Interim Results

RNS Number : 6159I

RIT Capital Partners PLC

20 November 2008

 



HALF-YEARLY RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008

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

Chairman's Statement

In our last Annual Report, I commented on the paradox of investors' appetite for risk increasing at a time when the level of risk was clearly rising. As is now clear, the actual outcome in terms of economic and market impact has exceeded even the most pessimistic forecasts. We are witnessing a deterioration in financial conditions of a severity unparalleled in our lifetime. The current economic crisis remains to a large extent unresolved. Such conditions however create opportunities and, as the crisis has deepened, valuations have been reduced to levels which we have not seen over the last decade.  

Although we had taken steps to position ourselves relatively defensively, during the half-year to 30 September your Company's net asset value per share declined by 9.1% to 992.2p and its total net assets to £1,536.1 million. Over this period the Morgan Stanley Capital International World Index (in Sterling), the FTSE All-Share Index and the Investment Trust Net Assets Index fell by 8.3%, 15.1% and 13.2% respectively.

The net asset value per share at 14 November, the latest available date, was 955.2p, a reduction of 3.7% on the figure at 30 September.  This compares with a decline of 10.6% in the Morgan Stanley Capital International World Index (in Sterling) over the same period.  This net asset value reflects the most recent valuations received from our external managers. In the case of our investments in private equity funds, these were mostly calculated as at 30 September.

Although the positioning of our portfolio was such that we largely avoided the specific areas most severely damaged by the recent market turmoil, the values within our portfolio have been affected by declines across almost every asset class.  

We set out below our asset allocation within the investment portfolio at the period end:

ASSET ALLOCATION

	% of Portfolio at 30 September 2008	% of Portfolio at 31 March 2008
Quoted investments	34.7	34.4
Government securities and money market funds	13.7	23.4
Hedge funds	3.1	4.2
Long equity funds	15.0	11.5
Unquoted investments	20.1	15.8
Private equity partnerships	11.7	9.0
Investment property	1.7	1.7
	100.0	100.0

The investment portfolio excludes cash, borrowings and other assets and liabilities.  

Currencies continue to be a significant contributor to our results. During the period under review we maintained a low exposure to Sterling and a substantial exposure to the US Dollar (and more recently to the Japanese Yen and the Swiss Franc). Consequently, we have benefited from the sharp decline in Sterling which has been particularly marked since the end of the half-year.  

The proportion of your Company's assets in unquoted investments has increased to 20.1% of the portfolio. Together with the 11.7% in private equity partnerships, the total in this area has increased to 31.8% from 24.8% at 31 March. This was principally due to new investments made during the period, as well as the reduction in size of the total portfolio following the fall in value of the quoted investments.  

The reduction in our holdings of government securities and money market funds, from 23.4% to 13.7% of the portfolio, resulted from the repayment of our US$150 million loan, as scheduled, in July and funding of new investments.

UNQUOTED PORTFOLIO

The overall valuation of our holdings in this area increased, particularly as a result of progress on two of our investments. In early October, we agreed to sell our holding in MessageLabs, an e-mail security business, for £28.2 million or 5.9x the cost of the investment, originally made in 1999. Prior to this transaction, the holding had been valued at £11.7 million. We also increased the valuation of our investment in Robin Hood Holdings, the generic pharmaceuticals company, from £45.5 million at 31 March to £81.3 million to reflect the continued strong progress of the underlying business. These uplifts in value more than compensated for a number of reductions in the valuation of other investments, which mainly resulted from the decline in the valuation of comparable listed companies over the period.

While the valuation of a number of our private equity partnerships declined, the impact of this was countered by the strengthening of the US Dollar, as the majority of these holdings are denominated in that currency.  

BOARD CHANGES

At the Annual General Meeting on 17 July I announced a number of changes to your Company's Board. Andrew Knight and Micky Breuer-Weil, who were previously non-executive directors have agreed to join the Company in an executive capacity. After twelve years' service, Andrew retired from the Board of RIT and was appointed as Chairman of J. Rothschild Capital Management, our main operating subsidiary. Micky was appointed as an executive director and fills the new role of Investment Director. He has been the principal investment adviser to my family's philanthropic foundation for a number of years.

David Haysey, who joined in 2005, retired from the Board with effect from 17 July. I am most grateful to David for his contribution over the last three years. He will continue to serve on the Investment Committee.

