Final Results
British Assets Trust PLC
16 November 2007
BRITISH ASSETS TRUST PLC
Date: 16 November 2007
Unaudited results for the year ended 30 September 2007
• Dividend increase of 4.0 per cent
• Share price total return of 10.5 per cent
• Net asset value total return of 9.7 per cent
Chairman's Statement:
Global stockmarkets made good progress during the year ended 30 September 2007
with the result that the Company and its composite benchmark index have both
delivered five consecutive years of positive total returns.
The Company's net asset value total return for the year was 9.7 per cent. The
share price total return was 10.5 per cent and the Company is again in a
position of being able to increase its dividend, with the Board recommending an
increase of 4.0 per cent for the year.
The net asset value total return of 9.7 per cent compares with a total return of
12.5 per cent from the Company's composite benchmark index of 75 per cent FTSE
All-Share Index and 25 per cent FTSE World (ex UK) Index. Overseas stock
selection, asset allocation, gearing and share buy backs all made positive
contributions during the year. However, these gains were more than offset by the
performance in the UK and the returns from the corporate bond portfolio.
For most of the year, markets were supported by strong corporate earnings and
dividend growth, together with ongoing mergers and acquisitions activity.
Markets also benefited from signs that there was unlikely to be a severe
economic slowdown in the US. However, in the summer months, increasing concerns
over the US sub-prime mortgage debt market caused panic in credit markets and a
sharp increase in market volatility, particularly amongst financial stocks. It
is already clear that the liquidity crisis which followed is likely to have an
adverse effect on growth forecasts, as well as hampering activity by hedge fund
and private equity investors who typically rely on borrowings to fund
investments.
The best returns within the portfolio came from the Pacific (ex Japan) and
Europe (ex UK) regions which have both benefited from strong economic growth and
good corporate earnings. Led by China, the Pacific region is becoming a key
contributor to global growth.
As previously announced, a new manager of the UK portfolio was appointed from
within the F&C UK equities team during the year, and this was followed by a
period of improved performance. Unfortunately, towards the end of the year,
performance suffered in the wake of the liquidity crisis as the Company has
significant exposure to financial stocks, including Northern Rock, which are an
important contributor to the revenue account. Notwithstanding the
underperformance for the year, the Board believes that the change in UK manager
will result in improved performance in this important part of the overall
portfolio.
Although outperforming its composite benchmark index, returns from the corporate
bond portfolio were less than equities during the year, principally as a result
of fears of defaults caused by the liquidity crisis. One of the main and
continuing reasons for having an exposure to corporate bonds is the benefit this
provides to the Company's revenue account.
Earnings and Dividends
The Company's revenue earnings per share for the year were 5.7p (2006 - 6.3p).
First, second and third interim dividends, each of 1.356p per Ordinary Share,
were paid on 10 April, 6 July and 5 October 2007 respectively.
During the year the Company continued to benefit from strong dividend growth
from its investee companies, in particular within the UK, as well as from the
receipt of a number of special dividends. Having reviewed the revenue outcome
for the year and considered carefully the Company's revenue forecast for the
forthcoming year, the Board is pleased to recommend a final dividend of 1.638p
per Ordinary Share in respect of the year ended 30 September 2007, payable on 11
January 2008 to shareholders on the register at close of business on 14 December
2007. This brings the total dividend in respect of the year to 5.706p per
Ordinary Share, an increase of 4.0 per cent from the previous year.
The Board considers the Company's dividend yield to be one of its key
attractions. As at 30 September 2007, the yield of 4.1 per cent was some 41 per
cent higher than the FTSE All-Share Index yield of 2.9 per cent.
Gearing
At the end of the year the Company's gearing, net of cash, was 15.0 per cent,
which compares with 20.3 per cent as at 30 September 2006. The level of gearing
was represented by 8.4 per cent in equities and 6.6 per cent in corporate bonds.
As a reflection of their cautious view on markets, the Managers reduced the
level of net gearing during the year by raising cash from the UK and Japanese
portfolios.
The Company's borrowings are represented by two £60 million bonds, one of which
is due for repayment in March 2008 and the other in 2031. It is the Board's
current intention to replace in full, or in part, the 6.625 per cent 2008 bond.
The Board has considered a number of options and currently favours replacing the
2008 bond with a more flexible form of borrowing.
Share Buy Backs
During the year the Company purchased 7,500,000 shares for cancellation,
equivalent to 2.4 per cent of the shares in issue as at 30 September 2006, for
an aggregate consideration of £11.2 million. These buy backs enhanced the net
asset value by 0.5p per share.
