Total comprehensive income for the period		(1.6)	(26.8)	(28.4)

	Six months ended 30 September 2009			Year ended 31 March 2010
	Revenue return £m	Capital  return £m	Total £m	Revenue return £m	Capital return £m	Total £m
Profit for the period	49.0	249.3	298.3	66.8	405.8	472.6
Other comprehensive income
Cash flow hedges	6.9	-	6.9	-	-	-
Exchange movements arising on consolidation	(0.5)	-	(0.5)	(0.2)	-	(0.2)
Actuarial loss in defined benefit pension plan	-	-	-	(0.2)	-	(0.2)
Total comprehensive income for the period	55.4	249.3	304.7	66.4	405.8	472.2

 

CONSOLIDATED BALANCE SHEET

		30 September 2010 £m	31 March  2010 £m	30 September  2009 £m
Non-current assets
Investments held at fair value		1,710.1	1,964.4	1,796.2
Investment property		34.1	33.4	28.0
Property, plant and equipment		0.5	0.4	0.3
Deferred tax asset		1.8	0.7	1.7
		1,746.5	1,998.9	1,826.2
Current assets
Sales for future settlement		3.5	4.9	107.2
Derivative financial instruments		41.2	42.3	34.0
Other receivables		4.6	14.0	11.9
Tax receivable		2.3	0.7	0.9
Cash at bank		56.5	115.3	72.4
		108.1	177.2	226.4
Total assets		1,854.6	2,176.1	2,052.6
Current liabilities
Bank loans and overdrafts		(0.5)	(157.6)	-
Purchases for future settlement		(49.8)	(18.6)	(69.2)
Derivative financial instruments		(7.6)	(25.3)	(8.0)
Provisions		(0.5)	(1.7)	(1.5)
Tax payable		-	(7.1)	(17.3)
Other payables		(2.2)	(3.4)	(2.5)
		(60.6)	(213.7)	(98.5)
Net current assets		47.5	(36.5)	127.9
Total assets less current liabilities		1,794.0	1,962.4	1,954.1
Non-current liabilities
Derivative financial instruments		-	(5.3)	(11.6)
Bank loans		-	(133.6)	(288.8)
Provisions		(7.7)	(7.3)	(9.1)
Retirement benefit liability		(1.3)	-	(1.0)
Finance lease liability		(0.5)	(0.5)	-
		(9.5)	(146.7)	(310.5)
Net assets		1,784.5	1,815.7	1,643.6
Equity attributable to equity holders
Called up share capital		153.9	153.9	154.5
Capital redemption reserve		36.3	36.3	35.7
Cash flow hedging reserve		-	(3.4)	(6.8)
Foreign currency translation reserve		0.3	0.4	0.1
Capital reserve		1,540.2	1,567.0	1,416.2
Revenue reserve		53.8	61.5	43.9
Total shareholders' equity		1,784.5	1,815.7	1,643.6
Net asset value per ordinary share		1,159.7p	1,180.1p	1,064.1p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 September 2010	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 2010	153.9	36.3	(3.4)	0.4	1,567.0	61.5	1,815.7
Loss for the period	-	-	-	-	(26.8)	(0.5)	(27.3)
Cash flow hedges:
Transferred to the income   statement for the period	-	-	3.4	-	-	-	3.4
Exchange movements arising on consolidation	-	-	-	(0.1)	-	-	(0.1)
Ordinary dividend paid	-	-	-	-	-	(6.2)	(6.2)
Other comprehensive income:
Actuarial loss in defined   benefit pension plan	-	-	-	-	-	(1.0)	(1.0)
Balance at 30 September 2010	153.9	36.3	-	0.3	1,540.2	53.8	1,784.5