The release of these two Board seats by Andrew Knight and David Haysey allowed us to make two independent non-executive appointments, with effect from 17 July, without having to increase the overall number of Directors. I am delighted that Sandra Robertson and Ian Wace were willing to become non-executive directors and I welcome them to the Board on behalf of our shareholders.  Sandra became Chief Investment Officer of Oxford University Asset Management in 2007, having spent the previous ten years at Wellcome Trust, where she became the co-Head of Portfolio Management. She has also agreed to serve on the Board's Valuations Committee. Ian is the co-founder of the hedge fund, Marshall Wace and was previously Global Head of Equity and Derivative Trading at Deutsche Morgan Grenfell.

In addition, Michael Sofaer has decided to retire from the Board with effect from today. I would like to thank him for the valued contribution that he has made since he joined the Board in 1999 and wish him well for the future.

BORROWINGS

Our US$150 million 3.93% fixed rate loan was repaid in July 2008. To replace this, we have arranged a US$150 million 364 day revolving credit facility, which remains undrawn.

Rothschild

20 November 2008

Enquiries:

David Haysey

020 7514 1926

  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 2008 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

20 November 2008

For and on behalf of the Board, the members of which 

are listed on page 17 of the Half-Yearly Financial Report.

  INDEPENDENT REVIEW REPORT TO RIT CAPITAL PARTNERS PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2008, which comprises the consolidated income statement, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Accounting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

The maintenance and integrity of the RIT Capital Partners plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.  This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose.  We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity', issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

  Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
20 November 2008
London

  CONSOLIDATED INCOME STATEMENT

	Six months ended 30 September 2008
	Notes	Revenue return  £m	Capital return  £m	Total £m
Income
Investment income		17.9	-	17.9
Other income		1.0	-	1.0
Losses on dealing investments held at fair value		(32.0)	-	(32.0)
Total income		(13.1)	-	(13.1)
Losses on portfolio investments held at fair value		-	(134.8)	(134.8)
Other capital items		-	15.8	15.8
		(13.1)	(119.0)	(132.1)
Expenses
Administrative expenses		(7.8)	(0.9)	(8.7)
Investment management fees		(3.3)	0.7	(2.6)
Loss before finance costs and tax		(24.2)	(119.2)	(143.4)
Finance costs		(6.1)	-	(6.1)
Loss before tax		(30.3)	(119.2)	(149.5)
Taxation		(0.9)	(0.5)	(1.4)
Loss for the period		(31.2)	(119.7)	(150.9)
Earnings per ordinary share	2	(20.2)p	(77.3)p	(97.5)p

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 INCOME STATEMENT, continued

			Six months ended 30 September 2007				Year ended 31 March 2008
Notes		Revenue return £m	Capital return £m	Total £m	Revenue return £m	Capital return £m		Total £m
Income
Investment income		22.1	-	22.1	45.6	-		45.6
Other income		0.7	-	0.7	3.2	-		3.2
(Losses)/gains on dealing investments held at fair value		(10.6)	-	(10.6)	57.4	-		57.4
Total income		12.2	-	12.2	106.2	-		106.2
Gains on portfolio investments held at fair value		-	124.7	124.7	-	42.6		42.6
Other capital items		-	15.1	15.1	-	(22.1)		(22.1)
		12.2	139.8	152.0	106.2	20.5		126.7
Expenses
Administrative expenses		(4.9)	(2.2)	(7.1)	(14.6)	(3.5)		(18.1)
Investment management fees		(3.5)	(3.9)	(7.4)	(5.6)	(2.3)		(7.9)
Profit before finance costs and tax		3.8	133.7	137.5	86.0	14.7		100.7
Finance costs		(6.8)	-	(6.8)	(13.3)	-		(13.3)
Profit before tax		(3.0)	133.7	130.7	72.7	14.7		87.4
Taxation		(2.3)	1.1	(1.2)	(4.1)	(4.7)		(8.8)
Profit for the period		(5.3)	134.8	129.5	68.6	10.0		78.6
Earnings per ordinary share	2	(3.4)p	86.7p	83.3p	44.2p	6.4p		50.6p

