WELSH INDUSTRIAL INVESTMENT TRUST plc
CHAIRMAN'S INTERIM STATEMENT
Dear Shareholder,
For the first time the interim accounts have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). This has resulted in
additional information being required and has necessitated a number of changes
in the traditional format of the statements which shareholders have received in
the past.
The comparative figures have also been revised to comply with IFRS and the
disclosures required by IFRS 1 concerning the transition from UK Generally
Accepted Accounting Principles to IFRS can be found in notes 7, 8 and 9 of these
interim accounts. As a result this interim statement is significantly longer
than in the past and, as might be expected, has incurred a much higher
cost.
The results for the half year ended 5th October 2005 show a profit on the
revenue account of £75,000 compared with a profit of £78,000 for the comparable
period last year and a gain of £177,000 for the capital account as against a
loss of £793,000 for the same period last year.
Overall this has resulted in earnings per ordinary share of 18.7p against a loss
of 53.0p for the comparable period last year. This variance is mainly due to the
movement in the capital account with the Revenue earnings per share remaining
fairly constant at 5.6p compared with 5.7p for the last interim period.
Consequently the Group's basic net asset value has risen from 446.8p as at 5th
April 2005 to 459.2p as at 5th October 2005, an increase of 12.4p or 2.8%.
Over the same six month period the FTSE All Share Index increased from 2,479 to
2,721, an increase of 9.76% and in the 12 month period to 5th October 2005 the
NAV has increased by 30.75% against an increase in the FTSE All Share Index of
16.6%.
Your Board continues with its strategy of seeking investments in companies that
have a real prospect of high growth. As in previous years the Board is
proposing no interim dividend.
A P Stirling
Chairman 21st December 2005.
WELSH INDUSTRIAL INVESTMENT TRUST plc
INTERIM RESULTS 2005
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the half year ended 5th October 2005
Six months to Six months to Year ended
5th October 5th October 2004 5th April 2005
2005
Restated Restated
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Income:
Dividend and
Interest income 71 - 71 108 - 108 174 - 174
Other operating income 48 - 48 12 - 12 (14) - (14)
Total revenue 119 - 119 120 - 120 160 - 160
Gains/(losses) on
investments held at
fair value - 177 177 - (793) (793) - 499 499
119 177 296 120 (793) (673) 160 499 659
Operating expenses (42) - (42) (40) - (40) (79) - (79)
Profit before finance
costs and taxation 77 177 254 80 (793) (713) 81 499 580
Finance costs (2) - (2) (2) - (2) (4) - (4)
Profit before taxation 75 177 252 78 (793) (715) 77 499 576
Taxation - - - - - - - - -
Profit/(loss) for
the period 75 177 252 78 (793) (715) 77 499 576
Earnings per Ordinary 18.7p (53.0)p 42.7p
Share (Note 3)
The total column of this statement represents the Group's Income Statement, prepared in
accordance with IFRS. The revenue and capital columns are supplementary to this and are prepared
under guidance published by the Association of Investment Trust Companies.
All revenue and capital items in the above statement derive from continuing operations.
