Interim Results

RNS Number : 3401V

British Assets Trust PLC

27 May 2008

 



BRITISH ASSETS TRUST PLC

To:        RNS

From:    British Assets Trust plc

Date:     27 May 2008 

Interim Results for the six months ended 31 March 2008

Chairman's Statement

Performance

Global stockmarkets fell sharply during the six month period ended 31 March 2008 as concerns grew over the prospects for economic growth, as fears of a US recession took hold and as the effects of the global financial crisis intensified.  

Against this backdrop, the Company's net asset value total return for the six month period ended 31 March 2008 was -10.7 per cent. This compares to a total return of -9.7 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. The share price total return for the period was -9.5 per cent.

It is pleasing that the UK portfolio contributed positively to the performance, not only outperforming the FTSE All-Share Index for the period under review, but also for the longer period since February 2007 when a new manager of this important part of the overall portfolio was appointed from within the F&C UK equities team. The Board has now agreed with the Managers that the North American portfolio will be managed within F&C using quantitative stock selection techniques with a view to also improving performance in this region.

Gearing was the main reason for the underperformance during a period of falling markets.

Gearing

At the end of the period the Company's gearing, net of cash, was 19.0 per cent, represented by equity gearing of 11.3 per cent and 7.7 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 five year £60 million multi-currency revolving advance facility with The Royal Bank of Scotland plc ('the Revolving Advance Facility'). This facility was put in place on 31 March 2008 to coincide with the date on which the Company's £60 million 6.625 per cent bonds ('the 2008 Bonds') were redeemed.

Amounts borrowed under the Revolving Advance Facility may be drawn down in varying amounts and currencies, thus providing the Company with a degree of flexibility which was not available with the 2008 Bonds. As at 31 March 2008 the amount drawn down under the facility was £30 million, in a variety of currencies relating to the geographical spread of the portfolio.

Earnings and Dividends

The Company's revenue earnings for the period were 2.8p per Ordinary Share (2007 - 2.7p). A first interim dividend of 1.4p per Ordinary Share was paid on 11 April 2008 and the Board has declared a second interim dividend of 1.4p per Ordinary Share which will be paid on 11 July 2008 to shareholders on the register on 13 June 2008.

Dividend growth from investee companies has generally exceeded expectation but there has been a reduction in the number of special dividends received. The Board would hope to increase the total dividend in respect of the current financial year, in line with its stated objective of maintaining a progressive dividend policy.

Share Buy Backs

During the period the Company purchased 3,500,000 shares for cancellation, equivalent to 1.2 per cent of the shares in issue at the start of the period, for an aggregate consideration of £4.8 million. These buy backs provided an enhancement of 0.2p to the net asset value share.

Board Composition 

The Board is pleased to announce the appointment of Mr Ian Russell as a non-executive Director of the Company with effect from 1 June 2008. The Board believes that Mr Russell's experience will be of benefit to the Company. He is a former chief executive and finance director of Scottish Power plc. He is currently a non-executive director of Johnston Press plc and The Mercantile Investment Trust plc, Chairman of Remploy Limited and an adviser to the 3i Group. 

VAT on Management Fees

Following the European Court of Justice ruling in June 2007 that investment trusts should be regarded as special investment funds, management fees paid by the Company are no longer subject to VAT. In addition, the Company will be able to recover some of the VAT suffered in the past on management fees. At this stage, however, the amount and timing of repayments are uncertain and no provision has therefore been made in the accounts. 

Outlook

The concerns surrounding the financial sector and the related tightening of credit are likely to continue to result in further volatility in stockmarkets around the world in the months ahead. In the US, fiscal stimulus should provide some support to the economy in the second half of 2008, suggesting a more favourable outlook for growth in 2009. Amid considerable market volatility, fundamentally sound companies have experienced sharp share price falls, and in the short term conditions are likely to remain difficult. However, this environment is presenting interesting investment opportunities. 