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 BALANCE SHEET

	Notes	30 September  2008 £m	31 March  2008  £m	30 September 2007 £m
Non-current assets
Investments held at fair value	4	1,682.4	1,878.6	1,875.0
Investment property	4	29.2	32.6	34.0
Property, plant and equipment		0.3	0.4	0.3
Derivative financial instruments		5.8	4.8	6.2
Retirement benefit asset		-	1.4	2.9
Deferred tax asset		-	-	2.2
		1,717.7	1,917.8	1,920.6
Current assets
Dealing investments held at fair value		3.8	1.9	1.5
Sales for future settlement		60.6	49.8	48.5
Other receivables		14.1	19.2	7.7
Tax receivable		1.0	0.6	0.7
Cash at bank		115.7	152.1	222.2
		195.2	223.6	280.6
Total assets		1,912.9	2,141.4	2,201.2
Current liabilities
Bank loans and overdrafts		(0.5)	(98.9)	(68.4)
Securities sold short		-	-	(2.0)
Purchases for future settlement		(59.3)	(37.8)	(35.6)
Tax payable		(1.9)	(3.2)	(0.2)
Other payables		(2.2)	(7.1)	(2.7)
		(63.9)	(147.0)	(108.9)
Net current assets		131.3	76.6	171.7
Total assets less current liabilities		1,849.0	1,994.4	2,092.3
Non-current liabilities
Derivative financial instruments		(2.7)	(4.7)	(1.0)
Bank loans		(296.3)	(284.9)	(327.6)
Provisions		(12.7)	(13.1)	(16.2)
Deferred tax liability		(1.2)	(1.7)	-
		(312.9)	(304.4)	(344.8)
Net assets		1,536.1	1,690.0	1,747.5
Equity attributable to equity holders
Called up share capital		154.8	154.8	155.0
Capital redemption reserve		35.4	35.4	35.2
Cash flow hedging reserve		3.1	0.1	5.2
Foreign currency translation reserve		-	(0.2)	(0.1)
Capital reserve-realised		1,434.2	1,344.1	1,312.1
Capital reserve-unrealised		(63.5)	146.3	304.5
Revenue reserve		(27.9)	9.5	(64.4)
Total shareholders' equity		1,536.1	1,690.0	1,747.5
Net asset value per ordinary share		992.2p	1,091.6p	1,127.7p

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended  30 September 2008	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 2008	154.8	35.4	0.1	(0.2)	1,490.4	9.5	1,690.0
Loss for the period	-	-	-	-	(119.7)	(31.2)	(150.9)
Cash flow hedges
Gains/(losses) taken to equity	-	-	3.1	-	-	-	3.1
Transferred to the income    statement for the period	-	-	(0.1)	-	-	-	(0.1)
Exchange movements arising on consolidation	-	-	-	0.2	-	-	0.2
Ordinary dividend paid	-	-	-	-	-	(6.2)	(6.2)
Purchase of own shares	-	-	-	-	-	-	-
Balance at 30 September 2008	154.8	35.4	3.1	-	1,370.7	(27.9)	1,536.1

Six months ended  30 September 2007	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 2007	156.2	34.0	5.4	(0.2)	1,494.5	(54.3)	1,635.6
Profit for the period	-	-	-	-	134.8	(5.3)	129.5
Cash flow hedges
Gains/(losses) taken to equity	-	-	0.3	-	-	-	0.3
Transferred to the income   statement for the period	-	-	(0.5)	-	-	-	(0.5)
Exchange movements arising on consolidation	-	-	-	0.1	-	-	0.1
Ordinary dividend paid	-	-	-	-	-	(4.8)	(4.8)
Purchase of own shares	(1.2)	1.2	-	-	(12.7)	-	(12.7)
Balance at 30 September 2007	155.0	35.2	5.2	(0.1)	1,616.6	(64.4)	1,747.5

Six months ended  30 September 2007		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 2007	156.2		34.0	5.4	(0.2)	1,494.5	(54.3)	1,635.6
Profit for the period	-		-	-	-	10.0	68.6	78.6
Cash flow hedges
Gains/(losses) taken to equity	-		-	(4.1)	-	-	-	(4.1)
Transferred to the income   statement for the period	-		-	(1.2)	-	-	-	(1.2)
Exchange movements arising on consolidation	-		-	-	-	-	-	-
Ordinary dividend paid	-		-	-	-	-	(4.8)	(4.8)
Purchase of own shares	(1.4)		1.4	-	-	(14.1)	-	(14.1)
Balance at 31 March 2008	154.8		35.4	0.1	(0.2)	1,490.4	9.5	1,690.0

CONSOLIDATED CASH FLOW STATEMENT

	Six months  ended 30 September 2008 £m	Six months  ended 30 September 2007 £m	Year ended  31 March 2008 £m
Cash inflow from Operating Activities	68.7	65.7	60.0
Investing Activities:
Purchase of property, plant and equipment	(0.2)	(0.1)	(0.2)
Sale of property, plant and equipment	0.1	-	-
Net cash outflow from Investing Activities	(0.1)	(0.1)	(0.2)
Financing Activities:
Purchase of own shares	-	(12.7)	(14.1)
Increase in term loans	-	150.0	74.5
Equity dividend paid	(6.2)	(4.8)	(4.8)
Net cash (outflow)/inflow from Financing Activities	(6.2)	132.5	55.6
Increase in cash and cash equivalents in the period	62.4	198.1	115.4
Cash and cash equivalents at the start of the period	130.0	10.8	10.8
Effect of foreign exchange rate changes	3.2	0.2	3.8
Cash and cash equivalents at the period end	195.6	209.1	130.0
Reconciliation:
Cash at bank	115.7	222.2	152.1
Money market funds (included in portfolio investments)	(80.4)	55.3	76.8
Bank loans and overdrafts	(0.5)	(68.4)	(98.9)
Cash and cash equivalents at period end	195.6	209.1	130.0

