Half Yearly Report

RNS Number : 2082M

British Assets Trust PLC

19 May 2010

 



BRITISH ASSETS TRUST PLC

To:                   RNS

From:              British Assets Trust plc

Date:               19 May 2010

Half-Yearly Financial Report for the six months ended 31 March 2010

Chairman's Statement

In the six month period to 31 March 2010 stockmarkets around the world have posted healthy gains. The exceptional stimulus measures announced by governments and central banks in the first half of 2009 appear to have contributed to improved prospects for economic and profit growth.

Against this backdrop, the Company's net asset value total return was 13.1 per cent during the period. This compares to a total return of 12.6 per cent for the composite benchmark index of 75 per cent FTSE All-Share Index and 25 per cent FTSE World (ex UK) Index. The Company's share price total return was 12.3 per cent, reflecting a widening of the debt-adjusted discount, which was 7.9 per cent as at 31 March 2010 compared to 6.9 per cent as at 30 September 2009  (source: Fundamental Data). 

The table below provides a breakdown of the estimated contributions to the net asset value total return for the period.

Market/benchmark return	12.6%
Stock selection
UK equities	-1.0%
Overseas equities	0.1%
Asset allocation	0.2%
Corporate bonds	-0.9%
Gearing	2.6%
Expenses	-0.5%
British Assets Trust net asset value total return	13.1%

The emerging markets portfolio has continued to deliver positive performance during the period, in terms of both stock selection and relative to developed markets. In the UK, investing for income remains difficult. The companies with more stable earnings and dividend prospects, which necessarily provide the bedrock of the Company's UK portfolio, delivered positive returns but continued to lag those companies with the greatest sensitivity to economic recovery. The corporate bond portfolio delivered positive returns but lagged the returns seen from equities. However, corporate bonds remain an important contributor to the Revenue Account, and to the Company's dividend. Gearing was a significant boost to returns in rising markets.

Earnings and Dividends

The Company's revenue earnings for the period were 2.4p per share (2009: 3.1p).

A first interim dividend of 1.442p per share was paid on 9 April 2010 and the Board has declared a second interim dividend of 1.442p per share which will be paid on 9 July 2010 to shareholders on the register on 11 June 2010. These interim dividends have been maintained at the same level as the previous year.

The period of dividend cuts for many UK companies should be largely behind us and analysts now expect dividends in the UK to rise between 5 per cent and 10 per cent in 2010.  However, it will take time for the Company's income levels to return to those of previous years.  In addition, the Company continues to be affected by very low interest rates on its bank deposits. However, having reviewed the revenue forecast for the current year, it remains the Board's intention, as stated in the 2009 Annual Report, that the three interim dividends for the year ended 30 September 2010 will each be maintained at 1.442p per share. The Board also continues to consider it likely that the level of the final dividend will be maintained but will keep the possibility of an increase under review as the year progresses.

Gearing

At the end of the period the Company's level of gearing, net of cash, was 19.3 per cent, represented by equity gearing of 5.1 per cent and 14.2 per cent in corporate bonds.

The Company's borrowings are represented by £60 million 6.25 per cent Bonds which are due for redemption in 2031 and a £60 million bank revolving credit facility which matures in March 2013, £27.4 million of which was drawn down at the end of the period.

Outlook

Emerging markets should continue to outperform developed markets as strengthening world trade growth and rising commodity prices favour the former, coupled with a strong investment case based on good long term growth prospects.

Many potential hurdles need to be negotiated in the UK this year, not least government measures to reduce borrowing and the timing of the withdrawal of the exceptional monetary stimulus provided in the credit crisis.  For now, a slump back into recession is unlikely, inflation is likely to remain subdued and liquidity conditions remain favourable. Indeed recent economic and corporate profit announcements have been positive. Many of the best performing stocks in 2009 paid no dividends at all. However, income remains scarce and we would expect to see investors shift attention to dividend paying stocks as 2010 progresses, which should be of benefit to the Company's portfolio.

Lynn Ruddick

Chairman

For further information please contact:

Julie Dent 0207 628 8000

[e-mail]

F&C Investment Business Limited

Unaudited Income Statement

For the Six Months ended 31 March 2010

	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments	-	39,406	39,406
Exchange differences	-	22	22
Income	8,035	-	8,035
Management expenses (see note 3)	(166)	(808)	(974)
Other expenses	(286)	-	(286)
Net return before finance costs & taxation	7,583	38,620	46,203
Finance Costs:
6.25% Bonds 2031	(474)	(1,422)	(1,896)
Bank borrowings	(42)	(126)	(168)
Return on ordinary activities before tax	7,067	37,072	44,139
Tax on ordinary activities	(129)	-	(129)
Return attributable to shareholders	6,938	37,072	44,010
Return per share (p)	2.4	12.7	15.1

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.