The Company will seek to renew its share buy back authority at the forthcoming
Annual General Meeting.
Board Composition
During the year, the Board conducted a detailed review of its composition. Of
the five Directors excluding the Chairman, three will have served for more than
nine years at the time of the forthcoming Annual General Meeting.
The Combined Code on Corporate Governance encourages boards to have at least
half of their number, excluding the chairman, with service of less than nine
years. The Board has therefore embarked on a process to appoint a new
non-executive Director within the next few months.
In addition, I will retire at the Annual General Meeting in 2009. Plans are in
hand as regards my succession.
VAT on Management Fees
The European Court of Justice ruling in June 2007, that investment trusts should
be regarded as special investment funds, has recently been accepted in principle
by HM Revenue and Customs, although a number of legal and procedural matters
remain to be resolved. As a result of this decision, management fees paid by the
Company will not be subject to VAT in future. In addition, the Company will be
able to recover some of the VAT suffered in the past on management fees although
at this stage the amount is uncertain.
Outlook
Following the events of recent months the immediate outlook for global growth
and financial markets remains uncertain. Until the full impact of the liquidity
crisis is clearer, market volatility is likely to continue, particularly amongst
financial stocks. However, prospects for corporate profits remain reasonable and
equity valuations are at fair levels by historic standards. The Board is
therefore hopeful that further gains can be made in the year ahead.
W R E Thomson
Chairman
Enquiries: Julie Dent/Gordon Hay Smith
F & C Asset Management plc - 0207 658 8000
Unaudited Income Statement for the Year ended 30 September 2007
2007 2007 2007
Notes Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 31,923 31,923
Exchange differences - (122) (122)
Income 2 21,234 1,839 23,073
Investment management fee (527) (1,581) (2,108)
Other expenses (894) - (894)
______ ______ ______
Net return before finance costs & taxation 19,813 32,059 51,872
Finance Costs (1,954) (5,860) (7,814)
______ ______ ______
Return on ordinary activities before tax 17,859 26,199 44,058
Tax on ordinary activities (337) - (337)
______ ______ ______
Return attributable to shareholders 17,522 26,199 43,721
______ ______ ______
Return per share 3 5.7p 8.6p 14.3p
Audited Income Statement for the Year ended 30 September 2006
Notes 2006 2006 2006
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 33,150 33,150
Exchange differences - 177 177
Income 2 23,353 257 23,610
Investment management fee (512) (1,537) (2,049)
Other expenses (826) - (826)
______ ______ ______
Net return before finance costs & taxation 22,015 32,047 54,062
Finance costs (1,954) (5,860) (7,814)
______ ______ ______
Return on ordinary activities before tax 20,061 26,187 46,248
Tax on ordinary activities (305) - (305)
______ ______ ______
Return attributable to shareholders 19,756 26,187 45,943
______ ______ ______
Return per share 3 6.3p 8.3p 14.6p
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies.
All revenue and capital items in the above Income Statement derive from
continuing operations.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the above Income Statement.
Unaudited Reconciliation of Movements in Shareholders' Funds
For the year ended 30 September 2007
Called up Capital Redemption Capital Revenue Total
Share Capital Reserve Reserves Reserve Shareholders'
Funds
£'000 £'000 £'000 £'000 £'000
Opening shareholders' funds 77,128 11,213 347,782 34,267 470,390
Ordinary shares purchased for (1,875) 1,875 (11,210) - (11,210)
cancellation
Dividends paid - - - (17,129) (17,129)
Return attributable to ordinary - - 26,199 17,522 43,721
shareholders
Closing shareholders' funds 75,253 13,088 362,771 34,660 485,772
Audited Reconciliation of Movements in Shareholders' Funds
For the year ended 30 September 2006
Called up Capital Redemption Capital Revenue Total
Share Capital Reserve Reserves Reserve Shareholders'
Funds
£'000 £'000 £'000 £'000 £'000
Opening shareholders' funds 80,828 7,513 340,990 31,527 460,858
Ordinary shares purchased for (3,700) 3,700 (19,395) - (19,395)
cancellation
Dividends paid - - - (17,016) (17,016)
Return attributable to ordinary - - 26,187 19,756 45,943
shareholders
Closing shareholders' funds 77,128 11,213 347,782 34,267 470,390
Unaudited Balance Sheet as at 30 September Audited
2007 2006
£'000 £'000
Non-current assets
Investments at fair value through profit or loss 558,724 566,081