WELSH INDUSTRIAL INVESTMENT TRUST plc
INTERIM RESULTS 2005
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the half year ended 5th October 2005
Half year ended 5th October 2005
Ordinary
Share Capital Retained
capital reserve earnings Total
£'000 £'000 £'000 £'000
Balance as at 5th
April, 2005 67 5,725 240 6,032
Profit for the period - 177 75 252
Ordinary dividend paid
(Note 4) - - (85) (85)
Balance at 5th
October, 2005 67 5,902 230 6,199
Half year ended 5th October, 2004
(Restated - see note 8)
Ordinary
Share Capital Retained
capital reserve earnings Total
£'000 £'000 £'000 £'000
Balance as at
5th April, 2004 67 5,226 248 5,541
Profit for the period - (793) 78 (715)
Ordinary dividend paid
(Note 4) - - (85) (85)
Balance at 5th
October, 2004 67 4,433 241 4,741
Year ended 5th April, 2005
(Restated - see note 7)
Ordinary
Share Capital Retained
capital reserve earnings Total
£'000 £'000 £'000 £'000
Balance as at
5th April, 2004 67 5,226 248 5,541
Profit for the period - 499 77 576
Ordinary dividend paid
(Note 4) - - (85) (85)
Balance at 5th
April, 2005 67 5,725 240 6,032
WELSH INDUSTRIAL INVESTMENT TRUST plc
INTERIM RESULTS 2005
UNAUDITED CONSOLIDATED BALANCE SHEET
as at 5th October 2005
5th 5th 5th
October October April
2005 2004 2005
Restated Restated
(see note 8) (see note 7)
Assets £'000 £'000 £'000
Non current assets
Investments held
at fair value 5,953 4,690 5,691
Total non current
assets 5,953 4,690 5,691
Current assets
Other accrued income
and prepaid expenses 7 8 4
Other current assets 54 13 47
Cash and cash equivalents 263 108 368
324 129 419
Total assets 6,277 4,819 6,110
Current liabilities
Trade and other payables (33) (33) (31)
Current tax payable - - (2)
Total current liabilities (33) (33) (33)
Total assets less
current liabilities 6,244 4,786 6,077
Non-current liabilities
8.75% Cumulative
Preference shares (45) (45) (45)
Net assets 6,199 4,741 6,032
Capital and reserves
Ordinary share capital 67 67 67
Capital reserve 5,902 4,433 5,725
Retained earnings 230 241 240
Total equity 6,199 4,741 6,032
Net asset value
per ordinary share 459.2p 351.2p 446.8p
(Note 6)
WELSH INDUSTRIAL INVESTMENT TRUST plc
INTERIM RESULTS 2005
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
for the Half Year to 5th October 2005
6 months to 5th 6 months to 5th Year Ended
October 2005 October 2004 5th April 2005
£'000 £'000 £'000
Cashflow from operating activities
Investment income received 104 120 169
Deposit interest received 3 2 5
Share dealing profit/(loss) 1 (11) (26)
Other income rec 2 - 1
Other cash payments (47) (47) (79)
Net cash flows from
operating activities 63 64 70
Cash flows from investing activities
Purchase of investments (440) (186) (420)
Sale of investments 355 189 682
(85) 3 262
Cash flows from financing activities
Preference dividends paid - - (4)
Equity dividends paid (83) (83) (84)
(83) (83) (88)
(Decrease)/increase in
cash and cash equivalents (105) (16) 244
Cash and cash equivalents at
start of period 368 124 124
Cash and cash equivalents at
end of period 263 108 368
Notes to the Financial Statements
1. Accounting policies.
The financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by the
European Union. These comprise standards and interpretations approved by
the International Accounting Standards Board ("IASB"), together with
interpretations of the International Accounting Standards and Standing
Interpretations Committee approved by the International Accounting
Standards Committee ("IASC") that remain in effect, to the extent that IFRS
have been adopted by the European Union.
The disclosures required by IFRS 1 concerning the transition from UK GAAP
to IFRS are given in notes 7, 8 and 9. These financial statements are
presented in pounds sterling because that is the currency of the primary
economic environment in which the Group operates. The financial statements
of the Group for the year ending 5th April, 2006 will also be prepared in
accordance with IFRS as adopted by the European Union.
Basis of preparation
The financial statements have been prepared under the historical cost
convention, as modified by the revaluation of investments. The principal
accounting policies adopted are set out below. Where presentational
guidance set out in the Statement of Recommended Practice ("the SORP") for
investment trusts issued by the Association of Investment Trust Companies
("the AITC") in January 2003 is consistent with the requirements of IFRS,
the directors have sought to prepare the financial statements on a basis
compliant with the recommendations of the SORP.
Basis of consolidation
The consolidated financial statements incorporate the financial statements
of the Company and its subsidiary undertakings made up to 5th October 2005.
All intra-group transactions, balances, income and expenses are eliminated
on consolidation.
Presentation of Income Statement
In order to better reflect the activities of an investment trust company
and in accordance with guidance issued by the AITC, supplementary
information which analyses the Income Statement between items of a revenue
and capital nature has been presented alongside the Income Statement. Net
capital returns may not be distributed by way of a dividend. The net
revenue is the measure the directors believe appropriate in assessing the
Group's compliance with certain requirements set out in section 842 of the
Income and Corporation Taxes Act 1988.
Investments in associates
An associate is an entity over which the Group is in a position to exercise
significant influence, but not control or joint control, through
participation in the financial and operating policy decisions of the
entity. The Group's associates are accounted for in accordance with IAS 39
Financial Instruments: Recognition and Measurement ("IAS 39") as
investments designated at fair value through profit and loss, and
therefore, in accordance with paragraph 1 of IAS 28 Investments in
Associates ("IAS 28"), equity accounting is not required.