Unaudited Income Statement

For the Six Months ended 31 March 2009

	Revenue	Capital	Total
	£'000	£'000	£'000
Losses on investments	-	(70,092)	(70,092)
Exchange differences	-	(2,665)	(2,665)
Income	9,133	-	9,133
Management expenses (see note 3)	926	(253)	673
Other expenses	(347)	-	(347)
Net return before finance costs & taxation	9,712	(73,010)	(63,298)
Finance Costs:
6.25% Bonds 2031	(474)	(1,422)	(1,896)
Bank borrowings	(139)	(415)	(554)
Return on ordinary activities before tax	9,099	(74,847)	(65,748)
Tax on ordinary activities	(173)	-	(173)
Return attributable to shareholders	8,926	(74,847)	(65,921)
Return per share (p)	3.1	(25.6)	(22.5)

Audited Income Statement

For the Year ended 30 September 2009

		Revenue £'000	Capital £'000	Total £'000
Gains on investments		-	29,773	29,773
Exchange differences		-	(1,344)	(1,344)
Income		18,369	-	18,369
Management expenses (see note 3)		1,086	(1,702)	(616)
Other expenses		(879)	-	(879)
Net return before finance costs & taxation		18,576	26,727	45,303
Finance Costs:
6.25% Bonds 2031		(944)	(2,832)	(3,776)
Bank borrowings		(192)	(578)	(770)
Return on ordinary activities before tax		17,440	23,317	40,757
Tax on ordinary activities		(293)	-	(293)
Return attributable to shareholders		17,147	23,317	40,464
Return per share (p)		5.8	8.0	13.8

Unaudited Balance Sheet	As At 31 March 2010	Audited As At 30 September 2009	As At 31 March 2009
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	464,509	429,158	328,029
Current assets
Debtors	3,345	3,053	7,092
Cash at bank and on deposit	11,355	13,663	18,066
	14,700	16,716	25,158
Creditors:
Amounts falling due within one year	(30,433)	(31,711)	(35,338)
Net current liabilities	(15,733)	(14,995)	(10,180)
Total assets less current liabilities	448,776	414,163	317,849
Creditors:  amounts falling due after more than one year:
6.25% Bonds 2031	(59,434)	(59,421)	(59,408)
Net assets	389,342	354,742	258,441
Capital and reserves
Called-up share capital	72,778	72,778	73,153
Capital redemption reserve	15,563	15,563	15,188
Capital reserve	268,064	230,992	134,473
Revenue reserve	32,937	35,409	35,627
Shareholders' funds	389,342	354,742	258,441
Net asset value per share (p)	133.7	121.9	83.3

Unaudited Reconciliation of Movements in Shareholders' Funds

	Six months ended	Six months ended	Audited Year ended
	31 March	31 March	30 September
	2010	2009	2009
	£'000	£'000	£'000
Opening shareholders' funds	354,742	333,516	333,516
Ordinary Shares purchased for cancellation	-	-	(1,645)
Dividends paid	(9,410)	(9,154)	(17,593)
Return attributable to ordinary shareholders	44,010	(65,921)	40,464
Closing shareholders' funds	389,342	258,441	354,742

Summarised Unaudited Statement of Cash Flows

	Six months ended	Six months ended	Audited Year ended
	31 March	31 March	30 September
	2010	2009	2009
	£'000	£'000	£'000
Net cash inflow from operating activities	4,937	10,272	18,667
Servicing of finance	(2,048)	(2,508)	(4,589)
Investments sold less investments purchased	4,625	4,299	4,324
Dividends paid	(9,410)	(9,154)	(17,593)
Net cash (outflow)/inflow before financing	(1,896)	2,909	809
Financing:
Ordinary Shares purchased for cancellation	-	-	(1,637)
Revolving advance facility repaid	-	-	(3,781)
(Decrease)increase in cash	(1,896)	2,909	(4,609)

Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash	(1,896)	2,909	(4,609)
Revolving advance facility repaid	-	-	3,781
Exchange differences	(91)	(2,726)	(1,106)
Increase in 6.25% Bonds 2031 liability	(13)	(13)	(26)
Opening net debt	(73,459)	(71,499)	(71,499)
Closing net debt	(75,459)	(71,329)	(73,459)

Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	46,203	(63,298)	45,303
(Gains)/losses on investments	(39,406)	70,092	(29,773)
Exchange differences	22	(393)	1,344
Tax on investment income	(129)	(153)	(293)
Changes in working capital and other non-cash items	(1,753)	4,024	2,086
Net cash inflow from operating activities	4,937	10,272	18,667

Statement of Principal Risks and Uncertainties

The Company's assets consist mainly of listed securities and its principal risks are therefore market related. The Company is also exposed to currency risk in respect of overseas markets in which it invests. Other risks faced by the Company include external, investment and strategic, regulatory, operational, and financial risks. These risks, and the way in which they are managed, are described in more detail under the heading Principal Risks and Risk Management within the Business Review in the Company's Annual Report for the year ended 30 September 2009. The Company's principal risks and uncertainties have not changed since the date of that report.

Statement of Directors' Responsibilities in Respect of the Half-Yearly Financial Report

We confirm that to the best of our knowledge:

·     the financial statements have been prepared in accordance with the Statement 'Half-Yearly Financial Reports' issued by the UK Accounting Standards Board and give a true and fair view of the assets, liabilities, financial position and return of the Company;

·     the Chairman's Statement (constituting the Interim Management Report) together with the Statement of Principal Risks and Uncertainties above include a fair review of the information required by the Disclosure and Transparency Rules ("DTR") 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·     the financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so. The only such transactions that have taken place during the period have been the payment of the investment management fee as disclosed in note 3.

On behalf of the Board

Lynn Ruddick

Director

19 May 2010

Notes:

1.   The unaudited interim 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 2009.

2.   The results for the first six months should not be taken as a guide to the results for the full year.

3.   Management Expenses

       As a result of the European Court of Justice decision in 2007 that investment management fees payable by investment trusts are not, and never should have been, liable to value added tax ('VAT'), the Company recovered an amount of £1,565,000 during the year ended 30 September 2009 (31 March 2009 - £1,271,000).  The amount recovered has been recognised in the Income Statement and, where applicable, allocated between revenue and capital in the same ratio as the VAT originally suffered.  The Company also received interest of £923,000 during the year ended 30 September 2009 (31 March 2009: same) in respect of VAT recoveries.

	Six months ended 31 March 2010			Six months ended 31 March 2009			Year ended 30 September 2009
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment Management Fee:
- basic fee	166	499	665	149	449	598	283	849	1,132
- performance fee	-	309	309	-	-	-	-	1,049	1,049
VAT related recoveries	-	-	-	(1,075)	(196)	(1,271)	(1,369)	(196)	(1,565)
	166	808	974	(926)	253	(673)	(1,086)	1,702	616

4.   The second interim dividend of 1.442p per Ordinary Share will be paid on 9 July 2010 to shareholders on the register on 11 June 2010.  In accordance with accounting standards this dividend and the first interim dividend of 1.442p per Ordinary Share, paid on 9 April 2010, have not been accounted for in the results for the six months ended 31 March 2010.

5.   The last date for receipt of mandate instructions for those shareholders who wish to join the Dividend Reinvestment Plan is 18 June 2010.

6.   Return per share is based on a weighted average 291,112,282 Ordinary Shares in issue during the period (31 March 2009 - 292,612,282 and 30 September 2009 - 292,587,264).

7.   There were 291,112,282 Ordinary Shares in issue at 31 March 2010 (31 March 2009 - 292,612,282 and 30 September 2009 - 291,112,282). 

8.   These accounts have not been audited or reviewed by the Company's auditors.

9.       The Company's geographic exposure as a percentage of shareholders' funds at 31 March 2010 was as follows:

	31 March 2010	30 September 2009
UK	72.3	70.8
Global Developed (ex UK)	20.0	19.6
Emerging Markets	12.8	15.1
Corporate Bonds	14.2	15.5
Cash	3.0	3.6
Borrowings	(22.3)	(24.6)
	_____	____
	100.0	100.0

10.       These are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 30 September 2009, which received an unqualified audit report, have been lodged with the Registrar of Companies.  No statutory accounts in respect of any period after 30 September 2009 have been reported on by the Company's auditors or delivered to the Registrar of Companies.  The Half-Yearly Financial Report will be available at the Company's website address, www.british-assets.co.uk.

 

END

 

 

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