________ ________
Current assets
Debtors 5,937 5,430
Cash at bank and on deposit 47,349 24,140
________ ________
53,286 29,570
Creditors: amounts falling due within one year (66,870) (6,014)
________ ________
Net current (liabilities)/assets (13,584) 23,556
________ ________
Total assets less current liabilities 545,140 589,637
Creditors: amounts falling due after more than one year (59,368) (119,247)
________ ________
Net assets 485,772 470,390
________ ________
Capital and reserves
Called-up share capital 75,253 77,128
Capital redemption reserve 13,088 11,213
Capital reserve - realised 318,090 246,431
Capital reserve - unrealised 44,681 101,351
Revenue reserve 34,660 34,267
________ ________
Equity shareholders' funds 485,772 470,390
________ ________
Net asset value per share 161.4p 152.5p
Unaudited Summarised Statement of Cash Flows
Year to 30 Audited
September 2007 Year to 30
September 2006
£'000 £'000
Net cash inflow from operating activities 19,747 19,048
Servicing of finance (9,713) (5,738)
Taxation - 39
Capital expenditure and financial investment 41,382 18,728
Equity dividends paid (17,129) (17,016)
________ ________
Net cash inflow before financing 34,287 15,061
Financing (11,210) (19,395)
________ ________
Increase/(decrease) in cash 23,077 (4,334)
________ ________
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the year 23,077 (4,334)
Currency gains 132 171
Increase in 6.625 per cent Bonds 2008 liability (63) (63)
Increase in 6.25 per cent Bonds 2031 liability (26) (26)
Opening net debt (95,107) (90,855)
________ ________
Closing net debt (71,987) (95,107)
________ ________
Reconciliation of net revenue before finance costs and taxation to net
cash inflow from operating activities
Net revenue before finance costs and taxation 51,872 54,062
Gains on investments (31,923) (33,150)
Exchange differences 122 (177)
Decrease in accrued income and prepayments 27 205
Decrease in other creditors (12) (1,588)
Tax on investment income (339) (304)
________ ________
Net cash inflow from operating activities 19,747 19,048
________ ________
Notes
1. The unaudited results have been prepared on the basis of the
accounting policies set out in the statutory accounts of the Company for the
year ended 30 September 2006.
2. Total income of £23,073,000 (2006: £23,610,000) includes special
dividends of £3,152,000 (2006: £4,636,000) of which £1,313,000 (2006:
£4,379,000) is recognised through revenue and £1,839,000 (2006: £257,000) is
recognised through capital.
3. Return per Ordinary Share is based on a weighted average of
306,387,624 (2006: 315,715,159) Ordinary Shares in issue.
4. The proposed final dividend of 1.638p per Ordinary Share, will be
paid on 11 January 2008 to ordinary shareholders on the register at close of
business on 14 December 2007.
The last date for receipt of mandate instructions for those
shareholders who wish to join the Dividend Reinvestment Plan is 21 December
2007.
5. The Company had 301,012,282 (2006: 308,512,282) Ordinary Shares in
issue as at 30 September 2007.
6. During the year, the Company purchased for cancellation 7,500,000
(2006: 14,800,000) Ordinary Shares with an aggregate nominal value of £1.9
million for a total consideration of £11.2 million (2006: £19.4 million)
representing 2.4% of the Ordinary Shares in issue at the previous year end.
The Company's geographic exposure as a percentage of ordinary
shareholders' funds at 30 September 2007 was as follows (comparative figures
are for 30 September 2006).
2007 2006
UK 77.2 85.0
North America 12.9 12.3
Europe (ex UK) 8.1 6.2
Pacific (ex Japan) 6.1 4.0
Japan 4.1 6.1
Corporate Bonds 6.6 6.7
Gearing (15.0) (20.3)
_____ _____
Total 100.0 100.0
_____ _____
8. The following table provides a breakdown of the estimated contributions
to the total return for the year:
Attribution of Return
2007
Market/benchmark return 12.5%
Stock selection
UK equities -2.1
UK equities- cost of portfolio re-alignment -0.4
Overseas equities 0.1
Regional asset allocation 0.4
Corporate bonds -0.7
Gearing/cash 0.4
Share buy backs 0.2
Expenses -0.7
-----
9.7%
----
10. These are not full statutory accounts in terms of Section 240 of the
Companies Act 1985. The full audited accounts for the year to 30 September
2006, which received an unqualified report under Section 235 of the Companies
Act 1985 from the auditors, have been lodged with the Registrar of Companies.
The 2007 annual report will be sent to shareholders during November 2007 and
will be available for inspection at 80 George Street, Edinburgh EH2 3BU, the
registered office of the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
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