Segmental reporting
A business segment is a group of assets and operations that are subject to
risks and returns that are different from those of other business segments.
The group comprises of one business segment only: the Investment Trust.
This is consistent with internal reporting. All revenues are derived from
operations within the United Kingdom and consequently no separate
geographical segment information is provided.
Income
Dividend and interest income
Income from listed securities and interest receivable on bank deposits is
accounted for on a receivable basis. Interest receivable on loans is
accounted for on an accruals basis.
Expenses
All expenses and interest payable are accounted for on an accruals basis.
All expenses are allocated to revenue except the expenses which are
incidental to the disposal of an investment are deducted from the disposal
proceeds of the investment.
Taxation
The tax expense represents the sum of the tax currently payable and
deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit before tax as reported in the income statement
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never
taxable or deductible. The Group's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the
balance sheet date.
In line with the recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented against capital returns in the
supplementary information in the income statement is the "marginal basis".
Under this basis, if taxable income is capable of being offset entirely by
expenses presented in the revenue column of the income statement, then no
tax relief is transferred to the capital return column.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the balance sheet
liability method. Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Investment trusts which have approval under section 842 of the Income
Corporation Taxes Act 1988 are not liable for taxation on capital gains.
The carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the
assets to be recovered.
Deferred tax is calculated at the rates that are expected to apply in the
period when the liability is settled or the asset realised. Deferred tax is
charged or credited in the income statement, except when it relates to
items charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Investments
(i) Securities
Purchases and sales of listed investments are recognised on the trade
date, the date on which the Group commit to purchase or sell the
investment. All investments are designated upon initial recognition as
held at fair value, and are measured at subsequent reporting dates at
fair value, which is either the bid price or the last traded price,
depending on the convention of the exchange on which the investment is
quoted. Fair values for unquoted investments, or for investments for
which there is only an inactive market, are established by taking into
account the guidelines issued by the British Venture Capital
Association as follows:
(i) Investments which have been made in the last 12 months are valued
at cost in the absence of overriding factors;
(ii) Investments in companies at an early stage of development are
also valued at cost in the absence of overriding factors;
(iii) Where investments have gone beyond the stage in their
development in (ii) above, the shares may be valued by having
regard to a suitable price-earnings ratio to that company's
historic post-tax earnings or the net asset value of the
investment; and
(iv) Where a value is indicated by a material arm's length market
transaction by a third party in the shares of a company, that
value may be used.
(ii)Loan Stock
Loan stock is valued at fair value, being the net present value of
future cash flows using an appropriate interest rate.
Gains and losses on investments are analysed within the income
statement as capital.
Trade and other receivables
Other receivables do not carry any interest and are short term in nature
and are accordingly stated at their nominal value as reduced by appropriate
allowances for estimated irrecoverable amounts.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are
short term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes
in value.
Dividends payable
All dividends are recognised in the period in which they are approved by
shareholders.
Bank borrowings
All bank loans are initially recognised at cost, being the fair value of
the consideration received, less issue costs where applicable. After
initial recognition, all interest-bearing loans and borrowings are
subsequently measured at amortised cost. Amortised cost is calculated by
taking into account any discount or premium on settlement. The costs of
arranging any interest-bearing loans are capitalised and amortised over the
life of the loan.
Trade and other payables
Other payables are not interest-bearing and are stated at their nominal
value.
2. Comparative information
The financial information contained in this interim report does not
constitute statutory accounts as defined in section 240 of the Companies
Act 1985. The financial information for the half years ended 5th October
2005 and 5th October 2004 has not been audited.
The information for the year ended 5th April, 2005 has been extracted from
the latest published audited financial statements, as restated to comply
with IFRS (see note 7). The audited financial statements for the year ended
5th April, 2005 have been filed with the Registrar of Companies. The report
of the auditors on those financial statements contained no qualification or
statement under section 237(2) or (3) of the Companies Act 1985.
3 Earnings per share.
The earnings per share figure is based on the net gain for the half year of
£252,000 (half year ended 5th October 2004: Loss £(715,000); year ended 5th
April, 2005: £576,000) and on 1,350,000 ordinary shares.