W R E Thomson

Chairman

For further information please contact:

Julie Dent 0207 628 8000

[e-mail]

F&C Investment Business Limited

  Unaudited Income Statement

For the 6 Months ended 31 March 2008

	2008	2008	2008
	Revenue	Capital	Total
	£'000	£'000	£'000
Losses on investments	-	(56,246)	(56,246)
Exchange differences	-	(562)	(562)
Income	10,157	873	11,030
Investment management fee	(222)	(663)	(885)
Other expenses	(369)	-	(369)
Net return before finance costs & taxation	9,566	(56,598)	(47,032)
Finance Costs:
6.625% Bonds 2008	(505)	(1,514)	(2,019)
6.25% Bonds 2031	(474)	(1,422)	(1,896)
Other	(20)	(45)	(65)
Return on ordinary activities before tax	8,567	(59,579)	(51,012)
Tax on ordinary activities	(68)	-	(68)
Return attributable to shareholders	8,499	(59,579)	(51,080)
Return per Ordinary Share (p)	2.8	(19.9)	(17.1)

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 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	(258)	(775)	(1,033)
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

Audited Income Statement 

For the Year ended 30 September 2007

		2007	2007	2007
		Revenue £'000	Capital £'000	Total £'000
Gains on investments		-	31,923	31,923
Exchange differences		-	(122)	(122)
Income		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:
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		17,859	26,199	44,058
Tax on ordinary activities		(337)	-	(337)
Return attributable to shareholders		17,522	26,199	43,721
Return per Ordinary Share (p)		5.7	8.6	14.3

Unaudited Balance Sheet	As At  31.03.08	Audited As At  30.09.07	As At 31.03.07
	£'000	£'000	£'000
Non-Current Assets
Investments at fair value through profit or loss	500,814	558,724	577,954
Current Assets
Debtors	53,028	5,937	8,385
Cash at bank and on deposit	7,775	47,349	34,000
	60,803	53,286	42,385
Creditors:
Amounts falling due within one year	(81,370)	(66,870)	(3,840)
Net Current (Liabilities)/Assets	(20,567)	(13,584)	38,545
Total Assets less Current Liabilities	480,247	545,140	616,499
Creditors:  amounts falling due after more than one year:
6.625% Bonds 2008	-	-	(59,936)
6.25% Bonds 2031	(59,382)	(59,368)	(59,355)
	(59,382)	(59,368)	(119,291)
Net Assets	420,865	485,772	497,208
Capital and Reserves
Called-up share capital	74,378	75,253	77,128
Capital redemption reserve	13,963	13,088	11,213
Capital reserve - realised	310,577	318,090	305,733
Capital reserve - unrealised	(12,224)	44,681	69,110
Revenue reserve	34,171	34,660	34,024
Shareholders' Funds	420,865	485,772	497,208
Net Asset Value per Ordinary Share (p)	141.5	161.4	161.2

  Unaudited Reconciliation of Movements in Shareholders' Funds

	Six months ended	Six months ended	Audited Year ended
	31 March	31 March	30 September
	2008	2007	2007
	£'000	£'000	£'000
Opening shareholders' funds	485,772	470,390	470,390
Share buy-backs	(4,839)	-	(11,210)
Dividends paid	(8,988)	(8,790)	(17,129)
Return attributable to shareholders	(51,080)	35,608	43,721
Closing shareholders' funds	420,865	497,208	485,772

Summarised Unaudited Statement of Cash Flows

	Six months ended	Six months ended	Audited Year ended
	31 March	31 March	30 September
	2008	2007	2007
	£'000	£'000	£'000
Net cash inflow from operating activities	7,549	7,060	19,747
Servicing of finance	(3,927)	(5,850)	(9,713)
Taxation	-	-	-
Capital expenditure and financial investment	1,162	17,132	41,382
Dividends paid	(8,988)	(8,790)	(17,129)
Net cash (outflow)/inflow before financing	(4,204)	9,552	34,287
Financing:
Ordinary shares purchased for cancellation	(4,839)	-	(11,210)
6.25% Bonds redeemed	(60,000)	-	-
Loan drawn down	30,000	-	-
(Decrease)/increase in cash	(39,043)	9,552	23,077
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash	(39,043)	9,552	23,077
Exchange differences	(531)	308	132
6.625% Bonds redeemed	60,000	-	-
Loan drawn down	(30,000)	-	-
Increase in 6.625% Bonds 2008 liability	(32)	(31)	(63)
Increase in 6.25% Bonds 2031 liability	(14)	(13)	(26)
Opening net debt	(71,987)	(95,107)	(95,107)
Closing net debt	(81,607)	(85,291)	(71,987)

Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	(47,032)	39,647	51,872
Losses/(gains) on investments	56,246	(30,766)	(31,923)
Exchange differences	(531)	(308)	122
Tax on investment income	(81)	(121)	(339)
Changes in working capital and other non-cash items	(1,053)	(1,392)	15
Net cash inflow from operating activities	7,549	7,060	19,747

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 2007. The Company's principal risks and uncertainties have not changed materially since the date of that report.

Statement of Directors' Responsibilities in Respect of the Interim Results

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) includes 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 Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and

• 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.

On behalf of the Board

W R E Thomson

Director

27 May 2008

  Notes:

• 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 2007.

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

3.   Total income of £11,030,000 includes special dividends of £873,000 all recognised through capital (31 March 2007 - £874,000 all recognised through revenue and 30 September 2007 - £3,152,000 of which £1,313,000 was recognised through revenue and £1,839,000 was recognised through capital).

4.  The second interim dividend of 1.40p per Ordinary Share will be paid on 11 July 2008 to shareholders on the register on 13 June 2008. In accordance with FRS 21 this dividend and the first interim dividend of 1.40p per Ordinary Share, paid on 11 April 2008, have not been accounted for in the results for the six months ended 31 March 2008. 

5.  The last date for receipt of mandate instructions for those shareholders who wish to join the Dividend Reinvestment Plan is 20 June 2008.

6.  Return per share is based on a weighted average 298,575,124 Ordinary Shares in issue during the period (31 March 2007 - 308,512,282 and 30 September 2007 - 306,387,624).

7. There were 297,512,282 Ordinary Shares in issue at 31 March 2008 (31 March 2007 - 308,512,282 and 30 September 2007 - 301,012,282).  

8.  Current Assets - debtors as at 31 March 2008 include outstanding brokers to settle of £48,435,000 (31 March 2007 - £3,982,000 and 30 September 2007 - £3,378,000).

Creditors - amounts falling due within one year include outstanding brokers to settle of £50,646,000 (31 March 2007 - £2,830,000 and 30 September 2007 - £6,089,000).

The increased amounts relate principally to the reorganisation of the US portfolio at the end of the period following a move to a quantitative stock selection technique as explained in more detail in the Chairman's Statement.

9.    Following a ruling by the European Court of Justice in June 2007, VAT is no longer charged on investment management fees paid by the Company. The investment management fee of £885,000 does not therefore include VAT (31 March 2007 - fee of £1,033,000 includes VAT of £154,000 and 30 September 2007 - fee of £2,108,000 includes VAT of £314,000). 

10.    These accounts have not been audited or reviewed by the Company's auditors pursuant to the Auditing Practices Board guidance on the review of interim financial information.
   

  11.    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	-9.7
Stock selection
UK equities	1.0
Overseas equities	-0.3
Regional asset allocation	0.0
Corporate bonds	0.4
Gearing	-1.6
Share buy backs	0.1
Expenses	-0.4
Other	-0.2
British Assets Trust net asset value total return	-10.7

12.    The Company's geographic exposure as a percentage of shareholders' funds at 31 March 2008 was as follows (comparative figures are for 30 September 2007).

	31 March 2008	30 September 2007
UK	77.0	77.2
North America	14.3	12.9
Europe (ex UK)	8.8	8.1
Pacific (ex Japan)	7.1	6.1
Japan	4.1	4.1
Corporate Bonds	7.7	6.6
Liquidity	2.2	9.6
Borrowings	(21.2)	(24.6)
	_____	____
	100.0	100.0

13.        These are not statutory accounts in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory accounts for the year ended 30 September 2007, 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 2007 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 2008 and, together with this statement, will be available at the Company's website address, www.british-assets.co.uk.

 

END

 

 

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