Interim Results
British Assets Trust PLC
09 May 2007
BRITISH ASSETS TRUST PLC
To: RNS
From: British Assets Trust plc
Date: 9 May 2007
Interim Results for the six months ended 31 March 2007
Financial Highlights
• Net asset value total return of 7.7 per cent
• Share price total return of 11.6 per cent
Chairman's Statement
For the six months ended 31 March 2007, the Company's net asset value total
return, with net dividends reinvested, was 7.7 per cent. This compares with a
return of 8.4 per cent from the composite benchmark of 75 per cent FTSE
All-Share Index and 25 per cent FTSE World (ex UK) Index.
The share price total return for the period was 11.6 per cent and the debt
adjusted discount of share price to net asset value per share narrowed from 10.5
per cent as at 30 September 2006 to 8.1 per cent as at the end of the period.
Strong corporate earnings and ongoing merger and acquisition activity continued
to support markets during the period. Lower oil prices and easing global
inflationary concerns also boosted markets. However, a sharp fall in Chinese
stocks in late February and concerns for the US sub-prime mortgage market
combined to unsettle markets. Equity markets fell sharply but recovered again in
March.
Financial market volatility has declined substantially over the past five years.
This in the main has reflected a more stable macroeconomic environment as
globalisation has improved growth whilst keeping inflation low. However,
investors are now starting to question if this stability will continue. This,
together with uncertainty over the outlook for the US economy is resulting in
more volatile financial markets.
Asset allocation, gearing and stock selection within the overseas portfolios
contributed positively to performance during the period. However, stock
selection returns within the UK portfolio lagged the FTSE All-Share Index. As
announced during the period, a new manager of the Company's UK portfolio was
appointed from within the F&C UK Equities Team. This will result in a more
focused portfolio going forward and the Board believes the change will result in
improved performance for this important part of the overall portfolio. The
underperformance of the UK portfolio during the period includes the cost of
re-aligning the portfolio in February.
Gearing
At the end of the period the Company's gearing, net of cash, was 16.2 per cent,
compared to 20.3 per cent as at 30 September 2006. This is represented by 9.7
per cent in equities and 6.5 per cent in corporate bonds. As a reflection of the
Managers' cautious view on markets, the level of net gearing was reduced during
the period by raising cash from the UK portfolio.
Earnings and Dividends
The Company's revenue earnings for the period were 2.7p per Ordinary Share (2006
- 2.4p). A first interim dividend of 1.356p per Ordinary Share was paid on 10
April 2007 and the Board has declared a second interim dividend of 1.356p per
Ordinary Share which will be paid on 6 July 2007 to shareholders on the register
on 8 June 2007.
The Company has continued to benefit from strong dividend growth from its
investee companies, in particular within the UK, and the continuing trend of
companies to return cash to shareholders by way of special dividends. Subject to
unforeseen circumstances, the Board would therefore hope to increase the total
dividend in respect of the current financial year by not less than 3.0 per cent
compared to the previous year.
The Board considers the Company's dividend yield to be one of its key
attractions. As at 31 March 2007, the yield of 3.8 per cent was some 36 per cent
higher than the FTSE All-Share Index yield of 2.8 per cent.
Outlook
Despite recent uncertainty, the fundamental backdrop for global stockmarkets
remains reasonable with little to choose between the geographic regions. A
recession in the US is unlikely but we do expect to see slower global growth and
lower earnings growth. Merger and acquisition activity is likely to continue to
bolster stockmarkets although there is some concern about the associated rising
debt levels.
W R E Thomson
Chairman
For further information please contact:
Julie Dent 0207 628 8000
Julie.dent@fandc.com
F&C Investment Business Limited
Unaudited Income Statement
For the 6 Months ended 31 March 2007
2007 2007 2007
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 30,766 30,766
Exchange differences - 6 6
Income 10,368 - 10,368
Investment management fee:
Basic (258) (775) (1,033)
Performance related - - -
Other expenses (460) - (460)
Net return before finance costs & taxation 9,650 29,997 39,647
Finance Costs:
6.625% Bonds 2008 (505) (1,514) (2,019)
6.25% Bonds 2031 (474) (1,422) (1,896)
Return on ordinary activities before tax 8,671 27,061 35,732
Tax on ordinary activities (124) - (124)
Return attributable to shareholders 8,547 27,061 35,608
Return per Ordinary Share (p) 2.7 8.8 11.5
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 6 Months ended 31 March 2006
2006 2006 2006
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 53,760 53,760
Exchange differences - (113) (113)
Income 9,335 - 9,335
Investment management fee:
Basic (253) (760) (1,013)
Performance related - (583) (583)
Other expenses (308) - (308)
Net return before finance costs & taxation 8,774 52,304 61,078
Finance Costs:
6.625% Bonds 2008 (505) (1,514) (2,019)
6.25% Bonds 2031 (474) (1,422) (1,896)
Return on ordinary activities before tax 7,795 49,368 57,163
Tax on ordinary activities (117) - (117)
Return attributable to shareholders 7,678 49,368 57,046
Return per Ordinary Share (p) 2.4 15.4 17.8
Audited Income Statement
For the Year ended 30 September 2006