The earnings per ordinary share figures detailed above can be further
analysed between revenue and capital as follows:-
Half year Half year
ended 5th ended 5th Year ended
October 2005 October 2004 5th April 2005
Restated Restated
(see note8) (see note7)
£'000 £'000 £'000
Net revenue profit 75 78 77
Net capital profit 177 (793) 499
Net total profit 252 (715) 576
The weighted average number of ordinary shares in issue during each of the
periods was 1,350,000
Earnings per share Pence Pence Pence
Revenue 5.6 5.7 5.7
Capital 13.1 (58.7) 37.0
Total earnings per share 18.7 (53.0) 42.7
4. Dividends.
Half year Half year
ended 5th ended 5th Year ended
October 2005 October 2004 5th April 2005
£'000 £'000 £'000
Amounts recognised as
distributions to equity
holders in the period:
Final dividend for the
year ended 5th April 2005
of 6.3p (2004: 6.3p) per
share 85 85 85
85 85 85
5. Share capital.
(i) Ordinary
1,350,000 ordinary shares were in issue throughout the periods covered in
this statement.
(ii) Preference
In addition there were in issue 225,000 8.75% cumulative preference shares
of 20p each. The preference dividend is cumulative and payable in one
instalment on 5th April every year, and is deemed to accrue evenly from day
to day. The voting rights of the preference shareholders are restricted to
resolutions to winding up the company, or to vary the special rights
attached to the preference shares, in which event each shareholder is
entitled to one vote. Upon the winding up of the company the preference
shareholders rank first in the return of capital, being however restricted
to the nominal amount paid up, together with any arrears of the preference
dividend. Under International Accounting Standard 32 the preference share
capital is classified as a liability and hence the dividend is shown as a
finance cost and the capital element as a non-current liability.
6. Net asset value per ordinary share.
The net asset value per ordinary share is based on the net assets
attributable to the equity shareholders of £6,199,000 (half year ended 5th
October 2004: £4,741,000 as restated; year ended 5th April 2005: £6,032,000
as restated) and on 1,350,000 ordinary shares, being the number of ordinary
shares in issue at each period end.
7. (a) Restatement of balances as at and for the year ended 5 April 2005.
At 6th April 2005 the Company adopted International Financial Reporting
Standards. In accordance with IFRS 1 (First Time Adoption of International
Financial Reporting Standards) the following is a reconciliation of the
results as at and for the year ended 5th April 2005, previously reported
under the applicable UK Accounting Standards and the SORP, to the restated
IFRS results.
(Audited) Effect of Restated
Previously transition 5th April
reported 5th to IFRS 2005
April 2005
Notes £'000 £'000 £'000
Investments 1 5,721 (30) 5,691
Current assets 419 419
Creditors: amounts
falling due within
one year 2 (118) 85 (33)
Total assets less
current liabilities 6,022 6,077
Non-current liabilities 3 - (45) (45)
Net assets 6,022 6,032
Capital and reserves
Called up share capital 3 112 (45) 67
Capital reserve 1 5,755 (30) 5,725
Revenue reserve /
Retained earnings 2 155 85 240
Total shareholders'
funds 6,022 6,032
Notes to the reconciliation
1. Investments are designated as held at fair value under IFRS and are carried
at bid prices which total their fair value at £5,691,000. Previously under UK
GAAP they were carried at mid prices with liquidity discounts as appropriate.
The aggregate differences, being a downward revaluation of £30,000, also
decrease capital reserves.
2. No provision has been made for the dividend on the ordinary shares for the
year ended 5 April 2005 of £85,050. Under IFRS the dividend is not recognised
until approved by the shareholders.
3. The 8.75% Cumulative Preference shares are designated under IFRS as a
liability rather than equity and hence the dividend is shown as a finance cost
and the capital element as a non-current liability.
(b) Reconciliation of the Statement of Total Return to the Income Statement
for the year ended 5th April 2005.
Under IFRS the Income Statement is the equivalent of the Statement of Total
Return reported previously.
2005
Notes £'000
Total transfer to reserves per the 514
Statement of Total Return
Add back dividends proposed 1 85
Investments held at fair value
changed from mid to bid basis at 2 (23)
5th April 2004 and 5th April 2005
Net profit per the Income 576
Statement
Notes to the reconciliation
1. Ordinary dividends declared and paid during the period are dealt with
through the Statement of Changes in Equity.