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

Year ended 31 March 2010	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 year	-	-	-	-	405.8	66.8	472.6
Cash flow hedges:
Losses taken to equity	-	-	-	-	-	-	-
Transferred to the income   statement for the year	-	-	10.3	-	-	-	10.3
Ordinary dividend paid	-	-	-	-	-	(11.6)	(11.6)
Purchase of own shares	(0.6)	0.6	-	-	(5.7)	-	(5.7)
Other comprehensive income:
Exchange movements arising   on consolidation	-	-	-	(0.2)	-	-	(0.2)
Actuarial loss in defined   benefit pension plan	-	-	-	-	-	(0.2)	(0.2)
Balance at 31 March 2010	153.9	36.3	(3.4)	0.4	1,567.0	61.5	1,815.7

CONSOLIDATED CASH FLOW STATEMENT

	Six months ended 30  September 2010 £m	Six months ended 30  September 2009 £m	Year ended 31 March 2010 £m
Cash inflow from Operating Activities	108.6	45.4	71.2
Investing Activities:
Purchase of property, plant and equipment	-	(0.1)	(0.3)
Sale of property, plant and equipment	-	-	-
Net cash outflow from Investing Activities	-	(0.1)	(0.3)
Financing Activities:
Purchase of own shares	-	-	(5.7)
Decrease in term loans	(133.6)	(61.5)	(171.7)
Equity dividend paid	(6.2)	(11.6)	(11.6)
Net cash outflow from Financing Activities	(139.8)	(73.1)	(189.0)
(Decrease)/increase in cash and cash equivalents in the period	(31.2)	(27.8)	(118.1)
Cash and cash equivalents at the start of the period	119.0	149.6	149.6
Effect of foreign exchange rate changes	(2.8)	(2.8)	(4.1)
Cash and cash equivalents at the period end	85.0	119.0	27.4
Reconciliation:
Cash at bank	56.5	72.4	115.3
Money market funds (included in portfolio investments)	29.0	46.6	69.7
Bank loans and overdrafts	(0.5)	-	(157.6)
Cash and cash equivalents at the period end	85.0	119.0	27.4

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 2010. They are prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority, IFRSs as adopted by the European Union and with International Accounting Standard IAS 34, Interim Financial Reporting, as adopted by the European Union, and were approved on 16 November 2010. These half-yearly financial statements should be read in conjunction with the Annual Report and Accounts for the year ended 31 March 2010 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 2010.

The unquoted portfolio has been re-valued as at 30 September 2010 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 2010 is based on the net loss of £27.3 million (six months ended 30 September 2009: net profit of £298.3 million; year ended 31 March 2010: net profit of £472.6 million) and the weighted average number of ordinary shares in issue during the period of 153.9 million (six months ended 30 September 2009:154.5 million; year ended 31 March 2010: 154.3 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 2010 £m	Six months ended 30 September 2009 £m	Year ended 31 March 2010 £m
Net revenue profit/(loss)	(0.5)	49.0	66.8
Net capital profit/(loss)	(26.8)	249.3	405.8
	(27.3)	298.3	472.6
	Pence per share	Pence per share	Pence per share
Revenue earnings/(loss) per ordinary share	(0.3)	31.7	43.3
Capital earnings/(loss) per ordinary share	(17.4)	161.4	263.0
	(17.7)	193.1	306.3

3. NET ASSET VALUE PER ORDINARY SHARE

The net asset value per ordinary share as at 30 September 2010 is based on the net assets attributable to equity shareholders of £1,784.5 million (30 September 2009: £1,643.6 million; 31 March 2010: £1,815.7 million) and the number of ordinary shares in issue at 30 September 2010 of 153.9 million (30 September 2009: 154.5 million; 31 March 2010: 153.9 million).

4. DIVIDENDS PAID

	Six months ended 30 September 2010 £m	Six months ended 30 September 2009 £m	Year ended 31 March 2010 £m
Dividends paid	6.2	11.6	11.6
Pence per share	4.0p	7.5p	7.5p

5. 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 2010 and 30 September 2009 has not been audited.

The information for the year ended 31 March 2010 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 31 March 2010 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

 

 

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