  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 2008. They are prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standard IAS 34, Interim Financial Reporting, and were approved on 20 November 2008. These half-yearly financial statements should be read in conjunction with the Annual Report and Accounts for the year ended 31 March 2008 as they provide an update of previously reported information. The half-yearly 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 2008.

The unquoted portfolio has been re-valued (on an unaudited basis) as at 30 September 2008 by the Valuation Committee as part of its detailed, six-monthly review of the fair value of these investments.

For the purpose of the allocation of capital reserves as between realised and unrealised, unrealised capital reserves relate to the gains and losses arising on portfolio investments which have not been sold at the balance sheet date.

2. EARNINGS PER ORDINARY SHARE

The earnings per ordinary share for the six months ended 30 September 2008 is based on the net loss of £150.9 million (six months ended 30 September 2007: net profit of £129.5 million; year ended 31 March 2008: net profit of £78.6 million) and the weighted average number of ordinary shares in issue during the period of 154.8 million (six months ended 30 September 2007: 155.6 million; year ended 31 March 2008: 155.2 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 2008 £m	Six months ended 30 September 2007 £m	Year ended  31 March 2008 £m
Net revenue (loss)/profit	(31.2)	(5.3)	68.6
Net capital (loss)/profit	(119.7)	134.8	10.0
	(150.9)	129.5	78.6
	Pence per share	Pence per share	Pence per share
Revenue (loss)/earnings per ordinary share	(20.2)	(3.4)	44.2
Capital (loss)/earnings per ordinary share	(77.3)	86.7	6.4
	(97.5)	83.3	50.6

3. NET ASSET VALUE PER ORDINARY SHARE

The net asset value per ordinary share as at 30 September 2008 is based on the net assets attributable to equity shareholders of £1,536.1 million (30 September 2007: £1,747.5 million; 31 March 2008: £1,690.0 million) and the number of ordinary shares in issue at 30 September 2008 of 154.8 million (30 September 2007: 155.0 million; 31 March 2008: 154.8 million).

4. MOVEMENTS IN INVESTMENTS

	Quoted  £m	Hedge  Funds £m	Long Equity Funds £m	Unquoted £m	Private Equity Partnerships £m	Other Securities £m	Investment  Property £m	Total £m
Cost at 31 March 2008	635.5	67.0	193.0	233.5	139.1	441.6	25.2	1,734.9
Appreciation/(depreciation) at 31 March 2008	22.9	12.7	26.7	68.0	32.2	6.4	7.4	176.3
Valuation at 31 March 2008	658.4	79.7	219.7	301.5	171.3	448.0	32.6	1,911.2
Reclassifications	0.2	-	-	(0.2)	-	-	-	-
Additions	589.0	2.8	112.3	50.6	42.6	157.4	-	954.7
Disposals	(541.6)	(25.9)	(38.7)	(11.1)	(12.7)	(368.6)	-	(998.6)
Revaluation	(111.5)	(3.8)	(37.1)	3.0	(0.6)	(2.3)	(3.4)	(155.7)
Valuation at 30 September 2008	594.5	52.8	256.2	343.8	200.6	234.5	29.2	1,711.6
Cost at 30 September 2008	697.0	51.9	271.0	269.4	170.5	236.2	25.2	1,721.2
Appreciation/(depreciation) at 30 September 2008	(102.5)	0.9	(14.8)	74.4	30.1	(1.7)	4.0	(9.6)

Other securities comprise government securities and investments in money market funds.

5. DIVIDENDS PAID

	Six months ended 30 September  2008 £m	Six months ended 30 September 2007 £m	Year ended  31 March 2008 £m
Dividends paid	6.2	4.8	4.8
Pence per share	4.0p	3.1p	3.1p

6. COMPARATIVE INFORMATION

The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985.  The financial information for the half years ended 30 September 2008 and 30 September 2007 has not been audited.

The information for the year ended 31 March 2008 has been extracted from the latest published audited financial statements.  The audited financial statements for the year ended 31 March 2008 have been filed with the Registrar of Companies and the report of the auditors on those accounts contained no qualification or statement under section 237(2) or (3) of the Companies Act 1985.

 

END

 

 

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