2. The portfolio valuations at 5th April 2004 and 5th April 2005 are required
to be valued at bid-price under IFRS. These values differ from the previous
valuations by £30,000 and £7,000 respectively.
8. (a) Restatement of balances as at and for the period ended 5th October 2004.
At 6th April 2005 the Company adopted International Financial Reporting
Standards. In accordance with IFRS 1 (First Time Adoption of International
Financial Reporting Standards) the following is a reconciliation of the
results as at and for the period ended 5th October 2004, previously
reported under the applicable UK Accounting Standards and the SORP, to the
restated IFRS results.
(Audited) Effect of Restated
Previously transition 5th October
reported 5th to IFRS 2004
October 2004
Notes £'000 £'000 £'000
Investments 1 4,711 (21) 4,690
Current assets 129 129
Creditors: amounts
falling due within
one year 2 (31) (2) (33)
Total assets less
current liabilities 4,809 4,786
Non-current liabilities 2 - (45) (45)
Net assets 4,809 4,741
Capital and reserves
Called up share capital 2 112 (45) 67
Capital reserve 1 4,454 (21) 4,433
Revenue reserve /
Retained earnings 2 243 (2) 241
Equity shareholders' funds 4,809 4,741
Notes to the reconciliation
1. Investments are designated as held at fair value under IFRS and are carried
at bid prices which total their fair value at £4,690,000. Previously under UK
GAAP they were carried at mid prices with liquidity discounts as appropriate.
The aggregate differences, being a downward revaluation of £21,000, also
decrease capital reserves.
2. The 8.75% Cumulative Preference shares are designated under IFRS as a
liability rather than equity and hence the dividend is shown as a finance cost
and the capital element as a non-current liability.
(b) Reconciliation of the Statement of Total Return to the Income Statement
for the period ended 5th October 2004.
Under IFRS the Income Statement is the equivalent of the Statement of Total
Return reported previously.
2004
Notes £'000
Total transfer to reserves per the (648)
Statement of Total Return
Adjustment to previously reported
reserves 1 (51)
Investments held at fair value
changed from mid to bid basis at
5th April 2004 and 5th October 2004 2 (14)
Accrual in respect of dividend on
cumulative preference shares now
deemed a finance cost 3 (2)
Net loss per the Income Statement (715)
Notes to the reconciliation
1 An adjustment is required as a result of an error in previously reported
capital reserves.
2 The portfolio valuations at 5th April 2004 and 5th October 2004 are
required to be valued at bid-price under IFRS. These values differ from the
previous valuations by £8,000 and £22,000 respectively.
3 The 8.75% cumulative preference shares are designated under IFRS as a
liability and the dividend is deemed a finance cost to be accrued over the
period.
9. Restatement of opening balances as at 5th April 2004.
In accordance with IFRS 1 (First Time Adoption of International Financial
Reporting Standards) the following is a reconciliation of the balance sheet
as at 5th April 2004, previously reported under the applicable UK
Accounting Standards and the SORP, to the restated IFRS balance sheet.
(Audited) Effect of Restated
Previously transition 5th April
reported 5th to IFRS 2004
April 2004
Notes £'000 £'000 £'000
Investments 1 5,486 (8) 5,478
Current assets 139 139
Creditors: amounts
falling due within
one year 2 (116) 85 (31)
Total assets less
current liabilities 5,509 5,586
Non-current liabilities 3 - (45) (45)
Net assets 5,509 5,541
Capital and reserves
Called up share capital 3 112 (45) 67
Capital reserve 1 5,234 (8) 5,226
Revenue reserve /
Retained earnings 2 163 85 248
Equity shareholders' funds 5,509 5,541
Notes to the reconciliation
1. Investments are designated as held at fair value under IFRS and are carried
at bid prices which total their fair value at £5,478,000. They were carried at
mid prices previously under UK GAAP with liquidity discounts as appropriate. The
aggregate differences, being a downward revaluation of £8,000, also decrease
capital reserves.
2. No provision has been made for the dividend on the ordinary shares for the
year ended 5th April 2004 of £85,050. Under IFRS this is not recognised until
approved by shareholders.
3. The 8.75% Cumulative Preference shares are designated under IFRS as a
liability rather than equity and hence the dividend is shown as a finance cost
and the capital element as a non-current liability.
10. Cash Flow Statement.
The impact of IFRS on the Cash Flow Statement is not significant other than
in presentational changes.