2006 2006 2006
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 33,150 33,150
Exchange differences - 177 177
Income 23,353 257 23,610
Investment management fee:
Basic (512) (1,537) (2,049)
Performance related - - -
Other expenses (826) - (826)
Net return before finance costs & taxation 22,015 32,047 54,062
Finance Costs:
6.625% Bonds 2008 (1,010) (3,028) (4,038)
6.25% Bonds 2031 (944) (2,832) (3,776)
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 Ordinary Share (p) 6.3 8.3 14.6
Unaudited Balance Sheet Audited
As At As At As At 31.03.06
31.03.07 30.09.06
£'000 £'000 £'000
Non-Current Assets
Investments 577,954 566,081 594,880
Current Assets
Debtors 8,385 5,430 7,503
Cash at bank and on deposit 34,000 24,140 19,764
42,385 29,570 27,267
Creditors:
Amounts falling due within one year (3,840) (6,014) (2,830)
Net Current Assets 38,545 23,556 24,437
Total Assets less Current Liabilities 616,499 589,637 619,317
Creditors: amounts falling due after more than one
year:
6.625% Bonds 2008 (59,936) (59,905) (59,873)
6.25% Bonds 2031 (59,355) (59,342) (59,329)
(119,291) (119,247) (119,202)
Net assets 497,208 470,390 500,115
Capital and reserves
Called-up share capital 77,128 77,128 79,103
Capital redemption reserve 11,213 11,213 9,238
Capital reserve - realised 305,733 246,431 255,476
Capital reserve - unrealised 69,110 101,351 125,867
Revenue reserve 34,024 34,267 30,431
Shareholders' Funds 497,208 470,390 500,115
Net Asset Value per Ordinary Share (p) 161.2 152.5 158.1
Unaudited Reconciliation of Movements in Shareholders' Funds
Six months Six months Audited Year
to to to
31 March 31 March 30 September
2007 2006 2006
£'000 £'000 £'000
Opening shareholders' funds 470,390 460,858 460,858
Share buy-backs - (9,016) (19,395)
Dividends paid (8,790) (8,773) (17,016)
Return attributable to shareholders 35,608 57,046 45,943
Closing shareholders' funds 497,208 500,115 470,390
Summarised Unaudited Statement of Cash Flows
Six months Six months Audited Year
to to to
31 March 31 March 30 September
2007 2006 2006
£'000 £'000 £'000
Net cash inflow from operating activities 7,060 4,613 19,048
Servicing of finance (5,850) (3,863) (5,738)
Taxation - 46 39
Financial investment 17,132 8,454 18,728
Dividends paid (8,790) (8,773) (17,016)
Net cash inflow before financing 9,552 477 15,061
Financing - (9,016) (19,395)
Increase/(decrease) in cash 9,552 (8,539) (4,334)
Increase/(decrease) in cash 9,552 (8,539) (4,334)
Currency gains 308 - 171
Increase in 6.625% Bonds 2008 liability (31) (31) (63)
Increase in 6.25% Bonds 2031 liability (13) (13) (26)
Movement in net debt 9,816 (8,583) (4,252)
Opening net debt (95,107) (90,855) (90,855)
Closing net debt (85,291) (99,438) (95,107)
Reconciliation of net return before finance costs and
taxation to net cash inflow from operating activities
Net revenue before finance costs and taxation 39,647 61,078 54,062
Gains on investment (30,766) (53,760) (33,150)
Exchange differences (308) - (171)
Tax on investment income (121) (130) (304)
Changes in working capital and other non-cash items (1,392) (2,575) (1,389)
Net cash inflow from operating activities 7,060 4,613 19,048
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 2006.
2. Earnings for the first six months should not be taken as a guide to the
results of the full year.
3. Total income of £10,368,000 includes special dividends of £874,000 all
recognised through revenue (31 March 2006 - £231,000 all through revenue and 30
September 2006 - £4,636,000 of which £4,379,000 was recognised through revenue
and £257,000 was recognised through capital).
4. The second interim dividend of 1.356p per Ordinary Share will be paid on
6 July 2007 to shareholders on the register on 8 June 2007. In accordance with
FRS 21 this dividend, and the first interim dividend of 1.356p per Ordinary
Share paid on 10 April 2007, have not been accounted for in the results for the
six months ended 31 March 2007.
5. The last date for receipt of mandate instructions for those shareholders
who wish to join the Dividend Reinvestment Plan is 15 June 2007.
6. Return per share is based on a weighted average 308,512,282 Ordinary
Shares in issue during the period (31 March 2006 - 320,093,326 and 30 September
2006 - 315,715,159).
7. There were 308,512,282 Ordinary Shares in issue at 31 March 2007 (31 March
2006 - 316,412,282 and 30 September 2006 - 308,512,282).
8. The following table provides a breakdown of the estimated contributions to
the net asset value total return for the period:
Attribution of Return Percentage Points
Market/benchmark return 8.4
Stock selection
UK equities -0.8
UK equities - cost of portfolio re-alignment -0.4
Overseas equities 0.3
Regional asset allocation 0.1
Corporate bonds -0.3
Gearing/cash 0.7
Expenses -0.3
British Assets Trust net asset value total return 7.7
9. The Company's geographic exposure as a percentage of shareholders'
funds at 31 March 2007 was as follows (comparative figures are for 30
September 2006).
31 March 2007 30 September 2006
UK 80.0 85.0
North America 12.3 12.3
Europe (ex UK) 7.3 6.2
Japan 5.7 6.1
Pacific (ex Japan) 4.4 4.0
Corporate Bonds 6.5 6.7
Liquidity 7.8 5.1
Borrowings (24.0) (25.4)
_____ ____
100.0 100.0
10. These are not statutory accounts in terms of Section 240 of the
Companies Act 1985 and are unaudited. Statutory accounts for the year ended 30
September 2006, 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 2006 have been reported on by the Company's auditors or
delivered to the Registrar of Companies. The Interim Report will be sent to
shareholders in May 2007.
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